Western Digital's Q1 Net Income Soars on Sandisk Gain, Revenue Up 27%

TL;DR

**WDC crushed it this quarter, the Sandisk play paid off big time, and the stock looks primed for a run.**

AI Summary

Western Digital Corporation reported a significant increase in net income to $1,182 million for the three months ended October 3, 2025, up from $493 million in the prior year period. Revenue, net, also saw a substantial rise to $2,818 million, compared to $2,212 million for the three months ended September 27, 2024, representing a 27.4% increase. A key driver for this performance was a $611 million gain on retained interest in Sandisk, which was not present in the prior year. Operating income more than doubled to $792 million from $334 million. The company's cash and cash equivalents decreased slightly to $2,048 million from $2,114 million at June 27, 2025. Total assets increased to $14,359 million from $14,002 million, while total liabilities decreased to $8,242 million from $8,462 million. The company repurchased $553 million of common stock during the quarter and paid $34 million in common stock dividends.

Why It Matters

This strong performance, particularly the $611 million gain from the retained interest in Sandisk, signals a successful strategic move following the Flash business separation, which could boost investor confidence in WDC's long-term value creation. The significant increase in net income and revenue suggests a robust demand environment for its HDD technologies, potentially strengthening its competitive position against rivals like Seagate Technology. For employees, this financial health could translate into job security and potential growth opportunities. Customers may benefit from continued investment in R&D, leading to advanced data storage solutions, while the broader market sees a key player in the data storage sector demonstrating strong financial resilience and strategic acumen.

Risk Assessment

Risk Level: medium — While the company reported strong financial results, the forward-looking statements highlight several risks, including 'adverse global or regional economic and social conditions' and 'dependence on a limited number of suppliers or disruptions in our supply chain.' The company also notes 'risks related to the Separation of Sandisk, our former Flash business, into an independent public company,' indicating ongoing uncertainties despite the recent gain.

Analyst Insight

Investors should consider WDC's strong net income of $1,182 million and 27.4% revenue growth as a positive indicator. The $611 million gain on the Sandisk retained interest is a one-time boost, so focus on the underlying operating income growth of 137% to $792 million. This suggests operational improvements and strong demand for its HDD products, making WDC a potentially attractive investment for those bullish on the data storage sector.

Financial Highlights

debt To Equity

1.40

revenue

$2,818M

operating Margin

28.1%

total Assets

$14,359M

total Debt

$4,683M

net Income

$1,182M

eps

$3.07

gross Margin

43.5%

cash Position

$2,048M

revenue Growth

+27.4%

Revenue Breakdown

Key Numbers

• $2.818B — Revenue, net (Increased from $2.212B in the prior year, a 27.4% rise.)
• $1.182B — Net income (Significantly up from $493M in the prior year, driven by Sandisk gain.)
• $611M — Gain on retained interest in Sandisk (A non-recurring gain contributing substantially to net income.)
• $792M — Operating income (More than doubled from $334M in the prior year, indicating strong core performance.)
• $3.07 — Diluted net income per common share (Increased from $1.35 in the prior year, reflecting higher profitability.)
• $553M — Common stock repurchases (Demonstrates capital return to shareholders during the quarter.)
• $2.048B — Cash and cash equivalents (Slight decrease from $2.114B at the end of the previous fiscal year.)
• $1.904B — Retained earnings (Increased significantly from $762M at June 27, 2025, reflecting strong earnings.)

Key Players & Entities

• WESTERN DIGITAL CORPORATION (company) — Registrant
• Sandisk (company) — Former Flash business unit, now an independent public company
• SEC (regulator) — Securities and Exchange Commission
• $1,182 million (dollar_amount) — Net income for the three months ended October 3, 2025
• $2,818 million (dollar_amount) — Revenue, net, for the three months ended October 3, 2025
• $611 million (dollar_amount) — Gain on retained interest in Sandisk
• $792 million (dollar_amount) — Operating income for the three months ended October 3, 2025
• $553 million (dollar_amount) — Repurchases of common stock
• $34 million (dollar_amount) — Dividends paid to common shareholders
• October 3, 2025 (date) — End of the reported quarterly period

FAQ

Risk Factors

• Fluctuations in Inventory Levels [medium — financial]: The company's inventory increased to $1,393 million as of October 3, 2025, from $1,291 million as of June 27, 2025. Significant fluctuations in inventory levels can impact future profitability and cash flow if demand changes unexpectedly or if inventory becomes obsolete.
• Dependence on Key Suppliers and Customers [high — financial]: While not explicitly detailed in this 10-Q excerpt, Western Digital's business is inherently dependent on relationships with key suppliers for components and major customers for sales. Disruptions in these relationships could materially affect revenue and operations.
• Intense Competition in Storage Market [high — market]: The storage industry is highly competitive, with rapid technological advancements and pricing pressures. Competitors' actions, such as new product introductions or aggressive pricing, can impact Western Digital's market share and profitability.
• Supply Chain Disruptions [medium — operational]: Global supply chain disruptions, as experienced in recent years, can impact the availability and cost of raw materials and components, affecting production schedules and the ability to meet customer demand.
• Compliance with International Trade Regulations [medium — regulatory]: As a global company, Western Digital is subject to various international trade regulations, tariffs, and export controls. Changes in these regulations or non-compliance can lead to penalties and impact market access.
• Litigation and Legal Proceedings [medium — legal]: The company is subject to various legal proceedings. While a specific 'Litigation matter' expense of $3 million was noted for the three months ended September 27, 2024, ongoing or future litigation could result in significant financial liabilities and reputational damage.

