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WDC posted Q3 EPS of $2.72, beating estimates and nearly doubling year over year on strong leverage.
Western Digital revenue jumped 45% YoY to $3.34B, fueled by AI-driven storage demand across markets.
WDC margins expanded sharply, with gross margin at 50.5% and operating income up 116% year over year.
Western Digital Corporation (WDC - Free Report) reported third-quarter fiscal 2026 non-GAAP earnings of $2.72 per share, which surpassed the Zacks Consensus Estimate of $2.41. The bottom line expanded 97% year over year and 28% sequentially, exceeding the high end of management’s guidance of $2.30 (+/- 15 cents). Driven by strong operating leverage, reduced interest costs and a more efficient tax structure, EPS nearly doubled year over year. These results highlight WDC’s focus on advanced innovation and disciplined execution.
Western Digital reported revenue of $3.34 billion, marking an 11% sequential increase and a remarkable 45% year-over-year jump. This growth reflects robust demand across all end markets, especially those related to AI and data infrastructure. The top line beat the consensus estimate by 3% and exceeded management’s expectations of $3.2 billion (+/- $100 million).
AI is no longer just a tailwind as it has become the primary driver of Western Digital’s growth. From training and inference to agentic and physical AI, every workload generates vast amounts of data. This data must be stored efficiently and cost-effectively—an area where HDDs remain essential. This benefits WD directly, as hyperscalers and enterprises expand their storage infrastructure to support AI deployments. The company is effectively positioned at the core of this transformation.
WDC shipped 222 exabytes in the quarter, representing a 34% year-over-year increase. This included 4.1 million next-gen ePMR drives, totaling 118 exabytes, with capacities of up to 32TB, highlighting the rapid scaling of new technology to meet strong demand.
Western Digital Corporation Price, Consensus and EPS Surprise
Western Digital’s board declared a cash dividend of 15 cents per share, payable on June 17 to shareholders on record as of June 5. This move signals strong free cash flow generation, improved balance sheet health and management’s confidence in sustained earnings power.
In response to surging revenues, expanding margins and a confident outlook that signals continued momentum, WDC’s shares jumped 5.3% in trading and closed the session at $434.52 on April 30. In the past year, shares have gained 888.7% compared with the Zacks Computer-Storage Devices industry’s rise of 460.1%.
Image Source: Zacks Investment Research
Quarter in Detail
Revenues from the Cloud end market (89% of total revenues) climbed 48% year over year to $3 billion, driven by strong demand for higher-capacity nearline products and a favorable pricing environment.
Revenues from the Client end market (5%) were up 31% year over year to $179 million.
Revenues from the Consumer end market (6%) rallied 24% year over year to $186 million.
Both client and consumer segments posted solid year-over-year exabyte growth, supported by better pricing.
Explosive Margin Expansions
WDC reported a non-GAAP gross margin of 50.5%, up 1,040 basis points (bps) year over year and 440 bps sequentially, above its guidance (47-48%). Strong gross margins were driven by a richer mix of higher-capacity drives, disciplined pricing and tight cost management.
Non-GAAP operating expenses were $397 million, improving 23% year over year and 40 bps sequentially and reflecting stronger operating leverage. The uptick was driven by increased R&D spending as the company expands HAMR qualifications with additional customers.
Robust revenue growth, higher gross margins and operating leverage lifted non-GAAP operating income to $1.3 billion, up 116% year over year, with operating margin expanding to 38.6%—a 1,260 bps increase.
Balance Sheet & Cash Flow
As of April 3, 2026, cash and cash equivalents were $2 billion, on par with the Jan. 2, 2026, figure.
In the third fiscal quarter, WDC strengthened its balance sheet by selling 5.8 million SanDisk shares, reducing debt by $3.1 billion and leaving just $1.6 billion in convertible debt outstanding.
Western Digital generated $1.1 billion in cash from operations compared with $508 million in the prior-year quarter. Disciplined CapEx of $145 million helped drive strong free cash flow of $978 million, up 124% year over year.
During the quarter, WDC repurchased approximately 2.9 million shares for $752 million and paid $43 million in dividends. Since launching the capital return program in fourth-quarter fiscal 2025, the company has returned a total of $2.2 billion to shareholders through buybacks and dividends.
