Western Digital delivered a first quarter that outperformed market expectations, with management attributing the results to robust demand from hyperscale data center customers and a rapid ramp-up of its highest-capacity hard drives. CEO Irving Tan highlighted the company’s ability to ship over 800,000 units of its new 11-disk, high-capacity drives in the quarter, underlining both technology leadership and operational execution. Management also credited disciplined cost control and streamlined operations following the separation of the Flash business as key contributors to improved profitability and gross margin expansion.
Is now the time to buy WDC? Find out in our full research report (it’s free).
Western Digital (WDC) Q1 CY2025 Highlights:
- Revenue: $2.29 billion vs analyst estimates of $2.25 billion (30.9% year-on-year growth, 1.9% beat)
- Adjusted EPS: $1.36 vs analyst estimates of $1.11 (22.7% beat)
- Adjusted EBITDA: $680 million vs analyst estimates of $639 million (29.6% margin, 6.4% beat)
- Revenue Guidance for Q2 CY2025 is $2.45 billion at the midpoint, above analyst estimates of $2.33 billion
- Adjusted EPS guidance for Q2 CY2025 is $1.45 at the midpoint, above analyst estimates of $1.14
- Operating Margin: 33.1%, up from 5.4% in the same quarter last year
- Inventory Days Outstanding: 86, down from 113 in the previous quarter
- Market Capitalization: $21.65 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Western Digital’s Q1 Earnings Call
- Erik Woodring (Morgan Stanley) asked about the cadence and potential growth of dividends and buybacks. CEO Irving Tan replied that capital returns will increase as leverage targets are met, with an initial focus on dividends and eventual inclusion of buybacks.
- Aaron Rakers (Wells Fargo) inquired about tariff impacts and how Western Digital’s Thailand manufacturing footprint is insulated. Tan and interim CFO Don Bennett explained that current tariffs have little direct effect, but uncertainty in enterprise and retail demand is being closely monitored.
- Karl Ackerman (BNP Paribas) sought insight on manufacturing capacity and whether visibility from long-term agreements could trigger expansion. Tan said technology-driven capacity enhancements, rather than physical expansion, are fueling exabyte growth, reducing the need for new facilities.
- Asiya Merchant (Citigroup) questioned if strong hyperscale demand could be masking double ordering. Tan responded that the tight supply-demand environment and long-term agreements align closely with actual customer needs, minimizing the risk of excessive ordering.
- Thomas O'Malley (Barclays) probed the structure of long-term agreements (LTAs) and whether they protect Western Digital from order volatility. Tan clarified that LTAs now span 9-12 months, provide better visibility, and are supported by purchase orders, though strict take-or-pay clauses are generally avoided to foster collaboration.
Catalysts in Upcoming Quarters
Heading into future quarters, the StockStory team will be watching (1) the pace of adoption for new high-capacity drive platforms and the corresponding effect on average selling prices; (2) evidence of sustained demand from hyperscale and cloud customers through long-term agreements; and (3) Western Digital’s ability to maintain gross margin discipline amid potential volatility in trade policy and tariffs. Ongoing progress in HAMR technology development and the impact of capital allocation initiatives will also be key signposts.
Western Digital currently trades at $62.23, up from $40.63 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).
Our Favorite Stocks Right Now
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
