Western Digital Beats Q1 With $4.64 EPS and Guides Q2 Far Above Estimates
Western Digital reported fiscal first-quarter revenue of $4.38 billion and adjusted EPS of $4.64, both above estimates, with an adjusted gross margin of 58.1%, and guided the second quarter to $5.0 billion to $5.2 billion of revenue, well above the $4.57 billion Wall Street expected.
Western Digital (WDC) reported fiscal first-quarter 2027 results after Thursday's close, with revenue of $4.38 billion and adjusted earnings of $4.64 a share, both above Wall Street estimates, according to the summary supplied. Adjusted gross margin reached 58.1%, above the company's 55% to 56% guide, and adjusted operating margin was 49.1%. For the second quarter, Western Digital guided revenue to $5.0 billion to $5.2 billion and adjusted EPS to $5.60 to $6.00, against estimates of $4.57 billion and $4.78. The report came after a rough stretch for the stock, which fell about 6% to roughly $355 in Thursday's afternoon session and is down about 24% over the past month.
First-quarter results
| Metric | Q1 FY2027 | Consensus | Company guidance | Prior quarter (Q4 FY2026) |
|---|---|---|---|---|
| Revenue | $4.38B | $4.13B | $4.1B ± $0.1B | $3.75B |
| Adjusted EPS | $4.64 | $4.07 | $4.00 ± $0.15 | $3.56 |
| GAAP EPS | $4.63 | — | — | — |
| Adjusted gross margin | 58.1% (+1,420 bps YoY) | — | 55%–56% | 54.4% |
| Adjusted operating income | $2.15B | — | — | — |
| Adjusted operating margin | 49.1% (+1,870 bps YoY) | — | — | — |
| Operating cash flow | $1.60B | — | — | — |
| Free cash flow | $1.38B | — | — | — |
By our calculation, revenue was about 17% above the $3.75 billion reported in the fourth quarter and about 55% above the $2.82 billion a year earlier, while adjusted EPS was about 30% higher than last quarter and 161% above the $1.78 of a year ago. Revenue topped the high end of the guided range by about $180 million and adjusted EPS topped it by about $0.49. Free cash flow was about 32% of revenue, by our calculation. Bank of America had estimated a gross margin of 56.4%, according to TipRanks, and the reported 58.1% exceeds that.
Second-quarter guidance
| Metric | Q2 FY2027 guidance | Consensus | Q1 actual |
|---|---|---|---|
| Revenue | $5.00–$5.20B | $4.57B | $4.38B |
| Adjusted EPS | $5.60–$6.00 | $4.78 | $4.64 |
| Adjusted gross margin | 60%–61% | — | 58.1% |
| Operating expenses | $400M–$410M | — | — |
| Interest and other expense, net | About $15M | — | — |
| Tax rate | About 17% | — | — |
| Diluted weighted average shares | About 380M | — | — |
The guidance midpoints of $5.10 billion in revenue and $5.80 in adjusted EPS sit about 12% and 21% above consensus, by our calculation, and imply sequential growth of about 16% in revenue and 25% in EPS. The guided gross margin of 60% to 61% is 190 to 290 basis points above the first-quarter result.
Capital returns
Western Digital repurchased $1.00 billion of common stock in the quarter and raised its quarterly cash dividend by 17% to $0.175 a share. The company returned $3.1 billion to shareholders in fiscal 2026, according to 24/7 Wall St.
What the report followed
Western Digital had slid since an early-October Nikkei report that Toshiba plans to double its hard disk drive capacity, and a broader tech and storage selloff added to the pressure on Thursday. Investors had been watching whether gross margin and pricing held up. In its fiscal fourth-quarter release on Aug. 5, the company reported revenue of $3.75 billion, a non-GAAP gross margin of 54.4% and non-GAAP EPS of $3.56, and guided the first quarter to $4.1 billion of revenue and $4.00 of EPS. CEO Irving Tan said then that Western Digital entered fiscal 2027 with "continued confidence in the durability of demand."
Sources: First-quarter results, second-quarter guidance and consensus figures are from the summary supplied. Prior-quarter results and the first-quarter guidance are from Western Digital's fiscal Q4 2026 earnings release (Aug. 5, SEC Exhibit 99.1); the year-ago quarter comes from TradingKey and the Bank of America estimate from TipRanks, as reported by TradingKey; the fiscal 2026 capital return and the Thursday price from 24/7 Wall St. The company's investor relations site hosts the earnings call, scheduled for 4:30 p.m. ET. This is informational, not a recommendation to buy or sell.
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