Summary
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% 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.
Key Highlights
- 1Revenue 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.
- 2Gross 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.
- 3Net 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.
- 4Operating income more than doubled to $908 million, a 62% increase year-over-year, reflecting strong revenue growth and improved gross margins.
- 5The 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.
- 6Western Digital reinstated its common stock dividend program, paying $0.125 per share in the current quarter, totaling $43 million.
- 7The 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.