Western Digital Earnings Beat, Shares Fall After Hours

Western Digital Corporation (Nasdaq: WDC) reported fiscal fourth-quarter earnings on Aug. 5, 2026, that topped forecasts, driven by cloud and AI storage demand boosting margins. Despite the strong results, shares fell sharply in after-hours trading as investors focused on the company’s Q1 fiscal 2027 outlook.

Fiscal Fourth Quarter and Full-Year Results

Western Digital said revenue for the fiscal fourth quarter ended July 3, 2026, reached $3.75 billion, a 44% increase year over year. The company noted the quarter’s results met or exceeded the high end of prior guidance, concluding fiscal 2026 with strong performance.

Earnings showed significant growth. GAAP diluted earnings per share (EPS) rose to $8.21 from $0.67 a year earlier, while non-GAAP diluted EPS, which excludes certain items, doubled to $3.56. This adjusted figure surpassed analyst estimates and reflected a sharp profit acceleration.

Margins expanded notably. GAAP gross margin reached 54.1%, and non-GAAP gross margin was 54.4%, up 1,310 basis points year over year. GAAP operating margin was 41.7%, with non-GAAP operating margin at 44.2%, up 1,610 basis points. Management attributed the margin gains to product-mix improvements, favorable pricing, and strong demand for high-capacity hard-disk drives (HDDs) and NAND flash products used in cloud and AI workloads.

The company generated $1.39 billion in cash flow from operations and $1.28 billion in free cash flow during the quarter, underscoring solid liquidity following the surge in revenue and profit.

For the full fiscal year ended July 3, 2026, Western Digital reported revenue of $12.92 billion, up 36% year over year. Non-GAAP diluted EPS more than doubled to $10.22, while GAAP diluted EPS was $24.28. Full-year non-GAAP gross margin rose 970 basis points to 49.1%, and non-GAAP operating margin increased 1,290 basis points to 37.3%.

In the prior quarter, fiscal Q3 2026, the company recorded revenue of $3.34 billion, up about 45% year over year, and non-GAAP EPS of $2.72, setting the stage for the year-over-year acceleration in Q4.

Guidance and After-Hours Market Reaction

Western Digital projected first-quarter fiscal 2027 revenue to rise 42% to 49% year over year, reflecting continued demand in cloud, AI, and other markets. Management highlighted strong exabyte growth, favorable pricing, and ongoing strength in cloud and AI workloads, with high-capacity HDDs and NAND products as key contributors.

Ahead of the report, analysts expected revenue near $3.69–$3.70 billion and adjusted EPS around $3.29–$3.35. The company modestly beat revenue estimates and exceeded EPS forecasts.

Despite the operational beat and margin gains, shares fell nearly 11% in after-hours trading following the release. Investors appeared to weigh the outlook against a sizable pre-earnings rally, with market commentary attributing the decline to the guidance and elevated expectations.

Previously, management had guided Q4 revenue to about $3.65 billion, plus or minus $100 million. The actual results came in at or above the high end of that range, with revenue, gross margin, and EPS all meeting or exceeding prior guidance.

"WD concluded fiscal year 2026 with strong performance," the company said in its press release. "In our fiscal fourth quarter, revenue increased 44% year over year, gross and operating margins expanded, and earnings per share more than doubled." [source:1]