Western Digital Reports Fiscal Second Quarter 2024 Financial Results

News Summary

  • Second quarter revenue was $3.03 billion, up 10% sequentially (QoQ). Cloud revenue increased 23% (QoQ), Client revenue decreased 2% (QoQ) and Consumer revenue increased 15% (QoQ).

  • Second quarter GAAP earnings per share (EPS) was $(0.87) and Non-GAAP EPS was $(0.69), which includes $156 million of underutilization-related charges in Flash and HDD.

  • Expect fiscal third quarter 2024 revenue to be in the range of $3.20 billion to $3.40 billion.

  • Expect Non-GAAP EPS in the range of $(0.10) to $0.20, which includes $30 to $40 million of underutilization-related charges in HDD.

SAN JOSE, Calif. - January 25, 2024

Western Digital Corp. (Nasdaq: WDC) today reported fiscal second quarter 2024 financial results.

"Western Digital's second quarter results demonstrate that the structural changes we have put in place over the last few years and the strategy we have been executing are producing significant outperformance across our flash and HDD businesses," said David Goeckeler, Western Digital CEO. "We are seeing our efforts come to fruition as our financial performance met, or exceeded, the non-GAAP guidance ranges we provided in October, and I am confident that our strategy of managing inventory proactively, offering a broad range of products, closely controlling our product cost through focused R&D and manufacturing, and bolstering the agility of our business will allow us to improve through-cycle profitability and dampen business cycles into the future."

Q2 2024 Financial Highlights

 

GAAP

Non-GAAP

 

Q2 2024

Q1 2024

Q/Q

Q2 2024

Q1 2024

Q/Q

Revenue ($M)

$3,032

$2,750

up 10%

$3,032

$2,750

up 10%

Gross Margin

16.2%

3.6%

up 12.6 ppt

15.5%

4.1%

up 11.4 ppt

Operating Expenses ($M)

$702

$695

up 1%

$561

$555

up 1%

Operating Loss ($M)

$(210)

$(596)

*

$(91)

$(443)

*

Net Loss ($M)

$(268)

$(685)

*

$(210)

$(554)

*

Earnings Per Share

$(0.87)

$(2.17)

*

$(0.69)

$(1.76)

*

* not a meaningful figure

 

GAAP

Non-GAAP

 

Q2 2024

Q2 2023

Y/Y

Q2 2024

Q2 2023

Y/Y

Revenue ($M)

$3,032

$3,107

down 2%

$3,032

$3,107

down 2%

Gross Margin

16.2%

17.0%

down 0.8 ppt

15.5%

17.4%

down 1.9 ppt

Operating Expenses ($M)

$702

$849

down 17%

$561

$659

down 15%

Operating Loss ($M)

$(210)

$(321)

*

$(91)

$(119)

*

Net Loss ($M)

$(268)

$(446)

*

$(210)

$(135)

*

Earnings Per Share

$(0.87)

$(1.40)

*

$(0.69)

$(0.42)

*

* not a meaningful figure

The company had an operating cash outflow of $92 million and ended the quarter with $2.48 billion of total cash and cash equivalents.

Additional details can be found within the company's earnings presentation, which is accessible online at investor.wdc.com.

End Market Summary


Revenue ($M)

Q2 2024

Q1 2024

Q/Q

Q2 2023

Y/Y

Cloud

$1,071

$872

up 23%

$1,224

down 13%

Client

1,122

1,147

down 2%

1,089

up 3%

Consumer

839

731

up 15%

794

up 6%

Total Revenue

$3,032

$2,750

up 10%

$3,107

down 2%

In the fiscal second quarter:

  • Cloud represented 35% of total revenue. Sequentially, the growth was attributed to higher nearline shipments to data center customers and better nearline pricing. The year-over-year decrease was due to lower eSSD bit shipments.

  • Client represented 37% of total revenue. Sequentially, an increase in flash ASPs was more than offset by a decline in flash bit shipments. The year-over-year increase was due to higher flash shipments, primarily driven by client SSD shipments into PC applications, more than offsetting a decline in flash ASPs.

  • Consumer represented 28% of total revenue. Sequentially, the growth was primarily due to seasonal strength in flash bit shipments. On a year-over-year basis, the increase in flash bit shipments was partially offset by a decline in flash ASPs as well as lower HDD shipments.

Business Outlook for Fiscal Third Quarter of 2024

Three Months Ending
March 29, 2024

 

GAAP(1)

Non-GAAP(1)

Revenue ($B)

$3.20 - $3.40

$3.20 - $3.40

Gross margin

21.5% - 23.5%

22.0% - 24.0%

Operating expenses ($M)

$710 - $730

$600 - $620

Interest and other expense, net ($M)

~$95

~$95

Income tax expense ($M)(2)

N/A

$20 - $30

Preferred dividend ($M)

$15

$15

Diluted earning per share

N/A

$(0.10) - $0.20

Diluted shares outstanding (in millions)

~330

~330

(1) Non-GAAP gross margin guidance excludes amortization of acquired intangible assets and stock-based compensation expense of approximately $10 million to $15 million. The company's Non-GAAP operating expenses guidance excludes stock-based compensation expense, and expenses related to business separation costs, totaling approximately $105 million to $115 million. In the aggregate, Non-GAAP diluted earnings per share guidance excludes these items totaling approximately $115 million to $130 million. The timing and amount of additional charges the company excludes from its Non-GAAP income tax expense and Non-GAAP diluted earnings per share are dependent on the timing and determination of certain actions and cannot be reasonably predicted. The timing and amount of these charges excluded from Non-GAAP gross margin, Non-GAAP operating expenses, and Non-GAAP diluted earnings per share cannot be further allocated or quantified with certainty. Accordingly, full reconciliations of Non-GAAP gross margin, Non-GAAP operating expenses, Non-GAAP income tax expense and Non-GAAP diluted earnings per share to the most directly comparable GAAP financial measures (GAAP gross profit, GAAP operating expenses, income tax expense and diluted earnings per share, respectively) are not available without unreasonable effort.

(2) Non-GAAP income tax expense is determined based on a percentage of Non-GAAP pre-tax income or loss. Our estimated Non-GAAP tax dollars may differ from our GAAP tax dollars (i) due to differences in the tax treatment of items excluded from our Non-GAAP net income or loss; (ii) the fact that our GAAP income tax expense or benefit recorded in any interim period is based on an estimated forecasted GAAP tax rate for the full year, excluding loss jurisdictions; and (iii) because our GAAP taxes recorded in any interim period are dependent on the timing and determination of certain GAAP operating expenses.

Investor Communications
The investment community conference call to discuss these results and the company's business outlook for the fiscal third quarter of 2024 will be broadcast live online today at 1:30 p.m. Pacific/4:30 p.m. Eastern. The live and archived conference call/webcast and the earnings presentation can be accessed online at investor.wdc.com.

About Western Digital
Western Digital is on a mission to unlock the potential of data by harnessing the possibility to use it. With Flash and HDD franchises, underpinned by advancements in storage technologies, we create breakthrough innovations and powerful data storage solutions that enable