Western Digital(WDC) - 2026 Q2 - Quarterly Results

Financial Performance - Revenue for Q2FY26 was $3.02 billion, representing a 25% increase year over year[5] - GAAP gross margin improved to 45.7%, up 800 basis points from 37.7% in Q2FY25[6] - Operating income reached $908 million, a 62% increase compared to $560 million in Q2FY25[6] - Diluted net income per common share for Q2FY26 was $4.73, a 272% increase from $1.27 in Q2FY25[6] - Net income for the three months ended January 2, 2026, was $1,842 million, a significant increase from $594 million in the same period last year, representing a growth of 210%[26] - GAAP gross profit for the three months ended January 2, 2026, was $1,380 million, compared to $1,227 million for the previous quarter, reflecting a 12.5% increase[28] - Non-GAAP gross profit for the same period was $1,391 million, up from $1,237 million, indicating a growth of 12.4%[28] - The company reported a GAAP operating income of $908 million for the three months ended January 2, 2026, compared to $792 million in the previous quarter, marking a 14.6% increase[28] - Non-GAAP diluted net income from continuing operations attributable to common shareholders was $807 million for the three months ended January 2, 2026, compared to $655 million in the previous quarter, reflecting a growth of 23.2%[30] Cash Flow and Dividends - Free cash flow for the quarter was $653 million, with over 100% returned to shareholders through share repurchases and dividends[4] - Free cash flow for the six months ended January 2, 2026, was $1,252 million, significantly higher than $321 million in the same period last year[30] - The company declared a cash dividend of $0.125 per share, payable on March 18, 2026[9] - Cash and cash equivalents at the end of the period were $1,975 million, down from $2,291 million at the end of the previous quarter[26] Future Guidance - For Q3FY26, revenue is expected to be approximately $3.2 billion, reflecting a 40% year-over-year growth at the mid-point[7] - Non-GAAP gross margin guidance for Q3FY26 is projected at 47.5%[7] Operational Insights - The company continues to focus on high-capacity drives to meet growing data center demand in the AI-driven data economy[4] - The company’s GAAP operating margin for the three months ended January 2, 2026, was 30.1%, compared to 28.1% in the previous quarter[28] - The company’s net cash provided by operating activities for the three months ended January 2, 2026, was $745 million, compared to $672 million in the previous quarter, an increase of 10.8%[30] - The company reported a net cash used in financing activities of $703 million for the three months ended January 2, 2026, compared to a minimal usage of $1 million in the previous quarter[26] Non-GAAP Measures and Adjustments - Non-GAAP gross margin guidance excludes stock-based compensation expense, totaling approximately $10 million[43] - Non-GAAP operating expenses guidance excludes stock-based compensation and other expenses, totaling approximately $40 million to $50 million[43] - Non-GAAP diluted net income per common share guidance excludes items totaling $50 million to $60 million[43] - Non-GAAP diluted weighted average shares include the benefit of 2 million shares from capped call transactions related to convertible senior notes due 2028[43] - Income tax adjustments reflect differences between GAAP and non-GAAP tax rates due to excluded items and non-recurring items[38] - Free cash flow is defined as cash flows from operating activities less capital expenditures, considered useful for strategic opportunities[40] - Business realignment charges may occur to align operations with market demand or achieve cost synergies, deemed not indicative of underlying performance[35] - The company recognizes expenses related to litigation matters that do not reflect operating results and are not indicative of business performance[34] - Adjustments to non-GAAP guidance may include unanticipated changes in GAAP effective tax rates and other non-recurring items[42] - Non-GAAP measures are provided to enhance understanding of underlying business performance and are not reconciled to GAAP due to unpredictability[41]