Core Viewpoint - Western Digital Corporation (WDC) has announced a $2 billion share repurchase program aimed at enhancing shareholder value and reflecting its strategic capital allocation framework [1][2]. Group 1: Share Repurchase Program - The $2 billion share repurchase program is designed to maximize long-term investor returns and bolster shareholder confidence in the company's financial health [1]. - The company plans to execute the repurchase through various methods, including open market transactions and private deals, under a Rule 10b5-1 trading plan [1]. - The timing and volume of repurchases will depend on market conditions and company considerations, with the right to modify or discontinue the program at any time [3]. Group 2: Capital Allocation Strategy - Western Digital emphasizes a balanced capital allocation strategy that includes growth reinvestment, debt reduction, and substantial shareholder returns through buybacks [2]. - The initiation of the repurchase program follows the introduction of a quarterly cash dividend program, indicating a proactive approach to delivering value [2]. Group 3: Financial Performance - In the third quarter of fiscal 2025, Western Digital generated $508 million in cash from operations, a significant increase from $58 million in the prior-year quarter [6]. - Free cash flow reached $436 million, reflecting a 379% year-over-year increase [6]. - As of March 28, 2025, the company had cash and cash equivalents of $3.477 billion, up from $2.291 billion as of December 27, 2024 [6]. Group 4: Stock Performance - Western Digital currently holds a Zacks Rank of 5 (Strong Sell), with shares declining by 31% over the past year, slightly better than the industry decline of 31.5% [7].

Core Insights - Western Digital's stock has increased by over 5% in a single trading day and nearly 40% over the past month, driven by positive developments in the company's financial performance and strategic initiatives [1] Group 1: Share Buyback Program - Western Digital announced a $2 billion share buyback program, reflecting strong confidence in its long-term prospects and reinforcing its shareholder-oriented capital allocation strategy [2] Group 2: Q3 Earnings Performance - In Q3 FY25, Western Digital reported $2.3 billion in revenue, a 31% year-over-year growth despite a 5% quarterly decrease. Non-GAAP EPS rose by 15% to $1.36, with gross margin increasing to 40.1% [3] - The Cloud division generated $2.0 billion, accounting for 87% of total revenue, and experienced a 38% year-over-year growth, driven by increased data demands from hyperscale cloud providers and AI adoption [3] Group 3: Positive Guidance - For the fiscal fourth quarter ending June 27, 2025, Western Digital provided a positive revenue forecast of $2.45 billion ± $150 million and non-GAAP EPS of $1.45 ± $0.20, both exceeding analyst expectations [4] - The company expects to maintain gross margins between 40.0% and 41.0%, with non-GAAP operating expenses managed between $330 million and $340 million, positioning itself favorably to benefit from the growing demand for high-capacity storage due to AI adoption [4] Group 4: Stock Volatility - Over the past four years, Western Digital's stock has shown significant volatility compared to the S&P 500, with annual returns of 18% in 2021, -52% in 2022, 66% in 2023, and 14% in 2024 [5] Group 5: Valuation Insights - Current assessment places Western Digital's stock value around $49 per share, aligning closely with its market value, indicating a balanced valuation perspective [7]

Summary of Western Digital (WDC) FY Conference Call Company Overview - **Company**: Western Digital (WDC) - **Focus**: 100% hard drive focused data storage company, heavily tied to cloud services, with 87% of business linked to cloud as of fiscal Q3 [7][8] Key Financial Highlights - **Buyback Program**: Initiated a $2 billion buyback program effective immediately [6] - **Debt Management**: Redeemed $1.8 billion of debt related to 2026 senior notes [7] - **Dividend**: Announced a dividend of $0.40 per share for the year [7] Strategic Priorities 1. **Customer Engagement**: Focus on deeper engagement with major customers, particularly in the cloud sector [10] 2. **Product Innovation**: Commitment to delivering leading-edge products and IP innovations, including transitioning to HAMR technology [11] 3. **Operational Efficiency**: Strong emphasis on operational execution and cost discipline, with hard drive yields improved from 60% to 90% [12] Market Dynamics - **Demand Trends**: Positive demand from cloud and hyperscalers, with strong CapEx spending intentions [13][14] - **Trade and Tariffs**: Potential indirect impacts on retail and enterprise client channels, but no major immediate effects from tariffs noted [16][20] - **Cloud Spending**: Robust outlook for cloud business, with long-term agreements providing visibility into demand through 2026 [22] Growth Projections - **Exabyte Growth**: Projected nearline exabyte growth CAGR of 23% from 2024 to 2028, with 15% from organic cloud growth and 8% from AI-related demand [26] - **Capacity Management**: Focus on aerial density improvements rather than increasing physical capacity, with no plans for additional CapEx [29][37] AI and Data Storage - **AI Workloads**: Hard drives are foundational for AI data lakes, providing cost-effective bandwidth despite limitations in IOPS [32][33] - **Customer Collaboration**: Close partnerships with hyperscale customers to optimize data center architectures for AI workloads [33] Product Roadmap - **Current Products**: Successful ramp-up of 26 terabyte CMR and 32 terabyte ultra SMR drives, with over 1 million units expected to ship [44][46] - **Future Products**: On track for next-gen ePMR based 28 terabyte CMR and 36 terabyte ultra SMR drives in the first half of next year [48] - **HAMR Technology**: Development of HAMR technology with customer feedback indicating confidence in execution timelines [50][52] Financial Performance - **Gross Margins**: Current gross margins exceed 40%, significantly better than previous targets of 31-34% [59] - **Operational Efficiencies**: Improved yields and cost discipline have driven margin expansion [61][62] Capital Allocation Strategy - **Free Cash Flow**: Plans to return 100% of excess free cash flow once net leverage reaches 1x to 1.5x, with a focus on dividends and buybacks [66][67] Conclusion - **Overall Outlook**: Western Digital is positioned for strong growth driven by cloud demand, operational efficiencies, and strategic product innovations, particularly in the AI space. The company is committed to maintaining a disciplined approach to capital allocation and operational execution.

