Western Digital Corporation

Western Digital reported FY2026 revenue of $12.9 billion, up 36% year over year, gross margin of 49.1% (+970 bps), operating margin of 37.3% (+1,290 bps), and EPS of $10.22, more than doubling from the prior year. Free cash flow was $3.5 billion, with a 27% free cash flow margin, and the company returned $3.1 billion to shareholders. In Q4 FY2026, revenue was $3.75 billion, up 44% year over year; EPS was $3.56, up 109%; gross margin was 54.4% (+1,310 bps year over year); operating income was $1.66 billion (+126% year over year); and free cash flow was $1.3 billion. WD shipped 231 exabytes, up 22% year over year, and cloud revenue was $3.3 billion, or 89% of total revenue. For Q1 FY2027, management guided revenue to $4.1 billion plus/minus $100 million, gross margin to 55% to 56%, operating expenses to $390 million to $400 million, interest and other expense to $15 million, tax rate to 17%, and EPS to $4.00 plus/minus $0.15.

Irving Tan framed fiscal 2026 as WD’s first full year as a focused pure-play HDD company and said the business is benefiting from durable AI- and cloud-driven storage demand. He emphasized that data creation is compounding through training, inference, agentic AI, and physical AI, making storage a structural tailwind rather than a one-time build cycle. His tone was confident and constructive, pointing to a strong technology roadmap, positive customer feedback on 40-terabyte ePMR qualification, and a 44-terabyte HAMR product on track for the first half of calendar 2027.

Kris Sennesael highlighted the financial leverage in the model: FY2026 revenue of $12.9 billion, gross margin of 49.1%, operating margin of 37.3%, EPS of $10.22, and $3.5 billion of free cash flow. In Q4, he cited $3.75 billion of revenue, 54.4% gross margin, $1.66 billion of operating income, $1.4 billion of operating cash flow, $108 million of capex, and $1.3 billion of free cash flow. He also noted $3.1 billion returned to shareholders, $1.1 billion of debt versus $1.6 billion of cash, and reiterated capital allocation discipline via dividends and share repurchases.

Analysts focused on the gap versus a competitor on growth and gross margin, and management said quarter-to-quarter differences reflect LTA timing, product mix, and the ramp of higher-capacity drives rather than a change in the long-term thesis. They reiterated that exabyte demand should grow above 25% and that 40-terabyte ePMR ramps in the second half of fiscal 2027 should help accelerate shipments, with 44-terabyte HAMR following in calendar 2027. Questions also probed pricing and visibility; management said pricing remains predictable under LTAs, visibility is improving, and they are already discussing contracts extending into calendar 2029, 2030, and 2031.