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Western Digital

WDC · Nasdaq

Costs grew 16.1% against revenue growth of 55.5%

Cost of revenue grew 16.1% while revenue grew 55.5%, lifting gross margin to 57.8% from 43.5%, a gap the filing ties to price and newer drives.

Q1 FY2027, the quarter to Oct 2, 2026 (Western Digital's fiscal 2027 ends in July 2027) · 10-Q filed Oct 23, 2026

Q1 FY2027 · revenue
$4.4B+55.5% on the year
Operating margin
46.7%
Net income
$1.8B
Free cash flow, quarter
$1.4B

Largest source of revenue: Cloud, 88.3% of the total.

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Where Western Digital's money goes

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Key insights · Q1 FY2027
  1. 01

    Costs grew 16.1% against revenue growth of 55.5%

    Cost of revenue grew 16.1% while revenue grew 55.5%, lifting gross margin to 57.8% from 43.5%, a gap the filing ties to price and newer drives.

    Why it matters

    Revenue was $4.38B against $2.82B a year earlier, up 55.5%. Cost of revenue was $1.85B against $1.59B, up 16.1%. Gross profit therefore rose 106.5% to $2.53B, and gross margin reached 57.8% against 43.5%. The filing names three causes: "improved pricing, an increased volume of shipments, and a lower cost structure on our newer generation products."1

    Cloud, 88.3% of revenue, grew 54.1% to $3.87B, and the filing says both exabytes shipped and average selling price per exabyte rose, the price on "an improved pricing environment." Client grew 119.2% to $320M, helped by a shift to higher capacity drives. Consumer grew 19.1% to $193M even as exabytes shipped fell.1

    AnalysisIn analysis, the cost line is the tell. A drive's cost is set mostly per drive built, while revenue is earned per exabyte sold. When price per exabyte rises and each generation packs more capacity into a drive, revenue can climb far faster than the cost of making it, which is what the two growth rates show.

    The climb predates this quarter. On the annual figures, gross margin was 28.1% in FY2024, 38.8% in FY2025 and 48.9% in FY2026, before 57.8% now. The filing also notes the year-ago quarter ran a week longer than this one, so the reported growth rates understate growth on equal calendars.1

  2. 02

    Four-fifths of gross profit now reaches operating income

    Operating income was 80.7% of gross profit against 64.5% a year earlier, because operating expenses grew 12.2% while gross profit more than doubled.

    Why it matters

    Total operating expenses were $488M against $435M, up 12.2%, and fell to 11.1% of revenue from 15.4%. Research and development fell 3.7% to $283M, which the filing attributes to lower compensation-related costs, and dropped to 6.5% of revenue from 10.4%. Selling, general and administrative cost rose 17.4% to $162M.1

    Operating income rose 158.3% to $2.05B, and operating margin reached 46.7% against 28.1% a year earlier. Business realignment charges of $43M, all employee termination benefits, were the fastest-growing cost line, but at 1.0% of revenue they did little to the margin.1

    AnalysisIn analysis, this is operating leverage running forward. Engineering and overhead are budgeted ahead of sales, so extra gross profit from price and mix flows almost entirely to operating income. The same fixed base turned into operating losses in FY2023 and FY2024, when gross profit fell short of it.

  3. 03

    A one-off gain flatters last year's net income

    Operating income rose 158.3% but net income only 50.5%, because last year's quarter included a $611M Sandisk gain equal to 51.7% of its net income.

    Why it matters

    Net income was $1.78B against $1.18B, up 50.5%, and net margin slipped 1.34 points to 40.6%. The year-ago quarter included a $611M gain on the retained interest in Sandisk, which the filing calls non-recurring and bases on its mark-to-market value at the time. That gain equaled 51.7% of the prior quarter's net income and 77.1% of its operating income.1

    Below operating income, the other lines moved little or helped. Interest expense fell to $11M from $59M, which the filing attributes to the reduction in debt. The effective tax rate, income tax over income before taxes, was 12.7% against 11.6%.1

    AnalysisIn analysis, operating income is the cleaner read of the business this quarter. The lower net margin reflects a comparison with an unusual quarter rather than weaker operations, so reported net income growth understates how much the operations improved.

