Full Breakdown
Western Digital Posts Strong Fiscal 2027 Q1 Results Amid AI-Driven Storage Surge
By Drooid · · How we work
Fiscal Q1 Performance Highlights
Western Digital Corp. reported revenue of $4.381 billion for the first fiscal quarter ended October 2, 2026, a 55 % year-over-year increase and 17 % quarter-over-quarter growth that topped market expectations of roughly $4.14 billion. GAAP net income rose to $1.779 billion, while diluted earnings per share reached $4.63 (adjusted EPS $4.64), up 161 % from a year earlier. The company generated $1.4 billion in free cash flow and posted a non-GAAP gross margin of 58.1 % and operating margin of 49.1 %.
Background & Context
The results come as data-center and AI markets demand higher-capacity storage. Western Digital’s ePMR platform, capable of up to 40-terabyte drives, entered volume production during the quarter, and the firm is on schedule with its first-generation heat-assisted magnetic recording (HAMR) drives. The strategy emphasizes increasing areal density to lower total-cost-of-ownership for cloud and hyperscale customers.
Data & Statistics
- Revenue: $4.381 billion (55 % YoY, 17 % QoQ)
- Free cash flow: $1.4 billion
- Adjusted EPS: $4.64 (161 % YoY)
- Gross margin: 58.1 % (up 1,420 bps YoY)
- Operating income: $2.2 billion (152 % YoY)
- Exabyte shipments: 248 EB (22 % YoY)
- Cloud revenue: $3.9 billion (88 % of total)
- Dividend: increased 17 % to $0.175 per share
- Share repurchases: $1 billion returned to shareholders
Official Statements & Responses
Chief Executive Officer Irving Tan said the quarter “exceeded our own expectations,” citing robust demand and progress in the ePMR and HAMR transitions.
Chief Financial Officer Kris Sennesael highlighted higher average selling prices per terabyte (up 28 % YoY) and a shift toward higher-capacity nearline drives. He projected capital expenditures to average 4 %–6 % of revenue over the next five years, with modestly higher spending in the near term to support technology development and automation.
Cantor Fitzgerald maintained an Overweight rating, lowered its price target to $625 from $900, and raised its EPS estimates to $30.00 for calendar 2027 and $41.50 for calendar 2028.
Bank of America raised its price target to $800, citing anticipated gross-margin expansion. Morgan Stanley kept an Overweight rating but trimmed its target to $643, noting parallels with prior memory-chip up-cycles.
Outlook and Capital Plans
Western Digital forecast second-quarter fiscal 2027 revenue of $5.0 billion–$5.2 billion, midpoint $5.1 billion, roughly 69 % YoY growth. Adjusted EPS is projected at $5.60–$6.00, midpoint $5.80. The company expects gross margin of 60 %–61 % and operating expenses of $400 million–$410 million.
The firm plans to qualify two hyperscale customers in calendar 2027 Q1 and begin volume shipments in the first half of the year, with additional qualifications slated for the same period. Second-generation HAMR drives are expected to enter qualification in the second half of calendar 2027, featuring a five-terabyte-per-platter design on an 11-disc platform.
What’s Next
- October 22 (scheduled): Release of the first-quarter fiscal 2027 earnings report after market close.
- Dividend payment: $0.175 per share, payable later this month.
- Capital-expenditure outlook: Spending will be modestly above the 4 %–6 % revenue range during the next two years to fund technology transitions.
The strong quarterly fundamentals, dividend increase, and clear technology roadmap underscore Western Digital’s positioning to capitalize on AI-driven data-center storage demand, while investors watch margin sustainability and capital deployment.