Direxion Daily MSCI Emerging Markets Bull 3X Shares

Western Digital reported December-quarter revenue of $3.8 billion, gross margin of 27.7% (28.7% non-GAAP excluding $38 million of HGST amortization), and net income of $335 million or $1.36 per share; on a non-GAAP basis, net income was $513 million or $2.09 per share. HDD shipments, excluding Toshiba under the divestiture agreement, totaled 59.2 million drives, and the average HDD selling price was $62, flat sequentially. The company generated $772 million in cash from operations and $526 million in free cash flow, with $246 million of CapEx. For March-quarter guidance, management expects revenue of $3.55 billion to $3.65 billion, gross margin of approximately 28% excluding HGST intangibles, R&D and SG&A of about $540 million excluding amortization, a tax rate of approximately 7%, share count of about 244 million, and non-GAAP EPS of $1.65 to $1.80.

Steve Milligan framed the quarter as a solid execution story amid soft industry demand, saying the company did a good job controlling what it can and produced better-than-expected revenue, profitability, and strong cash generation. He emphasized that the HDD market appears to be stabilizing, with improving visibility as OEM inventory rebalancing winds down. Strategically, he highlighted three growth areas: cloud, thin-and-light client systems, and Connected Life/personal cloud, and pointed to helium-filled drives, enterprise SSDs, and 5-millimeter products as important innovation vectors.

Wolfgang Nickl walked through the numbers in detail: $3.8 billion in revenue, 27.7% gross margin, $540 million of R&D and SG&A, $41 million of restructuring charges, and $1.36 GAAP EPS versus $2.09 non-GAAP EPS. He noted $772 million of operating cash flow, $526 million of free cash flow, and $246 million of CapEx, plus a quarter-end cash balance of $3.8 billion and net cash of $1.7 billion after $2.1 billion of debt. He also said the company repurchased 4.2 million shares for $146 million, paid a $0.25 dividend, and still has $2.4 billion remaining under its buyback authorization. For Q3, he guided to roughly $3.55 billion to $3.65 billion in revenue, around 28% gross margin ex-intangibles, about $540 million of operating expenses, about a 7% tax rate, and $1.65 to $1.80 non-GAAP EPS.

Analysts focused on mix, pricing, enterprise demand, capacity utilization, CapEx, and whether the company was backing away from its earlier $10 EPS target. Management said mix was favorable in the December quarter, especially from enterprise and branded products, but March-quarter mix should soften seasonally as PC and branded demand ease after the holidays. On the $10 EPS question, Wolfgang Nickl said that target is no longer realistic given the lower implied market size, and he also said buybacks will continue in line with the plan to return 50% of free cash flow through dividends and repurchases. On enterprise and inventory, management said inventory rebalancing is largely complete, enterprise share is roughly flat, and branded demand had recovered to above pre-flood levels.