Western Digital Corporation Q1 FY2026 Earnings Call

· Earnings call transcript and AI-powered summary

Western Digital Q1 Fiscal 2026 Earnings Summary

Quarter Overview

  • Revenue was $2.8 billion, up 27% year-over-year (YoY), exceeding guidance.
  • Non-GAAP gross margin reached 43.9%, up 660 basis points YoY and 260 basis points sequentially.
  • Non-GAAP EPS was $1.78, well above the high end of guidance.
  • Free cash flow was $599 million despite a $331 million repatriation tax payment.
  • 204 exabytes were shipped, up 23% YoY, including 2.2 million next-gen ePMR drives.
  • Cloud represented 89% of revenue as demand for higher-capacity nearline HDDs continued to surge.

Business & Market Commentary

  • AI adoption continues to accelerate across industries, driving exponential demand for data storage, particularly HDDs for large-scale archival and operational data.
  • Customers are shifting rapidly to higher-capacity drives (26TB CMR / 32TB UltraSMR), with average customer capacity requirements up 21% YoY.
  • UltraSMR and CMR shipments are now a 50/50 mix; UltraSMR provides a 20% capacity uplift vs. CMR.
  • Western Digital continues to leverage internal AI, resulting in up to 10% manufacturing productivity gains and ~20% improvements in firmware development efficiency.
  • Top customers are providing long-term visibility:
    • All top 7 customers have POs into 1H 2026.

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Operator: Good day, and welcome to the Western Digital First Quarter Fiscal 2026 Earnings Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Ambrish Srivastava, VP of Investor Relations. Thank you, and over to you. Ambrish Srivastava: Thank you, and good afternoon, everyone. Joining me today are Irving Tan, Western Digital's Chief Executive Officer; and Kris Sennesael, Western Digital's Chief Financial Officer. Before we begin, please note that today's discussion will contain forward-looking statements based on management's current assumptions and expectations which are subject to various risks and uncertainties. These forward-looking statements include expectations for our product portfolio, our business plans and performance, ongoing market trends and our future financial results. We assume no obligation to update these statements. Please refer to our most recent annual report on Form 10-K and our other filings with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially from expectations. In our prepared remarks, our comments will be related to non-GAAP results on the continuing operations basis, unless stated otherwise. Reconciliations between the non-GAAP and comparable GAAP financial measures are included in the press release and other materials that are being posted in the Investor Relations section of our website at investor.wdc.com. Lastl

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