# Western Digital (WDC) Sector: Data storage | Field | Value | |---|---| | Price | $289.78 | | Market cap | $108B | | Intrinsic value source | Analysts | | Data as of | 2026-11-10 | | Next earnings | 2027-01-28 (estimate) | Analysts: Bullish Picks: Top pick Discount category: Well below intrinsic value ## In short The market doubts that Western Digital's record hard drive margins can last, and results on guidance with stable prices per exabyte through 2027 can close the gap. ## Themes and gap - Themes: AI supplier (ai-supplier) - Gap type: Can close (closable) - Why: The Q2 fiscal 2027 report, expected in late January 2027, shows whether revenue, margins and EPS meet the raised guidance after the record Q1. ## About Western Digital (WD) designs and makes hard disk drives. Most of its sales go to cloud companies, which buy high-capacity drives for their data centers. In Q1 fiscal 2027, which ended on October 2, 2026, Cloud was 88% of revenue, Client was 7% and Consumer was 5%. In February 2025, WD separated its flash business into a new company, Sandisk, and it later used its retained Sandisk shares to reduce its debt. Revenue was $12.92 billion in fiscal 2026, which ended on July 3, 2026. Its fiscal year ends near June 30. ## Thesis The market doubts that Western Digital's record margins can last. Cloud companies need more storage for AI data, so WD shipped more exabytes at higher prices. Its non-GAAP gross margin rose to 58.1% in Q1 fiscal 2027 from 43.9% a year earlier, and non-GAAP EPS rose 161% to $4.64. But hard drive demand has moved in deep cycles before, and investors fear that customers stop buying when they have enough drives or that new supply pushes prices down. The share price fell by more than half from its June 2026 high while earnings kept rising. For the gap to close, three things must be true. Q2 fiscal 2027 results must meet the guidance of $5.1 billion of revenue and $5.80 of non-GAAP EPS. The price per exabyte and the gross margin must hold through 2027, which shows that long-term agreements with cloud customers work. Free cash flow must keep funding buybacks while debt stays low. The Q2 fiscal 2027 report, expected in late January 2027, gives the next test. If these checks pass, the gap can close within four to six quarters. The main reason it may not close is a downturn in cloud orders, which has ended past upturns. ## Checkpoints - Oct 22, 2026: Q1 fiscal 2027 results. Status: Passed. Watch: Revenue and non-GAAP EPS above the guidance of $4.1 billion and $4.00 pass; results below guidance or a lower gross margin fail. Outcome: Revenue of $4.38 billion and non-GAAP EPS of $4.64 beat the guidance, the non-GAAP gross margin rose to 58.1% and the Q2 guidance was higher again. - Jan 28, 2027 (estimate): Q2 fiscal 2027 results: margins and guidance. Status: Pending. Watch: Revenue near $5.1 billion, a non-GAAP gross margin near 60% and Q3 guidance for more growth pass; results below guidance or a lower price per exabyte fail. ## Balance sheet - Cash: $1.3B - Debt: $791M - Net cash: $523M - Undrawn credit line: $600M, to January 2027 - Debt due within 12 months: $791M Western Digital has little debt. At October 2, 2026, cash was $1.31 billion and debt principal was $791 million. The debt was $650 million under the revolving credit facility that matures in January 2027 and $141 million of 3.00% convertible notes. WD called these notes for redemption on November 16, 2026, and it expects holders to convert almost all of them first. It had $600 million of unused capacity under the revolving facility. Free cash flow was $1.38 billion in Q1 fiscal 2027. In that quarter, WD paid $1.00 billion for buybacks, $570 million to settle convertible notes and $56 million of dividends. At October 2, 2026, $2.26 billion of the buyback authorization remained. As of 2026-10-02. Sources: - https://www.sec.gov/Archives/edgar/data/106040/000162828026066882/a4ex991-pressreleaseq127.htm - https://www.sec.gov/Archives/edgar/data/106040/000162828026066933/wdc-20261002.htm ## Dividends - Dividend yield: 0.2% (last 12 months, at the current price) - Paid per share, last 12 months: $0.55 (4 payments) - Current annual rate: $0.60 ($0.15 x 4 a year) - Payout ratio: 2% of the earnings of the last fiscal year (the year ended 2026-07-03) - Latest ex-dividend date: 2026-09-08, $0.15 per share - Growth over the last 10 years: -9.6% a year Dividends per share by year: 2016: $1.5117, 2017: $1.5117, 2018: $1.5117, 2019: $1.1338, 2020: $0.7559, 2021: $0.00, 2022: $0.00, 2023: $0.00, 2024: $0.00, 2025: $0.325. Source: company filings and market data, read on 2026-11-09. ## Recent events - 2026-10-22: Western Digital reported Q1 fiscal 2027 results. Revenue rose 55% to $4.38 billion. The non-GAAP gross margin was 58.1%, and non-GAAP diluted EPS rose 161% to $4.64. Free cash flow was $1.38 billion, and the