Core Viewpoint - Western Digital Corporation's recent fiscal third-quarter earnings announcement highlighted a strong performance, exceeding profit expectations and providing optimistic forward guidance, which has garnered positive investor sentiment [1][4][15]. Financial Performance - For fiscal Q3 2025, Western Digital reported revenue of $2.29 billion, reflecting a 31% year-over-year increase, despite a slight sequential decline [7][9]. - The company achieved a non-GAAP EPS of $1.36, surpassing the analyst consensus estimate of $1.06, indicating effective cost management and favorable pricing dynamics [8]. - Non-GAAP gross margins reached 40.1%, exceeding the anticipated 40% threshold, showcasing operational efficiency [8][6]. Future Guidance - Management projects Q4 revenue between $2.30 billion and $2.60 billion, with a midpoint of $2.45 billion, which is above analyst expectations [4]. - The profit forecast for non-GAAP EPS is set between $1.25 and $1.65, with a midpoint of $1.45, indicating anticipated revenue stability and profitability [5]. Market Position and Demand - The cloud segment remains a significant driver, accounting for 87% of total revenue in Q3, with cloud revenue hitting $2.0 billion, a 38% year-over-year increase [9][10]. - The demand for high-capacity storage solutions is accelerating due to the growth of AI applications and data storage needs [10]. Dividend Initiation - Western Digital's Board of Directors has authorized a quarterly cash dividend program, starting with an initial dividend of $0.10 per share, signaling confidence in the business model and financial stability [11][12]. Analyst Sentiment - Following the earnings report, analysts have shown positive sentiment, with several firms reiterating or upgrading their ratings, maintaining a consensus rating of Moderate Buy [13][14]. - The average analyst price target is approximately $66.42, suggesting potential upside from the current stock price [14]. Strategic Outlook - The successful transition post-separation from the flash memory business positions Western Digital favorably within the data storage sector, indicating potential for a cyclical recovery [3][15][16].

Revenue Growth - Net revenue for the three months ended March 28, 2025, increased by 31% to $2,294 million, driven by a 4% increase in units sold and a 23% increase in pricing [162]. - For the nine months ended March 28, 2025, net revenue rose by 60% to $6,915 million, attributed to an 18% increase in units sold and a 35% increase in average selling price per unit [164]. - Cloud revenue for the three months ended March 28, 2025, increased by 38% to $2,007 million, reflecting a 14% increase in units sold and an 18% increase in average selling price per unit [165]. Income and Profitability - Operating income for the three months ended March 28, 2025, was $760 million, a significant increase of 709% compared to the prior year [162]. - The company reported a net income from continuing operations of $772 million for the three months ended March 28, 2025, compared to a net loss of $8 million in the same period last year [162]. - Gross profit increased by $393 million for the three months ended March 28, 2025, primarily due to higher product shipments and improved pricing [171]. - Gross margin increased by 10 percentage points year over year for the three months ended March 28, 2025, mainly due to improved pricing [171]. - Operating income for the nine months ended March 28, 2025, was $435 million, a turnaround from an operating loss of $927 million for the year ended June 28, 2024 [212]. - Net income for the nine months ended March 28, 2025, was $138 million, compared to a net loss of $1,211 million for the year ended June 28, 2024 [212]. Expenses and Cost Management - Total operating expenses for the three months ended March 28, 2025, decreased by 64% to $152 million, primarily due to a reduction in selling, general, and administrative expenses [162]. - Selling, general and administrative (SG&A) expense decreased by $68 million for the three months ended March 28, 2025, primarily due to a decrease in compensation and benefits [174]. - Research and development (R&D) expense increased by $49 million for the nine months ended March 28, 2025, primarily driven by higher variable compensation and increased headcount [173]. Cash Flow and Liquidity - Net cash provided by operating activities was $945 million for the nine months ended March 28, 2025, compared to a net cash used of $660 million for the same period in the prior year [185]. - Cash and cash equivalents increased by $1.598 billion for the nine months ended March 28, 2025 [185]. - Net cash provided by investing activities for the nine months ended March 28, 2025, was $401 million from the sale of a majority interest in a subsidiary, offset by $336 million in capital expenditures [195]. - Net cash provided by financing activities for the nine months ended March 28, 2025, included $2.15 billion from drawing on credit facilities, partially offset by $1.37 billion transferred to Sandisk [196]. Business Separation and Future Outlook - The company completed the separation of its HDD and Flash business units on February 21, 2025, creating two independent public companies [156]. - The company anticipates that digital transformation, including the artificial intelligence data-cycle, will drive improved market conditions in the long term [159]. - The company expects to monetize its 19.9% stake in Sandisk within one year from the separation date [156]. Inventory and Receivables Management - For the three months ended March 28, 2025, Days Sales Outstanding (DSO) increased by 7 days to 58 days, primarily due to lower trade accounts receivable factoring and timing of shipments [194]. - Days in Inventory (DIO) decreased by 24 days to 86 days, reflecting higher consumption of inventory driven by increased sales [194]. - Days Payable Outstanding (DPO) increased by 10 days to (85) days, attributed to more favorable payment terms and timing of purchases [194]. Tax and Regulatory Matters - The liability for unrecognized tax benefits as of March 28, 2025, was $561 million, with potential cash payments of approximately $476 million [200]. - The estimated mandatory deemed repatriation tax obligation as of March 28, 2025, was $331 million, expected to be paid within the next twelve months [214]. Capital Structure and Dividends - A quarterly cash dividend program was authorized, with a declared dividend of $0.10 per share to be paid on June 18, 2025 [204]. - The company issued $1.60 billion in convertible senior notes in November 2023, maturing on November 15, 2028, with an annual interest rate of 3.00% [206]. - As of March 28, 2025, the company had $1.25 billion available for borrowing under its revolving credit facility maturing in January 2027 [208]. Asset Management - As of March 28, 2025, current assets increased to $5,313 million from $2,149 million on June 28, 2024, while non-current assets rose to $4,677 million from $2,208 million [212]. - Intercompany revenue for the nine months ended March 28, 2025, was $1,128 million, down from $1,416 million for the year ended June 28, 2024 [212]. Accounting Policies - There have been no material changes in critical accounting policies and estimates from those disclosed in the 2024 Annual Report [221]. - The company has begun capitalizing and amortizing R&D expenses since 2023, which may lead to higher cash tax payments in future profitable periods [215]. - The company utilizes foreign exchange contracts to hedge against currency fluctuations affecting operating expenses and product costs [216].

