Key Highlights
- Fiscal Q3 revenue reached $3.34 billion, representing a 45% year-over-year increase and surpassing the $3.23 billion estimate.
- Earnings per share hit $2.72, marking a 97% year-over-year surge and exceeding the $2.36 analyst forecast.
- Gross profit margin achieved 50.5%, representing a 1,040 basis point improvement from the prior year.
- Cloud segment generated $3.0 billion, accounting for 89% of total revenue with 48% year-over-year growth.
- TD Cowen upgraded its price objective to $500 from $325 while maintaining its Buy recommendation.
Shares of Western Digital (WDC) advanced 5.27% to reach $434.52 following the company’s announcement of exceptional fiscal third-quarter 2026 results that significantly exceeded Wall Street’s projections across key metrics.
Western Digital Corporation, WDC
The data storage company delivered quarterly revenue of $3.34 billion, reflecting a 45% year-over-year expansion and topping the consensus estimate of $3.23 billion. Earnings per share reached $2.72, marking a substantial 97% increase from the year-ago period and comfortably beating the Street’s $2.36 expectation.
Gross profit margin expanded to 50.5% during the quarter, showing improvement of 1,040 basis points year over year and 440 basis points from the previous quarter. The company posted operating income of $1.3 billion, representing a 106% year-over-year climb, with operating margin reaching 38.6%.
The cloud business segment emerged as the primary growth catalyst. Cloud revenue totaled $3.0 billion, comprising 89% of overall revenue and expanding 48% compared to the same quarter last year. Company executives attributed this performance to robust demand for higher-capacity nearline storage solutions.
The company shipped 222 exabytes worth of storage capacity, marking a 34% year-over-year increase. This included 4.1 million EPMR drives representing 118 exabytes, with capacity configurations reaching up to 32 terabytes.
Average selling prices climbed 7% sequentially and 9% year over year during the March quarter. Pricing measured on a per-terabyte basis increased 9% annually, bolstered by long-term supply agreements with major customers.
The company generated free cash flow of $978 million, achieving a 29% free cash flow margin. During the period, Western Digital bought back 2.9 million shares for $752 million and distributed $43 million in dividend payments.
Western Digital also announced a 20% increase to its quarterly dividend, raising it to $0.15 per share. The payment will be made on June 17, 2026 to shareholders of record as of June 5.
SanDisk Stake Sale Eliminates Net Debt
The divestiture of 5.8 million SanDisk shares enabled the company to reduce its debt burden by $3.1 billion. Western Digital closed the quarter with a net cash position of $450 million, while retaining 1.7 million SanDisk shares.
Since initiating its capital return initiative in fiscal 2025, the company has distributed $2.2 billion back to shareholders through buybacks and dividends.
On the innovation front, 44-terabyte HAMR and 40-terabyte EPMR drive models are currently undergoing customer qualification testing. HAMR technology is being evaluated by four customers, while the 40-terabyte EPMR variant is with three clients. The company’s product development roadmap extends beyond 100 terabytes per drive.
UltraSMR technology has gained traction with the company’s three largest customers, with two of them fulfilling nearly all their exabyte requirements through this technology. Western Digital anticipates UltraSMR will account for approximately 60% of exabyte shipments by fiscal 2027.
Forward Outlook and Wall Street Response
For the upcoming fourth quarter, Western Digital provided revenue guidance of $3.65 billion, plus or minus $100 million, indicating approximately 40% year-over-year growth at the midpoint. The company expects gross margin to land between 51% and 52%, with non-GAAP earnings per share of $3.25, plus or minus $0.15.
The fourth-quarter outlook exceeded Street expectations by 18%, though shares experienced some after-hours selling pressure. TD Cowen attributed the modest pullback to marginally slower gross margin expansion — projected at 60–65% for the June quarter versus 90% in March — particularly when compared to Seagate’s implied 80% rate.
TD Cowen elevated its price target to $500 from the previous $325 level while reaffirming its Buy rating on the shares. The investment firm forecasts calendar year 2027 earnings of $21 per share, assuming 8% year-over-year average selling price growth.
Recent regulatory filings revealed that company insiders sold $28.7 million worth of stock, with no insider purchases documented during the reporting period.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
