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Western Digital (WDC) Q1 Earnings Top Estimates, Shares Fall
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Western Digital Corporation (WDC - Free Report) reported first-quarter fiscal 2022 non-GAAP earnings of $2.49 per share, which surpassed the Zacks Consensus Estimate by 1.2%. The bottom line increased 283% year over year and 15% quarter over quarter.
Revenues of $5.051 billion beat the Zacks Consensus Estimate by 0.1%. The top line increased 29% year over year and 3% sequentially. The performance was driven by higher demand from several end markets, particularly cloud customers.
For second-quarter fiscal 2022, the company expects non-GAAP revenues in the range of $4.7-$4.9 billion. In comparison, the Zacks Consensus Estimate for revenues is currently pegged at $5.28 billion.
Management projects non-GAAP earnings between $1.95 cents and $2.25 per share. The Zacks Consensus Estimate for earnings is currently pegged at $2.81 per share.
Following the announcement, shares dropped 11.2% in the premarket trading on Oct 29. In the past year, shares of Western Digital have returned 51.8% compared with the industry’s rally of 77.6%.
Western Digital Corporation Price, Consensus and EPS Surprise
Beginning from first-quarter fiscal 2022, Western Digital started to report revenues under three refined end-markets — Cloud (includes products for public or private cloud), Client (includes products sold directly to OEMs or through distribution) and Consumer (includes retail and other end-user products).
Revenues from Cloud end market (44% of total revenues) increased 72% year over year and 12% quarter over quarter to $2.225 billion. The top line was driven by continued momentum in enterprise hard drive and enterprise solid state drive or SSD revenues.
Revenues from Client end market (36.7%) increased 6% year over year but fell 2% sequentially to $1.853 billion. The metric was backed by strength in flash solutions across automotive, Internet of Things (IoT), mobile, gaming, and industrial applications product categories, added Western Digital.
Revenues from Consumer end market (19.3%) were up 10% year over year, but down 6% sequentially to $973 million. Uneven demand due to lockdowns in several parts of the world and supply chain disruptions negatively impacted flash and hard drive business units, noted the company.
Considering revenues by product group, HDD revenues (50.7% of total revenues) soared 39% year over year and 2% sequentially to $2.561 billion. The results benefited mainly from demand for energy-assisted drives from cloud and enterprise customers.
Flash revenues (49.3%) rose 20% from the year-ago quarter’s figure to $2.49 billion. Sequentially, flash revenues increased 3%. Demand for second-generation NVMe enterprise SSDs and ramp of new 5G phones incorporating the company’s latest BiCS5 node boosted flash revenues, added the company.
Key Metrics
The company shipped 24.1 million HDDs at an average selling price (ASP) of $102. The reported shipments were higher than the year-ago quarter’s figure by 4.8%.
On a quarter-over-quarter basis, HDD Exabytes sales increased 4%. Flash exabytes sales increased 8%. Total exabytes sales (excluding non-memory products) were up 4% sequentially.
ASP/Gigabytes (excluding non-memory products) were flat sequentially.
Margins
Non-GAAP gross margin of 33.9% expanded 760 basis points (bps) on a year-over-year basis.
Non-GAAP flash gross margin was 37% compared with 26.4% reported in the year-ago quarter. Non -GAAP HDD gross margin expanded 470 bps year over year to 30.9%.
Non-GAAP operating expenses increased 7.5% from the year-ago quarter’s level to $761 million.
Non-GAAP operating income came in at $952 million, which soared 195% year over year. As a percentage of revenues, non-GAAP operating margin of 18.8% compared with 8.2% reported in the year-ago quarter.
Balance Sheet & Cash Flow
As of Oct 1, 2021, cash and cash equivalents were $3.29 billion compared with $3.37 billion reported as of Jul 2, 2021.
Long-term debt (including current portion) was $8.521 billion as of Oct 1, 2021 compared with $8.725 billion as of Jul 2, 2021. In the fiscal first quarter, the company repaid debt of $213 million in debt, which includes a discretionary debt repayment of $150 million. On Oct 22, 2021, the company repaid Term Loan B debt of $943 million.
Western Digital generated $521 million in cash from operations compared with $994 million reported in the previous quarter.
Free cash flow came in at $224 million compared with a free cash flow of $792 million in the prior quarter.
During the quarter, the company did not pay out any dividends. On Apr 30, 2020, Western Digital suspended its dividend policy to strengthen reinvestment in innovation and growth as well as to facilitate ongoing deleveraging efforts.
Q2 Guidance
The company expects fiscal second quarter non-GAAP gross margin to be in the range of 32-34%. Non-GAAP operating expenses are expected between $760 million and $780 million.
Zacks Rank & Stocks to Consider
Currently, Western Digital carries a Zacks Rank #3 (Hold).
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Western Digital (WDC) Q1 Earnings Top Estimates, Shares Fall
Western Digital Corporation (WDC - Free Report) reported first-quarter fiscal 2022 non-GAAP earnings of $2.49 per share, which surpassed the Zacks Consensus Estimate by 1.2%. The bottom line increased 283% year over year and 15% quarter over quarter.
