WDC US S&P 500NASDAQ-100Russell 1000 Earnings call · transcribed from the recording
Western Digital (WDC) · Q3 2026 results and valuation
Share price: $313.31 · 2026-11-11
Western Digital develops, manufactures, and provides data storage devices and solutions based on hard disk drive technology. The company serves the cloud, enterprise, and consumer markets by providing storage for data centers, original equipment manufacturers, and individual consumers globally. Source: 10-K annual report (2026-08-14)
Results Q3 2026 vs Q2 2026 · previous quarter · fiscal Q1 2027 · published 22 Oct 2026 and 5 Aug 2026
Net income down 44.3% on the previous quarter. Management sounded very upbeat, though noticeably less so answering analysts.
1 · Numbers
−44.3%
Net income vs Q2 2026
Outlook given
Net income 1.78B vs 3.19B
Revenue +16.9%
Against the same quarter last year (Q3 2025) it is +50.5%, so the move on last quarter looks seasonal or timing-related rather than a trend.
Why Against the same quarter last year (+50.5%), net income rose primarily because revenue grew 55% year-over-year due to strong exabyte growth and a favorable pricing environment, while gross margin expanded to 58.1% and operating margin expanded to 49.1%.
2 · How management spoke
Very upbeat
More upbeat than 91% of company calls
Answers to analysts: upbeat, but clearly less so than the script.
Last call it was different: script and answers matched.
3 · What stood out
Western Digital expects gross margin to be between 60% and 61% due to a shift toward higher capacity drives and a strong pricing environment.
Valuation
Is Western Digital undervalued?
Reverse DCF. Free cash flow from the last full fiscal year (2026-07-03), grown for 10 years, discounted back, plus a terminal value. “Implied growth” is the rate the current price assumes.
At 20.0% growth a year (3-year revenue growth), the model's fair value is $481.33 a share — the stock trades 35% below it. Today's price assumes 14.1% growth a year.
Current price
$313.31
close of 2026-11-11
Market implies growth of iThe yearly free-cash-flow growth, for the next 10 years, that today’s share price already assumes. If you believe the company grows faster than this, the stock is cheap under this model; slower, and it is expensive.
+14.1% for 10 yrs
Fair value / share
$481.33
Buy below
$361.00
Price vs fair value
Undervalued 35%
Price vs buy-below price
Undervalued 13%
Read between the lines
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Guidance
WDC expects second quarter fiscal 2027 revenue to be $5.1 billion plus minus $100 million.
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Key theme
Gross margin is expected to be between 60% and 61% due to a shift toward higher capacity drives and a strong pricing environment.
Source quote
“Gross margin is expected to be in the range of 60 to 61% as we continue to benefit from the shift to higher capacity drives along with a strong pricing environment.”
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Figure
Revenue grew 55% year-over-year, while gross and operating margins expanded to 58% and 49% respectively.
Source quote
“Revenue grew 55% year-over-year, for gross and operating margins expanded meaningfully to 58% and 49% respectively.”
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Figure
Revenue grew to $4.4 billion in the first quarter of fiscal year 2027, a 55% increase over the prior year driven by exabyte growth and a favorable pricing environment.
Source quote
“During the first quarter of fiscal year 2027, revenue was $4.4 billion, up 55% year-over-year, driven by strong exabyte growth and a favorable pricing environment.”
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Figure
Gross margin expanded to 58.1%, up 1,420 basis points year over year, with incremental year-over-year gross margin above 80%.
4 more
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Figure
Incremental gross margins remained above 80% this quarter, which the company characterizes as very strong.
Source quote
“Our incremental gross margins continue to be very strong, well above 80%.”
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Guidance
WDC expects 30% of all near-lying bids in Q2 to be on the up to 40 terabyte platform.
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Figure
Volume production of the latest ePMR platform, which delivers up to 40 terabytes of capacity, has started well to drive revenue.
Source quote
“Volume production of our latest ePMR platform, delivering up to 40 terabytes of capacity, is off to a strong start.”
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Guidance
WDC expects capital expenditures to be modestly above the 4 to 6% average of revenue for the next two years to fund investments in media technology and factory automation.
Tone
How upbeat the language was, compared with other companiesiTone counts positive minus negative finance words, adjusted for length. Executives mostly speak positively, so the labels compare each call with every company's latest call: “typical” is the middle third, “very upbeat” the top tenth, “cautious” the bottom tenth.. Dot: Q3 2026. Ring: Q2 2026.
Management sounded noticeably less positive answering analysts than in its prepared script — a bigger drop than in 84% of calls. Scripts are polished in advance; a drop under questioning often marks the topics analysts pressed on, so the answers deserve a closer read than the script.
Sentences that drove the tone
“In summary, accelerating exabyte growth, technology leadership, expanding margins, and disciplined capital allocation provide a solid foundation for sustainable earnings, free cash flow growth, and long-term shareholder value creation.”
“Our product transitions are progressing well, resulting in higher capacity products, solid year-over-year growth in exabyte shift, and improved pricing, all driving another quarter of strong financial performance.”
“And that is going to drive a meaningful increase in our aerial density and a meaningful increase to higher capacity drives, and that will definitely accelerate our exabyte year-over-year supply...”
