Western Digital Q3 EPS $2.72, Revenue $3.34B Beat, Shares Drop 7%
Western Digital posted Q3 adjusted EPS of $2.72 and $3.34 billion revenue, beating estimates by $0.36 and $110 million respectively, while gross margins expanded to 50.5%. Despite guiding Q4 EPS $3.10–$3.40 (midpoint $3.25) and raising its dividend 20% to $0.15, shares fell over 7% premarket.
1. Q3 Results and Share Reaction
Western Digital delivered adjusted EPS of $2.72 versus the $2.36 estimate and generated $3.34 billion in revenue, topping forecasts by $110 million. The stock fell more than 7% in premarket trading despite closing up 5.3% the prior day and surging over 60% in the past month.
2. Margin Expansion and AI Demand Drivers
Gross margins widened by 436 basis points quarter-on-quarter to 50.5%, with incremental gross margins rising 73% year-over-year. Management cited broad-based demand from AI workloads—training, inference and agentic AI—that rely on long-term HDD storage as key to margin improvement.
3. Q4 Outlook and Dividend Hike
The company guided Q4 adjusted EPS between $3.10 and $3.40 (midpoint $3.25) against a $2.75 consensus, and projected revenue of $3.55 billion to $3.75 billion (midpoint $3.65 billion vs. $3.47 billion est.). Western Digital also raised its quarterly dividend by 20% to $0.15 per share.
4. Cash Flow Strength
Operating cash flow reached $1.12 billion in the quarter, while free cash flow totaled $978 million, underscoring robust cash generation amid strong demand and supporting the company’s increased shareholder returns.