  4. 04

    One quarter's free cash flow topped all of FY2025

    Free cash flow of $1.38B exceeded FY2025's full-year $1.28B, even as capital spending rose to $227M from $73M a year earlier.

    Why it matters

    Operating cash flow was $1.60B against $672M a year earlier. Capital spending was $227M against $73M. That left free cash flow of $1.38B, 31.4% of revenue, against $1.28B for the whole of FY2025 and $3.51B for FY2026.1

    Operating cash flow was 0.90 times net income. The filing says improved profitability drove the gain, partly offset by cash absorbed in inventories, as production ramped in response to growing demand, and in receivables, as revenue grew.1

    Capital spending was 5.2% of revenue and 14.2% of operating cash flow. The company expects capital spending as a share of revenue to run modestly above its long-run range over the next two years as it invests in heads and media technology and factory automation.1

    AnalysisIn analysis, the business is funding faster growth and heavier investment from its own cash at the same time. Free cash flow was 77.4% of net income, so profit is reaching the bank, though inventory and receivables built ahead of demand would weigh on cash if orders slowed.

Sources

  1. 1.Western Digital 10-Q for the period to 2026-10-02 (the filing), Oct 23, 2026, read Nov 2, 2026

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Business performance

Growth, profit and margin

Revenue went from $19.1B in FY2017 to $12.9B in FY2026, the operating margin from 10.2% to 34.5%, over 9 years.

  • Revenue$12.9B
  • Operating income$4.5B
  • Operating margin34.5%
Period
Q1 FY2027
Revenue
$4.4B
Operating income
$2.0B
Operating margin
46.7%
Net income
$1.8B
Free cash flow
$1.4B
Business performance

Does the profit turn into cash?

Q1 FY2027: free cash flow of $1.4B against net income of $1.8B in the quarter.

  • Operating cash flow$3.9B
  • Capital expenditure$418.0M
  • Free cash flow$3.5B
  • Net income$9.4B

Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.

Financial data and sources

How the revenue mix has shifted

Each breakdown the filing reports, as shares of revenue, for every period it restates.

Disaggregated Revenue, Geographic Information, Concentrations of Risk, and Segment Reporting - Schedule of Disaggregation of Revenue (Details). The filing restates this breakdown for 1 period.

Click a member to isolate it across the years shown.

The figures

Margins, cash and growth for the period, each with what it was computed from.

Gross margin
57.8%
Source10-Q, Derived from Gross profit and Revenue, net in the 10-Q filed 2026-10-23
Operating margin
46.7%
Source10-Q, Derived from Operating income and Revenue, net in the 10-Q filed 2026-10-23
Net margin
40.6%
Source10-Q, Derived from Net income and Revenue, net in the 10-Q filed 2026-10-23
Free cash flow, quarter
$1.4B
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-23
Free cash flow margin, quarter
31.4%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-23
Cash conversion, quarter
0.90x
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-23
Capital spending, quarter
5.2%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-23
Revenue growth
+55.5%
From the record's own history, against the prior year.

Where revenue comes from

Every breakdown the filing reports for the period, with each item's share.

Revenue streams

Cloud$3.9B88.3%
Client$320.0M7.3%
Consumer$193.0M4.4%

Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-10-23

Geographic markets

Americas$2.1B47.5%
Asia$1.7B39.0%
Europe, Middle East and Africa$592.0M13.5%

Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-10-23

What it costs

The cost lines beneath operating income, each as a share of revenue, then the operating result.

Costs are reported by function: what it cost to make what was sold, then the expenses of selling, developing and administering.

Cost lineQ1 FY2027Of revenueSource
Cost of revenue$1.8B42.2%Source10-Q, us-gaap:CostOfGoodsAndServicesSold, as reported in the 10-Q filed 2026-10-23
Operating income$2.0B46.7%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-10-23

Operating figures the company states

From the text of the filing rather than its statements, each with the sentence that states it.