Core Viewpoint - Western Digital reported quarterly earnings of $1.36 per share, exceeding the Zacks Consensus Estimate of $1.22 per share, and showing significant growth from $0.63 per share a year ago [1][2] Financial Performance - The company achieved revenues of $2.29 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 2.07%, but down from $3.46 billion year-over-year [3] - Over the last four quarters, Western Digital has exceeded consensus EPS estimates four times and revenue estimates twice [2][3] Stock Performance - Western Digital shares have declined approximately 31.9% since the beginning of the year, compared to a 5.5% decline in the S&P 500 [4] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating expectations of underperformance in the near future [7] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.34 on revenues of $2.38 billion, and for the current fiscal year, it is $4.62 on revenues of $9.24 billion [8] - The estimate revisions trend for Western Digital has been unfavorable leading up to the earnings release [7] Industry Context - The Computer-Storage Devices industry, to which Western Digital belongs, is currently ranked in the bottom 36% of over 250 Zacks industries, suggesting potential challenges ahead [9]

Financial Data and Key Metrics Changes - For the third fiscal quarter, the company reported revenue of $2.3 billion, down 5% sequentially but up 31% year over year [15] - Non-GAAP gross margin was 40.1%, reflecting a sequential improvement of 1.7 percentage points [17] - Non-GAAP earnings per share (EPS) was $1.36, driven by disciplined cost management and tax benefits [15][17] - Free cash flow for the quarter was $436 million [20] Business Line Data and Key Metrics Changes - Cloud business represented 87% of total revenue at $2 billion, down 4% sequentially but up 38% year over year [16] - Client business accounted for 6% of total revenue at $137 million, down 2% sequentially and year over year [16] - Consumer segment represented 7% of revenue at $150 million, down 13% sequentially and 4% year over year [17] Market Data and Key Metrics Changes - Nearline bit shipments decreased by 6% sequentially to 145 exabytes, while average price per unit increased by 4% sequentially to $179 [16] - Demand from hyperscale customers remains robust despite broader market uncertainties [12][13] Company Strategy and Development Direction - The company is focused on three pillars for capital allocation: reinvestment in the business, debt reduction, and returning cash to shareholders [11] - The introduction of a quarterly dividend of $0.10 per share reflects confidence in long-term cash generation ability [21] - The company is addressing tariff-related challenges through cross-functional teams and strategic evaluations of supply chain shifts [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current uncertain environment driven by tariffs and global trade tensions but remains optimistic about data center demand [12][14] - The company expects sequential revenue growth in the fiscal fourth quarter, driven by sustained strength in data center demand [14] - Management emphasized the importance of long-term agreements with hyperscale customers for better visibility and planning [13][32] Other Important Information - The company successfully redeemed $1.8 billion of its 2026 senior notes, strengthening its balance sheet [11][20] - The effective tax rate for the fiscal third quarter was 2%, lower than expected due to one-time deferred tax benefits [19] Q&A Session Summary Question: Inquiry about capital allocation and dividend growth - Management stated that once net leverage is reduced to the target range of 1.0-1.5x, they intend to return 100% of excess cash to shareholders through dividends and share buybacks [28] Question: Visibility on revenue margins and EPS growth - Management indicated that long-term agreements with customers provide greater visibility and confidence in strong demand through 2025 and into 2026 [32] Question: Clarification on tariff impacts - Management noted that while there is demand uncertainty in certain segments due to tariffs, they do not anticipate direct tariff impacts on pricing or costs in Q4 [36] Question: Discussion on gross margin expectations - Management highlighted that strong gross margins are driven by technology value and operational discipline, with potential for continued expansion [40][73] Question: Insights on LTAs and their benefits - Management explained that LTAs provide critical visibility and help maintain supply-demand balance, with agreements extending from three to six months to nine to twelve months [87] Question: Commentary on exabyte growth and capacity - Management stated that exabyte growth is primarily driven by technology improvements, allowing for capacity increases without significant capital expenditures [46] Question: Future of non-enterprise and non-cloud markets - Management confirmed that these markets remain a material part of the business, with ongoing efforts to drive growth in those areas [98]

Financial Data and Key Metrics Changes - For the third fiscal quarter, the company reported revenue of $2.3 billion, down 5% sequentially but up 31% year over year [12] - Non-GAAP gross margin was 40.1%, an improvement of 1.7 percentage points sequentially [14] - Non-GAAP earnings per share (EPS) was $1.36, driven by disciplined cost management and tax benefits [12][14] - Free cash flow for the quarter was $436 million [17] Business Line Data and Key Metrics Changes - Cloud business represented 87% of total revenue at $2 billion, down 4% sequentially but up 38% year over year [13] - Client business accounted for 6% of total revenue at $137 million, down 2% sequentially and year over year [13] - Consumer segment represented 7% of revenue at $150 million, down 13% sequentially and 4% year over year [14] Market Data and Key Metrics Changes - Nearline bit shipments decreased by 6% sequentially to 145 exabytes, while average price per unit increased by 4% to $179 [12][13] - Demand from hyperscale customers remains robust despite broader market uncertainties [10] Company Strategy and Development Direction - The company is focused on three pillars for capital allocation: reinvestment in the business, debt reduction, and returning cash to shareholders [8] - The introduction of a quarterly dividend of $0.10 per share reflects confidence in