Western Digital’s earnings for the quarter ended 2 October 2026 beat every number the company had promised. Revenue rose 55% to $4.38 billion and the outlook calls for faster growth still, but net profit fell 44% from the previous quarter, and that drop has nothing to do with selling hard drives.
Key takeaways
- Revenue for fiscal Q1 2027 was $4.38 billion, up 55% year over year and above the company’s own guidance of $4.0 to $4.2 billion.
- Net profit of $1.78 billion was up 54% on a year earlier but down 44% on fiscal Q4 2026. That quarter included a one-off $2.05 billion gain on Western Digital’s Sandisk stake.
- Gross margin climbed to 57.8%, up from 43.5% a year ago.
- For the next quarter, Western Digital expects revenue of $5.1 billion, give or take $100 million, which would be 66% to 72% growth. It also raised its dividend 17% to $0.175 a share.
- Before the report, the stock had already fallen more than 50% from its June high.
What did Western Digital report on 22 October 2026?
The hard-drive maker posted its results after the US market closed on 22 October 2026. According to the press release filed with the SEC, revenue reached $4.381 billion, up from $2.818 billion a year earlier and $3.747 billion in the prior quarter.
That came in well above Wall Street’s forecast. 24/7 Wall St. put the analyst consensus at about $4.15 billion in revenue and $4.10 in adjusted earnings per share. Western Digital delivered $4.64.
The business also generated a lot of cash: $1.60 billion from operations and $1.38 billion in free cash flow, which is the cash left after paying for factories and equipment. The company spent about $1.0 billion of that buying back its own shares during the quarter. CEO Irving Tan said fiscal 2027 was “off to a strong start, with results exceeding expectations.” IT之家 was among the first outlets to break down the figures for Chinese readers.
Why did profit fall 44% if sales grew?
The answer is Sandisk. When Western Digital spun off its flash-memory business, it kept a stake in the new company. Because it marks that stake to market, a rise in Sandisk’s share price shows up as profit on Western Digital’s books, even though it has nothing to do with selling drives.
In fiscal Q4 2026, that paper gain was $2.05 billion, which pushed net income to $3.195 billion. In fiscal Q1 2027 the gain was zero. Think of it like a year in which you sold an old car on top of your salary: your income looks huge, and the following year looks like a pay cut even though your salary went up.
Strip those gains out and the trend points firmly up. Adjusted (non-GAAP) net income, which leaves out one-off items like the Sandisk gain, was $1.78 billion, compared with $655 million attributable to shareholders a year earlier. Adjusted EPS went from $1.78 to $4.64.
| Metric | Q1 FY26 | Q4 FY26 | Q1 FY27 |
|---|---|---|---|
| Revenue | $2.82B | $3.75B | $4.38B |
| GAAP gross margin | 43.5% | 54.1% | 57.8% |
| Sandisk stake gain | $611M | $2.05B | $0 |
| GAAP diluted EPS | $3.07 | $8.21 | $4.63 |
| Non-GAAP diluted EPS | $1.78 | $3.56 | $4.64 |
| Free cash flow | $599M | $1.28B | $1.38B |
Why is AI making hard drives profitable again?
AI runs on fast chips, but the data it uses has to be stored somewhere. Training sets, logs, model checkpoints and AI-generated video pile up quickly, and most of it sits on “nearline” hard drives. These are high-capacity disks that stay switched on in data centres, and they are far cheaper per terabyte than flash.
Since the Sandisk spin-off, Western Digital sells almost nothing but hard drives, mostly to the big cloud companies. The margins show how much pricing power that gives it. A gross margin of 57.8% is a number you would expect from a software firm, not from a company that makes spinning metal platters. If you want the chip side of the same memory squeeze, our look at Samsung’s Pyeongtaek fabs covers it.
The next step in the technology is HAMR (heat-assisted magnetic recording), which uses a tiny laser to pack more data onto each platter. According to 24/7 Wall St.’s preview of the call, Western Digital plans to start shipping a 44TB HAMR drive in the first half of 2027.
Why was the stock sliding before the report?
Good numbers have not been enough lately. After the August report, the shares fell more than 18% even though both results and guidance beat forecasts, Yahoo Finance reported. Going into 22 October 2026, the stock had dropped about 22% in a month and was more than 50% below its June peak. It traded as low as $351.70 during the 22 October session.
Some of that came from the wider AI selloff, which we covered in why credit worries, not demand, sank chip stocks. The rest comes down to doubt: how long can prices and margins stay this high, and will HAMR arrive on time? Early after-hours trading swung both ways, which tells you investors are still unsure.
My opinion: the market is pricing Western Digital like a commodity at the peak of its cycle, but the company keeps reporting like one with pricing power. Over the next few quarters we will find out which view is right.
What happens next
- Fiscal Q2 2027 outlook: revenue of $5.1 billion, give or take $100 million, adjusted gross margin of 60% to 61%, and adjusted EPS of $5.80, give or take $0.20.
- Dividend: $0.175 a share, paid on 17 December 2026 to shareholders on record on 4 December 2026.
- HAMR: the 44TB drive is slated for the first half of 2027. Any delay would hit the bull case directly.
- Next report: it covers the quarter ending in early January 2027. That is the real test of whether the 60% margin guidance holds.
FAQ
Did Western Digital beat expectations?
Yes. Revenue of $4.38 billion beat both the company’s own range of $4.0 to $4.2 billion and the analyst consensus of about $4.15 billion. Adjusted EPS of $4.64 beat forecasts of about $4.10.
Why is Western Digital’s profit down from last quarter?
Fiscal Q4 2026 included a $2.05 billion paper gain on the company’s Sandisk stake. Fiscal Q1 2027 had no such gain, so net profit fell 44% on the quarter even though the core business grew.
What is Western Digital’s guidance for next quarter?
It expects revenue of $5.1 billion, give or take $100 million, which is 66% to 72% growth year over year. It also expects an adjusted gross margin of 60% to 61% and adjusted EPS of about $5.80.
If you follow AI infrastructure, track Western Digital’s margins alongside chipmakers’ results. Storage is where the AI boom shows up in a quieter way. This article is for information only and is not investment advice.
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