Key Highlights

  • Western Digital shares are down 15.00% in pre-market trading.
  • Fiscal Q4 2026 revenue reached $3.75 billion, up 44% year over year, beating estimates.
  • EPS came in at $3.56, beating consensus estimates of $3.35.
  • Fiscal Q1 2027 guidance fell short of the market's elevated expectations.
  • The stock is giving back a large portion of its outsized 176% year-to-date rally.

Shares Plunge Despite Earnings Beat

Western Digital (NASDAQ:WDC) is trading sharply lower today, extending Wednesday's after-hours slide, even after the company beat fiscal fourth-quarter expectations on both revenue and earnings. Shares fell as much as 15.00% to $441.30 in pre-market trading, adding to Wednesday's 5.36% regular-session decline, as investors reacted to guidance that fell short of the market's lofty expectations after WDC's massive 176% year-to-date rally.

Western Digital, a leading data storage company that designs, manufactures, and markets hard disk drives and solid-state drives under the Western Digital, WD, and SanDisk brands, reported fiscal fourth-quarter revenue of $3.75 billion, up 44% year over year, with EPS of $3.56, beating consensus estimates of $3.35 on revenue estimates of $3.7 billion.

Guidance Falls Short of Elevated Expectations

For fiscal first-quarter 2027, the company guided for revenue of $4.1 billion, plus or minus $100 million, with gross margin expected in the range of 54.4% to 55.4%, up more than 10 points year over year. While the guidance points to continued strong growth driven by favorable pricing and higher-capacity enterprise storage demand, it was not enough to satisfy a market pricing in even more optimistic results after the stock's sharp rally over the past year.

Gross margin expanded significantly to 54.4% in the just-completed quarter, up 1,310 basis points year over year, driven by mix shift toward higher-capacity products, favorable pricing, and operational efficiency, with full-year gross margin reaching 49.1%.

Balance Sheet Strength and Capital Returns

The company also strengthened its balance sheet, returning to a net positive cash position of $500 million, with $3.1 billion returned to shareholders via buybacks and dividends in fiscal 2026, and a $0.15 per share dividend payable September 17. Management continues to point to strong demand drivers from AI infrastructure, agentic AI, and emerging physical AI applications such as autonomous vehicles and humanoid robots, with a 40TB ePMR drive ramping and a 44TB HAMR product on track for shipment in the first half of calendar 2027.

Conclusion

Western Digital's sharp pre-market decline despite a genuine earnings beat underscores how elevated expectations following the stock's outsized rally have shifted the bar higher for what qualifies as a positive surprise. With strong underlying demand for high-capacity storage tied to AI infrastructure buildouts, the pullback may reflect valuation resets rather than a change in the company's fundamental trajectory.

Western Digital's stock had rallied 176% year-to-date heading into this report, among the strongest performances in the storage and semiconductor sector, which helps explain why even a genuine beat on both revenue and EPS was insufficient to sustain the rally. Investors will likely watch upcoming quarters closely for confirmation that fiscal Q1 2027 guidance proves conservative, similar to the pattern seen in prior quarters this year.

This article is for informational purposes only and does not constitute financial, investment, or trading advice. Readers should conduct their own research or consult a licensed financial advisor before making any investment decisions.