long-term cash generation [18] - The company is committed to innovation in HDD technology, with a focus on high-capacity drives and energy efficiency [6] Management's Comments on Operating Environment and Future Outlook - The current environment is characterized by uncertainty due to tariffs and global trade tensions, but demand from hyperscale customers remains strong [9][10] - The company expects sequential revenue growth in the fiscal fourth quarter, driven by data center demand [10][11] - Management expressed confidence in navigating the dynamic environment and maintaining a healthy supply-demand balance [20] Other Important Information - The company successfully redeemed $1.8 billion of its 2026 senior notes, strengthening its balance sheet [8][17] - The effective tax rate for the fiscal third quarter was 2%, lower than expected due to one-time deferred tax benefits [16] Q&A Session Summary Question: Inquiry about capital allocation and dividend growth - Management indicated that once the net leverage is reduced to the target range of 1.0 to 1.5x, they plan to return 100% of excess cash to shareholders through dividends and share buybacks [25][26] Question: Visibility into revenue margins and EPS growth - Management noted that long-term agreements with hyperscale customers provide greater visibility, suggesting strong demand through 2025 and into 2026 [28][30] Question: Clarification on tariff impacts - Management stated that while there are no direct tariff impacts anticipated, there is demand uncertainty in certain segments due to market volatility [34][36] Question: Discussion on gross margins and pricing dynamics - Management confirmed that gross margins are driven by technology value and operational discipline, with expectations for continued strength [38][40] Question: Insights on manufacturing capacity and exabyte growth - Management highlighted that exabyte growth is primarily driven by technology improvements rather than additional manufacturing capacity [44][53] Question: Update on HAMR technology and customer engagement - Management expects to start qualification for HAMR technology in the second half of 2026, with production ramp-up planned for early 2027 [78][80] Question: Concerns about hyperscaler demand and potential double ordering - Management reassured that there are no signs of double ordering and that demand patterns align with long-term agreements [67][69]

Financial Performance - Western Digital reported revenue of $2.3 billion[5] - The company's non-GAAP EPS was $1.36[5] - Non-GAAP gross margin reached 40.1%[5] - Operating cash flow was $508 million[5] - Free cash flow amounted to $436 million[5] - Cash and cash equivalents totaled $3.5 billion[5] Capital Allocation - Western Digital successfully redeemed $1.8 billion of its 4.750% Sr Unsecured Notes due 2026 on April 14, 2025[5] - The Board of Directors authorized a quarterly cash dividend program and declared a cash dividend of $0.10 per share[5] Revenue Trends - Cloud revenue was $2.0 billion, a decrease of 4% QoQ but an increase of 38% YoY[8] - Client revenue was $137 million, a decrease of 2% QoQ and 2% YoY[8] - Consumer revenue was $150 million, a decrease of 13% QoQ and 4% YoY[8] Q4 Fiscal Year 2025 Guidance - Revenue is expected to be $2.45 billion, plus or minus $150 million[19] - Non-GAAP EPS is guided at $1.45, plus or minus $0.20[19]

[News Summary & Highlights](index=1&type=section&id=News%20Summary%20%26%20Highlights) Summarizes CEO's statement, Q3 FY2025 financial highlights, dividend, and Q4 FY2025 business outlook [CEO Statement & Strategic Context](index=1&type=section&id=CEO%20Statement%20%26%20Strategic%20Context) CEO Irving Tan highlighted strong Q3 FY2025 performance, with revenue at guidance's high end and gross margin over **40%** - CEO Irving Tan stated the company performed well in Q3 FY2025, with revenue at the high end of guidance and gross margin exceeding **40%**[3](index=3&type=chunk) - Emphasized exponential data growth, HDD technology's cost-effectiveness and reliability for scaled storage, and the company's product portfolio meeting customer demands[3](index=3&type=chunk) [Fiscal Q3 2025 Key Financial Highlights](index=1&type=section&id=Fiscal%20Q3%202025%20Key%20Financial%20Highlights) Q3 FY2025 revenue was **$2.29 billion**, down **5% sequentially**, with GAAP diluted EPS at **$2.11** and Non-GAAP at **$1.36** Fiscal Q3 2025 Key Financial Data | Metric | Amount/Ratio | | :--------------------- | :---------- | | Revenue | $2.29 billion | | Revenue Sequential Change | down 5% | | GAAP EPS | $2.11 | | Non-GAAP EPS | $1.36 | - Cloud business revenue decreased **4% sequentially**, client business revenue decreased **2% sequentially**, and consumer business revenue decreased **13% sequentially**[4](index=4&type=chunk) [Dividend Program Announcement](index=1&type=section&id=Dividend%20Program%20Announcement) The Board approved a quarterly cash dividend program, declaring a **$0.10 per share** cash dividend payable June 18, 2025 - The Board authorized a quarterly cash dividend program commencing with the quarter ending June 27, 2025[3](index=3&type=chunk)[4](index=4&type=chunk) - Declared a cash dividend of **$0.10 per share** of common stock, payable on June 18, 2025, to shareholders of record as of June 4, 2025[3](index=3&type=chunk)[4](index=4&type=chunk) [Fiscal Q4 2025 Business Outlook Summary](index=1&type=section&id=Fiscal%20Q4%202025%20Business%20Outlook%20Summary) Q4 FY2025 revenue is projected around **$2.45 billion** (plus/minus **$150 million**), with Non-GAAP diluted EPS around **$1.45** (plus/minus **$0.20**) Fiscal Q4 2025 Business Outlook | Metric | Expected Range | | :--------------------- | :-------------------- | | Revenue | $2.45 billion +/- $150 million | | Non-GAAP EPS | $1.45 +/- $0.20 | [Fiscal Q3 2025 Financial Performance](index=2&type=section&id=Fiscal%20Q3%202025%20Financial%20Performance) Details Q3 FY2025 consolidated financial highlights, including GAAP and Non-GAAP metrics, and end market revenue performance [Consolidated Financial Highlights (GAAP & Non-GAAP)](index=2&type=section&id=Consolidated%20Financial%20Highlights%20(GAAP%20%26%20Non-GAAP)) Q3 FY2025 revenue was **$2,294 million**, down **5% sequentially** and up **31% year-over-year**, with GAAP gross margin **39.8%** and Non-GAAP **40.1%** Fiscal Q3 2025 Consolidated Financial Highlights | Metric | Q3 2025 (GAAP) | Q2 2025 (GAAP) | Q/Q Change | Q3 2024 (GAAP) | Y/Y Change | | :---------------------------------- | :------------- | :------------- | :------- | :------------- | :------- | | Revenue | $2,294M | $2,409M | down 5% | $1,752M | up 31% | | Gross Margin | 39.8% | 37.7% | up 2.1 ppt | 29.6% | up 10.2 ppt | | Operating Expenses | $152M | $347M | down 56% | $425M | down 64% | | Operating Income | $760M | $560M | up 36% | $94M | up 709% | | Diluted Net Income Attributable to Common Stockholders | $755M | $455M | up 66% | N/A | N/A | | Net Income Per Share | $2.11 | $1.27 | up 66% | N/A | N/A | | Metric | Q3 2025 (Non-GAAP) | Q2 2025 (Non-GAAP) | Q/Q Change | Q3 2024 (Non-GAAP) | Y/Y Change | | :---------------------------------- | :----------------- | :----------------- | :------- | :----------------- | :------- | | Revenue | $2,294M | $2,409M | down 5% | $1,752M | up 31% | | Gross Margin | 40.1% | 38.4% | up 1.7 ppt | 30.1% | up 10.0 ppt | | Operating Expenses | $324M | $335M | down 3% | $375M | down 14% | | Operating Income | $596M | $591M | up 1% | $153M | up 290% | | Diluted Net Income Attributable to Common Stockholders | $487M | $420M | up 16% | N/A | N/A | | Net Income Per Share | $1.36 | $1.18 | up 15% | N/A | N/A | - The company generated **$508 million** in operating cash flow this quarter, with total cash and cash equivalents at **$3.48 billion** at period-end[5](index=5&type=chunk) [End Market Revenue Summary](index=3&type=section&id=End%20Market%20Revenue%20Summary) Q3 FY2025 total revenue was **$2,294 million**, down **5% sequentially** and up **31% year-over-year**, with Cloud **87%**, Client **6%**, and Consumer **7%** Fiscal Q3 2025 End Market Revenue | Revenue ($M) | Q3 2025 | Q2 2025 | Q/Q | Q3 2024 | Y/Y | | :---------- | :------ | :------ | :-- | :------ | :-- | | Cloud | $2,007 | $2,096 | down 4% | $1,455 | up 38% | | Client | 137 | 140 | down 2% | 140 | down 2% | | Consumer | 150 | 173 | down 13% | 157 | down 4% | | Total Revenue | $2,294 | $2,409 | down 5% | $1,752 | up 31% | [Cloud Segment Performance](index=3&type=section&id=Cloud%20Segment%20Performance) Cloud segment revenue was **$2 billion**, **87%** of total, with a **4% sequential decrease** and **38% year-over-year increase** - Cloud business revenue was **$2 billion**, accounting for **87% of total revenue**, decreasing **4% sequentially** and increasing **38% year-over-year**[7](index=7&type=chunk) - Sequential decline primarily due to a **6% decrease** in nearline bit shipments, offset by a **5% increase** in cloud unit pricing[7](index=7&type=chunk) - Year-over-year growth driven by product portfolio strength, with revenue up **38%** and bit shipments up **32%**[7](index=7&type=chunk) [Client Segment Performance](index=3&type=section&id=Client%20Segment%20Performance) Client segment revenue was **$137 million**, **6%** of total, with a **2% sequential and year-over-year decrease** - Client business revenue was **$137 million**, accounting for **6% of total revenue**, decreasing **2% both sequentially and year-over-year**[7](index=7&type=chunk) - Revenue decline primarily attributed to reduced unit shipments[7](index=7&type=chunk) [Consumer Segment Performance](index=3&type=section&id=Consumer%20Segment%20Performance) Consumer segment revenue was **$150 million**, **7%** of total, with a **13% sequential decrease** and **4% year-over-year decrease** - Consumer business revenue was **$150 million**, accounting for **7% of total revenue**, decreasing **13% sequentially** and **4% year-over-year**[7](index=7&type=chunk) - Sequential decline primarily due to reduced unit shipments; year-over-year decline mainly due to pricing[7](index=7&type=chunk) [Fiscal Q4 2025 Business Outlook](index=4&type=section&id=Fiscal%20Q4%202025%20Business%20Outlook) Outlines performance guidance for the three months ending June 27, 2025, including Non-GAAP adjustments [Guidance for Three Months Ending June 27, 2025](index=4&type=section&id=Guidance%20for%20Three%20Months%20Ending%20June%2027,%202025) Q4 FY2025 guidance projects revenue around **$2.45 billion**, Non-GAAP gross margin **40.0% to 41.0%**, and Non-GAAP diluted EPS around **$1.45** Fiscal Q4 2025 Business Outlook | Metric | GAAP (Three Months Ending June 27, 2025) | Non-GAAP (Three Months Ending June 27, 2025) | | :-------------------------- | :----------------------- | :-------------------------- | | Revenue | $2.45B +/- $150M | $2.45B +/- $150M | | Gross Margin | 39.5% - 40.5% | 40.0% - 41.0% | | Operating Expenses ($M) | $385 - $395 | $330 - $340 | | Interest and Other Expense, Net ($M) | ~ $70 | ~ $70 | | Tax Rate | N/A | 8.0% - 10.0% | | Diluted EPS | N/A | $1.45 +/- $0.20 | | Diluted Shares Outstanding (Millions) | ~ 360 | ~ 360 | [Non-GAAP Guidance Adjustments Explanation](index=4&type=section&id=Non-GAAP%20Guidance%20Adjustments%20Explanation) Non-GAAP guidance excludes stock-based compensation and other items totaling **$60-75 million** for diluted EPS, with no full GAAP reconciliation due to unpredictable timing and amounts - Non-GAAP gross margin guidance excludes approximately **$10 million to $15 million** in stock-based compensation expense[8](index=8&type=chunk) - Non-GAAP operating expense guidance excludes approximately **$50 million to $60 million** in stock-based compensation and other expenses[8](index=8&type=chunk) - Non-GAAP diluted EPS guidance collectively excludes **$60 million to $75 million** for these items[8](index=8&type=chunk) - A full reconciliation of Non-GAAP measures to the most directly comparable GAAP financial measures cannot be provided due to the inability to reasonably predict the timing and amounts of certain adjusting items[8](index=8&type=chunk) [Corporate Information & Disclosures](index=5&type=section&id=Corporate%20Information%20%26%20Disclosures) Covers Sandisk separation basis, dividend program details, investor communications, company overview, and forward-looking statements [Basis of Presentation: Sandisk Separation](index=5&type=section&id=Basis%20of%20Presentation:%20Sandisk%20Separation) Western Digital completed the Sandisk Flash business separation on February 21, 2025; Sandisk is now independent, and its historical results are discontinued operations - Western Digital Corporation completed the separation of its Flash business unit, Sandisk Corporation, on February 21, 2025[10](index=10&type=chunk) - Sandisk is now an independent public