Western Digital Corp Q4 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Erik Woodring - Morgan Stanley - Analyst : Hey guys, thank you. Thank you very much for taking my questions and congrats on the results tonight. Kris, I wanted to kind of better understand the gross margin guidance for the September quarter. You're calling for, I believe, 20 basis points of sequential gross margin expansion at the midpoint. Can you maybe just help us unpack maybe why we're seeing that sequential gross margin expansion slow into the September quarter, if there are any one-timers or headwinds that are unusual in the quarter to call out? And I'll just ask the follow-up because it's related, which is, beyond September, I realize you have a 38% gross margin in your three-year financial model. As we progress through this up cycle though, how should we be thinking about the incremental margins in this business and maybe help us stream the dream of what's possible during this -- what's possible during this up cycle? Thanks so much.

Question: Aaron Rakers - Wells Fargo Securities LLC - Analyst : Yeah, thanks for taking the question. I do have two and I'll wait to ask a follow-up. I guess the first question, Kris, congrats on the results as well. But you've taken the debt down, you're well within your targeted range of 1 to 1.5 on a leverage ratio basis, strong free cash flow generation, you've got $2.1 billion of cash on the balance sheet. I'm curious as you start to think about share repurchase activity going forward. How should we as investors think about that? Or how do you think about excess cash generation or the right level of cash on the balance sheet that you'll operate the business at or rather the capacity for even stepping further on share repurchase going forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 30, 2025 / 8:30PM, WDC.OQ - Q4 2025 Western Digital Corp Earnings Call

Question: Aaron Rakers - Wells Fargo Securities LLC - Analyst : Yes, I do, Ambrish. Thank you. One of the metrics that you guys have historically given and helps kind of bridge the hard disk drive versus the non-hard disk drive business was the ASP. I didn't see that in tonight's release. So I'm curious if that's something that you could talk to? Or I guess, maybe put another way, how do we think about the non-HDD revenue in this most recent quarter?

Question: Aaron Rakers - Wells Fargo Securities LLC - Analyst : Thank you.

Question: Wamsi Mohan - Bank of America - Analyst : Yeah, thank you so much and congrats on your solid results as well. Could you maybe help us think a little bit longer term here? When you look at sort of the revenue contribution, 90% coming from cloud, does it really mean that the seasonality in the business is going to be materially different? And what I'm particularly wondering is, should we be thinking that you're just going to see sequential growth as demand is kind of strong, still all REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 30, 2025 / 8:30PM, WDC.OQ - Q4 2025 Western Digital Corp Earnings Call indications of cloud CapEx remained very strong that you could grow through even typically a seasonal weaker quarter like the March quarter? And I have a follow-up.

Question: Wamsi Mohan - Bank of America - Analyst : Okay. That's super helpful, Irving. And as my follow-up, Kris, I just wanted to go back to the incremental margin question that Erik cast around, and you answered with the moving pieces being price, mix and cost. So if we think about the sequential improvement in this June quarter of 120 bps, what would you say was the biggest driver between those three elements. And as we look forward, where do you see the most opportunity? I would think that the pricing is what it's going to be. It's pretty stable. It's kind of, not maybe a huge incremental driver. So should we think that mix is really the biggest kind of contributor on a go-forward basis as you mix up these UltraSMR drives? Or should I be thinking about it differently? Thank you so much.

Question: Asiya Merchant - Citibank Cameroon SA - Analyst : Great, thank you thanks for taking my question. I think in the last call, there was some discussion on tariffs and some potential for enterprise slowdown. Just curious if you have anything to suggest there, any updates there? And how do we make sure -- how do we -- how are you making sure that some of this demand is not just related to tariff pull forward? Thank you.

Question: Tom O'Malley - Barclays Services Corp - Analyst : Hi guys, thanks for taking my question. I just wanted to make sure I heard this correctly. You guys said ASPs in the June quarter were down low single digits. Is that correct?

Question: Tom O'Malley - Barclays Services Corp - Analyst : Got it. That makes sense. And then, I guess, as a follow-up, if you look at the market today. I think that your competitor had talked about an exabyte target where after that certain target, I think they said around 160 exabytes, they would need to see growth really exclusively from technology transitions. I asked you last quarter, but in terms of where you guys stand, is there any mark that you would call out as that kind of waterfall? Is there a spot that you would say from this point forward, we only need technology transitions to move forward just in your ability to capacity kind of constrain the market? Anything you have there?

Question: Ananda Baruah - Loop Capital Markets LLC - Analyst : Yeah, good afternoon guys. Thanks for taking the question. I really appreciate it two if I could, I'll do one and then one. Could you remind us of the aerial density road map from here until HAMR? And where do you think you come out aerial density-wise, let's say you sort of execute to the first half 2020 -- calendar year 2027 road map. Where do you think your aerial density lies there? So the road map up to that point and then where do you think you come out of that with HAMR? Thanks.

Question: Ananda Baruah - Loop Capital Markets LLC - Analyst : That's great. Thanks.

Question: Ananda Baruah - Loop Capital Markets LLC - Analyst : I do, Ambrish. And really more of a clarification. You guys mentioned the Platforms business and opportunity to sell dense systems into (inaudible) by AI companies, don't have their own infrastructure. Are those the [neo cloud]? Is that what you're talking about? And then how many of the -- like -- and if yes, like what's a useful way to think about which of that cadre may not have their own infrastructure change? I'd imagine some of the larger ones do. So just in a useful context would be helpful. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 30, 2025 / 8:30PM, WDC.OQ - Q4 2025 Western Digital Corp Earnings Call

Question: Ananda Baruah - Loop Capital Markets LLC - Analyst : Thank you.

Question: Mark Miller - Benchmark Company LLC - Analyst : Thank you for the question. I'm just wondering, could you actually quantify the hard drive ASPs in the quarter?

Question: Mark Miller - Benchmark Company LLC - Analyst : What were your hard drive ASPs in the June quarter?

Question: Mark Miller - Benchmark Company LLC - Analyst : The average selling price -- yeah, for hard drives. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 30, 2025 / 8:30PM, WDC.OQ - Q4 2025 Western Digital Corp Earnings Call

Question: Mark Miller - Benchmark Company LLC - Analyst : And just finally, DSOs for the quarter ?

Question: Mark Miller - Benchmark Company LLC - Analyst : Right.

Question: Mark Miller - Benchmark Company LLC - Analyst : Thank you.