Industry Context

Western Digital operates in the highly competitive and rapidly evolving data storage industry, facing challenges from both traditional hard disk drive (HDD) manufacturers and solid-state drive (SSD) technology providers. The industry is characterized by significant R&D investment, cyclical demand, and ongoing consolidation. Trends include the increasing demand for high-capacity storage solutions driven by data growth in cloud computing, AI, and IoT, alongside a shift towards flash-based storage for performance-critical applications.

Regulatory Implications

As a global technology company, Western Digital is subject to various regulatory frameworks, including international trade laws, data privacy regulations (like GDPR and CCPA), and environmental compliance standards. Changes in trade policies, tariffs, or export controls could impact its global supply chain and market access. Compliance with evolving data privacy laws is crucial to avoid penalties and maintain customer trust.

What Investors Should Do

1. Monitor the impact of the Sandisk gain on future earnings
2. Evaluate the increase in inventory levels
3. Assess the company's capital allocation strategy
4. Analyze operating expense trends

Key Dates

• 2025-10-03: End of Fiscal Q2 2025 — Reported strong financial results with significant revenue and net income growth, largely boosted by a gain on retained interest in Sandisk.
• 2025-06-27: End of Fiscal Q1 2025 / Fiscal Year End 2025 — Balance sheet figures as of this date provide a comparison point for the current quarter's performance, showing an increase in total assets and a decrease in total liabilities.
• 2024-09-27: End of Fiscal Q2 2024 — Prior year period results used for comparison, showing a substantial increase in revenue and net income for the current quarter.

Glossary

Retained interest in Sandisk

Represents the value of Western Digital's continuing ownership stake in Sandisk after a transaction, which can generate future income or be recognized as a gain/loss. (A $611 million gain from this item significantly boosted net income for the current quarter.)

Operating income

Profitability from a company's core business operations before accounting for interest, taxes, and other non-operating income/expenses. (More than doubled to $792 million, indicating strong underlying business performance.)

Diluted net income per common share

The portion of a company's profit allocated to each outstanding share of common stock, assuming all convertible securities and stock options were exercised. (Increased to $3.07 from $1.35, reflecting improved profitability on a per-share basis.)

Treasury stock

Company stock that has been repurchased from the open market and is held by the company. It reduces the number of outstanding shares. (The company held $583 million in treasury stock as of October 3, 2025, reflecting significant share repurchases.)

Retained earnings

The cumulative amount of net income that a company has retained over time, rather than distributing to shareholders as dividends. (Increased significantly to $1,904 million from $762 million, demonstrating substantial earnings accumulation.)

Debt-to-equity ratio

A financial leverage ratio that measures the total liabilities of a company relative to its shareholders' equity. (Calculated as approximately 1.40 ($8,242M liabilities / $5,888M equity), indicating the extent to which the company is financing its operations through debt versus equity.)

Year-Over-Year Comparison

Western Digital Corporation demonstrated a robust performance improvement compared to the prior year's comparable period. Revenue surged by 27.4% to $2,818 million, driven by strong overall sales. Net income saw a dramatic increase, more than doubling from $493 million to $1,182 million, significantly aided by a $611 million gain on retained interest in Sandisk, a factor absent in the prior year. Operating income also more than doubled, reflecting improved core operational efficiency. While cash and cash equivalents saw a slight decrease, total assets grew and total liabilities contracted, indicating a strengthening balance sheet.

Key Financial Figures

• $0.01 — ange on which registered Common Stock, $0.01 Par Value Per Share WDC The Nasdaq Stoc

Filing Documents

• wdc-20251003.htm (10-Q) — 1274KB
• exhibit101formofpsuagreeme.htm (EX-10.1) — 113KB
• exhibit102wdc-nonxemployee.htm (EX-10.2) — 39KB
• a6awdc-2026q1ex311.htm (EX-31.1) — 8KB
• a6bwdc-2026q1ex312.htm (EX-31.2) — 8KB
• a6cwdc-2026q1ex321.htm (EX-32.1) — 4KB
• a6dwdc-2026q1ex322.htm (EX-32.2) — 4KB
• wdc-20251003_g1.jpg (GRAPHIC) — 16KB
• 0001628280-25-047613.txt ( ) — 8369KB
• wdc-20251003.xsd (EX-101.SCH) — 55KB
• wdc-20251003_cal.xml (EX-101.CAL) — 107KB
• wdc-20251003_def.xml (EX-101.DEF) — 246KB
• wdc-20251003_lab.xml (EX-101.LAB) — 719KB
• wdc-20251003_pre.xml (EX-101.PRE) — 516KB
• wdc-20251003_htm.xml (XML) — 1251KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements (unaudited)