Fiscal Q4 2026 Outlook: Momentum Continues
With strong demand, pricing and improved visibility across cloud, consumer and client segments, WDC expects revenue of $3.65 billion (+/- $100 million), implying about 40% year-over-year growth at the midpoint.
Management projects non-GAAP earnings of $3.25 (+/- 15 cents).
WDC expects non-GAAP gross margin in the range of 51-52%. Non-GAAP operating expenses are expected to be between $385 million and $395 million.
Interest and other expenses are anticipated to be approximately $10 million.
WDC’s Zacks Rank
Currently, Western Digital carries a Zacks Rank #3 (Hold).
Seagate Technology Holdings plc (STX - Free Report) reported third-quarter fiscal 2026 non-GAAP earnings of $4.10 per share, beating the Zacks Consensus Estimate of $3.50 and exceeding the high end of management’s guidance of $3.40 (+/- 20 cents). The bottom line expanded 115% year over year and 32% sequentially on the back of STX’s strong execution of its strategic objectives and effective use of the technology roadmap to support growing demand. Non-GAAP revenues of $3.11 billion exceeded the Zacks Consensus Estimate by 5.7%. Revenues also surpassed the high end of guidance, increasing 44% year over year.
Badger Meter, Inc. (BMI - Free Report) reported EPS of 93 cents for first-quarter 2026, which missed the Zacks Consensus Estimate by 22.5%. The bottom line compared unfavorably with the year-ago quarter’s EPS of $1.30. Quarterly net sales were $202.3 million, down 9% from $222.2 million in the year-ago quarter due to delayed project deployments and weaker-than-expected short-cycle order activity. The Zacks Consensus Estimate was pegged at $230.1 million.
Sensata Technologies Holding plc (ST - Free Report) reported first-quarter 2026 adjusted EPS of 86 cents, up from 78 cents a year ago. The bottom line beat the Zacks Consensus Estimate by 2.4%. Revenues for the quarter reached $934.8 million, up 2.6% from a year ago. The figure came near to the upper end of management’s expectations ($917-$937 million) and beat the consensus estimate by 0.7%. Strength Aerospace, Defense and Commercial Equipment segments drove the top-line performance.
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WDC Q3 Earnings Top, AI Storage Boom Fuels Explosive Y/Y Sales Growth
Key Takeaways
Western Digital Corporation (WDC - Free Report) reported third-quarter fiscal 2026 non-GAAP earnings of $2.72 per share, which surpassed the Zacks Consensus Estimate of $2.41. The bottom line expanded 97% year over year and 28% sequentially, exceeding the high end of management’s guidance of $2.30 (+/- 15 cents). Driven by strong operating leverage, reduced interest costs and a more efficient tax structure, EPS nearly doubled year over year. These results highlight WDC’s focus on advanced innovation and disciplined execution.
Western Digital reported revenue of $3.34 billion, marking an 11% sequential increase and a remarkable 45% year-over-year jump. This growth reflects robust demand across all end markets, especially those related to AI and data infrastructure. The top line beat the consensus estimate by 3% and exceeded management’s expectations of $3.2 billion (+/- $100 million).
AI is no longer just a tailwind as it has become the primary driver of Western Digital’s growth. From training and inference to agentic and physical AI, every workload generates vast amounts of data. This data must be stored efficiently and cost-effectively—an area where HDDs remain essential. This benefits WD directly, as hyperscalers and enterprises expand their storage infrastructure to support AI deployments. The company is effectively positioned at the core of this transformation.
WDC shipped 222 exabytes in the quarter, representing a 34% year-over-year increase. This included 4.1 million next-gen ePMR drives, totaling 118 exabytes, with capacities of up to 32TB, highlighting the rapid scaling of new technology to meet strong demand.
Western Digital Corporation Price, Consensus and EPS Surprise
Western Digital Corporation price-consensus-eps-surprise-chart | Western Digital Corporation Quote
Western Digital’s board declared a cash dividend of 15 cents per share, payable on June 17 to shareholders on record as of June 5. This move signals strong free cash flow generation, improved balance sheet health and management’s confidence in sustained earnings power.
