Western Digital (WDC +10%) saw a significant increase in its share price following its Q1 earnings report, which showed impressive EPS growth. Revenue rose 48.9% year-over-year to $4.095 billion, aligning with prior guidance of $4.00-4.20 billion. The company provided in-line EPS and revenue guidance for Q2. Additionally, Western Digital is on track to separate its flash and HDD businesses by the end of 2024.
- Flash Revenue:
- Increased 21% year-over-year and 7% sequentially to $1.88 billion, marking its highest level in nine quarters.
- Growth driven by the recovery in data centers and strong demand for enterprise SSD applications, up 76% sequentially.
- Cloud demand offset by weak consumer and client sectors, with PC OEMs reducing inventory and delaying purchases.
- Outlook for Flash:
- Continued ramp-up of new enterprise SSDs expected to boost consumer market demand.
- PC OEM demand anticipated to stabilize, with recovery in consumer and client markets by 2025.
- Enterprise SSDs to drive revenue growth for the full fiscal year.
- HDD Revenue:
- Grew 85% year-over-year and 10% sequentially to $2.21 billion, achieving record data center revenue.
- Demand for products surpasses supply, prompting collaboration with customers for better demand forecasting.
- Increased adoption of UltraSMR technology noted.
- Outlook for HDD:
- Data center momentum expected to drive growth in the nearline portfolio.
- Expanding adoption of UltraSMR, especially among cloud customers.
- Ongoing positive transformation in the HDD business, with record revenue amid the rise of AI.
Investors are optimistic about Western Digital's strong start to the fiscal year. The company's recent performance marks a turnaround from its previous report in June, which had disappointed. The industry appears to be recovering, with data centers performing well and potential improvements in consumer and client markets by 2025. The upcoming separation of its flash and HDD units is another significant development for Western Digital.