Largest customer's share of revenue
14.0%
As of Oct 2, 2026
View source
For the three months ended October 2, 2026, two customers accounted for 14% and 13%, respectively, of our net revenue, and for the three months ended October 3, 2025, four customers accounted for 16%, 13%, 13% and 12%, respectively, of our net revenue.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, 10-Q filed Oct 23, 2026
Top 10 customers' share of revenue
64.0%
As of Oct 2, 2026
View source
Our top 10 customers accounted for 64% of our net revenue for the three months ended October 2, 2026, compared to 73% of our net revenue for the three months ended October 3, 2025.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, 10-Q filed Oct 23, 2026

The statements, as filed

The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.

Income statement25 lines, as presented in the 10-Q
LineQ1 FY2027A year earlierChangeOf revenueSource
Income Statement
Revenue, net$4.38B$2.82B+55%100%Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-10-23
Cost of revenue$1.85B$1.59B+16%42.2%Source10-Q, us-gaap:CostOfGoodsAndServicesSold, as reported in the 10-Q filed 2026-10-23
Gross profit$2.53B$1.23B+107%57.8%Source10-Q, us-gaap:GrossProfit, as reported in the 10-Q filed 2026-10-23
Operating expenses:
Research and development$283.0M$294.0M-3.7%6.5%Source10-Q, us-gaap:ResearchAndDevelopmentExpenseExcludingAcquiredInProcessCost, as reported in the 10-Q filed 2026-10-23
Selling, general and administrative$162.0M$138.0M+17%3.7%Source10-Q, us-gaap:SellingGeneralAndAdministrativeExpense, as reported in the 10-Q filed 2026-10-23
Business realignment charges$43.0M$3.0M+1,333%1.0%Source10-Q, wdc:BusinessRealignmentCharges, as reported in the 10-Q filed 2026-10-23
Total operating expenses$488.0M$435.0M+12%11.1%Source10-Q, us-gaap:OperatingExpenses, as reported in the 10-Q filed 2026-10-23
Income Statement
Operating income$2.05B$792.0M+158%46.7%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-10-23
Interest and other income (expense):
Interest income$7.0M$17.0M-59%0.2%Source10-Q, us-gaap:InvestmentIncomeInterest, as reported in the 10-Q filed 2026-10-23
Interest expense (shown as a deduction)($11.0M)$59.0M-81%0.3%Source10-Q, us-gaap:InterestExpenseNonoperating, as reported in the 10-Q filed 2026-10-23
Gain on retained interest in Sandisk$0$611.0M0.0%Source10-Q, us-gaap:EquitySecuritiesFvNiUnrealizedGainLoss, as reported in the 10-Q filed 2026-10-23
Other expense, net-$4.0M-$24.0M-83%0.1%Source10-Q, us-gaap:OtherNonoperatingIncomeExpense, as reported in the 10-Q filed 2026-10-23
Total interest and other income (expense), net-$8.0M$545.0M0.2%Source10-Q, us-gaap:NonoperatingIncomeExpense, as reported in the 10-Q filed 2026-10-23
Income before taxes$2.04B$1.34B+52%46.5%Source10-Q, us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest, as reported in the 10-Q filed 2026-10-23
Income tax expense$259.0M$155.0M+67%5.9%Source10-Q, us-gaap:IncomeTaxExpenseBenefit, as reported in the 10-Q filed 2026-10-23
Net income$1.78B$1.18B+51%40.6%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-10-23
Dividends allocated to preferred shareholders (shown as a deduction)($0)$5.0M0.0%Source10-Q, us-gaap:PreferredStockDividendsIncomeStatementImpact, as reported in the 10-Q filed 2026-10-23
Income attributable to participating securities (shown as a deduction)($0)$25.0M0.0%Source10-Q, us-gaap:UndistributedEarningsLossAllocatedToParticipatingSecuritiesBasic, as reported in the 10-Q filed 2026-10-23
Basic net income attributable to common shareholders$1.78B$1.15B+54%40.6%Source10-Q, us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic, as reported in the 10-Q filed 2026-10-23
Re-allocation of participating securities considered potentially dilutive$0$2.0M0.0%Source10-Q, us-gaap:DilutiveSecurities, as reported in the 10-Q filed 2026-10-23
Diluted net income attributable to common shareholders$1.78B$1.15B+54%40.6%Source10-Q, us-gaap:NetIncomeLossAvailableToCommonStockholdersDiluted, as reported in the 10-Q filed 2026-10-23
Weighted average common shares outstanding:
Basic (in shares)366,000,000345,000,000+6.1%Source10-Q, us-gaap:WeightedAverageNumberOfSharesOutstandingBasic, as reported in the 10-Q filed 2026-10-23
Diluted (in shares)384,000,000376,000,000+2.1%Source10-Q, us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding, as reported in the 10-Q filed 2026-10-23
Net income per common share:
Basic (in dollars per share)$5$3+46%0.0%Source10-Q, us-gaap:EarningsPerShareBasic, as reported in the 10-Q filed 2026-10-23
Diluted (in dollars per share)$5$3+51%0.0%Source10-Q, us-gaap:EarningsPerShareDiluted, as reported in the 10-Q filed 2026-10-23
Cash flow statement31 lines, as presented in the 10-Q

