Western Digital Q2 Revenue Rises 25% to $3B, EPS $2.13, Guides $3.2B
Western Digital reported Q2 fiscal 2026 revenue of $3.0 billion, up 25% year-over-year, and non-GAAP EPS of $2.13, shipping 215 exabytes (up 22% YoY) and achieving a 46.1% gross margin (+770 bps). UltraSMR mix topped 50% and Q3 revenue guidance stood at $3.2 billion ±$100 million with a 47–48% gross margin.
1. Q2 Demand Driven by AI and Cloud Expansion
Western Digital reported that fiscal Q2 volumes rose 22% year-over-year to 215 exabytes, with cloud customers accounting for 89% of revenue. Management highlighted that AI training and inference workloads—ranging from large language models to physical AI use cases like autonomous vehicles—are driving strong adoption of higher-density nearline hard drives. Shipments of more than 3.5 million latest-generation ePMR units, delivering up to 32TB UltraSMR capacity, underscored accelerating customer migration to ultra-high-capacity storage.
2. Progress on HAMR and ePMR Roadmaps
The company accelerated its heat-assisted magnetic recording (HAMR) qualification by approximately six months, initiating tests with a hyperscale customer in Q2 and preparing to qualify with a second. Meanwhile, next-generation ePMR drives have entered qualification with another hyperscaler. To bolster its HAMR roadmap, Western Digital acquired laser-related intellectual property and talent to improve drive manufacturability, reliability, and energy efficiency—key factors in scaling beyond 30TB capacities.
3. Q2 Financials Surpass Guidance
Revenue reached $3.0 billion, up 25% year-over-year, while non-GAAP earnings per share of $2.13 topped the high end of guidance. Gross margin expanded by 770 basis points to 46.1%, propelled by a mix shift toward higher-capacity drives and disciplined cost control. Operating income exceeded $1.0 billion, generating an operating margin of 33.8%. Cost per terabyte declined about 10% year-over-year, with management targeting further reductions through innovation and greater UltraSMR adoption.
4. Capital Returns and Q3 Outlook
Western Digital ended the quarter with $2.0 billion in cash and $3.2 billion in total liquidity against $4.7 billion of debt. Operating cash flow was $745 million and free cash flow totaled $653 million (21.6% free cash flow margin). The company returned $663 million to shareholders via $615 million of share repurchases and $48 million of dividends, bringing total returns since Q4 FY25 to $1.4 billion. For Q3, management guided to revenue of $3.2 billion plus or minus $100 million and gross margin of 47%–48%, with diluted non-GAAP EPS of $2.30 plus or minus $0.15.