Item 1. Financial Statements (unaudited) Condensed Consolidated Balance Sheets — As of October 3, 2025 and June 27, 2025 6 Condensed Consolidated Statements of Operations — Three Months Ended October 3, 2025 and September 27, 2024 7 Condensed Consolidated Statements of Comprehensive Income — Three Months Ended October 3, 2025 and September 27, 2024 8 Condensed Consolidated Statements of Cash Flows — Three Months Ended October 3, 2025 and September 27, 2024 9 Condensed Consolidated Statements of Convertible Preferred Stock and Shareholders' Equity — Three Months Ended October 3, 2025 and September 27, 2024 10 Notes to Condensed Consolidated Financial Statements 12

Management's Discussion and Analysis of Financial Condition and Results of Operations 36

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 36

Quantitative and Qualitative Disclosures About Market Risk 47

Item 3. Quantitative and Qualitative Disclosures About Market Risk 47

Controls and Procedures 47

Item 4. Controls and Procedures 47

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings 48

Item 1. Legal Proceedings 48

Risk Factors 48

Item 1A. Risk Factors 48

Unregistered Sales of Equity Securities and Use of Proceeds 48

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 48

Other Information 48

Item 5. Other Information 48

Exhibits 49

Item 6. Exhibits 49 Unless otherwise indicated, references herein to specific years and quarters are to our fiscal years and fiscal quarters, and references to financial information are on a consolidated basis. As used herein, the terms "we," "us," "our," the "Company," "WDC," and "Western Digital" refer to Western Digital Corporation and its subsidiaries, unless we state, or the context indicates, otherwise. WDC, a Delaware corporation, is the parent company of our data storage business. Our principal executive offices are located at 5601 Great Oaks Parkway, San Jose, California 95119. Our telephone number is (408) 717-6000. Western Digital, the Western Digital logo and WD are registered trademarks or trademarks of Western Digital or its affiliates in the United States and other countries. All other trademarks, registered trademarks and service marks, indicated or otherwise, are the property of their respective owners. 3 Table of Contents

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS This document contains forward-looking statements within the meaning of the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words, such as "may," "will," "could," "would," "project," "believe," "anticipate," "expect," "estimate," "continue," "potential," "plan," "forecast," and the like, or the use of future tense. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions. Examples of forward-looking statements include, but are not limited to, statements concerning: our expectations regarding the completed separation of our hard disk drives ("HDD") and flash-based products ("Flash") business units (the "Separation"); the impact of the global macroeconomic environment, including tariffs; expectations regarding demand trends and market conditions for our products; expectations regarding our tax resolutions, effective tax rate and unrecognized tax benefits; expectations regarding the merits of our positions and plans with respect to certain litigation matters; statements regarding our quarterly dividend program; and our beliefs regarding our capital allocation plans and the sufficiency of our available liquidity to meet our working capital, debt and capital expenditure needs. These forward-looking statements are based on management's current expectations, represent the most current information available to us as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and other factors that could cause actual results or performance to differ materially from those expressed or implied in the forward-looking statements. These risks and uncertainties include, but are not limited to: adverse global or regional economic and social conditions; changes in U.S. trade pol

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements (unaudited)

Item 1. Financial Statements (unaudited) WESTERN DIGITAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in millions, except par value) (Unaudited) October 3, 2025 June 27, 2025 ASSETS Current assets: Cash and cash equivalents $ 2,048 $ 2,114 Accounts receivable, net 1,355 1,486 Inventories 1,393 1,291 Retained interest in Sandisk 965 354 Other current assets 514 611 Total current assets 6,275 5,856 Property, plant and equipment, net 2,345 2,343 Goodwill 4,319 4,319 Other non-current assets 1,420 1,484 Total assets $ 14,359 $ 14,002 LIABILITIES, CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,533 $ 1,266 Accrued expenses 703 719 Accrued compensation 413 407 Income taxes payable 298 800 Current portion of long-term debt 2,226 2,226 Total current liabilities 5,173 5,418 Long-term debt 2,457 2,485 Other liabilities 612 559 Total liabilities 8,242 8,462 Commitments and contingencies (Notes 8 and 14) Convertible preferred stock, $ 0.01 par value; authorized — 5 shares; issued and outstanding — 0.2 shares as of both October 3, 2025 and June 27, 2025; aggregate liquidation preference of $ 265 as of both October 3, 2025 and June 27, 2025 229 229 Shareholders' equity: Common stock, $ 0.01 par value; authorized — 750 shares; issued — 349 shares as of both October 3, 2025 and June 27, 2025; issued and outstanding — 342 shares and 347 shares as of October 3, 2025 and June 27, 2025, respectively 3 3 Additional paid-in capital 4,550 4,621 Accumulated other comprehensive income 14 20 Retained earnings 1,904 762 Treasury stock — common shares at cost; 7 shares and 2 shares ( 583 ) ( 95 ) Total shareholders' equity 5,888 5,311 Total liabilities, convertible preferred stock and shareholders' equity $ 14,359 $ 14,002 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 6 Table of Contents WESTERN DIGITAL CORPORATION CONDENSED CONSO

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