• Revenue: $2.3 billion, down 5% sequentially, up 31% year over year.
• Non-GAAP Gross Margin: 40.1%.
• Non-GAAP Earnings Per Share: $1.36.
• Free Cash Flow: $436 million.
• Cloud Revenue: $2.0 billion, representing 87% of total revenue, down 4% sequentially, up 38% year over year.
• Client Revenue: $137 million, representing 6% of total revenue, down 2% sequentially and year over year.
• Consumer Revenue: $150 million, representing 7% of total revenue, down 13% sequentially, down 4% year over year.
• Operating Expenses: $324 million, down sequentially.
• Operating Income: $596 million, up 85 basis points sequentially.
• Operating Margin: 26.0%, up 1.5 percentage points sequentially.
• Cash and Cash Equivalents: $3.5 billion.
• Gross Debt Outstanding: $7.4 billion.
• Inventory: $1.3 billion, representing 86 days of inventory.
• Net Leverage Ratio: 1.7 times.
• Operating Cash Flow: $508 million.
• Cash Capital Expenditures: $72 million.
• Quarterly Dividend: Initiating $0.10 per share.
• Fiscal Q4 Revenue Guidance: $2.45 billion, plus or minus $150 million.
• Fiscal Q4 Gross Margin Guidance: 40% to 41%.
• Fiscal Q4 Operating Expenses Guidance: $330 million to $340 million.

• Warning! GuruFocus has detected 4 Warning Signs with WDC.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Western Digital Corp (NASDAQ:WDC) reported strong financial results for the third fiscal quarter with revenue of $2.3 billion, a non-GAAP gross margin of 40.1%, and non-GAAP earnings per share of $1.36.
• The company successfully completed the planned separation of its Flash business, focusing on its core HDD operations.
• Western Digital Corp (NASDAQ:WDC) initiated a quarterly dividend of $0.10 per share, reflecting confidence in its long-term cash-generating ability.
• The company has long-term agreements with two of its largest hyperscale customers, providing visibility into demand through the first half of calendar year 2026.
• Western Digital Corp (NASDAQ:WDC) is on track with its HAMR technology milestones, working closely with two hyperscale customers and receiving positive feedback.

Negative Points

• Total revenue for the quarter was down 5% sequentially, despite being up 31% year over year.
• The current environment remains highly uncertain and volatile, driven by tariffs and global trade tensions, which could impact demand in certain segments.
• There is potential demand uncertainty in the enterprise, distribution, and retail segments due to the unpredictability of tariffs.
• Western Digital Corp (NASDAQ:WDC) faces challenges in managing supply chain shifts and ensuring agility and resilience in the face of geopolitical uncertainties.
• The company anticipates an increase in operating expenses in the fiscal fourth quarter due to variable compensation, hiring, and increased investments in research and development.

Q & A Highlights

Q: Can you explain your approach to capital allocation, specifically regarding dividends and share buybacks? A: Irving Tan, CEO: Our goal is to reduce our net leverage to 1.5 times, after which we plan to return 100% of our excess cash to shareholders through dividends and share buybacks. We are starting with a small dividend and will look to increase it and complement it with buybacks as we progress.

Q: How are you addressing potential tariff impacts on your business? A: Irving Tan, CEO: We don't anticipate direct tariff impacts in Q4. However, there is potential demand uncertainty in enterprise, distribution, and retail segments due to market volatility. We have cross-functional teams to minimize disruption and are evaluating long-term supply chain shifts to stay agile and resilient.

Q: What are the hurdles for adding manufacturing capacity, and how does technology transition impact exabyte growth? A: Irving Tan, CEO: Our exabyte growth is driven by air density and technology improvements, such as our UltraSMR technology, which provides a 20% capacity uplift. We focus on R&D to drive greater air density performance, allowing us to deliver exabyte growth without significant CapEx for additional unit growth.

Q: Can you provide more details on the long-term agreements (LTAs) with hyperscale customers? A: Irving Tan, CEO: The LTAs provide greater visibility and help us plan our supply chain and CapEx investments. We have LTAs extending to the first half of calendar year 2026 with two hyperscale customers, which gives us confidence in the business and demand strength.

Q: How do you view the potential for enterprise slowdown due to tariffs, and what is your outlook for the September quarter? A: Irving Tan, CEO: We haven't seen a slowdown yet, but there is demand uncertainty due to tariffs. We have widened our guidance range for Q4. For the September quarter, we will have 14 weeks of expenses, and revenue will follow typical seasonal patterns, but we are not providing specific guidance yet.

Q: How are you managing non-enterprise and non-cloud markets amid strong demand in other segments? A: Irving Tan, CEO: We are not deemphasizing these markets; they remain a material part of our business. We manage supply chains for cloud and non-cloud businesses separately and are looking for opportunities to drive incremental growth in these areas.

Q: What is the status of your HAMR technology development and customer engagement? A: Irving Tan, CEO: We plan to start HAMR qualifications in the second half of calendar year 2026 and ramp up production in the first half of calendar year 2027. We have engineering samples with two large hyperscalers and are receiving positive feedback on performance.

Q: How are you addressing the potential impact of export controls from China on your supply chain? A: Irving Tan, CEO: We have developed alternate sources of supply for rare earth and precious minerals, so we do not anticipate any material impact from export controls.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.