Western Digital reported fiscal second-quarter revenue of $3.0 billion, representing a 25% year-over-year increase, and delivered earnings per share of $2.13, both metrics beating the high end of company guidance. The company shipped 215 exabytes of capacity during the quarter, up 22% year-over-year, including more than 3.5 million units of its latest-generation ePMR drives. Cloud segment revenue climbed 28% year-over-year to $2.7 billion, accounting for 89% of total sales, while client and consumer segments grew 26% and declined 3%, respectively.

Management attributed the strong mix shift toward higher-capacity nearline hard drives to accelerating adoption of generative and inference AI workloads—such as chatbots, virtual assistants and autonomous vehicle systems—that are driving exponential data creation. During the quarter, Western Digital advanced its HAMR and ePMR roadmaps, qualifying HAMR technology with one hyperscale customer ahead of schedule and beginning next-generation ePMR qualification with another. The acquisition of laser-related IP and talent is expected to boost HAMR manufacturability, reliability and energy efficiency.

Gross margin expanded to 46.1%, up 770 basis points year-over-year and 220 basis points sequentially, driven by mix shift toward UltraSMR and higher-capacity drives and tight cost control across manufacturing and the supply chain. Cost per terabyte declined approximately 10% year-over-year, with incremental gross margins for Q3 guided near 75%. UltraSMR now represents over half of the company’s drive mix and is delivering a 20% capacity uplift over conventional CMR, contributing to both pricing stability and margin leverage.

Western Digital ended the quarter with $2.0 billion in cash and cash equivalents, total liquidity of $3.2 billion and net debt of $2.7 billion. Operating cash flow was $745 million, capex $92 million and free cash flow $653 million, equating to a 21.6% free cash flow margin. The company returned $663 million to shareholders via $48 million in dividends and $615 million in share repurchases, bringing total returns since Q4 fiscal 2025 to $1.4 billion. For Q3, management forecasts revenue of $3.2 billion plus or minus $0.1 billion, gross margin between 47% and 48%, operating expenses of $380 million to $390 million, and non-GAAP diluted EPS of $2.30 plus or minus $0.15.