Western Digital lifts outlook after strong Q1

Western Digital projects sharp Q2 revenue growth

Western Digital (WDC) is forecasting a substantial acceleration in revenue in its fiscal second quarter of 2027 after a strong start to the year. The company expects revenue of $5.1 billion, plus or minus $100 million, which corresponds to year-over-year growth of roughly 66% to 72%. The guidance includes a projected non-GAAP gross margin of 60% to 61% and adjusted earnings per share of about $5.80, plus or minus $0.20. The guidance is significantly above prior market expectations of about $4.57 billion in revenue and $4.82 in earnings per share.

Within this outlook range, Western Digital is guiding non-GAAP earnings per share between $5.60 and $6.00. Management expects higher revenue and improved adjusted gross margins in the coming quarter as demand and pricing support financial performance. The company is positioning its storage business to serve cloud service providers and large-scale data center operators, targeting growing requirements tied to artificial intelligence infrastructure.

Strong Q1 FY2027 performance underpins guidance

The optimistic second-quarter forecast follows a strong fiscal first quarter of 2027. For the three months ended October 2, 2026, revenue reached $4.38 billion, up 55% year over year and 17% quarter over quarter. Non-GAAP diluted earnings per share were $4.64, an increase of 161% from a year earlier. Western Digital’s reported operating income rose 158% to $2.05 billion, while gross margin expanded to 57.8% from 43.5% a year earlier.

Non-GAAP gross margin in the first quarter was 58.1%, up 14.2 percentage points year over year, and non-GAAP operating margin reached 49.1%. Adjusted net income increased to $1.78 billion from $655 million in the prior-year quarter, reflecting improved profitability. Cash generated from operations more than doubled to $1.60 billion, and free cash flow rose to $1.38 billion from $599 million.

Demand, pricing and mix drive revenue and margin gains

Western Digital’s revenue growth outpaced the increase in storage shipped. Exabytes shipped rose to 248 from 204 a year earlier, an increase of about 22%, while revenue advanced 55%. FourWeekMBA's arithmetic showed revenue per exabyte rose about 28%, to about $17.7 million from about $13.8 million.

The company emphasized demand from cloud and AI-related workloads. The company said the cloud end market accounted for 88% of revenue in the fiscal first quarter of 2027.

Capital returns and balance sheet

Reflecting its improved financial performance, Western Digital raised its quarterly cash dividend by 17% to $0.175 per share. The dividend is scheduled to be paid on December 17 to shareholders of record on December 4. The company ended the quarter with $1.31 billion in cash and cash equivalents, compared with $1.58 billion at the end of the previous quarter.

Western Digital’s management indicated that the second-quarter forecast signals continued momentum, with expectations for higher revenue and improved adjusted gross margins. The combination of stronger profitability, rising free cash flow, and increased shareholder returns frames the company’s outlook as it targets expanding demand for data storage in cloud and AI infrastructure.