01—Abstract
Summary
Summary of the 10-Q filed January 31, 2025. Cited figures are marked; the original filing is the authoritative source.
Western Digital Corporation (WDC) reported a strong financial performance for the quarter ending December 26, 2024, demonstrating a significant turnaround from the prior year.
Revenue surged by 41% to $4.29 billiona, and the company achieved profitability with a net income of $594 million, a substantial improvement from a net loss of $287 million in the same period last year. This rebound was driven by a substantial increase in Hard Disk Drive (HDD) revenue, which grew 76%, and a more modest 13% increase in Flash-based product revenue. The company highlighted improved demand and pricing dynamics, particularly in the HDD segment, contributing to a significant expansion in gross margin to 35.4% from 16.2% a year ago.
Key strategic initiatives are underway, including the planned separation of the HDD and Flash business units into two independent public companies, with the distribution expected around February 21, 2025. The company also reported a significant gain of $113 millionb from the divestiture of a majority stake in its SDSS subsidiary.
Despite ongoing investments in R&D and SG&A, the operational improvements and revenue growth have positioned WDC favorably. Investors should monitor the execution of the business separation and the continued recovery in demand across its key end markets.
02—Key points
Key Highlights
- Revenue increased by 41% year-over-year to $4.29 billion for the quarter ended December 26, 2024.
- Net income turned positive at $594 million, a significant improvement from a net loss of $287 million in the prior year period.
- Gross margin expanded significantly to 35.4% from 16.2% year-over-year, driven by improved pricing and product mix.
- HDD revenue saw a substantial 76% increase due to higher exabyte shipments, while Flash revenue grew 13% with improved average selling prices.
- The company is actively progressing with the planned separation of its HDD and Flash businesses into two independent entities, with a distribution anticipated in late February 2025.
- A gain of $113 million was recognized from the sale of a majority interest in its SDSS subsidiary.
- Net cash provided by operating activities was $437 million for the six months ended December 27, 2024, a substantial recovery from negative cash flow in the prior year.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2025, Western Digital Corp kept $0.25.
- Revenue$2.41B100.0%
- Cost of revenue−$1.50B62.3%
- Gross profit$907.0M37.7%
- Operating costs−$347.0M14.4%
- Operating income$560.0M23.2%
- Interest, other & tax$34.0M1.4%
- Net income$594.0M24.7%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2025filed January 31, 2025Financial Statements
Q2 FY2025 against Q2 FY2024
| Line item | Q2 FY2025Q2 FY2024 | Change |
|---|---|---|
| Revenue | $2.41B$1.37B | +76.2% |
| Cost of Revenue | $1.50B$2.54B | −40.9% |
| Gross Profit | $907.00M$313.00M | +189.8% |
| SG&A Expenses | $132.00M$198.00M | −33.3% |
| Operating Expenses | $347.00M$702.00M | −50.6% |
| Operating Income | $560.00M-$210.00M | +366.7% |
| Net Income | $594.00M-$287.00M | +307.0% |
| EPS (Basic) | $1.68$-0.92 | +282.6% |
| EPS (Diluted) | $1.63$-0.92 | +277.2% |
| Shares Outstanding (Basic) | 346.00M325.00M | +6.5% |
| Shares Outstanding (Diluted) | 357.00M325.00M | +9.8% |
05—Questions
Frequently Asked Questions
What is the outlook for Western Digital's two business segments, HDD and Flash?
The company noted an improvement in supply and demand dynamics for HDDs, leading to increased revenues. For Flash, WDC is experiencing what it believes is a mid-cycle slowdown and expects to incur charges for unabsorbed manufacturing overhead costs in the remainder of fiscal year 2025 due to moderated production levels. However, WDC anticipates that digital transformation, including AI, will drive long-term market improvements for both segments.
What is the status of the planned separation of the HDD and Flash businesses?
Western Digital is proceeding with its plan to separate its HDD and Flash business units into two independent public companies. The company has entered the 'soft-spin' phase, testing critical processes and systems. The separation is planned to be effected via a pro rata distribution of 80.1% of the outstanding shares of SanDisk Corporation to common stockholders, with the distribution expected around February 21, 2025. Completion is subject to certain conditions.
How has the company's profitability changed compared to the previous year?
Profitability has significantly improved. For the three months ended December 27, 2024, WDC reported a net income of $594 million, compared to a net loss of $287 million in the same period last year. This turnaround is attributed to increased revenue, improved gross margins resulting from better pricing and product mix, and the absence of prior year charges for unabsorbed manufacturing overhead.
Are there any significant legal proceedings that could impact the company's financials?
The company is involved in two significant intellectual property litigations. A jury awarded $262 million in damages in one case related to HDD media patents, with additional prejudgment interest of $117 million awarded. WDC is contesting this verdict. In another case, a jury awarded $316 million in damages for HDD products related to an encryption patent, with significant prejudgment interest and legal costs awarded. WDC intends to contest this verdict, believing it will be reversed, amended, or vacated. While the company believes it has strong defenses and has not accrued liabilities for these verdicts, the outcomes remain uncertain and could materially impact financials if not overturned on appeal.
06—Continue