Summary of Western Digital FY Conference Call Company Overview - **Company**: Western Digital (NasdaqGS: WDC) - **Date of Conference**: December 09, 2025 Key Industry Insights - **Industry**: Data Storage, specifically focusing on Hard Disk Drives (HDDs) and the impact of AI on storage demand Core Points and Arguments 1. **Strong Demand for HDDs**: Demand for HDDs has been strong for the last three to four quarters, driven by the transition from on-prem storage to cloud storage, which is growing at a mid-teens exabyte growth rate [4][5][7] 2. **AI Impact on Data Storage**: The value of data is increasing due to AI, leading to more data being stored. Data generation rates are expected to triple over the next three years, with the percentage of stored data increasing from 2%-3% to mid-single digits [7][8] 3. **Video as a Storage Driver**: Video storage remains a significant driver, with applications in both consumer and industrial sectors, such as autonomous vehicles, which require extensive data storage for telemetry and training models [9][10][12] 4. **Hyperscaler Demand**: The majority of demand is coming from established hyperscalers rather than new AI-native vendors. These hyperscalers are focusing on investments in GPUs and memory but still rely on traditional storage solutions [15][21] 5. **Exabyte Growth Projections**: Western Digital projects a compound annual growth rate (CAGR) of 15%-23% for exabyte growth, with recent trends suggesting growth rates in the mid-20% range [22][23] 6. **Supply Discipline**: The company is not adding unit capacity but is focusing on improving areal density, which allows for higher storage capacity per drive. Current flagship drives are at 32 terabytes, with potential increases to 40-100 terabytes in the future [28][29][31] 7. **Long-term Contracts**: Firm purchase orders from top customers extend through 2026, with one customer extending to 2027, indicating strong visibility and demand [24][26][61] 8. **Technology Innovation**: Western Digital is advancing its technology with plans to launch a 36-terabyte Ultra SMR drive in 2026 and HAMR technology expected to be in volume production by 2027 [78][81] 9. **Pricing Environment**: The pricing environment is stable to slightly increasing, contrasting with previous expectations of a 7% annual price decline. Current pricing is flat to slightly up year-over-year [95][97] 10. **Competitive Positioning**: The company believes it is not at a competitive disadvantage despite competitors advancing in HAMR technology, as customers prioritize exabyte delivery over specific technology types [90][92] Additional Important Insights - **Customer Relationships**: The relationship with hyperscalers has evolved from transactional to more strategic, with customers providing better visibility into their storage needs [73][75] - **TCO Advantage**: HDDs maintain a significant total cost of ownership (TCO) advantage over enterprise SSDs, which is expected to continue due to stable pricing and lower acquisition costs [112][114] - **Financial Health**: Western Digital has a strong balance sheet, with plans to monetize its 7.5 million shares of SanDisk to reduce debt and return cash to shareholders [118][120] This summary encapsulates the key points discussed during the conference call, highlighting Western Digital's position in the data storage industry, the impact of AI, and the company's strategic focus on technology and customer relationships.

Group 1 - Western Digital Corp (WDC) is positioned well within the current AI infrastructure development due to its role as a provider of large-capacity storage solutions, which are increasingly in demand as data needs grow in the AI era [2] - The company is part of a broader trend where HDD providers are seeing heightened demand driven by the expansion of AI technologies [2] Group 2 - Tech Stock Pros, a team of former technology sector engineers, operates Tech Contrarians, which offers institutional-level company research to individual investors [3] - The group provides a live portfolio with quarterly updates and bi-weekly newsletters, aiming to simplify technology sector investing for individual investors [3]

Group 1 - Analysts project Seagate (STX) will announce quarterly earnings of $2.46 per share, a 134.3% increase year over year [1] - Revenues are expected to reach $2.41 billion, reflecting a 27.5% increase from the same quarter last year [1] - The consensus EPS estimate has been revised 0.5% higher over the last 30 days, indicating a collective reevaluation by analysts [2] Group 2 - Analysts suggest that 'Revenue by Product Line- HDD- Legacy' will be $245.91 million, a decrease of 15.2% year over year [5] - The estimate for 'Revenue by Product Line- HDD- Mass Capacity' is projected at $2.01 billion, an increase of 39.6% from the prior-year quarter [5] - The consensus estimate for 'Capacity Shipped - Total' and 'Capacity Shipped - Legacy' remains N/A, with no prior year figures available [6] Group 3 - Over the past month, Seagate shares have returned +6.7%, outperforming the Zacks S&P 500 composite's +4.9% change [6] - Seagate currently holds a Zacks Rank 2 (Buy), suggesting potential outperformance in the near future [6]

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]

Core Viewpoint - Rosenblatt analyst Kevin Cassidy has relaunched coverage on Western Digital (WDC) with a Buy rating and lowered the price target from $76 to $50, reflecting a valuation based on expected profitable growth in the HDD market [1] Group 1: Market Dynamics - HDDs are expected to remain the dominant storage media, accounting for over 80% of cloud storage, with exabyte shipments projected to grow at a 23% CAGR from 2024 to 2028 [2] - AI-driven storage demand is accelerating, contributing an estimated 8% growth to the HDD market by 2028, with Nearline HDD growth forecasted at 14% CAGR when including AI [2][3] Group 2: Financial Performance - Western Digital anticipates fiscal 2025 revenue for HDDs to be approximately $2.2 billion to $2.3 billion, with a sequential gross margin expansion of 50 basis points [5] - The company expects to generate $600 million from the SanDisk spin-off and aims for adjusted gross margins of 38% or higher and operating margins of 24% or higher in the long term [6] Group 3: Strategic Focus - Western Digital is shifting its focus to cloud storage, projected to contribute 88% of revenue by fiscal 2025, with Nearline HDDs being the primary revenue driver [3][4] - The company is transitioning to higher-capacity HDDs (40TB+) with EAMR and HAMR technologies to maintain cost-competitive leadership in the AI-driven era [8][10] Group 4: Cost Competitiveness - HDDs maintain a six times cost advantage over enterprise SSDs and a 3.6 times TCO advantage, with plans to transition to HAMR technology by 2027 [4][9] - HDD manufacturing has a capital intensity of just 5%, significantly lower than NAND's 44%, and has lower emissions intensity per TB [9] Group 5: Shareholder Returns - Western Digital is initiating a dividend in the fourth quarter of fiscal 2025 and is committed to returning 100% of excess cash to shareholders after achieving a net leverage target of 1.0 to 1.5 times EBITDA [7]