Western Digital Earnings Show Margin Rebound

Western Digital Corporation reported on Oct. 22, 2026, that its earnings showed stronger revenue and wider margins. The company said robust data-storage demand, higher pricing and exabyte growth drove fiscal first-quarter performance and supported a stronger outlook.

Quarter Results and Margins

For the quarter ended Oct. 2, 2026, Western Digital said revenue rose 55.0% year over year to $4.4 billion, increasing 17.0% sequentially. GAAP gross margin improved to 57.8% from 54.1% in the prior quarter and 43.5% a year earlier. GAAP operating income reached $2 billion, up 31.0% sequentially and 158.0% year over year, yielding a 46.7% operating margin. GAAP net income attributable to common shareholders was $1.8 billion, or $4.63 per diluted share, compared with $1.2 billion and $3.07 per share in the year-ago quarter.

On a non-GAAP basis, gross margin rose to 58.1% from 54.4% in the previous quarter and 43.9% a year earlier. Non-GAAP operating margin reached 49.1%, while non-GAAP diluted earnings per share increased 161.0% year over year.

Management attributed the results to strong customer demand, improved pricing, disciplined execution and exabyte growth. Chief Executive Officer Irving Tan said, "Fiscal 2027 is off to a strong start, with results exceeding expectations, driven by robust customer demand and disciplined execution."

Guidance, Cash Flow and Returns

Western Digital issued fiscal second-quarter 2027 non-GAAP guidance calling for revenue of $5.1 billion, plus or minus $100 million, and non-GAAP diluted EPS of $5.80, plus or minus $0.20. It expects a non-GAAP gross margin between 60.0% and 61.0%, with operating expenses of $400 million to $410 million, interest and other expenses near $15 million, and an approximate tax rate of 17.0%. Diluted weighted-average shares are projected at roughly 380 million. The company provides guidance only on a non-GAAP basis because certain GAAP-reconciliation items depend on future events.

Earlier guidance for fiscal first quarter 2027 had forecast revenue near $4.1 billion, non-GAAP gross margin of 55.0% to 56.0%, and non-GAAP EPS of $4.00, plus or minus $0.15. The reported results exceeded those ranges.

The company declared a quarterly cash dividend of $0.175 per share, a 17.0% increase, payable on Dec. 17, 2026, to shareholders of record on Dec. 4, 2026. Cash flow from operations was $1.6 billion, and free cash flow was $1.4 billion. Western Digital filed a Form 8-K on Oct. 22, 2026, incorporating the earnings release as Exhibit 99.1.

The company linked its outlook to continued customer demand, pricing and exabyte growth, making the durability of these factors the immediate test for investors assessing whether the margin rebound will continue.