company, and its financial and operating results post-separation are no longer consolidated into WDC's financial statements[10](index=10&type=chunk)[11](index=11&type=chunk) - Sandisk's historical results and financial position prior to the separation date are presented as discontinued operations in WDC's preliminary condensed consolidated balance sheets and statements of operations[11](index=11&type=chunk) [Dividend Program Details](index=5&type=section&id=Dividend%20Program%20Details) Future dividend amounts and timing depend on market conditions and company considerations; the program may be suspended or terminated anytime - The amount and timing of future dividends will depend on market conditions and other company considerations[12](index=12&type=chunk) - The company may suspend or terminate the dividend program at any time[12](index=12&type=chunk) [Investor Communications](index=5&type=section&id=Investor%20Communications) An investor conference call will discuss results and Q4 FY2025 outlook today, with webcast, archive, and presentation available at investor.wdc.com - An investor conference call will be held today at 5:30 AM PT/8:30 AM ET to discuss results and the business outlook[13](index=13&type=chunk) - A live webcast, archive, and earnings presentation are accessible online at investor.wdc.com[13](index=13&type=chunk) [About Western Digital](index=5&type=section&id=About%20Western%20Digital) Western Digital empowers data-dependent systems, providing high-capacity, high-quality, low TCO storage for cloud, enterprise, and consumers, while designing climate-conscious technology - Western Digital empowers data-dependent systems and people, offering high-capacity, high-quality, and low total cost of ownership storage products[14](index=14&type=chunk) - Customers include hyperscale cloud providers, enterprise data centers, content professionals, and global consumers[14](index=14&type=chunk) - The company is committed to designing storage technologies that meet data needs and contribute to a climate-conscious future[14](index=14&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements on Q4 FY2025 outlook, operations, financial performance, and dividend plans, subject to risks and uncertainties that could cause actual results to differ materially - This press release contains forward-looking statements concerning the company's business outlook, operations, financial performance, data growth, product demand, market conditions, and dividend payment plans for Q4 FY2025 and beyond[15](index=15&type=chunk)[16](index=16&type=chunk) - These statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated[15](index=15&type=chunk)[16](index=16&type=chunk) - Key risks and uncertainties include adverse global or regional conditions, fluctuating product demand, inflation, rising interest rates, economic recession, global health crisis impacts, business and market conditions, effects of HDD and Flash business separation, competitive products and pricing, new technology development and introduction, cost-saving initiatives, restructuring, M&A, supply chain disruptions, key employee retention, debt levels, changes in key customer relationships, cybersecurity incidents, dividend payment decisions, sustainability goals, international conflicts, legal and regulatory compliance risks, and other risks outlined in the company's SEC filings[16](index=16&type=chunk) [Preliminary Condensed Consolidated Financial Statements (GAAP)](index=7&type=section&id=Preliminary%20Condensed%20Consolidated%20Financial%20Statements%20(GAAP)) Presents preliminary condensed consolidated GAAP financial statements, including balance sheets, statements of operations, earnings per share, and cash flows [Balance Sheets](index=7&type=section&id=Balance%20Sheets) As of March 28, 2025, total assets were **$16.368 billion**, down from **$24.188 billion** due to Sandisk separation, with cash increasing to **$3.477 billion** Preliminary Condensed Consolidated Balance Sheets (Unaudited) | Metric | March 28, 2025 ($M) | June 28, 2024 ($M) | | :---------------------------------- | :------------------ | :------------------ | | **Assets** | | | | Cash and Cash Equivalents | $3,477 | $1,551 | | Inventories | $1,311 | $1,387 | | Retained Interest in Sandisk | $1,412 | — | | Current Assets of Discontinued Operations | — | $3,531 | | Total Current Assets | $8,086 | $8,060 | | Property, Plant and Equipment, Net | $2,347 | $2,359 | | Goodwill | $4,319 | $4,319 | | Non-Current Assets of Discontinued Operations | — | $8,613 | | **Total Assets** | **$16,368** | **$24,188** | | **Liabilities, Convertible Preferred Stock and Stockholders' Equity** | | | | Total Current Liabilities | $5,182 | $6,087 | | Long-Term Debt | $4,907 | $5,684 | | Non-Current Liabilities of Discontinued Operations | — | $368 | | **Total Liabilities** | **$10,962** | **$13,141** | | Convertible Preferred Stock | $229 | $229 | | **Total Stockholders' Equity** | **$5,177** | **$10,818** | | **Total Liabilities, Convertible Preferred Stock and Stockholders' Equity** | **$16,368** | **$24,188** | - Total assets decreased from **$24.188 billion** on June 28, 2024, to **$16.368 billion** on March 28, 2025, primarily impacted by the Sandisk separation[19](index=19&type=chunk) - Cash and cash equivalents increased from **$1.551 billion** to **$3.477 billion**[19](index=19&type=chunk) [Statements of Operations](index=8&type=section&id=Statements%20of%20Operations) Q3 FY2025 revenue was **$2,294 million**, gross profit **$912 million**, operating income **$760 million**, and net income **$520 million** (continuing operations **$772 million**, discontinued loss **$252 million**) Preliminary Condensed Consolidated Statements of Operations (Unaudited) | Metric | March 28, 2025 (Three Months) ($M) | March 29, 2024 (Three Months) ($M) | | :---------------------------------- | :-------------------------- | :-------------------------- | | Revenue, Net | $2,294 | $1,752 | | Cost of Sales | $1,382 | $1,233 | | Gross Profit | $912 | $519 | | Total Operating Expenses | $152 | $425 | | Operating Income (Loss) | $760 | $94 | | Interest and Other Expense, Net | $(686) | $(106) | | Income (Loss) Before Income Taxes | $74 | $(12) | | Income Tax Benefit | $(698) | $(4) | | Net Income (Loss) from Continuing Operations | $772 | $(8) | | Net Income (Loss) from Discontinued Operations, Net of Tax | $(252) | $143 | | **Net