Western Digital revenue jumps 55% to $4.38 billion and it guides to $5.1 billion, yet the stock is down 52% from June

Western Digital reported fiscal first-quarter revenue of $4.381 billion, up 55% from a year earlier, in its earnings release filed with the SEC on Thursday. The quarter ended October 2. The Wall Street Journal led with data-storage demand and higher pricing.

The numbers in the filing

Net income of $1.779 billion on $4.381 billion of revenue is a net margin of about 41%, unusual for a company that sells spinning disks. In August the company guided to about $4.1 billion of revenue, a 55.5% non-GAAP gross margin and $4.00 of EPS at the midpoints. It delivered $4.64 on a 58.1% margin, so the beat was about 16% on earnings, driven by margin rather than volume alone.

The guide is the bigger number

For the December quarter Western Digital guided to revenue of $5.1 billion, plus or minus $100 million, which it says is 66% to 72% above a year ago. It expects a non-GAAP gross margin of 60% to 61% and non-GAAP EPS of $5.80, plus or minus $0.20. At the midpoint that is about 16% more revenue than this quarter, in one quarter.

The board also raised the quarterly dividend 17% to $0.175 a share, payable December 17 to holders of record December 4. Buybacks of $1.001 billion dwarfed the $56 million paid in dividends, and the company ended the quarter with $1.314 billion of cash and $789 million of current debt. CEO Irving Tan said fiscal 2027 is "off to a strong start, with results exceeding expectations."

Why the stock fell anyway

Yahoo Finance data show Western Digital closed Thursday at $354.19, down 6.4% from $378.51 the day before, in the same week chip and AI stocks have been under pressure. Its 52-week range runs from $121.72 to $799.87. On closing prices the shares are about 52% below the June 18 peak, even as revenue grows more than 50%. We could not find a source for after-hours trading in the stock following the release, so we do not report one.

The gap between the earnings and the share price is the story. A company growing this fast with a 58% gross margin is being valued on whether the AI spending that buys its drives keeps going, not on one quarter. The pricing power the WSJ highlights is the part investors will test: margins of 60% on a hard drive business depend on customers accepting higher prices, and on rivals not adding capacity. Related: Toshiba's plan to double drive capacity hit both stocks earlier this month.

What to watch

• Whether the December quarter lands at the $5.1 billion midpoint and a 60%-plus margin.
• Competitor capacity announcements, and Seagate's next report.
• Cloud customers' capital spending plans, the demand behind the guide.

Sources: Western Digital earnings release (SEC EDGAR), WSJ, Yahoo Finance price data. Chart: Chronicle. This is market information, not investment advice.