TLDR
- Western Digital reported Q3 revenue of $3.34 billion, up 45% year over year, beating estimates of $3.23 billion.
- EPS came in at $2.72, up 97% year over year and above the forecasted $2.36.
- Gross margin hit 50.5%, a gain of 1,040 basis points year over year.
- Cloud revenue made up 89% of total revenue at $3.0 billion, rising 48% year over year.
- TD Cowen raised its price target to $500 from $325, keeping a Buy rating on the stock.
Western Digital (WDC) stock climbed 5.27% to $434.52 after the company posted record results for its fiscal Q3 2026, with revenue and earnings both clearing analyst expectations by a wide margin.
Western Digital Corporation, WDC
Revenue for the quarter came in at $3.34 billion, up 45% year over year, against an analyst estimate of $3.23 billion. EPS landed at $2.72, a 97% jump year over year, and well ahead of the $2.36 consensus.
Gross margin hit 50.5% for the quarter, improving 1,040 basis points year over year and 440 basis points sequentially. Operating income was $1.3 billion, up 106% year over year, at an operating margin of 38.6%.
$WDC Q3FY26 EARNINGS HIGHLIGHTS
🔹 Revenue: $3.3B (Est. $3.2B) 🟢; +45% YoY
🔹 EPS: $2.72 (Est. $2.37) 🟢; +97% YoY
🔹 Gross Margin: 50.5% (Est. 47.5%) 🟢Q4 2026 Guide:
🔹 Revenue: $3.6B (Est. $3.5B) 🟢; +40% YoY
🔹 EPS: $3.25 (Est. $2.71) 🟢; +104% YoY
🔹 Gross Margin: 51.0%…— Wall St Engine (@wallstengine) April 30, 2026
Cloud was the clear engine. At $3.0 billion, cloud revenue made up 89% of total revenue and grew 48% year over year. Management credited higher-capacity nearline products as the main driver.
Unit shipments came in at 222 exabytes, up 34% year over year. That included 4.1 million EPMR drives covering 118 exabytes, with capacity points up to 32 terabytes.
Average selling prices rose 7% quarter over quarter and 9% year over year in the March quarter. Pricing per terabyte was up 9% year over year, supported by long-term customer agreements.
Free cash flow for the quarter was $978 million, a 29% free cash flow margin. The company repurchased 2.9 million shares worth $752 million and paid $43 million in dividends.
Western Digital also raised its quarterly dividend by 20% to $0.15 per share, payable June 17, 2026 to holders of record as of June 5.
SanDisk Monetization Clears Debt
The sale of 5.8 million SanDisk shares generated a $3.1 billion reduction in debt. The company ended the quarter with a net positive cash position of $450 million, with 1.7 million SanDisk shares still held.
Since the fiscal 2025 launch of its capital return program, Western Digital has returned $2.2 billion to shareholders.
On the product side, 44-terabyte HAMR and 40-terabyte EPMR drives are currently in customer qualification. HAMR is in qualification with four customers, while 40-terabyte EPMR is with three. The product roadmap extends beyond 100 terabytes.
UltraSMR has been adopted by the three largest customers, with two meeting nearly all their exabyte needs through it. The company is targeting UltraSMR to represent around 60% of exabytes shipped by fiscal 2027.
Q4 Guidance and Analyst Reaction
For Q4, Western Digital guided revenue of $3.65 billion, plus or minus $100 million, representing roughly 40% year-over-year growth at the midpoint. Gross margin is expected between 51% and 52%, with non-GAAP EPS of $3.25, plus or minus $0.15.
The Q4 guidance came in 18% above Street expectations, though the stock initially sold off in after-hours trading. TD Cowen linked the dip to incrementally slower gross margin growth — 60–65% for the June quarter versus 90% in March — compared to Seagate’s implied 80%.
TD Cowen raised its price target to $500 from $325, maintaining its Buy rating. The firm projects $21 in calendar year 2027 EPS based on 8% year-over-year ASP growth.
Recent insider activity showed $28.7 million in stock sold by insiders, with no purchases recorded during the period.
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