Earnings Recap — Q4 FY2026
CY Q3 2026 · Reported August 5, 2026 · Beat 7 of last 7 quarters
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Western Digital's results reinforce the thesis that AI infrastructure buildout extends beyond compute to storage. The company's strong pricing power and capacity ramp indicate sustained demand for high-capacity HDDs as AI workloads shift to inference and agentic AI, which generate and retain more data. The company's ability to grow exabytes without adding unit capacity highlights the importance of areal density innovation in meeting AI-driven storage needs.
Western Digital reported Q4 FY2026 revenue of $3.75B, up 44% YoY, with gross margin of 54.4% and EPS of $3.56, all at or above the high end of guidance. Cloud revenue was $3.3B (89% of total), up 43% YoY, while Client and Consumer grew 61% and 38% respectively. The company shipped 231 exabytes, up 22% YoY, and began volume shipments of 40TB ePMR drives with two customers. Full-year FY2026 revenue grew 36% to $12.9B, with operating margin of 37.3% and $3.5B in free cash flow.
Management guided Q1 FY2027 revenue to $4.1B ± $100M (up 45% YoY), gross margin of 55–56%, and EPS of $4.00 ± $0.15. They reiterated confidence in long-term exabyte growth above 25% and expect acceleration as 40TB ePMR ramps to over 50% of nearline exabytes by Q3 FY2027, with 44TB HAMR shipping in 1H CY2027 and 50TB products in 2H CY2027. Pricing remains favorable, with blended price per terabyte up high-teens YoY in Q4, and management expects continued margin expansion driven by higher-capacity drives and cost per terabyte declines of ~10% annually. They are actively negotiating LTAs extending into CY2029–2031, signaling strong forward visibility.
“Today, roughly 80% of data stored in a hyperscale data center resides on hard disk drives. That is likely to continue.”
on HDD role in AI data centers
“We are on track to ship our 44-terabyte HAMR product in the first half of calendar year 2027. Customer feedback on the qualification process continues to be very positive with the capacity, performance and reliability of our drives exceeding customer expectations.”
on HAMR roadmap
“We have high conviction that we will continue to improve gross margins for many quarters going forward based on everything what we've explained.”
on Gross margin trajectory
How do you respond to your main competitor's stronger sequential growth and higher gross margin guide? Is it due to earlier HAMR ramp or contract timing?
Irving noted quarter-to-quarter variations from LTA timing and product transitions. He highlighted the 40TB ePMR ramp and ongoing operational efficiencies as drivers of future margin expansion, while Kris emphasized strong year-over-year incremental gross margins of 80%+.
Exabyte growth decelerated to 22% YoY — is this a temporary pause or a new normal?
Irving explained that mix of CMR vs UltraSMR products and customer ordering lumpiness cause quarterly variations. He reaffirmed the 25%+ long-term exabyte growth target, with acceleration expected as 40TB and HAMR ramp.
Can you elaborate on demand from sovereign and neocloud data centers?
Irving said demand is materializing from neoclouds, frontier AI labs, and physical AI companies, citing an autonomous vehicle customer whose exabyte demand for CY2027 has increased multiple-fold. He noted these customers are less price-sensitive given the tight supply environment.