Western Digital reported QQ1 2026 results with solid profitability and strong cash generation, underscored by an EBITDA of $792 million and net income of $1.182 billion on revenue of $2.818 billion. The quarter benefited from a sizable non-operating income line (total other income/expenses net of $545 million), which boosted pretax earnings and net income, producing an unusually high net margin of roughly 41.9%. Gross margin stood at 43.5%, supported by a favorable product mix and pricing dynamics within hard drives, SSDs, and data-center solutions. Operating margins remained healthy at 28.1%, reflecting disciplined cost management, but the sustainability of the net income level hinges on the durability of the one-off benefit and ongoing operating performance.
On the balance sheet and cash flow fronts, WD generated $672 million in cash from operating activities and roughly $599 million in free cash flow, with capital expenditures of about $73 million. The company ended the period with $2.05 billion in cash and equivalents and total debt outstanding of $4.68 billion, resulting in a net debt position of approximately $2.64 billion. While liquidity indicators are reasonable, leverage remains a key consideration given the sizable goodwill/intangible asset base and elevated short-term debt, implying ongoing focus on deleveraging and working capital optimization. Looking ahead, the earnings narrative will likely center on sustaining revenue in a cyclical storage market, managing the balance sheet, and converting operating profitability into recurring cash flow to fund strategic initiatives and potential capital allocation opportunities.