Western Digital (WDC) Q1 2026 earnings summary

Executive summary

• Revenue reached $2.82 billion in Q1 FY26, up 27% year-over-year, driven by strong cloud, nearline HDD, and AI-related data center demand.

• Non-GAAP EPS was $1.78, above guidance, and GAAP diluted EPS was $3.07, both showing significant year-over-year growth.

• Free cash flow was $599 million, with cash flow from operations at $672 million, reflecting robust operational execution.

• Completed the separation of the Flash business (Sandisk), retaining a minority stake with plans to monetize remaining shares before February 2026.

• Quarterly dividend increased by 25% to $0.125 per share, with increased share repurchases totaling $553 million.

Financial highlights

• Revenue: $2.82 billion, up 27% year-over-year; cloud segment contributed 89% of revenue at $2.5 billion, up 31%.

• Gross margin: 43.9% non-GAAP (up 660 bps YoY), 43.5% GAAP (up 710 bps YoY).

• Operating income: $856 million non-GAAP (30.4% margin), $792 million GAAP; net income from continuing operations was $1.18 billion.

• Free cash flow: $599 million; operating cash flow $672 million; capex $73 million.

• Share repurchases: 6.4 million shares for $553 million; dividend increased by 25% to $0.125 per share.

Outlook and guidance

• Q2 FY26 revenue expected at $2.9 billion ± $100 million, ~20% year-over-year growth.

• Gross margin guidance: 44%-45%; operating expenses to decrease to $365-$375 million.

• Diluted EPS expected at $1.88 ± $0.15; share count ~375 million.

• Exabyte growth trending toward 23% CAGR, with supply constraints expected through 2026 and more capacity coming online in 2027.

• Capital expenditures for 2026 expected to be 4%-6% of net revenue.