Western Digital Surpasses Estimates, Fuels Optimism with Strong Outlook
Western Digital Corp. (NASDAQ:WDC) delivered a robust fiscal second quarter for 2026, exceeding analyst expectations on both the top and bottom lines. The data storage specialist's performance, coupled with a surprisingly strong forecast for the current quarter, appears to be resonating positively with investors, as reflected in the stock's recent upward trajectory.
Earnings and Revenue: A Clear Beat
For the quarter ended January 2, 2026, Western Digital reported revenue of $3.02 billion, marking a significant 25% increase from the same period last year. This figure comfortably surpassed the analyst consensus estimate of approximately $2.95 billion.
The company's profitability metrics were even more impressive. Non-GAAP earnings per share (EPS) came in at $2.13, a substantial 10.5% above the $1.94 per share that analysts had projected. This performance underscores not just revenue growth but also effective margin management.
Key Financial Highlights from Q2 FY26:
- Revenue: $3.02 billion (Up 25% year-over-year)
- Non-GAAP Gross Margin: 46.1% (Expanded 770 basis points year-over-year)
- Non-GAAP Operating Income: $1.02 billion (Up 72% year-over-year)
- Non-GAAP EPS: $2.13 (Up 78% year-over-year)
CEO Irving Tan attributed the strong results to "disciplined execution to meet demand in the AI-driven data economy," highlighting customer confidence in the company's ability to deliver high-capacity hard disk drives (HDDs) at scale. He also noted that the company returned over 100% of its generated free cash flow to shareholders through buybacks and dividends during the quarter.
Forward Guidance Exceeds Expectations
Perhaps the most impactful element of the report was the outlook for the fiscal third quarter. Management provided non-GAAP guidance that points to continued momentum.
- Q3 FY26 Revenue Guidance: Approximately $3.2 billion, plus or minus $100 million.
- Q3 FY26 Non-GAAP EPS Guidance: Approximately $2.30, plus or minus $0.15.
This revenue midpoint of $3.2 billion is notably 6.8% higher than the analyst consensus estimate of about $2.96 billion for the coming quarter. The EPS guidance of $2.30 also sits well above current street expectations. CFO Kris Sennesael cited expectations for "strong revenue growth and improved profitability driven by continued data center demand and by the adoption of our high-capacity drives."
Market Reaction and Performance
The market's reaction to this beat-and-raise quarter has been decidedly positive. In after-hours trading immediately following the release, the stock showed significant strength. Over the past month, leading into the earnings report, shares of Western Digital had already climbed approximately 58%, suggesting building investor optimism. The strong results and optimistic forecast appear to validate that sentiment.
Strategic Context and Summary
It is important to note that these results reflect Western Digital as a standalone HDD company following the completion of the separation of its Flash business into Sandisk Corporation in February 2025. The reported figures are on a continuing operations basis, providing a clearer view of the core HDD business's performance.
The key takeaways from the earnings release are:
- Double Beat: The company exceeded analyst estimates for both revenue and earnings per share.
- Margin Expansion: Significant year-over-year improvement in gross and operating margins indicates pricing power and operational efficiency.
- Strong Forward Outlook: Guidance for the next quarter surpasses analyst expectations, suggesting management sees sustained demand.
- Capital Return: A commitment to returning capital to shareholders, with a declared cash dividend of $0.125 per share.
For a detailed look at historical earnings, future estimates, and analyst projections for Western Digital, you can review the data here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, investment recommendation, or an offer to buy or sell any securities. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
