Highlights

  • Western Digital shows 273.33% one-year basic EPS growth, P/E of 13.34 and PEG of -0.35.
  • First quarter 2027 net income was $1,779 million, against $1,182 million a year earlier.
  • Revenue was $4,381 million, up 55%; Cloud revenue was $3,868 million, up 54%.
  • Western Digital repurchased $1.00 billion of shares; $2.26 billion remains available.

An undervalued growth stock pairs earnings growth with its P/E and PEG ratios, and Western Digital (NASDAQ:WDC) shows all three: basic earnings per share grew 273.33% over one year, the trailing twelve-month P/E ratio is 13.34 and the PEG ratio, on an expected basis, is -0.35, with shares trading at USD 392.20 on October 28, 2026, up 2.97%. Alongside those figures, the hard disk drive maker issued a redemption notice for its convertible notes on September 14, declared a $0.175 per share quarterly dividend on October 21, and reported first quarter 2027 net income of $1,779 million against $1,182 million.

Based in San Jose, California, and incorporated in Delaware, Western Digital describes itself as a developer, manufacturer and provider of data storage devices and solutions based on hard disk drive technology. It sells under the Western Digital and WD brands into three end markets: Cloud, its largest, Client and Consumer. Its fiscal year ends on the Friday nearest to June 30, and fiscal 2027 ends on July 2, 2027.

Growth: First Quarter 2027 Earnings, Revenue and End Markets

Net income was $1,779 million in the first quarter of 2027, ended October 2, 2026, against $1,182 million a year earlier. Basic earnings per share were $4.86 against $3.34, and diluted earnings per share were $4.63 against $3.07. The prior-year quarter included a $611 million gain on the retained interest in Sandisk and had 14 weeks, against 13 weeks now.

Revenue was $4,381 million against $2,818 million, up 55%. Gross profit was $2,534 million against $1,227 million, which the company attributed to pricing, shipment volumes and a lower cost structure on newer products.

By end market, Cloud revenue was $3,868 million against $2,510 million, up 54%, with exabytes shipped up more than 20% and average selling price per exabyte up approximately 25%. Client revenue was $320 million, up 119%, and Consumer revenue was $193 million, up 19%.

Valuation: P/E of 13.34, PEG of -0.35 and Cash Flow

The P/E ratio of 13.34 is measured on trailing twelve-month earnings, and the PEG ratio of -0.35 on expected growth. Net cash provided by operating activities was $1,604 million against $672 million, and capital expenditures were $227 million against $73 million.

On the October 22 earnings call, management said visibility is extending further out and that free cash flow generation supported the dividend increase. The company expects repurchases to be funded principally by operating cash flows.

Capital Returns, Convertible Notes and Liquidity

Western Digital repurchased 2.0 million shares for $1.00 billion in the quarter, against $553 million a year earlier. The Board has authorized up to $6.0 billion of repurchases with no expiration date, and $2.26 billion was available at October 2, 2026. Dividends paid were $0.15 per share, or $56 million. The $0.175 per share dividend declared October 21 is payable December 17, 2026.

The company used $570 million to settle part of its convertible notes. Notes of $141 million remained outstanding, and any not converted will be redeemed on November 16, 2026. The revolving credit facility had $650 million outstanding, matures in January 2027 and had $600 million of remaining capacity. Cash and cash equivalents were $1,314 million against $1,579 million at July 3, 2026, and debt was $791 million.

Disclosed Risks and Outlook for the Second Quarter

The company disclosed that its top 10 customers accounted for 64% of net revenue, with two customers at 14% and 13%. Business realignment charges were $43 million against $3 million.

In patent litigation, a 2024 jury awarded SPEX Technologies $316 million; an amended judgment later set nominal damages of $1. Both sides have appealed, and the company has not accrued a liability, as it believes a loss is not probable. The liability for unrecognized tax benefits was $635 million.

For the second quarter of fiscal 2027, management guided to revenue of $5.1 billion, plus or minus $100 million, a gross margin of 60% to 61%, operating expenses of $400 million to $410 million and non-GAAP diluted earnings per share of $5.80, plus or minus $0.20, on 380 million shares. It expects capital expenditures to average 4% to 6% of revenue over five years, modestly above that range for the next two. Management expects its latest platform to reach close to 30% of nearline shipments in the second quarter and 50% in the third, with first-generation HAMR volume shipments planned for the first half of calendar year 2027.