958102AP0 Filings — Western Digital Corporation - FilingSpy
958102AP0
Western Digital Corporation
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A maker of hard disk drives and storage products that keep data safe, from cloud data centers to home computers. Founded in 1970 as General Digital Corporation, it started out making calculator chips before pivoting to storage, renaming itself Western Digital in 1971 for a "broader industrial identity." It later absorbed flash-memory maker SanDisk, and today its drives power hyperscale data centers, PCs, and external storage sold in retail.
Western Digital eliminated all long-term debt while gross margin crossed 50% and a $6.5B non-cash gain on Sandisk shares pushed net income to $9.4B.
Western Digital became debt-free on its core operations and passed 50% for the first time. rose 36% to $12.9 billion and more than doubled to $4.5 billion as cloud data-center demand for high-capacity drives drove a 25% increase in sold, though reported of $9.4 billion was dominated by a $6.5 billion non-cash on retained shares that the company has now fully exited. The business is generating cash, returning it to shareholders, and carrying no traditional , but the $1.6 billion in remains the last claim on the balance sheet.
Key takeaways
reached 48.9% for the year, up 10.1 points, and crossed 50% in each of the final two quarters as higher volumes, lower costs on newer-generation products, and a mix shift toward high-capacity enterprise drives combined to lift profitability.
Cloud , now 89% of the total, rose 38% on a 25% increase in sold and an 8% rise in average selling price per exabyte, reflecting sustained hyperscale investment in AI data-center infrastructure.
Section summaries
Business
Western Digital is a leading HDD manufacturer serving Cloud, Client, and Consumer markets, positioned as a foundational provider for the AI-driven data economy.
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The company operates through three end markets: (the largest and fastest growing, serving hyperscale/enterprise data centers), ( and channel HDDs for PCs), and (external storage products sold via retail and channel partners).
more than doubled to $4.5 billion, but reported of $9.4 billion included a $6.5 billion non-cash on the retained stake — a position the company fully exited by year-end.
The company eliminated all traditional , paying down $2.5 billion during the year, and ended FY2026 with only the $1.60 billion in 3.00% due 2028 outstanding.
Western Digital returned $2.59 billion to shareholders through share repurchases and raised the quarterly to $0.15 per share, while reached $3.5 billion for the year.
Three customers accounted for 16%, 15%, and 13% of net , and international sales were 60% of the total, leaving the company exposed to customer concentration and tariff risk on its Asia-based manufacturing.
What changed
The FY2025 10-K flagged whether the 20% HDD average selling price increase and 36% Cloud unit growth would hold. In FY2026, ASP growth decelerated to 8% but exabyte growth remained at 25%, and Cloud accelerated to 38% growth from 28% the prior year.
The unrealized gain or loss on the retained stake was flagged every quarter as a wildcard. The position swung from a $772 million loss in FY2025 to a cumulative $6.5 billion gain in FY2026, and the company disclosed it sold all remaining shares by year-end, removing the mark-to-market volatility from future results.
Convertible note holder activity was a recurring watch item. During FY2026, the company settled $1.22 billion of the $1.60 billion in , leaving $380 million in principal outstanding at year-end.
U.S. tariff and retaliatory trade action risk was flagged in every prior filing with no material change disclosed. The FY2026 10-K repeats the risk, noting that new or increased tariffs may raise costs for imported materials and components, and the company may be unable to pass those costs on to customers.
The FY2025 10-K noted the initiation of a $0.10 quarterly and a $2.0 billion program. In FY2026, the dividend was raised to $0.15 and total share repurchases reached $2.59 billion, exceeding the original authorization.
What to watch
Q1 FY2027 Cloud growth and HDD average selling price per exabyte to confirm whether the 8% ASP increase and 25% exabyte growth are sustained as the hyperscale buildout continues.
Impact of new or increased U.S. tariffs and retaliatory trade actions on HDD component costs and end demand, given that 60% of is international and manufacturing is concentrated in Thailand, Malaysia, the Philippines, and China.
Resolution of the remaining $380 million in due 2028, which could require a cash settlement and draw on the $1.58 billion cash balance.
Capital allocation cadence now that traditional is zero — whether the pace of $2.59 billion in annual buybacks continues or shifts toward M&A or capacity investment.
Western Digital designs and manufactures substantially all of its own recording heads and magnetic media, a vertical integration strategy that supports its leadership in and cost efficiency.
The HDD product roadmap includes technologies like ePMR, , UltraSMR, and HAMR to deliver high-capacity drives, with a common platform strategy that reduces costs and facilitates management.
Three customers accounted for 16%, 15%, and 13% of net in 2026, and international sales represented 60% of net revenue, highlighting significant customer and geographic concentration.
The company holds approximately 4,700 active patents and relies on a combination of IP protection, trade secrets, and internal safeguards to maintain its competitive position.
Manufacturing and assembly operations are concentrated in Thailand, Malaysia, the Philippines, China, and the US, with a workforce of approximately 40,000 employees globally, 88% of whom are in Asia Pacific.