Year to date, as a quarterly filing reports it.

LineQ1 FY2027A year earlierChangeSource
Cash flows from operating activities
Net income$1.78B$1.18B+51%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-10-23
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization$104.0M$88.0M+18%Source10-Q, us-gaap:DepreciationDepletionAndAmortization, as reported in the 10-Q filed 2026-10-23
Stock-based compensation$79.0M$53.0M+49%Source10-Q, us-gaap:ShareBasedCompensation, as reported in the 10-Q filed 2026-10-23
Deferred income taxes-$30.0M$55.0MSource10-Q, us-gaap:DeferredIncomeTaxesAndTaxCredits, as reported in the 10-Q filed 2026-10-23
Gain on retained interest in Sandisk (shown as a deduction)($0)$611.0MSource10-Q, us-gaap:EquitySecuritiesFvNiUnrealizedGainLoss, as reported in the 10-Q filed 2026-10-23
Other non-cash operating activities, net$3.0M$4.0M-25%Source10-Q, us-gaap:OtherOperatingActivitiesCashFlowStatement, as reported in the 10-Q filed 2026-10-23
Changes in:
Accounts receivable, net (shown as a deduction)($206.0M)-$131.0MSource10-Q, us-gaap:IncreaseDecreaseInAccountsReceivable, as reported in the 10-Q filed 2026-10-23
Inventories (shown as a deduction)($269.0M)$101.0M+166%Source10-Q, us-gaap:IncreaseDecreaseInInventories, as reported in the 10-Q filed 2026-10-23
Accounts payable$52.0M$248.0M-79%Source10-Q, us-gaap:IncreaseDecreaseInAccountsPayableTrade, as reported in the 10-Q filed 2026-10-23
Accrued expenses-$14.0M-$21.0M-33%Source10-Q, us-gaap:IncreaseDecreaseInAccruedLiabilities, as reported in the 10-Q filed 2026-10-23
Accrued compensation-$83.0M$6.0MSource10-Q, us-gaap:IncreaseDecreaseInEmployeeRelatedLiabilities, as reported in the 10-Q filed 2026-10-23
Income taxes payable$131.0M-$503.0MSource10-Q, us-gaap:IncreaseDecreaseInAccruedIncomeTaxesPayable, as reported in the 10-Q filed 2026-10-23
Other assets and liabilities, net (shown as a deduction)(-$58.0M)-$141.0M-59%Source10-Q, us-gaap:IncreaseDecreaseInOtherOperatingCapitalNet, as reported in the 10-Q filed 2026-10-23
Cash flows from operating activities
Net cash provided by operating activities$1.60B$672.0M+139%Source10-Q, us-gaap:NetCashProvidedByUsedInOperatingActivities, as reported in the 10-Q filed 2026-10-23
Cash flows from investing activities
Purchases of property, plant and equipment (shown as a deduction)($227.0M)$73.0M+211%Source10-Q, us-gaap:PaymentsToAcquirePropertyPlantAndEquipment, as reported in the 10-Q filed 2026-10-23
Strategic investments and other, net (shown as a deduction)(-$2.0M)-$16.0M-88%Source10-Q, us-gaap:PaymentsForProceedsFromOtherInvestingActivities, as reported in the 10-Q filed 2026-10-23
