WDC earnings analysis
What we found in WDC's 10-K: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
Western Digital delivered a strong FY2026 operating recovery, with revenue up 36%, gross margin reaching 48.9% and operating margin reaching 34.5%, supported by Cloud demand, higher-capacity drives and improved pricing. Cash generation strengthened substantially and the company used Sandisk monetization, debt repayment, buybacks and dividends to simplify the balance sheet and return capital. However, the outlook remains highly dependent on Cloud customers and successful HAMR/product transitions, while near-term convertible-note settlements and geopolitical supply-chain risks add material execution and liquidity exposure.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- Strong multi-year revenue acceleration
- Revenue increased 36% to $12.919 billion in FY2026 from $9.520 billion in FY2025 and $6.317 billion in FY2024. Growth reflected a 25% increase in exabytes sold and an 8% increase in ASPs per exabyte.
- Major margin expansion
- Gross margin expanded to 48.9% in FY2026 from 38.8% in FY2025 and 28.1% in FY2024, while operating margin increased to 34.5% from 24.5% and negative 6.4%, respectively. Management attributed the improvement to higher shipments, newer-product cost structure, higher-capacity mix and improved pricing.
- EPS inflection, aided by Sandisk gain
- Diluted EPS from continuing operations rose to $24.28 in FY2026 from $4.45 in FY2025 and a $2.51 loss in FY2024. FY2026 net income included a $6.498 billion gain on the retained Sandisk interest, so reported EPS materially benefited from a non-operating item.
- Cloud and pricing lead growth
- Cloud revenue increased 38% to $11.490 billion, representing 89% of total revenue, driven by a 27% increase in exabytes sold and an 8% increase in ASPs per exabyte. Client revenue rose 31% to $726 million and Consumer revenue rose 13% to $703 million.
- Cash generation and reinvestment improve
- Operating cash flow rose to $3.929 billion in FY2026 from $1.691 billion in FY2025 and negative $294 million in FY2024. The company invested $418 million in capital expenditures and expects annual capital expenditures over the next five years to average 4% to 6% of net revenue.
- Pure-play HDD and shareholder returns
- The company completed the transition to a pure-play HDD business after the 2025 Flash separation, monetized its remaining Sandisk shares, reduced debt and returned capital. FY2026 included $2.592 billion of common-stock repurchases, $174 million of common dividends and $1.664 billion of debt repayments.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- Extreme Cloud and customer concentration
- Revenue concentration materially increased: Cloud represented 89% of FY2026 revenue, while the top 10 customers represented 73% versus 68% in FY2025 and 55% in FY2024. Three customers accounted for 16%, 15% and 13% of revenue, and two customers represented 25% and 17% of accounts receivable.
- HAMR and technology-transition execution
- The product roadmap depends on successful technology transitions, including HAMR-based areal-density recording. The filing states that failures in development, customer qualification, manufacturing ramp or yields could pressure gross margin and market position, while $70 million of incremental product-development costs were incurred in FY2026.
- Near-term conversion and liquidity demands
- The company had $710 million of 2028 Convertible Notes outstanding at July 3, 2026, with $343 million already tendered and the remaining $367 million expected likely to be tendered. Management expects the settlement to require $710 million of cash for principal, while the company also had $350 million drawn on its revolving facility, which matures in January 2027.
- Tariffs and geopolitical supply-chain risk
- New or heightened geopolitical and trade exposure includes China export restrictions on rare-earth minerals and related materials critical to semiconductor and hard-drive manufacturing, as well as potential tariffs and retaliatory actions. The filing states these developments may increase costs, limit material availability or require supply-chain redesign.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $24.28
- Gross margin
- 48.9%
- Operating margin
- 34.5%
- Segment
- HDD reportable segment: $12.919 billion revenue in FY2026; Cloud $11.490 billion, Client $726 million, Consumer $703 million
What they said about what is next.
The 10-K does not provide quantitative annual revenue or EPS guidance; the company discusses long-term cloud, AI-driven storage demand and expects fiscal 2027 capital expenditures to be higher than 2026. Annual outlook was generally deferred to the Q4 earnings press release/call.
The filing reads better than the one before it.
What came before.
- 10-Q · April 30, 2026
- Western Digital's Q3 FY2026 results show a strong performance with revenue of $3.34 billion and EPS of $2.72, surpassing estimates. Notable revenue and profit growth driven by demand in the cloud and hyperscale markets,…
- 10-Q · January 30, 2026
- Western Digital reported a strong quarter: net revenue of $3,017.0M (up from $2,409.0M in the prior-year quarter) with gross margin expanding to 45.7% and operating income of $908M. Diluted EPS from continuing…
- 10-Q · January 31, 2025
- Western Digital reported a strong quarter: net revenue of $4,285 million and GAAP net income of $594 million (diluted EPS $1.63) for the three months ended December 27, 2024, versus a net loss of $(287) million in the…
- 10-Q · October 31, 2024
- Western Digital reported quarterly revenue of $4,095 million (up $1,345 million, +48.9% vs. prior year) and GAAP diluted EPS of $1.35 (vs. $(2.17) a year ago). Consolidated gross margin expanded to 37.9% from 3.6% a…
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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