Western Digital Corporation Q3 FY2026 earnings call

WD started calendar year 2026 with strong execution. AI-driven data economy creates demand for high-capacity storage. WD's technology roadmap includes high-capacity drives, UltraSMR technology, and performance innovation. Long-term agreements extend into calendar 28 and 29. Continued innovation and execution to meet customer needs.

In the third quarter of fiscal 2026, revenue was $3.3 billion, up 45% year-over-year. Cloud represented 89% of total revenue at $3 billion, up 48% year-over-year. Consumer represented 6% of revenue at $186 million, up 24% year-over-year. Client represented 5% of total revenue at $179 million, up 31% year-over-year. Gross margin exceeded 50%, and EPS nearly doubled compared to last year.

Third quarter revenue was $3.3 billion, up 45% year-over-year. EPS was $2.72. Q4 revenue anticipated to be $3.65 billion plus minus $100 million, midpoint reflecting 40% year-over-year growth. Gross margin expected in range of 51 to 52%. Operating expenses expected in range of $385 million to $395 million.

Q: Eric Woodring at Morgan Stanley asked about tailwinds from agentic AI and its impact on HDD growth.

A: Three core drivers: training storage requirements, agentic AI and inferencing generating new data to store, and physical AI generating synthetic data needing storage.

Q: Amit Daryanani with Evercore asked about pricing and cost per exabyte.

A: Pricing up due to value creation and new LTAs. Cost per exabyte down due to higher aerial density, uptake of ultra-SMR, and supply chain efficiency.

Q: Aaron Rakers at Wells Fargo asked about capacity to fulfill demand.

A: No plans to increase unit capacity, focus on improving aerial density and mixing customers.

Q: Tom O'Malley at Barclays asked about pricing appetite and LTAs.

A: Focus on predictable pricing for customer architectural decisions. Progress in LTAs extending into 2029.

Q: Asia Merchant with Citi asked about yield, reliability, and HDD vs Flash.

A: Yields and quality high. HDD for large-scale object storage, Flash for high IOPS. Symbiotic relationship.

Q: Samic Chatterjee with JPMorgan asked about gross margin outperformance.

A: Driven by strong pricing, mix to higher capacity drives, and cost reduction execution.

Q: Wamsi Mohan with Bank of America asked about UltraSMR adoption.

A: Expansion into tier 2 CSPs, 60% of exabytes to be on ultra-SMR by end of 2027.

Q: CJ Muse at Cantor Fitzgerald asked about LTAs and SanDisk position.

A: LTAs have exabyte volume and pricing. Intention to monetize remaining SanDisk shares tax-free by end of 2026.

Q: Carl Ackerman at BNP Paribas asked about media capacity and LTAs.

A: Focus on aerial density improvements, not unit capacity. Purchase orders placed a year in advance, LTEA frameworks beyond first year.

Q: Chris Sankar with TD Cowan asked about demand patterns across hyperscale customers.

A: Similar demand patterns due to ongoing data storage requirements for training, inference, and synthetic data.

Q: Jim Schneider at Goldman Sachs asked about Hammer on shipments.

A: Focus on de-risking transition to Hammer, four customers in qualification with positive feedback.