Why is GAAP EPS of $8.21 so much higher than non-GAAP EPS of $3.56?

The gap is mainly a non-operating gain. In Q4FY26 WD recorded a $2.05 billion gain from marking up its retained interest in Sandisk, which is excluded from non-GAAP results. Stock-based compensation, business realignment charges and debt and equity transaction costs are also excluded. Investors typically rely on non-GAAP EPS to judge operating performance because the Sandisk gain is not tied to WD's core business and may not recur.

How much did WD's debt and balance sheet change over the year?

Total debt fell from about $4.7 billion at June 27, 2025 to roughly $1.05 billion at July 3, 2026, all of which is classified as current, with no long-term debt remaining. Shareholders' equity increased to $8.9 billion from $5.3 billion, helped by the Sandisk stake gains and the conversion of preferred stock. Cash fell to $1.58 billion, as the company used cash for buybacks ($2.6 billion), convertible note settlements ($1.2 billion) and debt repayment.

What does the Q1FY27 guidance imply for investors?

Management guided to revenue of $4.1 billion at the midpoint, which would be up roughly 42% to 49% year over year, and to a non-GAAP gross margin of 55% to 56%, which would be a further expansion from Q4's 54.4%. Non-GAAP EPS guidance is $4.00 on about 388 million diluted shares. Guidance is provided only on a non-GAAP basis, and the company notes that unanticipated items could cause results to differ materially.

Is WD's free cash flow growth sustainable?

Q4 free cash flow of $1.28 billion and FY26 free cash flow of $3.51 billion reflect strong operating cash generation, with operating cash flow of $3.93 billion for the year. Capital expenditures remained modest at $418 million for the year, so most operating cash converted to free cash flow. Sustainability depends on continued demand for data storage and on margins holding up. Working capital also absorbed cash, with receivables and inventories rising during the year.

What does the Sandisk stake mean for WD's future reported results?

WD still holds a retained interest in Sandisk, which it marks to market each quarter, so GAAP earnings will continue to swing with Sandisk's share price. Retained interest appears as zero on the July 3, 2026 balance sheet, and the company has been monetizing its stake through debt-for-equity and equity-for-equity exchanges. Investors should expect volatile GAAP results from these gains and losses, and should look at non-GAAP figures and the 10-K for details on the remaining position.

WDC 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed August 5, 2026. Cited figures are marked; the original filing is the authoritative source.

Western Digital (WDC) reported fiscal fourth quarter and full-year 2026 results for the period ended July 3, 2026, showing sharp top-line and margin expansion.

Q4FY26 revenue was $3.75 billion^a, up 44% year over year and 12% sequentially, with GAAP gross margin of 54.1% (up 1,310 bps YoY) and non-GAAP gross margin of 54.4%. Non-GAAP operating margin reached 44.2%, versus 28.1% a year earlier. GAAP diluted EPS was $8.21, but this figure is inflated by a $2.05 billion gain on the company's retained interest in Sandisk; non-GAAP diluted EPS of $3.56 is the better gauge of operating performance.

Free cash flow was $1.28 billion^b in the quarter and $3.51 billion for the full year. For fiscal 2026, revenue rose 36% to $12.9 billion, and non-GAAP diluted EPS was $10.22, up 104%. GAAP results were heavily affected by mark-to-market gains on the Sandisk stake and by debt and equity transaction costs of $907 million.

The balance sheet improved markedly: total debt fell from roughly $4.7 billion^c to about $1.05 billion (all current), shareholders' equity rose to $8.9 billion from $5.3 billion, and the company repurchased $2.6 billion of stock during the year. Cash was $1.58 billion at year-end. Management guided fiscal Q1 2027 revenue to $4.1 billion (±$100 million), up roughly 42% to 49% year over year, with non-GAAP gross margin of 55% to 56% and non-GAAP EPS of $4.00 (±$0.15) on about 388 million diluted shares.

The board declared a $0.15^d quarterly dividend payable September 17, 2026. The 10-K is expected on or about August 14, 2026.

02—Key points

Key Highlights

Q4FY26 revenue of $3.75 billion, up 44% YoY and 12% QoQ, with FY26 revenue of $12.9 billion, up 36%
Non-GAAP operating margin of 44.2% in Q4FY26 (up 1,610 bps YoY); GAAP operating margin of 41.7%
GAAP diluted EPS of $8.21 included a large non-operating gain on the retained Sandisk stake; non-GAAP diluted EPS was $3.56
Free cash flow of $1.28 billion in Q4 and $3.51 billion for FY26, versus $1.43 billion in FY25
Balance sheet deleveraged: debt fell to about $1.05 billion from roughly $4.7 billion, and equity rose to $8.9 billion
Q1FY27 guidance: revenue of $4.1 billion (+42% to 49% YoY), non-GAAP gross margin of 55% to 56%, and non-GAAP EPS of $4.00 ±$0.15
Quarterly dividend of $0.15 per share declared, payable September 17, 2026; $2.6 billion of buybacks in FY26

03—Questions

Frequently Asked Questions

Why is GAAP EPS of $8.21 so much higher than non-GAAP EPS of $3.56?
The gap is mainly a non-operating gain. In Q4FY26 WD recorded a $2.05 billion gain from marking up its retained interest in Sandisk, which is excluded from non-GAAP results. Stock-based compensation, business realignment charges and debt and equity transaction costs are also excluded. Investors typically rely on non-GAAP EPS to judge operating performance because the Sandisk gain is not tied to WD's core business and may not recur.
How much did WD's debt and balance sheet change over the year?
Total debt fell from about $4.7 billion at June 27, 2025 to roughly $1.05 billion at July 3, 2026, all of which is classified as current, with no long-term debt remaining. Shareholders' equity increased to $8.9 billion from $5.3 billion, helped by the Sandisk stake gains and the conversion of preferred stock. Cash fell to $1.58 billion, as the company used cash for buybacks ($2.6 billion), convertible note settlements ($1.2 billion) and debt repayment.
What does the Q1FY27 guidance imply for investors?
Management guided to revenue of $4.1 billion at the midpoint, which would be up roughly 42% to 49% year over year, and to a non-GAAP gross margin of 55% to 56%, which would be a further expansion from Q4's 54.4%. Non-GAAP EPS guidance is $4.00 on about 388 million diluted shares. Guidance is provided only on a non-GAAP basis, and the company notes that unanticipated items could cause results to differ materially.
Is WD's free cash flow growth sustainable?
Q4 free cash flow of $1.28 billion and FY26 free cash flow of $3.51 billion reflect strong operating cash generation, with operating cash flow of $3.93 billion for the year. Capital expenditures remained modest at $418 million for the year, so most operating cash converted to free cash flow. Sustainability depends on continued demand for data storage and on margins holding up. Working capital also absorbed cash, with receivables and inventories rising during the year.
What does the Sandisk stake mean for WD's future reported results?
WD still holds a retained interest in Sandisk, which it marks to market each quarter, so GAAP earnings will continue to swing with Sandisk's share price. Retained interest appears as zero on the July 3, 2026 balance sheet, and the company has been monetizing its stake through debt-for-equity and equity-for-equity exchanges. Investors should expect volatile GAAP results from these gains and losses, and should look at non-GAAP figures and the 10-K for details on the remaining position.

04—Continue

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