Revenue is highly concentrated, with 89% from the Cloud market and 73% from the top 10 customers, creating significant customer dependency risk.
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Loss of a major Cloud customer or reduced hyperscale AI infrastructure investment could materially harm , as three customers each account for 10%+ of net revenue.
Long-term volume agreements lock in pricing and supply commitments, exposing the company to opportunity costs if market prices rise or to damages if it fails to deliver.
Technology transitions, particularly HAMR-based areal density recording, require costly R&D and manufacturing ramps; failure to execute could erode competitiveness and margins.
Supply chain concentration creates vulnerability: many critical components are sole-sourced, and trade restrictions or geopolitical conflicts could disrupt availability and raise costs.
New or increased tariffs and retaliatory trade actions may raise costs for imported materials and components, and the company may be unable to pass these costs on to customers.
The evolving AI regulatory landscape and energy concerns around AI data centers could constrain demand for storage products or increase compliance costs.
Our principal executive offices are located in San Jose, California. Our leased facilities have contracts expiring at various times through 2034. Our principal manufacturing, R&D, marketing and administrative facilities as of July 3, 2026 were as follows: Location Buildings Owne…
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Our principal executive offices are located in San Jose, California. Our leased facilities have contracts expiring at various times through 2034. Our principal manufacturing, R&D, marketing and administrative facilities as of July 3, 2026 were as follows:
Location Buildings Owned or Leased Approximate Square Footage Description
United States
California
Fremont Leased 295,000 Manufacturing and R&D
Irvine Leased 258,000 R&D, administrative, marketing and sales
San Jose Owned 1,957,000 Manufacturing, R&D, administrative, marketing and sales
Colorado
Colorado Springs Leased 54,000 R&D
Minnesota
Rochester Leased 111,000 R&D
Asia
China
Shenzhen Owned and Leased 614,000 Manufacturing
India
Bangalore Leased 209,000 R&D and administrative
Japan
Fujisawa Owned 638,000 R&D
Malaysia
Johor Bahru Owned 277,000 Manufacturing
Kuala Lumpur Owned 145,000 R&D and administrative
Kuching Owned 638,000 Manufacturing and R&D
Penang Owned 1,192,000 Manufacturing
Philippines
Laguna Owned 632,000 Manufacturing and administrative
Singapore Leased 6,000 Administrative, marketing and sales
Thailand
Bang Pa-In Owned and Leased 1,595,000 Manufacturing and R&D
Prachinburi Owned 1,568,000 Manufacturing
We also lease office space in various other locations worldwide primarily for R&D, marketing and sales, and administration. Although we believe our present facilities are adequate for our current needs, we anticipate making additional investments to enhance our operations.
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Table of Contents
See Part II, Item 8, Note 16, Legal Proceedings of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for disclosures regarding certain legal proceedings, which are incorporated by reference herein.
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See Part II, Item 8, Note 16, Legal Proceedings of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for disclosures regarding certain legal proceedings, which are incorporated by reference herein.
Revenue surged 36% to $12.9B in FY2026, driven by strong cloud demand and improved pricing, while gross margin expanded 10.1 points.
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Net grew 36% to $12.9 billion, fueled by a 25% increase in sold and an 8% rise in average selling prices per exabyte.
, 89% of total revenue, jumped 38% on strong demand for high-capacity enterprise drives and an improved pricing environment.
expanded to 48.9% from 38.8%, benefiting from higher volumes, a better cost structure on newer products, and a mix shift toward higher-capacity drives.
more than doubled to $4.5 billion, while a $6.5 billion on the retained interest in drove from continuing operations to $9.4 billion.
The company used of $3.9 billion to $2.59 billion in shares and settle $1.22 billion of , ending the year with no remaining shares.
Quantitative and Qualitative Disclosures About Market Risk
The company faces foreign currency and interest rate risks, using short-term hedges and sensitivity models to quantify potential impacts.
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Foreign currency risk arises from non-U.S. dollar transactions for product costs and operating expenses, hedged with short-term forward contracts typically maturing within 12 months.
A hypothetical 10% adverse move in foreign exchange rates relative to the U.S. dollar would result in a $74 million loss on as of July 3, 2026.
The company does not hedge all foreign currency exposures and states its hedging activities may not fully protect against currency fluctuation risks.
Interest rate risk stems from variable-rate debt under the , with a $350 million balance outstanding as of July 3, 2026.
A 1% increase in the variable interest rate would raise annual by approximately $4 million.
KPMG issued an unqualified audit opinion on Western Digital's FY2026 financials and internal controls, highlighting two critical audit matters.
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The independent auditor, KPMG, opined that the consolidated financial statements present fairly, in all material respects, the company's financial position and results of operations for the fiscal year ended July 3, 2026.
KPMG also opined that the company maintained effective as of July 3, 2026.
The first involved the evaluation of audit evidence over reductions to , such as price protection and sales incentives for resellers and OEMs, due to the complexity of related IT systems.
The second involved the tax-free determination of the Flash business separation and subsequent debt-for-equity and equity-for-equity exchanges, requiring subjective auditor judgment on the application of complex tax laws.