To evaluate Western Digital (Nasdaq: WDC), assess it as an HDD-focused company—not as the former combined hard-drive and flash-memory business. Western Digital completed the separation of its Flash business into Sandisk on February 21, 2025, and its FY2026 filing says it held no Sandisk shares as of July 3, 2026. That distinction matters: FY2026 net income included a large accounting gain tied to the retained Sandisk interest, so headline earnings do not by themselves show the ongoing performance of WDC’s hard-drive business.
What Western Digital owns after the Sandisk separation
Western Digital completed the separation of its Flash business into Sandisk on February 21, 2025. WD continued as an HDD-focused company; its FY2026 filing says it had no Sandisk shares remaining as of July 3, 2026. The current WDC business therefore should not be evaluated as if it still combines HDDs and flash memory.
Historical comparisons need care, too. For periods before the separation, Sandisk’s results are reported as discontinued operations. After the separation, Sandisk results are no longer consolidated into Western Digital. A year-over-year comparison that crosses the separation can therefore reflect a changed reporting perimeter as well as operating changes. Use continuing-operations results and check what businesses each period includes.
How much of WDC depends on hard drives?
In FY2026, Cloud represented about 89% of Western Digital’s $12.919 billion in revenue. The company’s reported revenue mix was:
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| FY2026 end market | Revenue | Share of total revenue |
|---|---|---|
| Cloud | $11.490 billion | About 89% |
| Client | $726 million | About 6% |
| Consumer | $703 million | About 5% |
| Total | $12.919 billion | 100% |
These are Western Digital’s FY2026 reported end-market figures. Its current filing does not present an operating Flash segment. The mix makes cloud and enterprise storage demand central to an investment case: strength in those markets can matter far more than the smaller Client and Consumer categories, while a slowdown or change in purchasing by large cloud customers can have an outsized effect.
Separate shipment growth, pricing, and product mix
Western Digital reported FY2026 revenue growth of 36%, while exabytes sold rose 25% and average selling prices per exabyte rose 8%. The company attributed cloud growth to stronger shipments of high-capacity enterprise products and an improved pricing environment. It also said gross-margin expansion reflected shipments, the cost structure of newer generations, and a mix shift toward higher-capacity drives.
These measures help distinguish the sources of growth. More exabytes shipped indicate greater capacity sold; a higher average selling price per exabyte indicates improved realized pricing. Product mix and manufacturing costs also influence margins. A useful evaluation tracks these drivers separately across future reports rather than assuming one strong year establishes a durable trend. The growth and explanations are company-reported results and attribution, not a guarantee of future demand or pricing.
Management has cited long-term data-storage demand and AI-related workloads as factors benefiting HDD demand. Western Digital also says customers are seeking higher-capacity drives, which involve greater manufacturing complexity and longer lead times, and that some are engaging earlier and extending commercial arrangements. Treat these as the company’s outlook framing, not independent proof that demand will persist.
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Western Digital reported FY2026 continuing-operations net income of $9.424 billion, but that figure included a $6.498 billion mark-to-market gain on its retained Sandisk interest. Since the company says it had no Sandisk shares remaining at year-end, investors should not treat that gain as recurring HDD operating profit. It can distort comparisons of net income, earnings growth, and price-to-earnings ratios.
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Other FY2026 figures provide a view of reported operating performance, but each has limits as a valuation input:
| Measure | FY2026 reported figure | How to use it |
|---|---|---|
| Revenue | $12.919 billion | Shows scale; compare periods with the separation and reporting perimeter in mind. |
| Gross profit | $6.311 billion | Consider alongside product mix, pricing, and manufacturing costs. |
| Operating income | $4.453 billion | Useful for assessing operating performance, while checking for unusual transaction-related items. |
| Continuing-operations net income | $9.424 billion | Includes the $6.498 billion Sandisk-related gain; do not treat the full amount as recurring. |
For the fourth quarter of FY2026, Western Digital reported revenue of $3.747 billion, GAAP gross margin of 54.1%, GAAP operating income of $1.563 billion, GAAP diluted EPS of $8.21, operating cash flow of $1.39 billion, and free cash flow of $1.28 billion. These are Q4 figures, not full-year results. The company’s earnings release also gave Q1 FY2027 year-over-year revenue growth guidance of 42% to 49%; that is management guidance, not a realized result.
