Abstract

Western Digital will report fiscal Q2 2026 results on January 29, 2026 Post Market; this preview compiles the latest quarterly consensus, last quarter’s performance, and institutional perspectives for the near-term outlook.

Market Forecast

Based on the most recent projections, Western Digital’s fiscal Q2 2026 revenue is estimated at $2.92 billion, down 31.40% year over year, with forecast EBIT at $0.93 billion and forecast adjusted EPS at $1.92; the implied gross margin and net margin outlook are not explicitly guided, but the company’s previous disclosure suggests mixed margin dynamics. The main business highlights point to cloud-led revenue concentration and a recovery path in client and consumer storage; the cloud segment remains the most promising, with estimated revenue of $2.51 billion and previously observed momentum suggesting favorable mix effects year over year.

Last Quarter Review

Western Digital’s last reported quarter delivered revenue of $2.82 billion, a gross profit margin of 43.54%, GAAP net profit attributable to the parent company of $1.18 billion, a net profit margin of 41.94%, and adjusted EPS of $1.78; year-over-year data indicated declines in revenue but an improvement in profitability and EPS versus estimates. A notable business highlight was robust margin expansion on a leaner revenue base, supported by pricing discipline and mix improvements. Main business revenue composition featured cloud at $2.51 billion, consumer services at $0.16 billion, and client at $0.15 billion, reinforcing the weight of cloud in the overall portfolio.

Current Quarter Outlook

Main Business: Cloud Storage Platforms and Enterprise Drives

The core driver for the current quarter remains demand from hyperscale customers for enterprise HDDs and high-capacity flash in cloud deployments. Order visibility has reportedly stabilized as large customers rationalize inventories, which historically translates into steadier shipment schedules and better cost absorption in manufacturing. Pricing traction for capacity enterprise products could sustain elevated gross margins relative to trough-cycle levels, although the revenue base is set to be lower year over year. Overlapping effects from disciplined supply, node transitions in NAND, and richer configurations in nearline HDDs should support profitability even in a softer top line environment.

Most Promising Business: Cloud

Cloud continues to show the strongest structural demand backdrop due to AI training and inference workloads, data lakes, and content distribution needs that expand both HDD capacity and SSD performance requirements. The segment’s scale enables better fixed-cost leverage and procurement efficiencies, offering a path to defend margins even under pricing variability. While the estimated quarterly revenue of $2.51 billion implies a significant portion of the total, growth year over year is restrained by last year’s base effects and broader storage cycle normalization. Management execution in aligning product mix toward high-capacity nearline drives and enterprise SSDs remains the primary lever to protect contribution margins.

Stock Price Drivers: Pricing, Mix, and Supply Discipline

The stock’s near‑term performance hinges on the interplay of ASP trends in NAND and nearline HDD, the share of shipments going to hyperscale versus client OEMs, and operational discipline around capex and inventory. A favorable mix skew toward capacity enterprise drives and higher-performance flash can offset weaker unit volumes, preserving margin structure. Conversely, unexpected pricing pressure or a slower pace of customer reorders could compress EBIT and EPS relative to estimates, especially given the revenue decline embedded in consensus. Execution on cost reductions and yield improvements across manufacturing nodes will be closely watched as key inputs to sustaining the recent margin recovery.

Analyst Opinions

The majority of recent institutional commentary leans cautiously positive, emphasizing margin resilience amid a lower revenue base and a constructive view on cloud demand normalization. Analysts point to supportive drivers from enterprise HDD capacity transitions and NAND cost downs, with a preference for companies demonstrating pricing discipline and inventory control. Well-known firms have highlighted the potential for better-than-feared profitability as product mix improves, and consensus forecasts for adjusted EPS of $1.92 and EBIT of $0.93 billion reflect this guarded optimism. The prevailing view underscores that, while year-over-year revenue is expected to decline to $2.92 billion, the earnings profile can remain intact if mix and cost improvements continue, setting a measured backdrop for Western Digital’s fiscal Q2 update.