Tech

Western Digital Revenue Jumps 55% on AI Storage Demand, Guides Higher

Western Digital reported fiscal Q1 revenue of $4.38 billion, up 55%, beat estimates and raised its dividend 17%, yet shares fell about 6% after hours amid a broad AI-stock selloff.

Oct 23, 2026 - 07:12

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Western Digital (Nasdaq: WDC) reported fiscal first-quarter results on Thursday, October 22, 2026, that exceeded analyst estimates as cloud and artificial-intelligence customers bought more high-capacity hard drives, and it forecast revenue growth of 66% to 72% for the current quarter. The shares nonetheless fell about 6% in after-hours trading following a day of heavy selling in AI-related stocks, CNBC reported.

Results versus estimates

Revenue for the quarter ended October 2 rose 55% to $4.381 billion from $2.818 billion a year earlier, according to the company's earnings release. Adjusted earnings were $4.64 a share, up 161% from $1.78. Analysts polled by LSEG had expected adjusted earnings of $4.09 a share on revenue of $4.14 billion, CNBC said.

On a GAAP basis, net income was $1.779 billion, or $4.63 a diluted share, compared with $1.182 billion, or $3.07 a share, a year earlier. GAAP gross margin widened to 57.8% from 43.5%, and non-GAAP gross margin reached 58.1%. Non-GAAP operating margin expanded to 49.1% from 30.4%. Operating cash flow was $1.604 billion and free cash flow was $1.377 billion.

Cloud drives the growth

The company shipped 248 exabytes of storage in the quarter, up 22% from a year earlier and 8% from the prior quarter, Chief Financial Officer Kris Sennesael said on the earnings call. The cloud segment generated about $3.9 billion, or 88% of revenue, according to the call summary. Sennesael said year-over-year growth in average price per terabyte increased to 28%, compared with the high teens in the prior quarter.

"AI is fundamentally a data system. Every workload creates more data, and that data must be stored, managed and accessed in a scalable and economical manner," Chief Executive Irving Tan said. He said storage demand is broadening beyond hyperscale cloud providers to enterprises, neocloud operators and AI labs.

Product roadmap

Tan said the company's latest energy-assisted (ePMR) drive platform, with capacities of up to 40 terabytes, is expected to make up close to 30% of nearline shipments in the fiscal second quarter and 50% in the fiscal third quarter. Western Digital expects to finish qualifying its first heat-assisted magnetic recording (HAMR) drives with two hyperscale customers in the first quarter of calendar 2027 and to begin volume shipments in the first half of that year. Sennesael said the company was seeing some input-cost increases for the DRAM and NAND used inside its hard drives.

Guidance and shareholder returns

For the fiscal second quarter, Western Digital forecast revenue of $5.1 billion, plus or minus $100 million, non-GAAP gross margin of 60% to 61%, and non-GAAP earnings of $5.80 a share, plus or minus 20 cents. The board raised the quarterly dividend 17% to 17.5 cents a share, payable December 17 to holders of record on December 4. The company repurchased $1.001 billion of stock during the quarter, according to its cash flow statement.

Trading backdrop

The report followed a session in which AI-linked shares sold off broadly on concerns about the cost of financing the AI buildout. Western Digital was still lower in early premarket trading on Friday despite its beat and upbeat outlook, according to a premarket report published on Yahoo Finance.