Leading data storage manufacturer Western Digital (NASDAQ: WDC) reported Q2 CY2026 results beating Wall Street’s revenue expectations, with sales up 43.8% year on year to $3.75 billion. Guidance for next quarter’s revenue was better than expected at $4.1 billion at the midpoint, 1.5% above analysts’ estimates. Its non-GAAP profit of $3.56 per share was 7.9% above analysts’ consensus estimates.
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Western Digital (WDC) Q2 CY2026 Highlights:
- Revenue: $3.75 billion vs analyst estimates of $3.71 billion (43.8% year-on-year growth, 0.9% beat)
- Adjusted EPS: $3.56 vs analyst estimates of $3.30 (7.9% beat)
- Adjusted Operating Income: $1.66 billion vs analyst estimates of $1.52 billion (44.2% margin, 9% beat)
- Revenue Guidance for Q3 CY2026 is $4.1 billion at the midpoint, above analyst estimates of $4.04 billion
- Adjusted EPS guidance for Q3 CY2026 is $4 at the midpoint, above analyst estimates of $3.76
- Operating Margin: 41.7%, up from 26.1% in the same quarter last year
- Free Cash Flow Margin: 34.2%, up from 25.9% in the same quarter last year
- Inventory Days Outstanding: 80, up from 74 in the previous quarter
- Market Capitalization: $189.1 billion
Company Overview
Founded in 1970 by a Motorola employee, Western Digital (NASDAQ: WDC) is a leading producer of hard disk drives, SSDs and flash memory.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Western Digital struggled to consistently generate demand over the last five years as its sales dropped at a 5.3% annual rate. This wasn’t a great result, but there are still things to like about Western Digital. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Western Digital’s annualized revenue growth of 43% over the last two years is above its five-year trend, suggesting its demand recently accelerated. 
This quarter, Western Digital reported magnificent year-on-year revenue growth of 43.8%, and its $3.75 billion of revenue beat Wall Street’s estimates by 0.9%. Beyond the beat, this marks 8 straight quarters of growth, showing that the current upcycle has had a good run - a typical upcycle usually lasts 8-10 quarters. Company management is currently guiding for a 45.5% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 42.7% over the next 12 months, similar to its two-year rate. This projection is particularly healthy for a company of its scale and suggests the market is forecasting success for its products and services.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’s capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Western Digital’s DIO came in at 80, which is 39 days below its five-year average. These numbers show that despite the recent increase, there’s no indication of an excessive inventory buildup.
Key Takeaways from Western Digital’s Q2 Results
We were impressed by how significantly Western Digital blew past analysts’ operating income expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its inventory levels materially increased. Overall, we think this was a solid quarter with some key areas of upside. The market seemed to be hoping for more, and the stock traded down 10% to $467.34 immediately following the results.
Is Western Digital an attractive investment opportunity right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).
