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Western Digital Q2 Profit Rises on AI Storage Demand

 

 

Western Digital’s fiscal second-quarter earnings for 2026 showed a significant year-over-year increase in profit and revenue, driven by robust demand for data storage products aligned with artificial intelligence (AI) and cloud computing workloads.

 

The company reported a net profit of $1.84 billion, or $4.73 per share on a GAAP basis, compared with a profit of approximately $594 million in the prior year period, reflecting marked improvement in its business results.

 

On a non-GAAP basis, Western Digital delivered $2.13 in earnings per share (EPS), surpassing the consensus analyst estimate. Revenue for the quarter reached about $3.02 billion, up roughly 25 percent year over year and above Wall Street forecasts, as the company continued to benefit from expanding data center build-outs and increased adoption of high-capacity hard disk drives (HDDs).

 

AI and Cloud Storage Demand Drive Growth

 

Western Digital’s management highlighted accelerating demand tied to AI and cloud infrastructure deployments as a key driver of its earnings performance. Growth in AI training, inference, and data creation activities has prompted hyperscale cloud customers to expand storage capacity, particularly for cost-efficient, high-density HDDs. The cloud segment accounted for the majority of revenue, with about 89 percent of total sales coming from cloud and data center customers, according to company statements.

 

Executives said that the strong uptake of nearline HDD products with capacities up to 26 TB (using conventional magnetic recording) and up to 32 TB (with advanced UltraSMR technology) supported both volume growth and improved pricing. Western Digital also moved forward plans to qualify next-generation drives based on heat-assisted magnetic recording (HAMR) technology with key hyperscale customers, aiming to further enhance data density and performance.

 

Gross Margin Expansion and Cost Management

 

Gross profit margins improved notably during the quarter, reflecting both mix shifts toward higher-capacity storage products and disciplined cost control measures. Non-GAAP gross margin expanded to 46.1 percent, up 770 basis points year over year. This improvement contributed to stronger overall operating results and highlighted Western Digital’s ability to translate rising demand into enhanced profitability.

 

Operating expenses increased modestly on a year-over-year basis but declined sequentially, enabling Western Digital to sustain operating leverage as revenue scaled. Additionally, free cash flow generation remained strong, with about $653 million reported for the period, supporting balance sheet flexibility and shareholder returns.

 

Shareholder Returns and Liquidity Position

 

During the quarter, Western Digital returned more than 100 percent of free cash flow to shareholders through share repurchases and dividend payments. The company ended the quarter with approximately $2.0 billion in cash and $3.2 billion in total liquidity, underlining its solid financial footing as it pursues growth in an evolving storage market.

 

The board of directors also declared a cash dividend of $0.125 per share, payable in March 2026 to shareholders on record as of early March. This dividend reflects the company’s commitment to shareholder value alongside investment in capacity and technology advancements.

 

Third-Quarter Outlook Signals Continued Expansion

 

Looking ahead to the fiscal third quarter of 2026, Western Digital provided optimistic guidance, expecting revenues of about $3.2 billion at the midpoint of its forecast range and non-GAAP gross margins between 47 percent and 48 percent. The earnings guidance also anticipated incremental growth in non-GAAP EPS to around $2.30 per share, highlighting management’s confidence in continued demand momentum.

 

Executive commentary during the earnings call revealed the company’s view that the AI-driven data economy is expanding the addressable market for high-capacity storage solutions. CFO Kris Sennesael noted that strong underlying demand for nearline HDDs and customer commitments to larger capacity systems are expected to sustain growth in the coming quarter.

 

Competitive Dynamics in Data Storage Sector

 

Western Digital’s performance comes amid a broader rally in the data storage industry, where competitors such as Seagate Technology also reported strong quarterly results driven by similar AI and cloud demand trends. For example, Seagate’s earnings surpassed expectations, lifting sector sentiment, and contributing to investor interest in storage hardware providers.

 

The positive results from multiple storage suppliers highlight the structural shift toward data-intensive computing environments and the resulting investments by hyperscale cloud operators and enterprise customers. These trends have collectively strengthened Western Digital’s market position and support innovation efforts in advanced data storage technologies.