Western Digital reported adjusted earnings of $3.56 per share and revenue of $3.75 billion for the fourth quarter of fiscal 2026, beating Wall Street expectations of $3.29 per share and $3.69 billion, respectively. But its shares closed down 5.36% at $519.17 before falling an additional 11.12% in after-hours trading to $461.42.
Earnings per share beat expectations by $0.27, or 8.21%, while revenue exceeded estimates by $60 million, or 1.63%. Quarterly revenue rose 44% year over year, while adjusted earnings per share increased 109%.
Revenue and margin growth
Western Digital's full-year fiscal revenue rose 36% to $12.9 billion, while earnings per share more than doubled to $10.22. The company said its full-year operating margin widened to 37.3%, supported by its transition to a company focused entirely on hard disk drives and by demand from cloud-computing and artificial-intelligence customers.
Fourth-quarter gross margin was 54.4%, up 1,310 basis points year over year, while operating margin was 44.2%, up 1,610 basis points. The company posted operating income of $1.66 billion, up 126%, while operating expenses totaled $382 million, or about 10% of revenue.
Storage shipments rose 22% to 231 exabytes. Operating cash flow was $1.4 billion and capital expenditure was $108 million, while free cash flow reached $1.3 billion, with a 34% margin, during the quarter, and $3.5 billion, with a 27% margin, for the full year.
Shares fall after results
The shares fell despite the earnings and revenue beats. They had closed the regular session at $519.17, compared with a previous close of $548.56, before dropping to $461.42 after hours, bringing the total decline from the previous close to about 15.9%.
The shares remained above their 52-week low of $73.14 and below their 52-week high of $799.87. They had gained 625% over the past year and 219% year to date, while beta stood at 2.22. The article cited a price-to-earnings ratio of 29.54 and an enterprise-value-to-EBITDA multiple of 45.17.
First-quarter guidance and product plans
Western Digital forecast revenue of $4.1 billion, plus or minus $100 million, for the first quarter of the fiscal year, and adjusted earnings per share of $4.00, plus or minus $0.15. It also forecast a gross margin of between 55% and 56%, operating expenses of between $390 million and $400 million, interest and other expenses of $15 million, and a tax rate of 17%.
Management said it expects exabyte shipment growth of 25% or more going forward. It added that 40-terabyte ePMR drives are on track to account for more than 50% of nearline exabytes by the third quarter of fiscal 2027, while 44-terabyte HAMR drives are targeted for the first half of calendar 2027, followed by 50-terabyte products in the second half of calendar 2027.
The company said it was testing high-bandwidth drives with five customers targeting artificial-intelligence workloads, and was in discussions over long-term agreements extending through 2029, 2030 and 2031.
Demand, liquidity and risks
“Data creation is not slowing down; it is accelerating,” said Irving Tan, Western Digital's chief executive.
Chief Executive Irving Tan said the company was entering fiscal 2027 with strong customer demand and greater visibility into future orders, pointing to AI training, inference, agentic AI and physical AI applications as drivers of demand for storage.
Chief Financial Officer Chris Senekal said fiscal 2026 was a “standout year,” reaffirming the company's commitment to returning free cash flow to shareholders through dividends and share buybacks. The company had $1.6 billion in cash against $1.1 billion in debt, according to remarks during the question-and-answer session.
