Western Digital Sees Q2 Gross Margin Jump 770bps as Stock Soars 500%
Western Digital’s fiscal Q2 gross margin rose 770 basis points to 46.1% year-over-year and beat its 44–45% guidance, powered by a shift to higher-capacity drives and 75% incremental margin flow-through. Over the past year, Western Digital stock surged 500% on AI-driven demand, restructuring and profitability gains.
1. Q2 Gross Margin Performance
Western Digital reported a Q2 non-GAAP gross margin of 46.1%, up 770 basis points from the prior year and 220 basis points sequentially, surpassing its 44–45% guidance. This marked the highest margin level in recent quarters and reflected robust execution on pricing and cost controls.
2. Drivers of Margin Expansion
The margin improvement was fueled by a steady transition to higher-capacity HDDs, rigorous cost management across manufacturing and the supply chain, and a roughly 10% year-over-year decline in cost per terabyte. Management noted incremental gross margin flow-through of about 75%, driven by stable pricing and declining per-terabyte costs.
3. Stock Performance and Surge Drivers
Over the past 12 months, Western Digital shares rose approximately 500% as hyperscale data center demand for AI and high-capacity storage intensified. Corporate restructuring initiatives, improved profitability metrics and long-term agreements with major customers also underpinned investor enthusiasm.
4. Outlook and Guidance
For fiscal Q3, Western Digital forecasts non-GAAP gross margins of 47–48% and revenue of $3.2 billion ± $100 million, implying about 40% year-over-year sales growth. Continued adoption of high-capacity drives and steady data center demand are expected to sustain margin momentum.