Western Digital slips 3% after results despite strong margins and upbeat outlook

Western Digital shares fell 3% in after-hours trading despite delivering strong fiscal second-quarter results and issuing an optimistic forecast, in what appears to be a round of profit-taking following a 58% rise in the stock year-to-date.

For the quarter ended 2 January 2026, the data storage giant reported revenue of $3.02 billion and GAAP diluted earnings per share of $4.73.

Gross margin was 45.7% on a GAAP basis and 46.1% on a non-GAAP basis. Western Digital generated $745 million in operating cash flow and $653 million in free cash flow.

Operating performance improved significantly compared with the previous year. GAAP operating income rose to $908 million from $560 million, with margin expanding from 23.2% to 30.1%.

On a non-GAAP basis, operating income reached $1.02 billion with a margin of 33.8%. Non-GAAP earnings per share were $2.13.

“Our business continues to strengthen,” said Kris Sennesael, chief financial officer. “We expect strong revenue growth and improved profitability driven by continued data centre demand and by the adoption of our high-capacity drives.”

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For the fiscal third quarter, the company guided to revenue of $3.2 billion, plus or minus $100 million, and non-GAAP gross margin between 47% and 48%. Non-GAAP EPS is expected to be around $2.30.

Western Digital also noted that its results no longer include Sandisk Corporation, following the spin-off of its Flash business in February 2025. Previous periods reflect Sandisk as discontinued operations.

The Recap

• Western Digital reported fiscal Q2 revenue of $3.02 billion.
• GAAP diluted earnings per share were $4.73 in Q2.
• Company expects Q3 revenue about $3.2 billion at midpoint.