Western Digital(US:WDC)2025-10-30 21:30Financial Data and Key Metrics Changes - For Q1 fiscal 2026, the company reported revenue of $2.8 billion, a 27% increase year-over-year, driven by strong demand for nearline drives [13][14] - Non-GAAP gross margin was 43.9%, improving by 660 basis points year-over-year and 260 basis points sequentially [15][11] - Non-GAAP earnings per share (EPS) was $1.78, exceeding guidance [13][11] - Free cash flow for the quarter was $599 million, reflecting strong cash generation capabilities [11][16] Business Line Data and Key Metrics Changes - Cloud business represented 89% of total revenue at $2.5 billion, up 31% year-over-year, driven by demand for higher capacity nearline products [14] - Client business accounted for 5% of total revenue at $146 million, up 5% year-over-year [15] - Consumer business represented 6% of revenue at $162 million, down 1% year-over-year [15] Market Data and Key Metrics Changes - The company delivered 204 exabytes to customers, a 23% increase year-over-year, including 2.2 million drives of the latest generation ePMR [13][11] - Shipments of ePMR products with capacities up to 26 terabytes CMR and 32 terabytes Ultra SMR surpassed 2.2 million units in the September quarter [5][11] Company Strategy and Development Direction - The company is focusing on AI-driven growth, leveraging AI to enhance productivity and innovation internally [4][5] - Investments are being made in head wafer and media technology to drive higher aerial density and manufacturing throughput [6][7] - The company is on track to start HAMR qualification for one hyperscale customer in the first half of calendar year 2026, with plans to expand to three customers [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term business strength despite macroeconomic uncertainties, expecting continued revenue growth driven by data center demand [12][11] - The company anticipates revenue for Q2 fiscal 2026 to be around $2.9 billion, reflecting approximately 20% year-over-year growth [18][12] Other Important Information - The company announced a 25% increase in its dividend per share to $0.125, reflecting confidence in long-term business prospects [11][17] - The company has returned a total of $785 million to shareholders through share repurchases and dividends since the launch of its capital return program [17][16] Q&A Session Summary Question: How does the company plan to meet rising customer demand while keeping supply-demand in balance? - The company focuses on delivering higher capacity drives and has shipped over 2.2 million units last quarter, equating to about 70 exabytes of data [23][24] Question: How should the market think about incremental gross margins moving forward? - The company reported a gross margin of 43.9% and expects further improvement in Q2 fiscal 2026, with a focus on maintaining incremental gross margins of approximately 50% [26][27] Question: Can you provide an update on the HAMR roadmap and its qualification timeline? - The company has pulled forward the qualification process for HAMR to the first half of calendar 2026, with expectations for ramp-up in the first half of calendar 2027 [31][32] Question: What is the outlook for exabyte growth and pricing trends? - The company sees exabyte growth trending towards 23% due to strong demand and expects mid to high single-digit cost reductions per terabyte [41][42] Question: How does the company view the balance between HDDs and SSDs in the market? - The company anticipates HDDs will continue to represent about 80% of the bits stored in data centers, despite the rise of SSDs for certain workloads [92][93] Question: What are the implications of long-term agreements with hyperscale customers? - The company has secured firm purchase orders extending throughout 2026 and into 2027, indicating strong customer confidence and demand [8][62]