In response to surging revenues, expanding margins and a confident outlook that signals continued momentum, WDC’s shares jumped 5.3% in trading and closed the session at $434.52 on April 30. In the past year, shares have gained 888.7% compared with the Zacks Computer-Storage Devices industry’s rise of 460.1%.
Image Source: Zacks Investment Research
Quarter in Detail
Revenues from the Cloud end market (89% of total revenues) climbed 48% year over year to $3 billion, driven by strong demand for higher-capacity nearline products and a favorable pricing environment.
Revenues from the Client end market (5%) were up 31% year over year to $179 million.
Revenues from the Consumer end market (6%) rallied 24% year over year to $186 million.
Both client and consumer segments posted solid year-over-year exabyte growth, supported by better pricing.
Explosive Margin Expansions
WDC reported a non-GAAP gross margin of 50.5%, up 1,040 basis points (bps) year over year and 440 bps sequentially, above its guidance (47-48%). Strong gross margins were driven by a richer mix of higher-capacity drives, disciplined pricing and tight cost management.
Non-GAAP operating expenses were $397 million, improving 23% year over year and 40 bps sequentially and reflecting stronger operating leverage. The uptick was driven by increased R&D spending as the company expands HAMR qualifications with additional customers.
Robust revenue growth, higher gross margins and operating leverage lifted non-GAAP operating income to $1.3 billion, up 116% year over year, with operating margin expanding to 38.6%—a 1,260 bps increase.
Balance Sheet & Cash Flow
As of April 3, 2026, cash and cash equivalents were $2 billion, on par with the Jan. 2, 2026, figure.
In the third fiscal quarter, WDC strengthened its balance sheet by selling 5.8 million SanDisk shares, reducing debt by $3.1 billion and leaving just $1.6 billion in convertible debt outstanding.
Western Digital generated $1.1 billion in cash from operations compared with $508 million in the prior-year quarter. Disciplined CapEx of $145 million helped drive strong free cash flow of $978 million, up 124% year over year.
During the quarter, WDC repurchased approximately 2.9 million shares for $752 million and paid $43 million in dividends. Since launching the capital return program in fourth-quarter fiscal 2025, the company has returned a total of $2.2 billion to shareholders through buybacks and dividends.
Fiscal Q4 2026 Outlook: Momentum Continues
With strong demand, pricing and improved visibility across cloud, consumer and client segments, WDC expects revenue of $3.65 billion (+/- $100 million), implying about 40% year-over-year growth at the midpoint.
Management projects non-GAAP earnings of $3.25 (+/- 15 cents).
WDC expects non-GAAP gross margin in the range of 51-52%. Non-GAAP operating expenses are expected to be between $385 million and $395 million.
Interest and other expenses are anticipated to be approximately $10 million.
WDC’s Zacks Rank
Currently, Western Digital carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Performances of Other Companies
Seagate Technology Holdings plc (STX - Free Report) reported third-quarter fiscal 2026 non-GAAP earnings of $4.10 per share, beating the Zacks Consensus Estimate of $3.50 and exceeding the high end of management’s guidance of $3.40 (+/- 20 cents). The bottom line expanded 115% year over year and 32% sequentially on the back of STX’s strong execution of its strategic objectives and effective use of the technology roadmap to support growing demand. Non-GAAP revenues of $3.11 billion exceeded the Zacks Consensus Estimate by 5.7%. Revenues also surpassed the high end of guidance, increasing 44% year over year.
Badger Meter, Inc. (BMI - Free Report) reported EPS of 93 cents for first-quarter 2026, which missed the Zacks Consensus Estimate by 22.5%. The bottom line compared unfavorably with the year-ago quarter’s EPS of $1.30. Quarterly net sales were $202.3 million, down 9% from $222.2 million in the year-ago quarter due to delayed project deployments and weaker-than-expected short-cycle order activity. The Zacks Consensus Estimate was pegged at $230.1 million.
Sensata Technologies Holding plc (ST - Free Report) reported first-quarter 2026 adjusted EPS of 86 cents, up from 78 cents a year ago. The bottom line beat the Zacks Consensus Estimate by 2.4%. Revenues for the quarter reached $934.8 million, up 2.6% from a year ago. The figure came near to the upper end of management’s expectations ($917-$937 million) and beat the consensus estimate by 0.7%. Strength Aerospace, Defense and Commercial Equipment segments drove the top-line performance.