Western Digital’s third quarter saw strong market approval, as the company’s results exceeded Wall Street’s expectations for both revenue and profit. CEO Tiang Yew Tan attributed the positive momentum to robust adoption of high-capacity hard disk drives (HDDs), fueled by expanding artificial intelligence (AI) workloads at hyperscale data centers. Tan highlighted that shipments of next-generation ePMR and UltraSMR drives surpassed 2.2 million units, noting, “Our ability to reliably scale our ePMR technology and transition customers to higher capacity drives is one of several ways we support the growing demand for exabytes.” Productivity improvements via AI-driven automation and manufacturing efficiencies contributed to significant margin gains.
Is now the time to buy WDC? Find out in our full research report (it’s free for active Edge members).
Western Digital (WDC) Q3 CY2025 Highlights:
- Revenue: $2.82 billion vs analyst estimates of $2.74 billion (27.4% year-on-year growth, 2.8% beat)
- Adjusted EPS: $1.78 vs analyst estimates of $1.58 (12.9% beat)
- Adjusted EBITDA: $944 million vs analyst estimates of $844.8 million (33.5% margin, 11.7% beat)
- Operating Margin: 28.1%, up from 15.1% in the same quarter last year
- Inventory Days Outstanding: 80, up from 76 in the previous quarter
- Market Capitalization: $54.74 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Western Digital’s Q3 Earnings Call
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Christopher Muse (Cantor Fitzgerald) asked how Western Digital plans to balance rapidly rising storage demand with supply discipline. CEO Tiang Yew Tan explained the company is focusing on scaling higher-capacity drives and productivity improvements without adding new unit capacity.
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Aaron Rakers (Wells Fargo) inquired about the potential expansion of UltraSMR drive capacities and the progress of HAMR qualification. Tan noted continual engineering efforts to push capacity points and confirmed accelerated qualification timelines for both technologies.
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Erik Woodring (Morgan Stanley) asked whether exabyte growth is trending above prior guidance and how long supply will remain constrained. Tan said exabyte demand is trending toward the high end of guidance and supply constraints may persist through 2026.
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Karl Ackerman (BNP Paribas) questioned the scope and impact of recent price increases and whether average selling price improvements are limited to non-long-term agreements. Tan clarified that price increases were focused on channel customers, representing about 10–15% of business.
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Steven Fox (Fox Advisors) asked about the sustainability of strong free cash flow and the dynamic of customer push for higher capacity drives. CFO Kris Sennesael highlighted working capital improvements, while Tan described the relationship with customers as mutually beneficial for driving capacity adoption.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will closely watch (1) the progress and customer adoption of ePMR and HAMR drive qualifications, (2) the pace at which hyperscale customers shift to higher capacity drives and extend purchase commitments, and (3) continued realization of internal productivity gains from AI-driven manufacturing and engineering initiatives. We will also monitor any shifts in customer storage architecture or competitive developments in SSD adoption.
Western Digital currently trades at $161.67, up from $138.18 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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