Income (Loss)** | **$520** | **$135** | - Net income from continuing operations was **$772 million**, while net loss from discontinued operations was **$252 million**[20](index=20&type=chunk) [Earnings (Loss) Per Common Share](index=9&type=section&id=Earnings%20(Loss)%20Per%20Common%20Share) Q3 FY2025 GAAP diluted EPS from continuing operations was **$2.11**, diluted loss from discontinued operations **$0.69**, totaling **$1.42** diluted EPS Preliminary Earnings (Loss) Per Common Share (Unaudited) | Metric | March 28, 2025 (Three Months) | March 29, 2024 (Three Months) | | :------------------------------------------------ | :---------------------- | :---------------------- | | Net Income Attributable to Common Stockholders from Continuing Operations - Diluted ($M) | $755 | $(22) | | Net Income (Loss) from Discontinued Operations, Net of Tax ($M) | $(248) | $135 | | Net Income (Loss) Attributable to Common Stockholders - Diluted ($M) | $507 | $113 | | Diluted Weighted-Average Shares Outstanding (Millions) | 358 | 335 | | Earnings Per Common Share from Continuing Operations - Diluted | $2.11 | $(0.07) | | Earnings (Loss) Per Common Share from Discontinued Operations - Diluted | $(0.69) | $0.41 | | **Earnings (Loss) Per Common Share - Diluted** | **$1.42** | **$0.34** | - GAAP diluted EPS from continuing operations was **$2.11**, and diluted loss per share from discontinued operations was **$0.69**[22](index=22&type=chunk) [Statements of Cash Flows](index=10&type=section&id=Statements%20of%20Cash%20Flows) Q3 FY2025 operating activities generated **$508 million**, investing **$142 million**, and financing **$533 million**, with period-end cash at **$3.477 billion**, an increase of **$1.186 billion** Preliminary Condensed Consolidated Statements of Cash Flows (Unaudited) | Metric | March 28, 2025 (Three Months) ($M) | March 29, 2024 (Three Months) ($M) | | :---------------------------------- | :-------------------------- | :-------------------------- | | Net Cash Provided by (Used in) Operating Activities | $508 | $58 | | Net Cash Provided by Investing Activities | $142 | $7 | | Net Cash Provided by (Used in) Financing Activities | $533 | $(645) | | Effect of Exchange Rate Changes | $3 | $(7) | | Net Increase (Decrease) in Cash and Cash Equivalents | $1,186 | $(587) | | Cash and Cash Equivalents at Beginning of Period | $2,291 | $2,481 | | **Cash and Cash Equivalents at End of Period** | **$3,477** | **$1,894** | - Net cash provided by operating activities was **$508 million**, by investing activities **$142 million**, and by financing activities **$533 million**[23](index=23&type=chunk) - Cash and cash equivalents at period-end totaled **$3.477 billion**, an increase of **$1.186 billion** from the beginning of the period[23](index=23&type=chunk) [Reconciliation of GAAP to Non-GAAP Financial Measures](index=11&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) Provides GAAP to Non-GAAP reconciliations for gross profit, operating expenses, operating income, net income, diluted EPS, and free cash flow, with adjustment explanations [Non-GAAP Gross Profit and Operating Expenses Reconciliation](index=11&type=section&id=Non-GAAP%20Gross%20Profit%20and%20Operating%20Expenses%20Reconciliation) Q3 FY2025 GAAP gross profit was **$912 million** (Non-GAAP **$920 million**), and GAAP operating expenses **$152 million** (Non-GAAP **$324 million**), after adjustments Non-GAAP Gross Profit Reconciliation | Metric | March 28, 2025 (Three Months) ($M) | | :-------------------------- | :-------------------------- | | GAAP Gross Profit | $912 | | Stock-based Compensation Expense | $7 | | Litigation Matter | — | | Other | $1 | | **Non-GAAP Gross Profit** | **$920** | Non-GAAP Operating Expenses Reconciliation | Metric | March 28, 2025 (Three Months) ($M) | | :-------------------------- | :-------------------------- | | GAAP Operating Expenses | $152 | | Stock-based Compensation Expense | $(28) | | Litigation Matter | $201 | | Employee Termination, Asset Impairment and Other | — | | Strategic Review | — | | Other | $(1) | | **Non-GAAP Operating Expenses** | **$324** | [Non-GAAP Operating Income, Interest & Other, and Income Tax Reconciliation](index=11&type=section&id=Non-GAAP%20Operating%20Income,%20Interest%20%26%20Other,%20and%20Income%20Tax%20Reconciliation) Q3 FY2025 GAAP operating income was **$760 million** (Non-GAAP **$596 million**), interest and other **-$686 million** (Non-GAAP **-$84 million**), and income tax benefit **-$698 million** (Non-GAAP expense **$12 million**) Non-GAAP Operating Income Reconciliation | Metric | March 28, 2025 (Three Months) ($M) | | :-------------------------- | :-------------------------- | | GAAP Operating Income (Loss) | $760 | | Gross Profit Adjustments | $8 | | Operating Expense Adjustments | $(172) | | **Non-GAAP Operating Income** | **$596** | Non-GAAP Interest and Other Expense Reconciliation | Metric | March 28, 2025 (Three Months) ($M) | | :-------------------------- | :-------------------------- | | GAAP Interest and Other Expense, Net | $(686) | | Unrealized Loss on Retained Interest in Sandisk | $606 | | Litigation Matter | $(6) | | Other | $2 | | **Non-GAAP Interest and Other Expense, Net** | **$(84)** | Non-GAAP Income Tax Reconciliation | Metric | March 28, 2025 (Three Months) ($M) | | :-------------------------- | :-------------------------- | | GAAP Income Tax Benefit | $(698) | | Income Tax Adjustments | $710 | | **Non-GAAP Income Tax Expense** | **$12** | [Non-GAAP Net Income and Diluted EPS Reconciliation](index=12&type=section&id=Non-GAAP%20Net%20Income%20and%20Diluted%20EPS%20Reconciliation) Q3 FY2025 GAAP net income was **$772 million**, adjusted to **$500 million** Non-GAAP, resulting in Non-GAAP diluted EPS of **$1.36** versus GAAP diluted EPS of **$2.11** Non-GAAP Net Income Reconciliation | Metric | March 28, 2025 (Three Months) ($M) | | :------------------------------------------ | :-------------------------- | | GAAP Net Income | $772 | | Stock-based Compensation Expense | $35 | | Litigation Matter | $(207) | | Employee Termination, Asset Impairment and Other | — | | Unrealized Loss on Retained Interest in Sandisk | $606 | | Other | $4 | | Income Tax Adjustments | $(710) | | **Non-GAAP Net Income** | **$500** | | Less: Amount Allocated to Preferred Stockholders | $13 | | **Non-GAAP Diluted Net Income Attributable to Common Stockholders** | **$487** | Diluted