Revenues of $5.051 billion beat the Zacks Consensus Estimate by 0.1%. The top line increased 29% year over year and 3% sequentially. The performance was driven by higher demand from several end markets, particularly cloud customers.
For second-quarter fiscal 2022, the company expects non-GAAP revenues in the range of $4.7-$4.9 billion. In comparison, the Zacks Consensus Estimate for revenues is currently pegged at $5.28 billion.
Management projects non-GAAP earnings between $1.95 cents and $2.25 per share. The Zacks Consensus Estimate for earnings is currently pegged at $2.81 per share.
Following the announcement, shares dropped 11.2% in the premarket trading on Oct 29. In the past year, shares of Western Digital have returned 51.8% compared with the industry’s rally of 77.6%.
Western Digital Corporation Price, Consensus and EPS Surprise
Western Digital Corporation price-consensus-eps-surprise-chart | Western Digital Corporation Quote
Quarter in Detail
Beginning from first-quarter fiscal 2022, Western Digital started to report revenues under three refined end-markets — Cloud (includes products for public or private cloud), Client (includes products sold directly to OEMs or through distribution) and Consumer (includes retail and other end-user products).
Revenues from Cloud end market (44% of total revenues) increased 72% year over year and 12% quarter over quarter to $2.225 billion. The top line was driven by continued momentum in enterprise hard drive and enterprise solid state drive or SSD revenues.
Revenues from Client end market (36.7%) increased 6% year over year but fell 2% sequentially to $1.853 billion. The metric was backed by strength in flash solutions across automotive, Internet of Things (IoT), mobile, gaming, and industrial applications product categories, added Western Digital.
Revenues from Consumer end market (19.3%) were up 10% year over year, but down 6% sequentially to $973 million. Uneven demand due to lockdowns in several parts of the world and supply chain disruptions negatively impacted flash and hard drive business units, noted the company.
Considering revenues by product group, HDD revenues (50.7% of total revenues) soared 39% year over year and 2% sequentially to $2.561 billion. The results benefited mainly from demand for energy-assisted drives from cloud and enterprise customers.
Flash revenues (49.3%) rose 20% from the year-ago quarter’s figure to $2.49 billion. Sequentially, flash revenues increased 3%. Demand for second-generation NVMe enterprise SSDs and ramp of new 5G phones incorporating the company’s latest BiCS5 node boosted flash revenues, added the company.
Key Metrics
The company shipped 24.1 million HDDs at an average selling price (ASP) of $102. The reported shipments were higher than the year-ago quarter’s figure by 4.8%.
On a quarter-over-quarter basis, HDD Exabytes sales increased 4%. Flash exabytes sales increased 8%. Total exabytes sales (excluding non-memory products) were up 4% sequentially.
ASP/Gigabytes (excluding non-memory products) were flat sequentially.
Margins
Non-GAAP gross margin of 33.9% expanded 760 basis points (bps) on a year-over-year basis.
Non-GAAP flash gross margin was 37% compared with 26.4% reported in the year-ago quarter. Non -GAAP HDD gross margin expanded 470 bps year over year to 30.9%.
Non-GAAP operating expenses increased 7.5% from the year-ago quarter’s level to $761 million.
Non-GAAP operating income came in at $952 million, which soared 195% year over year. As a percentage of revenues, non-GAAP operating margin of 18.8% compared with 8.2% reported in the year-ago quarter.
Balance Sheet & Cash Flow
As of Oct 1, 2021, cash and cash equivalents were $3.29 billion compared with $3.37 billion reported as of Jul 2, 2021.
Long-term debt (including current portion) was $8.521 billion as of Oct 1, 2021 compared with $8.725 billion as of Jul 2, 2021. In the fiscal first quarter, the company repaid debt of $213 million in debt, which includes a discretionary debt repayment of $150 million. On Oct 22, 2021, the company repaid Term Loan B debt of $943 million.
Western Digital generated $521 million in cash from operations compared with $994 million reported in the previous quarter.
Free cash flow came in at $224 million compared with a free cash flow of $792 million in the prior quarter.
During the quarter, the company did not pay out any dividends. On Apr 30, 2020, Western Digital suspended its dividend policy to strengthen reinvestment in innovation and growth as well as to facilitate ongoing deleveraging efforts.
Q2 Guidance
The company expects fiscal second quarter non-GAAP gross margin to be in the range of 32-34%. Non-GAAP operating expenses are expected between $760 million and $780 million.
Zacks Rank & Stocks to Consider
Currently, Western Digital carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector worth considering are Salesforce (CRM - Free Report) , HP Inc (HPQ - Free Report) and Jabil (JBL - Free Report) . Salesforce and HP Inc sport a Zacks Rank #1 (Strong Buy) while Jabil carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Salesforce, HP Inc and Jabil is currently pegged at 16.8%, 12.7% and 12%, respectively.