Western Digital Q3 2026 earnings: AI storage demand drives record gross margin, dividend hike
Western Digital's cloud/AI-driven storage demand pushed revenue up 45% and gross margin above 50% for the first time, alongside a 20% dividend increase.
| Q3 2026 | Reported |
|---|---|
| EPS | $8.20 |
| Revenue | $3.34B |
Figures as reported by the company to the SEC for the quarter ended April 3, 2026. Analyst estimates are not part of a filing, so no comparison to expectations is shown.
Key takeaways
- Revenue rose 45% from a year earlier and the company shipped 222 exabytes of storage capacity (up 34% year-over-year), as data-center customers kept buying high-capacity hard drives to store data generated by AI systems.
- Cloud customers were the main growth engine: cloud revenue climbed 48% and made up 89% of total sales, with large hyperscale data-center operators leaning more heavily on WD’s nearline (high-capacity, data-center-grade) hard drives.
- Gross margin — the share of each sales dollar left after production costs — topped 50% for the first time in the company’s history, a sign that stronger demand and pricing for higher-capacity drives are letting WD keep more of what it sells.
- Profitability has swung sharply higher over the past year: trailing twelve-month net profit margin near 73% and return on equity above 100% point to a company converting a much larger share of sales into bottom-line profit than it did previously.
- The board raised the quarterly dividend 20% to $0.15 per share, a move companies typically make when they’re confident in their ongoing cash generation.
- For the current (fiscal fourth) quarter, management guided to roughly $3.65 billion in revenue and a non-GAAP gross margin around 51-52%, implying continued sequential growth.
- CEO Irving Tan said the company entered the year with broad-based growth across its cloud, consumer, and client businesses, and said he expects “agentic AI” to drive a step-function increase in demand for capacity-oriented storage.
- Management said the company’s 2026 hard-drive production capacity is already fully committed under multi-year agreements with hyperscale customers running through 2028-2029, indicating demand visibility well beyond the current quarter.
Q3 2026 in context
| Metric | Apr 2026 | Mar 2025 | Change |
|---|---|---|---|
| Revenue | $3.3B | $2.3B | +45.5% |
| Net income | $3.2B | $520M | +516.3% |
| Free cash flow | $978M | $379M | +158.0% |
| Diluted EPS | $8.20 | $1.42 | +477.5% |
| Gross margin | 50.2% | 39.8% | +10.5 pts |
| Operating margin | 35.7% | 33.1% | +2.5 pts |
| Net margin | 96.0% | 22.7% | +73.4 pts |
Figures for the quarter ended Apr 2026 and the quarter ended Mar 2025, as reported to the SEC.
How the stock took it
Western Digital Corp closed at $434.52 on Apr 30, 2026, the last session before the report, and at $442.36 on May 4, 2026, the first session after it — +1.8% across the report.
| Earlier report | Close before | Close after | Change |
|---|---|---|---|
| Jan 30, 2026 | $278.41 | $270.23 | -2.9% |
| Oct 31, 2025 | $138.13 | $158.02 | +14.4% |
| Aug 14, 2025 | $76.07 | $75.06 | -1.3% |
Closes from the market's daily record. Each figure spans the report date — from the last session that closed before it to the first that closed after — because a company may report before the open or after the close.
Sources: company report · earnings call