Net cash used in investing activities-$225.0M-$57.0M+295%Source10-Q, us-gaap:NetCashProvidedByUsedInInvestingActivities, as reported in the 10-Q filed 2026-10-23
Cash flows from financing activities
Taxes paid on vested stock awards under employee stock plans (shown as a deduction)($317.0M)$55.0M+476%Source10-Q, wdc:TaxesPaidOnVestedStockAwardsUnderEmployeeStockPlans, as reported in the 10-Q filed 2026-10-23
Repurchases of common stock (shown as a deduction)($1.00B)$553.0M+81%Source10-Q, us-gaap:PaymentsForRepurchaseOfCommonStock, as reported in the 10-Q filed 2026-10-23
Dividends paid to common shareholders (shown as a deduction)($56.0M)$34.0M+65%Source10-Q, us-gaap:PaymentsOfDividendsCommonStock, as reported in the 10-Q filed 2026-10-23
Dividends paid to preferred shareholders (shown as a deduction)($0)$5.0MSource10-Q, us-gaap:PaymentsOfDividendsPreferredStockAndPreferenceStock, as reported in the 10-Q filed 2026-10-23
Settlement of convertible notes transactions (shown as a deduction)($570.0M)$0Source10-Q, us-gaap:RepaymentsOfConvertibleDebt, as reported in the 10-Q filed 2026-10-23
Repayments of debt (shown as a deduction)($600.0M)$31.0M+1,835%Source10-Q, us-gaap:RepaymentsOfDebt, as reported in the 10-Q filed 2026-10-23
Proceeds from debt$900.0M$0Source10-Q, us-gaap:ProceedsFromIssuanceOfLongTermDebt, as reported in the 10-Q filed 2026-10-23
Net cash used in financing activities-$1.64B-$678.0M+142%Source10-Q, us-gaap:NetCashProvidedByUsedInFinancingActivities, as reported in the 10-Q filed 2026-10-23
Statement of Cash Flows
Effect of exchange rate changes on cash$0-$3.0MSource10-Q, us-gaap:EffectOfExchangeRateOnCashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-23
Net decrease in cash and cash equivalents-$265.0M-$66.0M+302%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsPeriodIncreaseDecreaseIncludingExchangeRateEffect, as reported in the 10-Q filed 2026-10-23
Cash and cash equivalents, beginning of period$1.58BSource10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-23
Cash and cash equivalents, end of period$1.31B$2.05B-36%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-23
Supplemental disclosure of cash flow information:
Cash paid for income taxes$36.0M$446.0M-92%Source10-Q, us-gaap:IncomeTaxesPaidNet, as reported in the 10-Q filed 2026-10-23
Cash paid for interest$6.0M$50.0M-88%Source10-Q, us-gaap:InterestPaidNet, as reported in the 10-Q filed 2026-10-23
Balance sheet24 lines, as presented in the 10-Q
LineQ1 FY2027A year earlierChangeSource
Current assets:
Cash and cash equivalents$1.31BSource10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-10-23
Accounts receivable, net$2.23BSource10-Q, us-gaap:AccountsReceivableNetCurrent, as reported in the 10-Q filed 2026-10-23
