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 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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