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Western Digital (WDC) Q1 Earnings Miss Estimates, Revenues Beat
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Western Digital Corporation (WDC - Free Report) reported first-quarter fiscal 2023 non-GAAP earnings of 20 cents per share, which missed the Zacks Consensus Estimate by 33.3%. The bottom line decreased 92% year over year and 89% quarter over quarter.
However, revenues of $3.736 billion beat the Zacks Consensus Estimate by 2.9%.
The top line decreased 26% year over year. The decline was owing to weak performance across all segments. On a sequential basis, revenues decreased 17%.
In the past year, shares of Western Digital have lost 36.4% of their value compared with the industry’s decline of 25.5%.
Image Source: Zacks Investment Research
Quarter in Detail
Beginning with first-quarter fiscal 2022, Western Digital started reporting revenues under three refined end markets — Cloud (includes products for public or private cloud), Client (includes products sold directly to OEMs or through distribution) and Consumer (includes retail and other end-user products).
Revenues from the Cloud end market (49% of total revenues) fell 18% year over year to $1.829 billion owing to weakness in demand for both hard drive and flash products. On a sequential basis, cloud revenues were down 13%.
Revenues from the Client end market (33%) were down 34% year over year and declined 25% sequentially to $1.229 billion. The downtick was caused by reduced flash pricing on a year-over-year basis. Sequentially, reduced flash pricing and customers’ (mostly PC OEMs) inventory reductions caused the decline in revenues.
Revenues from the Consumer end market (18%) were down 30% year over year and 15% sequentially to $678 million. Sequential performance was affected by lower flash pricing and reduced retail HDD shipments.
Considering revenues by product group, HDD revenues (54% of total revenues) decreased 21.4% year over year to $2.014 billion. The downtick was mainly caused by softness in other capacity enterprise product channels and consumer demand. Revenues declined 5% quarter over quarter.
Flash revenues (46%) declined 30.8% from the year-ago quarter’s figure to $1.722 billion. Sequentially, flash revenues fell 28%.
Key Metrics
The company shipped 14.7 million HDDs at an average selling price (ASP) of $125. The reported shipments declined 39% from the year-ago quarter’s levels.
On a quarter-over-quarter basis, HDD Exabytes sales inched up 1%. Flash exabytes sales declined 10%. Total exabytes sales (excluding non-memory products) were unchanged sequentially.
ASP/Gigabytes (excluding licensing, royalties, and non-memory products) were down 22% sequentially.
Margins
Non-GAAP gross margin of 26.7% contracted 720 basis points (bps) on a year-over-year basis.
HDD gross margin contracted 200 bps year over year to 29%. Flash gross margin was 25%, down from 37% reported in the year-over-year quarter. Non-GAAP operating expenses moved down 9% from the year-ago quarter’s level to $689 million.
Non-GAAP operating income came in at $307 million, down 68% year over year. As a percentage of revenues, the non-GAAP operating margin was 8.2% compared with 18.8% reported in the year-ago quarter.
Balance Sheet & Cash Flow
As of Sep 30, cash and cash equivalents were $2.049 billion compared with $2.327 billion reported as of Jul 1.
The long-term debt (including the current portion) was $7.071 billion as of Sep 30, compared with $7.022 billion as of Jul 1.
Western Digital generated $6 million in cash from operations compared with $295 million reported in the previous quarter.
Free cash outflow came in at $215 million compared with a free cash outflow of $97 million in the prior quarter.
During the quarter, the company did not pay out any dividends. On Apr 30, Western Digital suspended its dividend policy to strengthen reinvestment in innovation and growth as well as facilitate ongoing deleveraging efforts.
Q2 Guidance
For second-quarter fiscal 2023, the company expects non-GAAP revenues in the range of $2.9-$3.1 billion. The Zacks Consensus Estimate for revenues is currently pegged at $3.5 billion.
Management projects non-GAAP earnings between loss of 25 cents and earnings of 5 cents per share. The Zacks Consensus Estimate for earnings is currently pegged at breakeven.
Western Digital expects the non-GAAP gross margin in the range of 20-22%. Non-GAAP operating expenses are expected to be between $650 million and $670 million.
Zacks Rank & Stocks to Consider
Currently, Western Digital carries a Zacks Rank #4 (Sell).
The Zacks Consensus Estimate for Pure Storage’s 2022 earnings is pegged at $1.18 per share, up 24.2% in the past 60 days. The long-term earnings growth rate is anticipated to be 35.5%.
Pure Storage’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 171.8%. Shares of PSTG have gained 10.8% in the past year.
The Zacks Consensus Estimate for Blackbaud’s 2022 earnings is pegged at $2.55 per share, unchanged in the past 60 days. The long-term earnings growth rate is anticipated to be 3%.
Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 8.5%. Shares of BLKB have lost 26.4% in the past year.
The Zacks Consensus Estimate for Aspen’s fiscal 2023 earnings is pegged at $6.77 per share. The long-term earnings growth rate is anticipated to be 18.2%.
AZPN’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 6.2%. Shares of AZPN have gained 60.3% in the past year.