Inventories$1.78BSource10-Q, us-gaap:InventoryNet, as reported in the 10-Q filed 2026-10-23
Other current assets$541.0MSource10-Q, us-gaap:OtherAssetsCurrent, as reported in the 10-Q filed 2026-10-23
Total current assets$5.87BSource10-Q, us-gaap:AssetsCurrent, as reported in the 10-Q filed 2026-10-23
Non-current assets:
Property, plant and equipment, net$2.59BSource10-Q, us-gaap:PropertyPlantAndEquipmentNet, as reported in the 10-Q filed 2026-10-23
Goodwill$4.32BSource10-Q, us-gaap:Goodwill, as reported in the 10-Q filed 2026-10-23
Other non-current assets$1.46BSource10-Q, us-gaap:OtherAssetsNoncurrent, as reported in the 10-Q filed 2026-10-23
Assets
Total assets$14.24BSource10-Q, us-gaap:Assets, as reported in the 10-Q filed 2026-10-23
Current liabilities:
Accounts payable$1.86BSource10-Q, us-gaap:AccountsPayableCurrent, as reported in the 10-Q filed 2026-10-23
Accrued expenses$675.0MSource10-Q, us-gaap:AccruedLiabilitiesCurrent, as reported in the 10-Q filed 2026-10-23
Accrued compensation$469.0MSource10-Q, us-gaap:EmployeeRelatedLiabilitiesCurrent, as reported in the 10-Q filed 2026-10-23
Income taxes payable$304.0MSource10-Q, us-gaap:AccruedIncomeTaxesCurrent, as reported in the 10-Q filed 2026-10-23
Debt, current$789.0MSource10-Q, us-gaap:LongTermDebtCurrent, as reported in the 10-Q filed 2026-10-23
Total current liabilities$4.09BSource10-Q, us-gaap:LiabilitiesCurrent, as reported in the 10-Q filed 2026-10-23
Non-current liabilities:
Other liabilities$799.0MSource10-Q, us-gaap:OtherLiabilitiesNoncurrent, as reported in the 10-Q filed 2026-10-23
Liabilities:
Total liabilities$4.89BSource10-Q, us-gaap:Liabilities, as reported in the 10-Q filed 2026-10-23
Shareholders’ equity:
Common stock$4.0MSource10-Q, us-gaap:CommonStockValueOutstanding, as reported in the 10-Q filed 2026-10-23
Additional paid-in capital$66.0MSource10-Q, us-gaap:AdditionalPaidInCapital, as reported in the 10-Q filed 2026-10-23
Accumulated other comprehensive income$24.0MSource10-Q, us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax, as reported in the 10-Q filed 2026-10-23
Retained earnings$9.27BSource10-Q, us-gaap:RetainedEarningsAccumulatedDeficit, as reported in the 10-Q filed 2026-10-23
Treasury stock (shown as a deduction)($15.0M)Source10-Q, us-gaap:TreasuryStockCommonValue, as reported in the 10-Q filed 2026-10-23
Liabilities:
Total shareholders’ equity$9.35B$5.89B+59%Source10-Q, us-gaap:StockholdersEquity, as reported in the 10-Q filed 2026-10-23
Liabilities and shareholders’ equity
Total liabilities and shareholders’ equity$14.24BSource10-Q, us-gaap:LiabilitiesAndStockholdersEquity, as reported in the 10-Q filed 2026-10-23

