Western Digital Q3 Earnings & Revenues Beat, Up Y/Y on Cloud Momentum

Core Insights - Western Digital Corporation (WDC) reported third-quarter fiscal 2025 non-GAAP earnings of $1.36 per share, exceeding the Zacks Consensus Estimate of $1.17 and significantly up from 63 cents per share in the prior-year quarter [1] - Revenues for the quarter reached $2.29 billion, a 31% year-over-year increase, surpassing the Zacks Consensus Estimate of $2.24 billion, driven by strong demand in Cloud end markets [1][4] - The company completed the separation of its HDD and Flash businesses into two independent entities on February 21, 2025, positioning the new SanDisk to capitalize on AI opportunities [2] Financial Performance - Revenues from the Cloud end market, which constitutes 87% of total revenues, increased by 38% year over year to $2 billion, although it saw a 4% sequential decline [4] - Client end market revenues decreased by 2% year over year and sequentially to $137 million, while Consumer end market revenues fell by 4% year over year and 13% sequentially [5] - Non-GAAP gross margin improved to 40.1% from 30.1% in the year-ago quarter, supported by higher capacity drive adoption [6] - Non-GAAP operating income surged 290% year over year to $596 million, with operating expenses down 14% to $324 million [6] Balance Sheet & Cash Flow - As of March 28, 2025, cash and cash equivalents stood at $3.477 billion, up from $2.291 billion as of December 27, 2024 [9] - Long-term debt was reported at $7.333 billion, while cash generated from operations reached $508 million, a significant increase from $58 million in the prior-year quarter [9] - Free cash flow for the quarter was $436 million, reflecting a 379% year-over-year increase [9] Fiscal Q4 Outlook - For the upcoming quarter, WDC expects non-GAAP revenues of $2.45 billion (+/- $150 million), with a consensus estimate of $2.38 billion [10] - Projected non-GAAP earnings are anticipated to be $1.45 (+/- 20 cents), compared to a consensus estimate of $1.34 [10] - The company expects non-GAAP gross margin to be in the range of 40-41% and operating expenses between $330 million and $340 million [10]