When forming a normalized earnings view, examine operating income and cash generation alongside net income and EPS. Review debt, interest expense, and unusual costs as well. The FY2026 filing identifies costs associated with debt-for-equity exchanges, convertible-note transactions, and equity-for-equity exchanges. These can affect reported results and share count, so investors should understand their treatment before comparing earnings per share across periods. Do not assume that an adjusted figure removes every economically relevant cost.
Test the customer concentration and capital-return case
The ten largest customers generated 73% of FY2026 revenue. Three individual customers represented 16%, 15%, and 13%. That concentration makes order timing, customer bargaining power, and changes in cloud or enterprise spending important risks to monitor. It also means consolidated growth can depend heavily on a relatively small number of purchasing decisions.
Western Digital reported that $3.26 billion remained under its share repurchase program as of July 3, 2026, after repurchasing $2.59 billion of shares during FY2026. It reported FY2026 dividends of $0.50 per share. In August 2026, the board declared a $0.15-per-share dividend payable September 17, 2026, to shareholders of record September 8, 2026. These are dated historical disclosures, not promises of future buybacks or dividends; check the latest filings and company announcements for current authorization and payout information.
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Account for the risks that can change the thesis
Western Digital’s FY2026 filing identifies risks relevant to evaluating its business and stock. Consider how each could affect shipments, pricing, margins, cash flow, or the ability to meet financial obligations:
- Demand and pricing volatility: storage demand and product pricing can change, affecting revenue and profitability.
- Customer concentration and relationships: dependence on large customers can expose results to their spending plans, order timing, negotiating leverage, or relationship changes.
- Supplier and manufacturing exposure: dependence on a limited supplier base and manufacturing or supply-chain disruptions could constrain production or increase costs.
- Competition and product execution: competing products and pricing, product development, and execution on new technologies can affect demand and margins.
- Debt and financial obligations: debt and other obligations matter when assessing resilience and how much cash is available for investment or capital returns.
- Separation effects: the separation changes the company’s scope and historical comparability, and its execution and effects are among the disclosed risks.
Compare WDC with peers on the same basis
A headline valuation multiple is only useful if the earnings and business being compared are defined consistently. Before comparing WDC with another storage company, establish each company’s current business mix and reporting perimeter. Then compare the business and financial drivers that influence the multiple:
- Exposure to cloud, enterprise, client, consumer, HDD, and flash markets.
- Capacity shipped, shipment growth, realized pricing, and product mix.
- Customer concentration and the bargaining position of major buyers.
- Gross and operating margins, with comparable treatment of unusual items.
- Capital intensity and free cash flow, as well as debt and interest expense.
- Valuation based on normalized earnings rather than earnings inflated by nonrecurring gains.
Do not compare post-separation WDC directly with its former combined-company results as if the businesses were unchanged. A fair comparison needs current market prices and peer financial data from the same period; the FY2026 operating disclosures alone do not establish a current WDC valuation multiple or expected return.
A practical framework for deciding whether WDC fits
- Define the business you are buying. Treat WDC as an HDD-focused company after the Sandisk separation, and make sure any historical comparison reflects the change in reporting scope.
- Assess the operating drivers. Track cloud exposure, exabytes sold, average selling prices, product mix, and margin development in subsequent results.
- Normalize profitability. Separate the Sandisk-related gain and assess transaction-related costs, operating income, cash flow, debt, and interest expense before relying on EPS or P/E.
- Stress-test concentration and execution. Consider how major customers changing orders, weaker pricing, supply disruptions, or product-development challenges could affect your assumptions.
- Compare valuation using current figures. Use current market data and peer results to judge whether normalized earnings and free cash flow justify the price; the figures in this article do not supply a current share price or valuation multiple.
- Match the risks to your portfolio. Decide whether a cloud-weighted HDD business, with its concentration and demand sensitivity, fits your time horizon and risk tolerance.
Western Digital CEO Irving Tan characterized Q4 FY2026 as a period of strong performance, citing 44% year-over-year revenue growth, expanded gross and operating margins, and more than doubled EPS. That is management’s account of the quarter, not an independent forecast. A WDC investment case ultimately depends on whether operating and cash-flow performance can support a valuation after one-time gains are set aside, and whether the risks are acceptable at the price an investor would pay.
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