About this data

Source
Western Digital 10-Q, accession 0001628280-26-066933, filed Oct 23, 2026, read on Nov 2, 2026.
History
From the SEC's XBRL company facts, the value from the latest filing that stated each period.
Reading
Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
Version
methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
Edge and risks

What holds Western Digital's model up, and what could bend it

Competitive edge

  • Each drive generation lowers the cost of capacity

    Revenue is earned per exabyte, and the filing credits a lower cost structure on newer generation products for part of the margin gain.

    The detail

    The filing explains revenue by exabytes shipped and average selling price per exabyte, and the gross profit gain partly by "a lower cost structure on our newer generation products." Client revenue rose 119.2% to $320M, which the filing ties in part to a shift in product mix to higher capacity drives.1

    AnalysisIn analysis, the advantage lasts as long as each generation adds capacity faster than it adds cost. That depends on heads and media technology, which is where the filing says the extra capital spending is going.

  • Cloud buyers are committing earlier and for longer

    Cloud is 88.3% of revenue, and the filing says longer lead times have customers partnering earlier and extending their commercial arrangements.

    The detail

    The filing says AI and cloud workloads are "accelerating demand for high-capacity drives" and causing "greater manufacturing complexity and longer production lead times." In response, "customers are partnering with us earlier to support their future growth requirements and are extending the duration of their commercial arrangements." Cloud revenue grew 54.1% to $3.87B.1

    AnalysisIn analysis, earlier commitments give the company visibility to plan production and capital spending. Whether they steady the cycle depends on terms the filing does not disclose: commitments that fix volume and price would, statements of intent would not.

What to watch

  • Price per exabyte is carrying the margin

    Consumer revenue rose 19.1% while exabytes shipped fell on higher prices, showing buyers push back when price per exabyte climbs.

    The detail

    In Consumer, average selling price per exabyte rose while exabytes shipped fell, and the filing attributes the decline to "general softness in demand in these end markets as a result of the increased pricing levels." Consumer's share of revenue fell 1.34 points to 4.4%.1

    AnalysisIn analysis, price is where a turn would show first. If cloud buyers slow their build plans or industry supply grows faster than demand, price per exabyte would likely fall before volumes do, and with costs set per drive, margin would compress faster than revenue. The downturn years FY2023 and FY2024 ended in operating losses.

  • Ten customers still buy 64% of revenue

    The top ten customers were 64% of revenue against 73% a year earlier, and the largest single customer was 14%, counted by end customer.

    The detail

    From this quarter the company attributes revenue to the ultimate end customer even when a distributor or contract manufacturer places the order, and restated the prior year to match. On that basis the ten largest customers were 64% of revenue against 73%, and the largest 14% against 16%. The filing ties shifts in geographic mix to "the deployment and build plans of our larger Cloud customers."1

    AnalysisIn analysis, concentration is easing but remains high. A pause by one or two large cloud buyers would show directly in a quarter's revenue, and in receivables, where the filing says a few customers also account for large shares.

  • New minimum taxes press on a low tax rate

    The effective tax rate was 12.7% against 11.6%, and the company became subject to the US corporate alternative minimum tax this fiscal year.

    The detail

    The filing says the US corporate alternative minimum tax applies from this fiscal year, that the company expects that liability to exceed its regular tax liability this year, and that the excess creates credits it can carry forward. Its tax rate also reflects the global minimum tax in Malaysia and Thailand, which the filing says minimizes the benefit of its tax holidays there.1

    AnalysisIn analysis, the minimum tax mainly affects cash rather than the reported rate for now, since the filing says it did not change this quarter's effective rate. The open question is how long the rate can stay well below the US statutory rate as these regimes take hold.

Sources

  1. 1.Western Digital 10-Q for the period to 2026-10-02 (the filing), Oct 23, 2026, read Nov 2, 2026
Go deeper

Western Digital, further in

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What could change the outlook

What Western Digital's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.

  • What a 57.8% gross margin depends on from here

    How much of the margin rests on price per exabyte versus cost per exabyte, and which signals in later filings would show that balance shifting first.

  • Where the cash goes as growth starts to cost more

    How rising capital spending, inventory and receivables interact with the cash the business now generates, and what would have to stay true for that balance to last.

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Questions to start with
  • How much of Western Digital's gross margin rise to 57.8% came from price per exabyte rather than lower cost per drive?
  • Why did Western Digital's net income grow 50.5% when its operating income grew 158.3%?
  • What would a slowdown in cloud customers' build plans do to Western Digital's operating income?

Business Lens describes Western Digital from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.