Western Digital Corp. reported fiscal third‑quarter 2026 results that surpassed expectations, with revenue of $3.34 billion—up 45% year‑over‑year—and a non‑GAAP diluted earnings per share of $2.72, beating the consensus estimate of $2.41 per share by $0.31. Gross margin rose to 50.5% from 46.1% in the prior quarter, while operating income climbed to $1.19 billion. The company’s guidance for the fourth quarter projects revenue of $3.65 billion and a non‑GAAP gross margin of 51–52%.
The revenue growth was driven largely by robust demand from hyperscale data centers, which continue to adopt high‑capacity cloud drives for AI workloads. The shift in product mix toward larger, higher‑margin drives, combined with effective cost controls that lowered the cost per terabyte, underpinned the 45% year‑over‑year increase and the margin expansion. This mix shift also helped the company maintain profitability even as overall data‑center spending grew at a faster pace than the broader market.
Margin expansion can be attributed to two key factors: first, the company’s focus on high‑capacity cloud drives that command higher prices; second, disciplined cost management that reduced the cost of goods sold per terabyte. The result is a non‑GAAP gross margin that exceeded 50% for the first time in the company’s history, a level that signals strong pricing power and efficient scale. Operating income growth mirrored the margin improvement, reflecting the company’s ability to convert revenue gains into earnings gains.
Management highlighted a 20% increase in the quarterly cash dividend, raising it to $0.15 per share, and emphasized the company’s strong free‑cash‑flow position that supports its share‑repurchase program. CFO Kris Sennesael said, "Our business continues to strengthen with visibility extending as we continue to build momentum across all our end markets, driven by innovation, strong customer engagements, and disciplined execution. We have also strengthened our balance sheet while deploying our robust free cash flow to drive shareholder returns."
CEO Irving Tan noted, "WD started calendar year 2026 with great execution, driving strong sequential and year‑over‑year revenue growth in all our end markets, while expanding gross and operating margins. Gross margin exceeded 50%, reflecting our continued delivery of innovation across an expanding set of customers. Given our confidence in the durability of our business, we are also announcing a 20% increase in the quarterly cash dividend on the company's common stock to $0.15 per share." He added, "The demand drivers are clear: Virtually every AI workload, from training, inference, agentic AI to physical AI, creates data that is stored persistently and cost‑efficiently on HDDs."
Western Digital’s results reinforce its strategy of focusing on high‑margin HDDs for AI‑driven storage needs. The company remains a key player in the HDD market, competing primarily with Seagate, and its continued investment in high‑capacity drives positions it well to capture the growing demand from data‑center operators. The robust earnings beat, margin expansion, and dividend increase signal strong financial health and confidence in the company’s long‑term growth trajectory.
The content on EveryTicker is for informational purposes only and should not be construed as financial or investment advice. We are not financial advisors. Consult with a qualified professional before making any investment decisions. Any actions you take based on information from this site are solely at your own risk.