Executive Summary
Western Digital reported QQ1 2026 revenue of $2.818 billion, down 25.13% year over year but up 22.84% quarter over quarter, underscoring the ongoing cyclicality of the storage market and the impact of a softer PC HDD/SSD environment. Despite the top-line decline, the company delivered robust profitability metrics, highlighted by an EBITDA of $792 million and net income of $1.182 billion, aided by positive non-operating items and a favorable tax/other income mix. The quarter demonstrates a clear margin resilience, with gross margin of 43.54% (down YoY by 9.31% but up QoQ by 34.54%), and an operating margin of 28.11%. The sizable contribution from 'Total Other Income/Expenses Net' (~$545 million) to pre-tax earnings indicates a material one-off or non-recurring component that amplified reported profitability relative to ongoing operations.
The earnings backdrop points to a bifurcated narrative: (1) a challenging revenue environment driven by cyclical demand in client storage and a highly competitive pricing landscape, and (2) a profitability uptick driven by operational discipline and favorable non-operating items. Investors should monitor whether core, recurring cash-flow drivers can stabilize alongside the potential recovery in enterprise storage and data-center spending. In the near term, the stock's trajectory will hinge on demand normalization, pricing dynamics, and the sustainability of the non-operating income that boosted this quarter's results.
Key Performance Indicators
QoQ: 22.84% | YoY:-25.13%
QoQ: 125.57% | YoY:2 930.77%
QoQ: 116.88% | YoY:263.04%
Key Insights
Revenue: $2.818B; YoY change: -25.13%; QoQ change: +22.84%
Gross Profit: $1.227B; Gross Margin: 43.54%; YoY change: -9.31%; QoQ change: +34.54%
Operating Income (EBITDA): $0.792B; EBITDA Margin: 28.11%; YoY change: +266.67%; QoQ change: +4.21%
Net Income: $1.182B; Net Margin: 41.94%; YoY change: +2,930.77%; QoQ change: +125.57%
EPS (Basic): $3.34; EPS (Diluted): $3.07; YoY EPS change: +263.04%; QoQ EPS change: +116.88%
Key drivers: Operating earnings benefited from a strong non-operating income ...
Financial Highlights
Revenue: $2.818B; YoY change: -25.13%; QoQ change: +22.84%
Gross Profit: $1.227B; Gross Margin: 43.54%; YoY change: -9.31%; QoQ change: +34.54%
Operating Income (EBITDA): $0.792B; EBITDA Margin: 28.11%; YoY change: +266.67%; QoQ change: +4.21%
Net Income: $1.182B; Net Margin: 41.94%; YoY change: +2,930.77%; QoQ change: +125.57%
EPS (Basic): $3.34; EPS (Diluted): $3.07; YoY EPS change: +263.04%; QoQ EPS change: +116.88%
Key drivers: Operating earnings benefited from a strong non-operating income line totaling $545M and a relatively lean operating expense base; however, the core revenue base remains pressured by a cyclic HDD/SSD market and PC demand softness. The reported gross margin compression YoY reflects mix and pricing headwinds, while QoQ resurgence in gross profit and operating earnings suggests improving efficiency and potential seasonality.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
2.82B |
-25.13% |
22.84% |
| Gross Profit |
1.23B |
-9.31% |
34.54% |
| Operating Income |
792.00M |
266.67% |
4.21% |
| Net Income |
1.18B |
2 930.77% |
125.57% |
| EPS |
3.34 |
263.04% |
116.88% |
Management Commentary
Transcript content not provided in the prompt. Once available, summarize management themes by: (1) strategy and product cadence (enterprise HDD/SSD, data-center solutions, WD brand positioning), (2) operating efficiency and cost discipline (R&D, SG&A optimization), (3) market conditions (enterprise vs consumer storage demand, pricing environment, competitive dynamics), (4) capital allocation and balance sheet considerations, (5) any near-term guidance or targets. Note: quotes will be added with proper attribution.
Forward Guidance
No explicit full-year numeric guidance was provided in the supplied data. Given the revenue contraction in QQ1 2026, investors should assess any management color on: (i) expected stabilization or recovery in PC and enterprise storage demand, (ii) anticipated mix shift toward higher-margin enterprise products and software solutions, (iii) cadence of capital expenditures and any debt/financing considerations, and (iv) potential impact of supplier dynamics and pricing. Key factors to monitor include data-center capex trends, utilization of WDās enterprise HDD/SSD portfolio, pricing environment for flash and HDD products, and the sustainability of the non-operating income observed this quarter.