It has been about a month since the last earnings report for Western Digital (WDC Quick QuoteWDC - Free Report) . Shares have lost about 2.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Western Digital due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for Western Digital Corporation before we dive into how investors and analysts have reacted as of late.

Western Digital Q4 Earnings Beat Estimates

Western Digital reported fourth-quarter fiscal 2026 non-GAAP earnings of $3.56 per share, which surpassed the Zacks Consensus Estimate of $3.35. The bottom line increased 109% year over year and 31% sequentially, exceeding the high end of management’s guidance of $3.25 (+/- 15 cents).

Quarterly revenues of $3.75 billion surged 44% year over year, surpassing the Zacks Consensus Estimate of $3.70 billion. Western Digital attributed its strong financial performance to innovation, operational excellence and rising customer storage demand. Entering fiscal 2027, the company sees robust demand, improved visibility and confidence in its ability to meet growing AI- and cloud-driven storage needs with its industry-leading products and technology roadmap. For fiscal 2026, revenues grew 36% year over year to $12.9 billion. 

The broader storage industry remains supported by several favorable long-term trends. AI workloads require enormous datasets, increasing the need for high-capacity storage solutions. Cloud providers continue to expand their data centers globally, while enterprises modernize their digital infrastructure. Additionally, growing adoption of video analytics, autonomous systems, IoT, cybersecurity data retention and regulatory compliance all contribute to increasing storage demand. Western Digital's product portfolio positions it to benefit from many of these secular growth drivers.

During the quarter, Western Digital shipped 231 exabytes, up 22% year over year, driven by strong nearline demand and solid growth in non-nearline storage. The company also began shipping next-generation ePMR hard drives up to 40TB, with volume ramp expected over the coming quarters.

Quarter in Detail

Revenues from the Cloud end market (89% of total revenues) climbed 43% year over year to $3.3 billion, driven by strong demand for higher-capacity nearline products and a favorable pricing environment.

Revenues from the Client end market (6%) were up 61% year over year to $225 million.

Revenues from the Consumer end market (5%) rallied 38% year over year to $187 million.

Both segments experienced pricing improvements.

Margins

It reported a non-GAAP gross margin of 54.4%, up 1,310 basis points (bps) year over year and 390 bps sequentially, above its guidance (51-52%). Higher-capacity drive sales, improved pricing and manufacturing discipline drove results, with the average price per terabyte increasing from the high single digits to the high teens year over year.

Non-GAAP operating expenses were $382 million, improving 170 bps sequentially, reflecting stronger operating leverage. 

Strong revenue growth, higher gross margins and operating leverage drove non-GAAP operating income to $1.66 billion, with the operating margin expanding to 44.2%, up 1,610 bps year over year.

Balance Sheet & Cash Flow

As of July 3, 2026, cash and cash equivalents were $1.6 billion compared with $2 billion reported as of April 3.

It ended the quarter with $1.1 billion of debt.

Western Digital generated $1.4 billion in cash from operations compared with $746 million in the prior-year quarter. Free cash flow amounted to $1.3 billion in the quarter under review, up 90%.

Western Digital completed the exchange of its remaining 1.7 million SanDisk shares for 4.8 million WD shares and repurchased 2.3 million shares for $1 billion during the quarter.

Begins Fiscal 2027 With Strong Guidance

Western Digital issued encouraging guidance for the first quarter of fiscal 2027. It continues to benefit from robust demand, stronger long-term visibility and favorable pricing across its end markets. At the midpoint of its guidance, Western Digital anticipates non-GAAP revenues of $4.1 billion (+/- $100 million), up 45% year over year.

Management projects non-GAAP earnings of $4 (+/- 15 cents). 

It expects non-GAAP gross margin in the range of 55-56%. Non-GAAP operating expenses are expected to be between $390 million and $400 million.

Interest and other expenses are anticipated to be approximately $15 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 15.16% due to these changes.

VGM Scores

Currently, Western Digital has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock has a score of D on the value side, putting it in the bottom 40% for value investors.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Western Digital has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.