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Western Digital (WDC) Q1 Earnings Miss Estimates, Revenues Beat
Western Digital Corporation (WDC - Free Report) reported first-quarter fiscal 2023 non-GAAP earnings of 20 cents per share, which missed the Zacks Consensus Estimate by 33.3%. The bottom line decreased 92% year over year and 89% quarter over quarter.
However, revenues of $3.736 billion beat the Zacks Consensus Estimate by 2.9%.
The top line decreased 26% year over year. The decline was owing to weak performance across all segments. On a sequential basis, revenues decreased 17%.
In the past year, shares of Western Digital have lost 36.4% of their value compared with the industry’s decline of 25.5%.
Image Source: Zacks Investment Research
Quarter in Detail
Beginning with first-quarter fiscal 2022, Western Digital started reporting revenues under three refined end markets — Cloud (includes products for public or private cloud), Client (includes products sold directly to OEMs or through distribution) and Consumer (includes retail and other end-user products).
Western Digital Corporation Price
Western Digital Corporation price | Western Digital Corporation Quote
Revenues from the Cloud end market (49% of total revenues) fell 18% year over year to $1.829 billion owing to weakness in demand for both hard drive and flash products. On a sequential basis, cloud revenues were down 13%.
Revenues from the Client end market (33%) were down 34% year over year and declined 25% sequentially to $1.229 billion. The downtick was caused by reduced flash pricing on a year-over-year basis. Sequentially, reduced flash pricing and customers’ (mostly PC OEMs) inventory reductions caused the decline in revenues.
Revenues from the Consumer end market (18%) were down 30% year over year and 15% sequentially to $678 million. Sequential performance was affected by lower flash pricing and reduced retail HDD shipments.
Considering revenues by product group, HDD revenues (54% of total revenues) decreased 21.4% year over year to $2.014 billion. The downtick was mainly caused by softness in other capacity enterprise product channels and consumer demand. Revenues declined 5% quarter over quarter.
Flash revenues (46%) declined 30.8% from the year-ago quarter’s figure to $1.722 billion. Sequentially, flash revenues fell 28%.
Key Metrics
The company shipped 14.7 million HDDs at an average selling price (ASP) of $125. The reported shipments declined 39% from the year-ago quarter’s levels.
On a quarter-over-quarter basis, HDD Exabytes sales inched up 1%. Flash exabytes sales declined 10%. Total exabytes sales (excluding non-memory products) were unchanged sequentially.
ASP/Gigabytes (excluding licensing, royalties, and non-memory products) were down 22% sequentially.
Margins
Non-GAAP gross margin of 26.7% contracted 720 basis points (bps) on a year-over-year basis.
HDD gross margin contracted 200 bps year over year to 29%. Flash gross margin was 25%, down from 37% reported in the year-over-year quarter.
Non-GAAP operating expenses moved down 9% from the year-ago quarter’s level to $689 million.
Non-GAAP operating income came in at $307 million, down 68% year over year. As a percentage of revenues, the non-GAAP operating margin was 8.2% compared with 18.8% reported in the year-ago quarter.
Balance Sheet & Cash Flow
As of Sep 30, cash and cash equivalents were $2.049 billion compared with $2.327 billion reported as of Jul 1.
The long-term debt (including the current portion) was $7.071 billion as of Sep 30, compared with $7.022 billion as of Jul 1.
Western Digital generated $6 million in cash from operations compared with $295 million reported in the previous quarter.
Free cash outflow came in at $215 million compared with a free cash outflow of $97 million in the prior quarter.
During the quarter, the company did not pay out any dividends. On Apr 30, Western Digital suspended its dividend policy to strengthen reinvestment in innovation and growth as well as facilitate ongoing deleveraging efforts.
Q2 Guidance
For second-quarter fiscal 2023, the company expects non-GAAP revenues in the range of $2.9-$3.1 billion. The Zacks Consensus Estimate for revenues is currently pegged at $3.5 billion.
Management projects non-GAAP earnings between loss of 25 cents and earnings of 5 cents per share. The Zacks Consensus Estimate for earnings is currently pegged at breakeven.
Western Digital expects the non-GAAP gross margin in the range of 20-22%. Non-GAAP operating expenses are expected to be between $650 million and $670 million.
Zacks Rank & Stocks to Consider
Currently, Western Digital carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the broader technology space are Pure Storage (PSTG - Free Report) , Blackbaud (BLKB - Free Report) and Aspen Technology (AZPN - Free Report) . All stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Pure Storage’s 2022 earnings is pegged at $1.18 per share, up 24.2% in the past 60 days. The long-term earnings growth rate is anticipated to be 35.5%.
Pure Storage’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 171.8%. Shares of PSTG have gained 10.8% in the past year.
The Zacks Consensus Estimate for Blackbaud’s 2022 earnings is pegged at $2.55 per share, unchanged in the past 60 days. The long-term earnings growth rate is anticipated to be 3%.
Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 8.5%. Shares of BLKB have lost 26.4% in the past year.
The Zacks Consensus Estimate for Aspen’s fiscal 2023 earnings is pegged at $6.77 per share. The long-term earnings growth rate is anticipated to be 18.2%.
AZPN’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 6.2%. Shares of AZPN have gained 60.3% in the past year.