01—Abstract
Summary
Summary of the 10-Q filed October 31, 2025. Cited figures are marked; the original filing is the authoritative source.
Western Digital Corporation (WDC) reported a strong fiscal first quarter ending October 3, 2025, with a significant surge in revenue and net income, largely driven by robust performance in the Cloud segment and favorable pricing dynamics for their Hard Disk Drive (HDD) products.
Revenue increased by 27%a year-over-year, fueled by higher average selling prices due to a favorable product mix towards higher-capacity drives and increased demand for data storage systems. The company's strategic separation of its Flash business (Sandisk) is continuing to shape its financial profile, with the current results presented on a continuing operations basis focusing solely on the HDD business. A notable item impacting profitability was a substantial gain from the mark-to-market valuation of its retained interest in Sandisk.
Despite ongoing investments in research and development, the company managed to reduce selling, general, and administrative expenses, contributing to a significant improvement in operating income and a substantial increase in net income from continuing operations. The company also initiated a new share repurchase program, demonstrating confidence and a commitment to returning capital to shareholders.
02—Key points
Key Highlights
- Revenue surged by 27% year-over-year to $2.818 billion, primarily driven by a 19% increase in average selling price (ASP) due to a favorable product mix towards higher-capacity HDDs and growth in data storage systems.
- Net income from continuing operations dramatically increased to $1.182 billion, up from $153 million in the prior year period, reflecting strong operational performance and a significant gain on the retained interest in Sandisk.
- Gross margin expanded by 7 percentage points to 43.5%, attributed to higher volumes, product cost reductions, and improved pricing.
- Operating income more than doubled year-over-year to $792 million, benefiting from increased gross profit and a reduction in SG&A expenses.
- The company recorded a significant gain of $611 million from the mark-to-market valuation of its retained interest in Sandisk, significantly boosting the 'Interest and other income (expense)' line item.
- SG&A expenses decreased by $66 million, largely due to the post-Separation realignment of corporate overhead roles and reduced marketing/legal costs.
- Western Digital initiated a substantial share repurchase program, buying back $553 million of its common stock during the quarter, with $1.30 billion remaining under the $2.0 billion authorization.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2026, Western Digital Corp kept $0.61.
- Revenue$3.02B100.0%
- Cost of revenue−$1.64B54.3%
- Gross profit$1.38B45.7%
- Operating costs−$472.0M15.6%
- Operating income$908.0M30.1%
- Interest, other & tax$934.0M31.0%
- Net income$1.84B61.1%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2026filed October 31, 2025Financial Statements
Q2 FY2026 against Q2 FY2025
| Line item | Q2 FY2026Q2 FY2025 | Change |
|---|---|---|
| Revenue | $3.02B$2.41B | +25.2% |
| Cost of Revenue | $1.64B$1.50B | +9.0% |
| Gross Profit | $1.38B$907.00M | +52.1% |
| SG&A Expenses | $128.00M$132.00M | −3.0% |
| Operating Expenses | $472.00M$347.00M | +36.0% |
| Operating Income | $908.00M$560.00M | +62.1% |
| Net Income | $1.84B$594.00M | +210.1% |
| EPS (Basic) | $5.27$1.68 | +213.7% |
| EPS (Diluted) | $4.73$1.63 | +190.2% |
| Shares Outstanding (Basic) | 341.00M346.00M | −1.4% |
| Shares Outstanding (Diluted) | 381.00M357.00M | +6.7% |
05—Questions
Frequently Asked Questions
What is the main driver behind Western Digital's significant revenue growth in this quarter?
The primary driver for the 27% year-over-year revenue growth is a combination of higher average selling prices (ASP), which increased by 19%, and a 3% increase in units sold. The ASP increase is largely attributed to a favorable shift in product mix towards higher-capacity Hard Disk Drives (HDDs) and growth in data storage systems revenue.
How did the separation of the Flash business (Sandisk) impact the current financial results?
The financial statements are presented on a continuing operations basis, reflecting only the HDD business. However, the separation significantly impacted the 'Interest and other income (expense)' line item due to a $611 million unrealized gain from the mark-to-market valuation of Western Digital's retained interest in Sandisk. This gain was a major contributor to the substantial increase in net income.
What is the company's outlook on liquidity and its ability to meet financial obligations?
Western Digital believes its current cash and cash equivalents, along with its available revolving credit facility, are sufficient to meet its working capital, debt, dividend, and capital expenditure needs for at least the next twelve months and the foreseeable future. The company also anticipates being able to access debt and equity capital markets if necessary.
Are there any significant debt-related considerations for investors?
Investors should note that the company's $1.6 billion in 3.00% convertible senior notes due 2028 have been classified as a current liability because the conditional conversion feature was triggered. Holders now have the right to convert these notes in the next quarter (ending December 31, 2025). The company is also managing its debt obligations, including scheduled repayments and maintaining compliance with its financial leverage ratio covenant.
06—Continue