Fiscal first-quarter revenue rose 55% and adjusted earnings beat by about 14%, and the company guided for revenue growth of up to 72%. The after-hours reversal came as management laid out a multiyear rise in capital spending and flagged higher input costs.
Western Digital's results answered the demand question. Its call raised a cost question, and the stock spent the evening deciding which mattered more.
Revenue rose 55% to $4.38 billion in the fiscal first quarter ended Oct. 2, ahead of the $4.14 billion analysts expected, according to Investing.com. Adjusted earnings were $4.64 a share, up from $1.78 a year earlier and above the $4.08 consensus. Gross margin was 58.1% on an adjusted basis. Free cash flow came to $1.38 billion.
The outlook was stronger still. Western Digital expects revenue to grow 66% to 72% from a year earlier in the December quarter, or about $5.0 billion to $5.2 billion, and adjusted earnings of $5.60 to $6.00 a share. The midpoint of that range is about 20% above the $4.82 analysts had forecast.
"Fiscal 2027 is off to a strong start, with results exceeding expectations, driven by robust customer demand and disciplined execution," the company said.
A round trip after the bell
Shares had fallen 6.4% to $354.19 during Thursday's regular session, along with other memory and storage makers. They rose about 4% after the release, then reversed during the conference call and traded as much as about 8% lower. By early Friday, they were indicated about 1.3% below Thursday's close. Seagate was quoted about 0.8% higher.
The turn came as management discussed costs. According to accounts of the call, Western Digital said capital spending will average 4% to 6% of revenue over the next five years and run modestly higher than that over the next two, and it flagged rising input costs.
The capex question
For a storage company in a demand boom, spending more on capacity is not surprising. What investors watch is whether that spending stays disciplined, because memory and storage booms have historically ended when the industry adds too much supply. A commitment to a higher spending ratio, made at a moment of record demand, raises that question even if the levels themselves are moderate.
The overnight recovery suggests some investors decided the guidance outweighed the cost commentary. Thursday's broad selloff in AI-related shares, which hit storage names before the report, may also have exaggerated the after-hours swing.
What to watch
Exabyte pricing and gross margins in the December quarter, which will show whether input costs bite. Results from Seagate and Micron will test whether the demand Western Digital described is industrywide.