Full figures
USD · SEC EDGAR XBRL (10-Q, period end 2026-10-02)
| Metric | Q3 2026period end 2026-10-02 | Q2 2026period end 2026-07-03 | Change | Q3 2025 | YoY |
|---|---|---|---|---|---|
| Revenue | 4.38B | 3.75B | +16.9% | 2.82B | +55.5% |
| Gross profit | 2.53B | 2.03B | +25.0% | 1.23B | +106.5% |
| Operating income | 2.05B | 1.56B | +30.9% | 792.0M | +158.3% |
| Net income | 1.78B | 3.19B | −44.3% | 1.18B | +50.5% |
| EPS | 4.63 | 8.23 | −43.7% | 3.07 | +50.8% |
| P/E today 10.2 | 16.1 | 22.2 | −6.1 | 19.2 | −3.1 |
Topics
Most discussed now
- In the need term, and I've indicated this before, this is not a surprise, Western Digital is facing some input cost...
- Demand remains strong across Western Digital's customer base and end markets.
- Across its global operations teams, Western Digital is working closely with its own internal manufacturing assets and vendors to get the...
- Starting in the second half of Calendia 27, Western Digital will also start qualification of its second generation hammer drives, and...
- Both Western Digital's customer technical support teams are working very closely with customers to complete those call schedules and get…
Faded since Q2 2026
- Fading Demand for storage is being driven both by AI as well as by core cloud services.
- Dropped If Western Digital fasts forward that to what it is looking at in terms of what it is discussing with customers...
- Fading Western Digital is targeting up to 8x the throughput of today's drives without the corresponding increase in power draw, exactly the...
- Fading Western Digital is engaging with many large enterprise customers who are in the physical AI space, and it has good visibility...
Latest announcements
Official filings, newest first. Summaries are generated from each filing and its attachment; every figure is checked against the source.
- Results of operations · SEC 8-K
Western Digital reported revenue of $4.38 billion for the first fiscal quarter of 2027, which is an increase of 55% compared to the same period last year.
- Regulation FD disclosure; Other events · SEC 8-K
The Company issued a notice to redeem all outstanding 3.00% Convertible Senior Notes with an aggregate principal amount of $109,505,000 on November 16, 2026.
- Unregistered share sale; Other events · SEC 8-K
Western Digital Corporation entered into agreements to exchange approximately $191.0 million of 3.00% Convertible Senior Notes for $192.7 million in cash and a number of common shares.
- Results of operations · SEC 8-K
Western Digital reported revenue of $3.75 billion for the fourth quarter of fiscal year 2026, which represents an increase of 44% compared to the previous year.
- Other events · SEC 8-K
Western Digital Corporation entered into exchange agreements to swap 1,038,681 shares of Sandisk Corporation common stock for its own common stock, with the transaction expected to close on June 22, 2026.
- Unregistered share sale; Other events · SEC 8-K
Western Digital Corporation entered into agreements to exchange approximately $858.4 million of its 3.00% Convertible Senior Notes due 2028 for cash and common stock.
- Director or officer change; Regulation FD disclosure · SEC 8-K
Western Digital Corporation announced the appointment of Manuvir Das to its board of directors, effective May 26, 2026.
- Results of operations · SEC 8-K
Western Digital reported revenue of $3.34 billion for the third fiscal quarter of 2026, representing a 45% increase compared to the same period last year.
Balance sheet & ownership
From SEC filings; short interest is FINRA data via Yahoo. Collected 2026-10-28.
Cash & runway
Cash & equivalents
$1.31B
2026-10-02
Long-term investments
$94.0M
total liquidity $1.41B
Implied runway
—
operating cash flow positive over the TTM window
Dilution
weighted-average basic shares, per quarter. Change: +6.1% YoY.
| Quarter | Shares |
|---|---|
| Q4 2024 | 346.0M |
| Q1 2025 | 348.0M |
| Q4 2025 | 345.0M |
| Q1 2026 | 341.0M |
| Q2 2026 | 342.0M |
| Q4 2026 | 366.0M |
Shares outstanding: 374.3M (2026-10-15)
Insider transactions
Form 4 open-market trades (codes S/P), trailing 12 months. Coverage: newest 50 of 149 filings; 50 filings parsed.
Sold by insiders
35.8K shares
$16.1M · 50 transactions
Bought by insiders
0 shares
0 transactions
Net direction
net selling
Catalyst calendar
management-stated targets — from the latest earnings call; plans, not promises.
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through fiscal 2027 and beyond
exabyte shipments to continue to increase
Source quote
“As we ram production across our next generation ePMR and HAMMER platforms, we expect our exabyte shipments to continue to increase through fiscal 2027 and beyond.”
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by the second quarter
platform to represent close to 30% of our near-lying shipments
Source quote
“customer adoption is progressing ahead of prior transitions, and we expect this platform to represent close to 30% of our near-lying shipments by the second quarter, and 50% by the third quarter of fiscal 2027.”
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in the first quarter of Calendia 2027
finish qualifications with two Hyperscale customers
Source quote
“On our first-generation Hammer product, we are on track to finish qualifications with two Hyperscale customers in the first quarter of Calendia 2027, and are on schedule to begin volume shipments in the first half of calendar year 2027.”
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during the first half of calendar year 2027
begin qualifications with two additional customers
Source quote
“We also expect to begin qualifications with two additional customers during the first half of calendar year 2027, further expanding customer validation and supporting broader adoption of our hammer products.”
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in the first half of calendar year 2027
introduction of our hammer technology
Source quote
“Nearline products continue to drive growth as we execute on our product transitions, starting with the ramp of our latest generation EPMR drives with capacities up to 40 terabyte, and followed by the introduction of our hammer technology in the first half of calendar year 2027, setting us up for stronger year-over-year growth in exabyte shipments.”