Earnings Per Common Share Reconciliation | Metric | March 28, 2025 (Three Months) | | :-------------------------- | :-------------------------- | | GAAP Diluted EPS | $2.11 | | **Non-GAAP Diluted EPS** | **$1.36** | [Non-GAAP Free Cash Flow Reconciliation](index=12&type=section&id=Non-GAAP%20Free%20Cash%20Flow%20Reconciliation) Q3 FY2025 operating cash flow was **$508 million**, resulting in **$436 million** free cash flow after deducting **$128 million** for capital expenditures and **$56 million** for Flash Ventures Non-GAAP Free Cash Flow Reconciliation | Metric | March 28, 2025 (Three Months) ($M) | | :------------------------------------------ | :-------------------------- | | Net Cash Provided by (Used in) Operating Activities | $508 | | Net Additions to Property, Plant and Equipment | $(128) | | Flash Ventures Related Activities, Net | $56 | | **Free Cash Flow** | **$436** | [Notes to Non-GAAP Reconciliations](index=13&type=section&id=Notes%20to%20Non-GAAP%20Reconciliations) Non-GAAP measures supplement GAAP by excluding non-core expenses, gains, and losses, offering insights into profitability and comparisons, including stock-based compensation, litigation, asset impairment, strategic review, Sandisk retained interest losses, and tax adjustments - Non-GAAP measures provide investors with useful information for evaluating the company's profitability and period-over-period comparisons by excluding certain expenses, gains, and losses not representative of core operating performance[27](index=27&type=chunk) - These measures are among the primary indicators management uses to evaluate company performance and plan for future periods but should not be considered a substitute for, or superior to, GAAP results[27](index=27&type=chunk) [Stock-based Compensation Expense](index=13&type=section&id=Stock-based%20Compensation%20Expense) Excluding stock-based compensation aids in understanding underlying business performance and comparability with peers - Excluding stock-based compensation expense helps management and investors understand and evaluate the company's underlying business performance and comparability with peers[28](index=28&type=chunk) [Litigation Matter](index=14&type=section&id=Litigation%20Matter) Excluding patent litigation expenses and reversals, as they do not reflect operating results or underlying business performance - Excluding expenses and reversals related to patent litigation matters, as these do not reflect the company's operating results or underlying business performance[29](index=29&type=chunk) [Employee Termination, Asset Impairment and Other](index=14&type=section&id=Employee%20Termination,%20Asset%20Impairment%20and%20Other) Excluding expenses or credits from employee terminations, asset impairments, sales, or prior period reversals due to inconsistent amounts and frequency - Excluding expenses or credits from employee terminations, asset impairments, gains on asset sales, or reversals of prior period expenses, as their amounts and frequency are inconsistent and do not represent the underlying business performance[30](index=30&type=chunk) [Strategic Review](index=14&type=section&id=Strategic%20Review) Excluding strategic review expenses for HDD and Flash business separation, as they do not reflect operating results or underlying business performance - Excluding strategic review expenses related to the separation of the HDD and Flash business units, as they do not reflect the company's operating results or underlying business performance[31](index=31&type=chunk) [Unrealized Loss on Retained Interest in Sandisk](index=14&type=section&id=Unrealized%20Loss%20on%20Retained%20Interest%20in%20Sandisk) Excluding unrealized losses from Sandisk retained interest fair value adjustments, as they do not reflect operating results or underlying business performance - Excluding unrealized losses arising from fair value adjustments of the retained interest in Sandisk, as these do not reflect the company's operating results or underlying business performance[32](index=32&type=chunk) [Other Adjustments](index=14&type=section&id=Other%20Adjustments) Excluding expenses or gains from non-core asset sales/impairments or other non-ongoing items due to inconsistent amounts and frequency - Excluding expenses or gains from the sale or impairment of non-core business investments or other assets, or other expenses or benefits not part of ongoing operations, due to their inconsistent amounts and frequency[33](index=33&type=chunk) [Income Tax Adjustments](index=15&type=section&id=Income%20Tax%20Adjustments) Income tax adjustments include Non-GAAP vs GAAP tax rate differences, Flash business separation restructuring, and remeasurement of unrecognized tax benefits - Income tax adjustments include differences between the projected Non-GAAP tax rate and the GAAP tax rate, as well as internal restructuring related to the Flash business separation and the remeasurement of certain unrecognized tax benefits[34](index=34&type=chunk) - These adjustments are excluded as they do not represent the underlying performance of the company's continuing operations[34](index=34&type=chunk) [Free Cash Flow Definition](index=15&type=section&id=Free%20Cash%20Flow%20Definition) Free cash flow is operating cash flow less net property, plant, and equipment additions and Flash Ventures related activities - Free cash flow is defined as cash flow provided by (used in) operating activities less net additions to property, plant, and equipment and Flash Ventures related activities[35](index=35&type=chunk) - Free cash flow is considered a useful indicator of cash available for strategic opportunities such as investing in the business, strategic acquisitions, debt repayment, and strengthening the balance sheet[35](index=35&type=chunk) [Contacts](index=16&type=section&id=Contacts) Provides contact information for Western Digital's investor relations and media relations teams [Investor and Media Contacts](index=16&type=section&id=Investor%20and%20Media%20Contacts) Provides contact information for Western Digital's investor relations and media relations, including names, phone numbers, and email addresses - Investor Contact: Ambrish Srivastava, Phone: 408.717.9765, Email: investor@wdc.com, ambrish.srivastava@wdc.com[36](index=36&type=chunk) - Media Contact: Media Relations, Phone: 408.801.0021, Email: WD.Mediainquiries@wdc.com[36](index=36&type=chunk)