company bought back 2.0 million shares for $1.00 billion. It raised the quarterly dividend by 17% to $0.175 per share. For Q2 fiscal 2027, it expects revenue of $5.1 billion, plus or minus $100 million, and non-GAAP EPS of $5.80, plus or minus $0.20. - 2026-09-14: Western Digital gave notice that it will redeem all of its remaining 3.00% convertible notes due 2028 on November 16, 2026. In the quarter that ended October 2, 2026, it settled $569 million of these notes in cash for the principal and with about 14.0 million shares for the conversion premium. - 2026-08-05: Western Digital reported Q4 fiscal 2026 results. Revenue rose 44% to $3.75 billion, and non-GAAP diluted EPS was $3.56. For fiscal 2026, revenue rose 36% to $12.92 billion and non-GAAP diluted EPS rose 104% to $10.22. GAAP diluted EPS of $24.28 included gains on the retained Sandisk shares. - 2026-04-30: Western Digital reported Q3 fiscal 2026 results. Revenue was $3.34 billion, the non-GAAP gross margin was 50.5% and non-GAAP diluted EPS was $2.72. - 2026-02-17: Western Digital converted all of its remaining Series A convertible preferred shares into 7 million common shares. - 2026-02-02: The board authorized an additional $4.0 billion of share buybacks. The total program is $6.0 billion and has no end date. ## Latest news and filings - Last earnings: 2026-10-22 (8-K: https://www.sec.gov/Archives/edgar/data/106040/000162828026066882/) - Next earnings: 2027-01-28 (expected; the company has not confirmed it) | Filed | Form | Headline | Period end | XBRL document | Link | | --- | --- | --- | --- | --- | --- | | 2026-10-23 | 10-Q | Quarterly report for the period ended Oct 2, 2026 | 2026-10-02 | wdc-20261002 | https://www.sec.gov/Archives/edgar/data/106040/000162828026066933/wdc-20261002.htm | | 2026-10-22 | 8-K | Earnings release | | wdc-20261022 | https://www.sec.gov/Archives/edgar/data/106040/000162828026066882/wdc-20261022.htm | | 2026-09-14 | 8-K | Investor disclosure and Other company news | | | https://www.sec.gov/Archives/edgar/data/106040/000119312526389859/d23939d8k.htm | | 2026-08-26 | 8-K | Other company news | | | https://www.sec.gov/Archives/edgar/data/106040/000119312526365796/d376254d8k.htm | | 2026-08-14 | 10-K | Annual report for the period ended Jul 3, 2026 | 2026-07-03 | wdc-20260703 | https://www.sec.gov/Archives/edgar/data/106040/000162828026057139/wdc-20260703.htm | | 2026-08-05 | 8-K | Earnings release | | wdc-20260805 | https://www.sec.gov/Archives/edgar/data/106040/000162828026053305/wdc-20260805.htm | | 2026-06-11 | 8-K | Other company news | | | https://www.sec.gov/Archives/edgar/data/106040/000119312526267514/d83915d8k.htm | | 2026-06-03 | 8-K | Other company news | | | https://www.sec.gov/Archives/edgar/data/106040/000119312526254621/d106828d8k.htm | | 2026-05-28 | 8-K | Change of directors or officers and Investor disclosure | | wdc-20260526 | https://www.sec.gov/Archives/edgar/data/106040/000162828026038632/wdc-20260526.htm | | 2026-05-01 | 10-Q | Quarterly report for the period ended Apr 3, 2026 | 2026-04-03 | wdc-20260403 | https://www.sec.gov/Archives/edgar/data/106040/000162828026029054/wdc-20260403.htm | Every filing on SEC EDGAR (CIK 106040): https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000106040&type=&dateb=&owner=include&count=40 ## Risks - High: Hard drive demand and prices move in cycles. In Q1 fiscal 2027, the price per exabyte in Cloud rose about 25% from a year earlier. If cloud customers slow their orders or rivals add supply, prices and margins can fall fast, as they did in past downturns. - Medium: Cloud was 88% of revenue in Q1 fiscal 2027, and a small number of large customers buy most of these drives. A change in the plans of one large customer can change WD's results. - Medium: WD must keep its lead in drive capacity. Seagate competes with its own high-capacity drives, and flash storage competes for part of the market. A delay in new drive technology can cost market share. - Low: The 10-Q lists changes in U.S. trade policy, new tariffs and trade restrictions as risks to costs and sales. New trade barriers can raise costs or limit sales to some customers. ## Links - Page: https://picks.utilarium.app/company/WDC/ - History of changes: https://picks.utilarium.app/company/WDC/history/ - JSON with full history: https://picks.utilarium.app/data/company/WDC.json > Picks is a personal record of stock picks. It gives general opinions about stocks, including a "Top pick" label. They are not tailored to your needs, goals or risk tolerance. Kevin is not a registered adviser and relies on the general-advice exemption in Canadian securities law (NI 31-103 s.8.25). Do your own research, or ask a registered adviser. Kevin may hold any stock on this site. Prices, intrinsic values and ratings can be delayed or wrong; check the original source. Full disclaimer: /disclaimer/.