Western Digital (WDC) Q2 2026 earnings summary

Executive summary

• Revenue reached $3.02 billion in Q2 FY26, up 25% year-over-year, driven by strong demand in cloud, AI, and high-capacity HDDs.

• Cloud segment accounted for 89% of revenue, with significant growth in high-capacity drives and UltraSMR adoption.

• Completed the separation of the Flash business (Sandisk), retaining a minority stake and using part to reduce debt.

• Innovation focus includes HAMR and ePMR roadmap acceleration, UltraSMR-enabled JBOD platforms, and strategic investment in quantum hardware.

• Free cash flow generation remained robust at $653 million, with over 100% returned to shareholders via buybacks and dividends.

Financial highlights

• Q2 revenue: $3.02 billion, up 25% year-over-year; GAAP gross margin: 45.7%, non-GAAP gross margin: 46.1%.

• GAAP diluted EPS: $4.73 (up 272% YoY); non-GAAP EPS: $2.13 (up 78% YoY).

• Operating income: $908 million (GAAP), $1,019 million (non-GAAP); operating margin: 30.1% (GAAP), 33.8% (non-GAAP).

• Free cash flow: $653 million; cash and equivalents: $1.98 billion; net debt: $2.43 billion.

• Share repurchases: $615 million in Q2; dividends paid: $48 million.

Outlook and guidance

• Q3 FY26 revenue expected at $3.2 billion ± $100 million, ~40% year-over-year growth at midpoint.

• Gross margin guidance: 47%-48%; operating expenses: $380–$390 million.

• Diluted EPS expected at $2.30 ± $0.15; tax rate ~16%.

• CapEx as a percentage of revenue expected to remain within 4%-6% as HAMR ramps.

• Plans to monetize remaining Sandisk stake within one year to further reduce debt.