Western Digital Q4 FY2026 earnings: profit doubles on AI storage demand, but stock slides on margin outlook
Western Digital's fiscal Q4 beat estimates as AI/cloud-driven hard-drive demand more than doubled EPS, but shares fell as margin guidance missed lofty expectations.
| Q4 2026 | Reported | Expected | Surprise |
|---|---|---|---|
| EPS | $3.56 | $3.33 | +7.0% |
| Revenue | $3.75B | $3.73B | +0.5% |
Key takeaways
- Western Digital’s fiscal Q4 results beat Wall Street expectations on both lines, with earnings per share more than doubling from a year earlier, driven largely by data centers buying more storage.
- Growth was powered by hard drives for cloud and AI data centers: cloud customers now make up about 89% of sales, and that segment’s revenue grew 43% as hyperscalers bought more high-capacity ‘nearline’ drives used to store data cheaply at scale.
- The fundamentals table shows gross margin near 49% and net margin near 73% on a trailing-12-month basis — both unusually high for the company, reflecting the pricing power of higher-capacity drives plus the effects of Western Digital’s 2025 split into a pure-play hard-drive company (it spun off its flash-memory business).
- For the full fiscal year, revenue rose 36% to $12.9 billion and free cash flow reached $3.5 billion, meaning the company generated significantly more cash than it spent on operations and investment.
- Management pointed to durable, longer-term demand drivers beyond typical cloud storage — including AI training and inference workloads, ‘neocloud’ providers, sovereign (government-backed) data centers, and physical AI/robotics customers — as reasons for optimism about sustained order volume.
- Guidance for the current quarter (fiscal Q1 2027) calls for revenue of about $4.1 billion, up roughly 45% year-over-year, and EPS of $4.00, both of which would extend the growth trend if achieved.
- Despite the beat and above-consensus guidance, shares fell sharply after the report — coverage attributed this to the company’s margin outlook (55%-56% gross margin guided for next quarter) falling short of the higher bar investors had set after rival Seagate’s recent results.
Q4 2026 in context
| Metric | Jul 2026 | Jun 2025 | Change |
|---|---|---|---|
| Revenue | $3.7B | $2.6B | +43.8% |
| Net income | $3.2B | $282M | +1033.0% |
| Free cash flow | $1.3B | $675M | +89.8% |
| Gross margin | 54.1% | 41.0% | +13.2 pts |
| Operating margin | 41.7% | — | — |
| Net margin | 85.3% | 10.8% | +74.4 pts |
Figures for the quarter ended Jul 2026 and the quarter ended Jun 2025, as reported to the SEC. Fourth-quarter flows are derived as the fiscal year minus its first three quarters.
How the stock took it
Western Digital Corp closed at $548.56 on Aug 4, 2026, the last session before the report, and at $451.52 on Aug 6, 2026, the first session after it — -17.7% across the report.
| Earlier report | Close before | Close after | Change |
|---|---|---|---|
| May 1, 2026 | $434.52 | $442.36 | +1.8% |
| 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.
Fundamentals
| Metric | Value | Period |
|---|---|---|
| Gross margin | 48.9% | Trailing 12 months |
| Operating margin | 30.3% | Trailing 12 months |
| Net profit margin | 73.0% | Trailing 12 months |
| Pretax margin | 76.7% | Trailing 12 months |
| EPS | $24.47 | Trailing 12 months |
| Revenue growth (YoY) | 35.7% | Trailing 12 months |
| EPS growth (YoY) | 363.8% | Trailing 12 months |
| Return on equity | 117.8% | Trailing 12 months |
Sources: company report · earnings call · Reuters/financial press coverage