TLDR
- Western Digital (WDC) stock traded at $351.30 in premarket Friday, down 1%, after a 6% drop Thursday.
- Adjusted earnings were $4.64 a share on $4.4 billion in revenue, beating estimates of $4.11 and $4.1 billion.
- December quarter revenue is guided to $5.1 billion, well above the $4.6 billion estimate.
- A Nikkei report that Toshiba plans to double its AI drive capacity has weighed on the stock.
- Evercore ISI reiterated its Outperform rating and $575 price target.
Western Digital (WDC) stock traded at $351.30 in premarket Friday, down about 1%. It fell 6% in regular trading on Thursday.
Western Digital Corporation, WDC
That drop came after the hard-drive maker beat fiscal first-quarter estimates. The stock now sits 53% below its June 18 closing high.
Adjusted earnings came in at $4.64 a share, ahead of the $4.11 FactSet estimate. Revenue rose 55% from a year ago to $4.4 billion.
Wall Street wanted wider profits and a strong outlook. The company delivered both, but the stock still slid.
Margins and Outlook
Adjusted gross margin hit 58.1%, up from 54.4% last quarter and 43.9% a year ago. Evercore ISI pointed to a 370 basis point jump from the prior quarter.
For the December quarter, Western Digital expects revenue of $5.1 billion, plus or minus $100 million. Analysts were looking for $4.6 billion.
The company sees gross margin between 60% and 61%. Evercore says the midpoint points to about 69% year-over-year revenue growth.
Shipments totaled 248 exabytes, up 22% from a year ago. Revenue per terabyte rose 28%.
Nearline drives made up 90% of exabytes shipped, at 223 exabytes. The 40TB ePMR platform should reach 30% of nearline shipments in December and 50% in the March quarter.
HAMR qualifications with two hyperscalers are on track to finish in early 2027. Volume shipments should follow in the first half of the year.
Why Investors Stayed Cautious
Earlier this month, Nikkei reported that Toshiba plans to double its AI data center drive capacity in fiscal 2027. That report hit the stock, and it still seems to hang over it.
CEO Irving Tan said he sees no change in long-term industry fundamentals. He added that the company will focus on more advanced drives rather than more units.
Memory chips are in tight supply, and Western Digital’s drives use some of that content. Tan warned that cost per terabyte may fall more slowly in the near term.
The company still expects a 10% year-over-year cut in cost per terabyte. That is the plan, even if the road gets bumpy.
Seagate (STX) dropped 8% on Thursday as well. Toshiba’s U.S.-listed stock (TSHTY) rose about 2%.
Evercore ISI reiterated its Outperform rating and $575 price target on Friday. InvestingPro says six analysts recently raised their earnings estimates, and the stock trades at a P/E ratio of 14.6.
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