WD posts 55% revenue growth as 40TB and HAMR ramps approach

By Tom Whitfield

Western Digital Corp. reported fiscal first-quarter 2027 revenue of $4.38 billion, up 55% year over year and above its $4.1 billion outlook. GAAP profit reached $1.8 billion, up 50.5% from a year earlier but down 44% from the prior quarter’s $3.2 billion, which included roughly $1.7 billion in one-time Sandisk-related fair-value gains in interest and other income.

What drove the stronger quarter?

Revenue, non-GAAP gross margin and non-GAAP EPS all finished above the high end of guidance. Public-cloud and enterprise purchases of disks for cloud and AI workloads drove growth, while higher volume, a mix shift toward higher-capacity nearline hard drives and better pricing lifted margins.

CFO Kris Sennesael said: “Our first quarter results demonstrate the continued momentum in our business, with robust exabyte growth and improved pricing driving another quarter of strong financial performance.” WD shipped 248 exabytes, up 21.6% from 231 exabytes in the prior quarter.

Revenue per exabyte rose 28% year over year and 8.8% sequentially to $17.7 million. Cloud accounted for 88% of revenue, client drives for 7% and consumer drives for 5%. Client revenue climbed 119% year over year, while 90% of shipped drives were mass-capacity nearline models.

The quarter therefore combined more data shipped, richer capacity mix and higher prices rather than relying on the prior accounting gain. The operating improvement came from volume, mix and price.

What changed in cash and shareholder returns?

The financial summary showed:

• Gross margin: 57.8%, versus 50.2% in the prior quarter.
• Operating cash flow: $1.6 billion, versus $1.12 billion.
• Free cash flow: $1.4 billion, versus $978 million.
• Cash and equivalents: $1.3 billion, versus $1.58 billion.
• Diluted EPS: $4.64, versus $8.20.

WD declared a quarterly cash dividend of $0.175 per share, up 17% from the prior quarter. The payment came as the company worked to monetize its retained Sandisk interest and reduce debt.

Those actions included debt-for-equity exchanges, equity-for-equity exchanges and a private settlement of part of WD’s convertible-note obligations. Transaction costs, mainly discounts granted to counterparties, and share repurchases help explain the $265 million cash decline; WD ended with a net $0.5 billion cash position.

The restructuring changed the balance sheet, not the quarter’s operating strength. Despite the lower cash balance, WD generated $1.6 billion of operating cash.

What do the 40TB and HAMR road maps mean?

WD is ramping production of its next-generation ePMR platform at the 40TB level. Tan expects it to represent close to 30% of nearline shipments in fiscal Q2 and 50% in fiscal Q3; these shares remain management targets.

For first-generation heat-assisted magnetic recording, or HAMR, WD plans 44TB drives. Tan said: “On our first-generation HAMR product, we are on track to finish qualifications with 2 hyperscale customers in the first quarter of calendar year 2027.”

WD remains on schedule to begin volume shipments during the first half of 2027. The company also expects to qualify two additional customers during that period. Tan reported positive feedback, particularly on failure rates, and the timetable appears shorter than the qualification period Seagate endured.

Second-generation HAMR qualification starts in the second half of 2027, using five terabytes per platter on an 11-disk platform. Management expects those drives to reach 55TB, another roadmap target rather than shipped capacity.

The schedule moves WD from 40TB ePMR into 44TB and then 55TB HAMR. Actual shipments still depend on customer qualification and production execution.

Can faster HDDs displace NVMe SSDs for AI workloads?

WD is also sampling high-bandwidth hard drives with multiple customers and reports clear use cases and value creation. The company combines higher I/O speed with its drive economics through high-bandwidth and dual-pivot technology, aiming at workloads now assigned to more costly storage media.

Tan identified KV-cache workloads in AI inference and video streaming as possible targets. KV cache currently runs entirely from NVMe SSDs, making substitution by much slower disks difficult; nevertheless, WD has sent samples to many customers, which responded positively.

The samples establish customer interest, not proof that HDD economics can overcome NVMe latency. For now, high-bandwidth HDDs remain an option seeking a workload.

How durable are demand and pricing?

Tan said demand now extends beyond core cloud and hyperscale customers into enterprises, neoclouds and AI frontier labs. He said customers are extending infrastructure plans into the next decade and expects exabyte shipments to rise through fiscal 2027 and beyond as ePMR and HAMR production ramps.

WD claims good visibility into its seven largest customers through 2030 and 2031, with quarterly demand signals rising. Tan also expects durability through 2028, 2029 and 2030, and links technology transitions, broader customer relationships and longer visibility to a more durable business.

Sennesael said pricing remains strong because WD delivers higher-capacity drives that improve rack density and lower power, reducing customers’ total cost of ownership. He also sees room to raise price per terabyte as the roadmap progresses.

Tan dismissed Toshiba’s plan to increase unit shipments and move from 10% to 30% market share. He argued that WD and Seagate build their own media and heads, while Toshiba uses some third-party platters and heads, giving the integrated suppliers an areal-density and cost edge. Without that integration, rivals must ship more units merely to preserve share and position.

WD’s case for durable pricing rests on higher-capacity execution. Toshiba’s expansion remains the main competitive test.

What does fiscal Q2 guidance require?

CFO Sennesael’s fiscal second-quarter 2027 midpoint guidance calls for revenue of $5.1 billion, plus or minus $100 million, a non-GAAP gross margin of 60.5% and non-GAAP EPS of $5.80. That midpoint would put revenue 70% above the year-earlier quarter.

These figures remain forecasts, not booked results. The near-term test is whether 40TB ePMR production, 44TB HAMR qualification and firmer pricing can sustain exabyte growth while delivering the projected margin.