Western Digital Corporation WDC reported second-quarter fiscal 2025 non-GAAP earnings of $1.77 per share, surpassing the Zacks Consensus Estimate of $1.75. The company incurred a loss of 75 cents per share in the prior-year quarter. Management anticipated fiscal second-quarter non-GAAP earnings per share to be between $1.75 and $2.05. 

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Revenues of $4.29 billion beat the Zacks Consensus Estimate by 0.8%. The top line climbed 41% year over year owing to heightened demand across Cloud end markets. On a sequential basis, revenues increased 5%. For second-quarter fiscal 2025, the company expected non-GAAP revenues in the range of $4.2-$4.4 billion.

With the upcoming split of Western Digital and SanDisk into separate entities, WDC is well-positioned to capture the artificial intelligence (AI)-driven demand for storage and optimize its Flash business for long-term success. Management expects to witness continued strength in its HDD segment while strategically managing its Flash business. The company’s approach aligns with the New Era of NAND, where AI-driven demand is transforming the storage industry.

In response to the results, shares of WDC gained 3.7% in the pre-market trading on Jan. 30. In the past year, shares have gained 11.8% compared with the sub-industry’s growth of 2.3%.

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Quarter in Detail

Revenues from the Cloud end market (55% of total revenues) skyrocketed 119% year over year to $2,346 million, fueled by strong growth in both HDD and Flash. The cloud segment grew 6% sequentially, primarily due to increased nearline HDD shipments amid declining Flash sales.

Revenues from the Client end market (27%) were up 4% year over year to $1,168 million, powered by increasing flash average selling prices (ASPs) as bit shipments fall, offset by a dip in HDD revenues. Client revenues decreased 3% sequentially, owing to pricing pressure in Flash, despite bit shipment growth. HDD revenues remained flat.

Revenues from the Consumer end market (18%) were down 8% year over year to $771 million. The downtick was due to lower shipments in both Flash and HDD, along with pricing declines in Flash storage products. Revenues increased 14% on a sequential basis, driven by higher Flash and HDD bit shipments. However, pricing challenges persisted.

Western Digital Corporation Price, Consensus and EPS Surprise

Western Digital Corporation price-consensus-eps-surprise-chart | Western Digital Corporation Quote

Considering revenues by product group, Flash revenues (43.8% of total revenues) rose 13% from the year-ago quarter figure to $1.9 billion. It remained flat sequentially. Strong performance in Client and Consumer segments led to higher-than-anticipated bit shipments amid pricing headwinds.

Hard disk drive (HDD) revenues (56.2% of total revenues) surged 76% year over year to $2.4 billion. Revenues were up 9% quarter over quarter. The uptick was driven by higher HDD exabyte shipments owing to healthy growth in the nearline portfolio.

Margins

Non-GAAP gross margin was 35.9% compared with 15.5% in the year-ago quarter. 

HDD’s gross margin was 38.6%, up from 24.8% in the prior-year quarter. Flash gross margin came in at 32.5% compared with 7.9% in the prior-year quarter. 

Non-GAAP operating expenses increased 20% year over year to $674 million. Non-GAAP operating income totaled $864 million against a non-GAAP operating loss of $91 million in the prior-year quarter.

Balance Sheet & Cash Flow

As of Dec. 27, 2024, cash and cash equivalents were $2.291 billion compared with $1.71 billion as of Sept. 27, 2024.

The long-term debt (including the current portion) was $7.366 billion as of Dec. 27.

Western Digital generated $403 million in cash from operations against $92 million of cash utilized in the prior-year quarter.

Free cash flow amounted to $335 million in the quarter under review against free cash outflow of $176 million reported in the prior-year quarter.

Fiscal Q3 Outlook

The company expects non-GAAP revenues in the range of $3.75-$3.95 billion. The Zacks Consensus Estimate is currently pegged at $3.9 billion.

Management projects non-GAAP earnings between 90 cents per share and $1.20. The Zacks Consensus Estimate is currently pegged at $1.32.

WDC expects non-GAAP gross margin in the range of 31.5-33.5%. Non-GAAP operating expenses are expected to be between $700 million and $720 million.

WDC’s Zacks Rank

Currently, Western Digital carries a Zacks Rank #5 (Strong Sell). 

You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.

Recent Performance of Other Companies

Plexus Corp PLXS reported first-quarter fiscal 2025 adjusted earnings per share (EPS) of $1.73, up 40.7% year over year. The figure outpaced the Zacks Consensus Estimate of $1.59 per share.

In the past year, shares of PLXS have gained 72.9%.

Seagate Technology Holdings plc STX reported second-quarter fiscal 2025 non-GAAP earnings of $2.03 per share, beating the Zacks Consensus Estimate by 7.98%. The company reported non-GAAP earnings of 12 cents per share in the year-ago quarter.

In the past year, STX shares has gained 16.8%.

Simulations Plus, Inc. SLP reported first-quarter fiscal 2025 adjusted earnings of 17 cents per share, which declined 5.6% year over year. The figure, however, missed the Zacks Consensus Estimate of 18 cents per share.

Shares of SLP declined 14.4% in the past year.

 

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