01—Abstract
Summary
Summary of the 10-Q filed January 30, 2026. Cited figures are marked; the original filing is the authoritative source.
Western Digital Corporation (WDC) reported a strong financial performance for the quarter ended January 2, 2026, with a significant increase in revenue and net income compared to the prior year period.
Revenue grew 25%a year-over-year, driven by higher exabytes sold and improved average selling prices, particularly in the Cloud segment. This top-line growth translated into a substantial increase in gross profit and operating income, with gross margin expanding by 8 percentage points due to cost efficiencies and better pricing on higher-capacity drives. The company's strategic separation of its Flash business and focus on its HDD segment appear to be driving positive results.
Significant gains were recognized from the retained interest in Sandisk, contributing substantially to the net income. While operating expenses, particularly R&D, saw an increase to support innovation, the overall profitability improved considerably. The company also initiated a substantial share repurchase program and resumed dividend payments, signaling confidence in its financial health and commitment to returning capital to shareholders.
02—Key points
Key Highlights
- Revenue increased by 25% year-over-year to $3.017 billion, driven by a 22% increase in exabytes sold and a 2% increase in average selling price per exabyte, largely due to strong demand for high-capacity enterprise products.
- Gross profit surged by 52% to $1.380 billion, with gross margin improving by 8 percentage points to 45.7%, attributed to a lower cost structure on newer products and improved pricing on higher-capacity drives.
- Net income from continuing operations dramatically increased to $1.842 billion, a 295% jump from $466 million in the prior year period, significantly boosted by a $1.103 billion gain on the retained interest in Sandisk.
- Operating income more than doubled to $908 million, a 62% increase year-over-year, reflecting strong revenue growth and improved gross margins.
- The company repurchased $1.17 billion of its common stock during the six months ended January 2, 2026, under its $2.0 billion share repurchase program.
- Western Digital reinstated its common stock dividend program, paying $0.125 per share in the current quarter, totaling $43 million.
- The company ended the quarter with $1.975 billion in cash and cash equivalents, and has $1.25 billion available under its revolving credit facility, indicating a strong liquidity position.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2026, Western Digital Corp kept $0.96.
- Revenue$3.34B100.0%
- Cost of revenue−$1.66B49.8%
- Gross profit$1.68B50.2%
- Operating costs−$486.0M14.6%
- Operating income$1.19B35.7%
- Interest, other & tax$2.02B60.4%
- Net income$3.21B96.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2026filed January 30, 2026Financial Statements
Q3 FY2026 against Q3 FY2025
| Line item | Q3 FY2026Q3 FY2025 | Change |
|---|---|---|
| Revenue | $3.34B$2.29B | +45.5% |
| Cost of Revenue | $1.66B$1.38B | +20.2% |
| Gross Profit | $1.68B$912.00M | +83.8% |
| SG&A Expenses | $147.00M$108.00M | +36.1% |
| Operating Expenses | $486.00M$152.00M | +219.7% |
| Operating Income | $1.19B$760.00M | +56.6% |
| Net Income | $3.21B$520.00M | +516.3% |
| EPS (Basic) | $9.26$1.46 | +534.2% |
| EPS (Diluted) | $8.20$1.42 | +477.5% |
| Shares Outstanding (Basic) | 342.00M348.00M | −1.7% |
| Shares Outstanding (Diluted) | 387.00M358.00M | +8.1% |
05—Questions
Frequently Asked Questions
What is the main driver of Western Digital's revenue growth in this quarter?
The primary drivers for the 25% year-over-year revenue increase were a 22% rise in exabytes sold, fueled by strong demand for high-capacity enterprise products, and a 2% increase in the average selling price per exabyte, attributed to better pricing on higher-capacity drives.
How did the separation of the Flash business impact the financial results?
The separation of the Flash business, completed in February 2025, positions WDC as a pure-play HDD company. The financial results show a significant gain on the retained interest in Sandisk ($1.103 billion in the quarter and $1.714 billion year-to-date), which substantially boosted net income. Prior period results are now presented on a continuing operations basis excluding the Flash business.
What is the company's outlook regarding share buybacks and dividends?
Western Digital demonstrated a strong commitment to returning capital to shareholders by repurchasing $1.17 billion of its common stock in the first six months of the fiscal year under a $2.0 billion program and by reinstating its common stock dividend program, paying $0.125 per share in the current quarter. The company expects to fund future repurchases with operating cash flows.
How is the company managing its debt and liquidity?
The company is actively managing its debt, evidenced by the use of Sandisk stock proceeds to reduce term loan principal and a $1.17 billion share buyback program. Liquidity remains robust, with $1.975 billion in cash and cash equivalents and an available $1.25 billion revolving credit facility, which the company believes is sufficient to meet its working capital, debt, dividend, and capital expenditure needs for the foreseeable future.
06—Continue