Western Digital revenue jumps 55% and guides well above consensus, but shares reverse after the call

Western Digital (WDC) reported fiscal first-quarter 2027 results after the close on Oct. 22. Revenue rose 55% from a year earlier to $4.38 billion, ahead of the $4.14 billion consensus, and non-GAAP EPS of $4.64 beat the $4.08 estimate by $0.56; GAAP diluted EPS was $4.63. Non-GAAP gross margin widened to 58.1% from 43.9% a year earlier and non-GAAP operating margin reached 49.1%, while free cash flow came in at $1.38 billion. The company raised its quarterly dividend 17% to $0.175 per share.

The outlook was the stronger part of the release. Western Digital guided fiscal Q2 revenue to $5.0 billion to $5.2 billion, up 66% to 72% year over year, with non-GAAP EPS of $5.60 to $6.00, gross margin of 60% to 61% and non-GAAP operating expenses of $400 million to $410 million. Investing.com put the guidance midpoints about 12% above the $4.57 billion revenue consensus and about 20% above the $4.82 EPS consensus. Bloomberg characterized the outlook as driven by AI demand.

The stock reaction was messier. Shares had already fallen 7.1% to $351.70 in the regular session on Oct. 22, before the report, as memory and storage names sold off; Seagate (STX) fell more than 7% that day too. After the release the stock initially jumped about 4%, then reversed lower following the earnings call and was down more than 1% in Friday premarket trading. On the call management flagged rising input costs and said capital spending should average 4% to 6% of revenue over the next five years, modestly higher over the next two; Q1 capex was $227 million versus $73 million a year earlier, and inventories rose to $1,781 million from $1,511 million at the start of the quarter. The questions to watch are whether margins hold near 60% as costs rise, and the pace of the 44TB HAMR drive rollout, which Simply Wall St flags as the main execution risk while a rival is already shipping.