WESTERN DIGITAL CORP: quarterly profit up 11-fold, but almost all of it is paper

5 августа WESTERN DIGITAL CORP раскрыла результаты за четвёртый квартал 2026 финансового года: выручка выросла на 43,8% год к году, до 3 747 млн долл., EBITDA – на 117%, до 1 662 млн долл., а чистая прибыль – на 1033%, до 3 195 млн долл.. Однако основной вклад в прибыль внесли неоперационные статьи – переоценка доли в Sandisk и прочие доходы, тогда как операционная прибыль выросла на 130%, до 1 563 млн долл.. На текущей цене акция выглядит скорее привлекательно, но с оговорками: мультипликаторы высоки, а драйверы роста во многом связаны с искусственным интеллектом и памятью для дата-центров.

Key takeaways

— Revenue grew 44% driven by demand for AI and cloud storage products

— EBITDA margin reached 44.4% versus 29.4% a year earlier – operating leverage works

— Net profit of $3.2 billion includes about $2 billion of paper revaluation of Sandisk stake

— Company turned to net cash position: debt decreased and cash flow increased

— Dividend maintained at $0.15 per share, but yield is minimal

— Shares fell 5.4% on the report day and another 12.1% after – market expected more

— Portal model suggests upside of +27% from current price

Attractiveness

Key figures, USD bn

Revenue grew 44% driven by demand for AI and cloud storage products

In the fourth quarter of fiscal 2026, WESTERN DIGITAL CORP revenue reached $3,747 million, up 43.8% year-over-year. The company attributes growth to expanding demand for data storage solutions, especially from cloud providers and hyperscalers, amid accelerated AI adoption.

Sequential dynamics are also strong: revenue grew 12% quarter-over-quarter. For the full fiscal year, revenue reached $12,919 million, up 36% from the prior year. Management expects revenue to grow 42–49% year-over-year in the first quarter of fiscal 2027, indicating sustained strong demand.

EBITDA margin reached 44.4% versus 29.4% a year earlier – operating leverage works

EBITDA for the reported quarter reached $1,662 million, up 117% year-over-year. EBITDA margin jumped to 44.4% from 29.4% a year earlier. The main contribution came from gross margin expansion: GAAP gross margin reached 54.1% versus 41.0% a year ago.

Operating income grew to $1,563 million, with operating margin at 41.7% versus 26.1% last year. The company attributes the improvement to scale effects and operational discipline. Margin expansion is the key factor behind profit growing faster than revenue.

Net profit of $3.2 billion includes about $2 billion of paper revaluation of Sandisk stake

Net profit for the quarter reached $3,195 million, 11 times higher than a year earlier. However, the line 'interest and other income/expense' shows income of $1,684 million, a large part of which is the revaluation of the retained interest in Sandisk. Excluding these paper items, non-GAAP net profit would be $1,382 million, still double the year-ago level.

For the full fiscal year, net profit reached $9,424 million, but here too a large share is non-operating income – particularly from the Sandisk stake revaluation. Investors should look at non-GAAP metrics, which exclude these one-off and paper effects, to assess operational dynamics.

Company turned to net cash position: debt decreased and cash flow increased

At the end of the quarter, net debt stood at minus $527 million, meaning cash exceeded debt. A year earlier, net debt was $2,597 million, so the company radically improved its balance sheet. Net debt to EBITDA for the trailing twelve months is minus 0.11, indicating financial stability.

Operating cash flow for the quarter reached $1,389 million, and free cash flow was $1,281 million (after capex of $108 million). For the year, operating cash flow totaled $3,929 million, almost double the prior year. The company used funds to repay debt and buy back shares.

Dividend maintained at $0.15 per share, but yield is minimal

The Board of Directors declared a quarterly dividend of $0.15 per share, payable on September 17, 2026. Over the trailing twelve months, dividend yield was only 0.11% – a symbolic payment for shareholders.

At the current share price, the dividend stream is not a significant factor in investment attractiveness. The company prefers to direct free cash flow to debt repayment and share buybacks – it spent $2,592 million on buybacks over the year, significantly more than dividend payments.

Shares fell 5.4% on the report day and another 12.1% after – market expected more

Despite strong operating results, WESTERN DIGITAL CORP shares fell 5.4% on the day of the earnings release and another 12.1% by September 9, 2026. This reaction suggests investors had priced in even higher growth rates and margins.

Current market capitalization is $174,103 million, corresponding to a trailing twelve-month P/E of 18.5 and EV/EBITDA of 34.7. These multiples are noticeably higher than historical averages for a hard drive manufacturer, explaining market caution.

Portal model suggests upside of +27% from current price

Our value model, based on EBITDA growth and target multiple, suggests the share has upside potential of +27% to fair value. This means that even after the recent decline, the market does not fully appreciate the company's ability to grow profits.

However, such a forecast is sensitive to maintaining current EBITDA growth rates and margins. If demand for AI data center products slows or competition intensifies, actual results may fall short of the model.

Valuation on the latest reported figures

Bottom line

WESTERN DIGITAL CORP's fiscal Q4 2026 report was strong operationally: revenue and EBITDA grew at double-digit rates, margins reached record levels, and the company turned to a net cash position. However, a significant part of net profit is paper revaluation of the Sandisk stake, and without it profit is half as much. Shares fell after the report, reflecting high expectations and expensive valuation. Verdict – rather attractive: operational momentum is strong, but investors should watch margin sustainability and AI-segment demand.