Western Digital (WDC) investor relations material

Executive summary

• Revenue reached $2.82 billion in Q1FY26, a 27% year-over-year increase, driven by strong cloud and AI demand, with non-GAAP EPS of $1.78 and GAAP EPS of $3.07, both exceeding guidance.

• Internal AI adoption improved productivity in manufacturing and engineering, with up to 10% gains in select use cases and 20% in firmware development.

• Completed the separation of the Flash business (Sandisk), retaining a minority stake and planning to monetize remaining shares within a year.

• Announced a 25% dividend increase to $0.125 per share and increased share repurchases to $553 million.

• Long-term purchase orders from major customers now extend through 2027, reflecting strong confidence in the product roadmap.

Financial highlights

• Q1FY26 revenue was $2.82 billion, up 27% year-over-year, with non-GAAP EPS of $1.78 and GAAP EPS of $3.07.

• Non-GAAP gross margin reached 43.9%, up 660 basis points year-over-year; GAAP gross margin was 43.5%, up 710 basis points.

• Non-GAAP operating income was $856 million, up 110% year-over-year; GAAP operating income was $792 million, up 137%.

• Free cash flow was $599 million, with operating cash flow of $672 million and capital expenditures of $73 million.

• Cloud segment contributed 89% of total revenue at $2.5 billion, up 31% year-over-year.

Outlook and guidance

• Q2FY26 revenue is expected to be $2.9 billion ± $100 million, reflecting ~20% year-over-year growth.

• Non-GAAP gross margin guidance is 44%-45%, with operating expenses projected at $365-$375 million.

• Non-GAAP diluted EPS is projected at $1.88 ± $0.15, based on 375 million shares.

• Supply-demand balance is expected to remain tight through 2026, with more exabytes coming online in the second half of 2027.

• Capital expenditures for 2026 are expected to be approximately 4% to 6% of net revenue.