Key Highlights

  • Revenue reached USD 4.38 billion, up 55% year over year.
  • Non-GAAP gross Margin widened to 58.1% from 43.9% a year earlier.
  • Non-GAAP Diluted Earnings per Share rose 161% to USD 4.64.
  • The quarterly Dividend rose 17% to USD 0.175 per share.

Margins Widen

Western Digital (NASDAQ:WDC) reported fiscal first-quarter 2027 results on Thursday for the period ended Oct. 2. Revenue of USD 4.38 billion compares with USD 2.82 billion a year earlier and USD 3.75 billion in the preceding quarter. GAAP gross margin was 57.8%, against 43.5% a year ago, while non-GAAP gross margin was 58.1%.

GAAP Operating Income reached USD 2.05 billion, up 158%. Non-GAAP operating income was USD 2.15 billion, a margin of 49.1% against 30.4% a year earlier. Non-GAAP diluted earnings per share were USD 4.64, compared with USD 1.78 a year ago and USD 3.56 in the prior quarter. GAAP diluted earnings per share were USD 4.63, up 51% from USD 3.07.

Cloud Leads Demand

Cloud revenue totaled USD 3.9 billion, up 54%, and accounted for 88% of the total. Client revenue was USD 320 million, up 119%, and consumer revenue was USD 193 million, up 19%. The company attributed the cloud result to durable Demand for high-capacity nearline drives.

Shipments of 248 exabytes were up 22% from a year earlier and 8% from the previous quarter. Average price per terabyte rose 28% year over year, an acceleration from the high-teens rate of the prior quarter. Management said demand visibility with its top seven customers extends to 2030 and 2031, and that the customer base is widening beyond traditional hyperscalers to enterprises and AI labs.

Cash and Dividend

Cash flow from operations was USD 1.60 billion and free Cash Flow was USD 1.38 billion. Dividends and share repurchases totaled USD 1.1 billion, and the company ended the quarter with a net cash position of USD 0.5 billion.

The board declared a quarterly dividend of USD 0.175 per share, up from USD 0.15, payable on Dec. 17 to stockholders of record on Dec. 4. CEO Irving Tan tied the increase to confidence in the Business and a commitment to return Capital to shareholders.

Capital expenditures are projected to average 4% to 6% of revenue over five years, with spending modestly above that range over the next two years for head and media technology and factory automation. Management also noted rising input costs for the memory components used in its drives.

Guidance and Technology Shifts

For the fiscal second quarter, the company guides to revenue of USD 5.1 billion, plus or minus USD 100 million, which implies growth of 66% to 72%. Non-GAAP gross margin is guided at 60% to 61%, operating expenses at USD 400 million to USD 410 million, and non-GAAP diluted earnings at USD 5.80 per share, plus or minus USD 0.20, on about 380 million shares.

The energy-assisted recording platform is projected to reach 30% of nearline shipments by the second fiscal quarter and 50% by the third. Qualification of heat-assisted drives with two hyperscale customers is scheduled to finish in the first quarter of calendar 2027, with Volume shipments starting in the first half of that year. Management projects long-term exabyte demand growth above 25% a year.

Markers to Follow

The quarter pairs volume and price: shipments grew 22% while price per terabyte rose 28%, and that combination took gross margin from 43.5% to 57.8% on a GAAP basis in a year. Free cash flow of USD 1.38 billion was 31.5% of revenue, and dividends and repurchases of USD 1.1 billion absorbed about four-fifths of it.

The guidance midpoint of USD 5.1 billion sits 16% above the quarter's revenue, with non-GAAP gross margin guided 190 to 290 basis points above the 58.1% reported. Against that, the company cites rising memory component costs and capital spending set modestly above its 4% to 6% range. The next datapoints are exabyte shipments, price per terabyte, the energy-assisted share of nearline shipments, and the heat-assisted qualifications due in the first quarter of calendar 2027.