On October 22, 2026, Western Digital (WD) reported that revenue for the first quarter of fiscal 2027 rose 55% year over year to $4.381 billion. The figures cover the fiscal quarter ended October 2, 2026, not calendar 2027. Shipped capacity, which measures the total amount of data the HDDs it shipped can store, rose about 22%, so revenue growth far outpaced it. Company-wide revenue divided by shipped capacity also improved. Separating the effect of shipping more capacity from the effect of earning more revenue per unit of capacity helps explain why profit surged.
Revenue up 55% against capacity up 22%
In the first quarter of fiscal 2027, WD's shipped capacity grew about 22% year over year, while revenue per exabyte shipped rose about 28%.
This is a calculation combining revenue from WD's earnings release with total HDD shipped capacity on page 5 of the earnings presentation. An EB (exabyte) is a unit of data capacity. We compared the year-earlier quarter ended October 3, 2025, with the current quarter ended October 2, 2026, using company-wide revenue and total HDD shipped capacity in both.
| Metric | Year-earlier quarter | Current quarter |
|---|---|---|
| Revenue | $2.818 billion | $4.381 billion |
| Total HDD shipped capacity | 204EB | 248EB |
Capacity growth is 248 ÷ 204 − 1, or about 21.5686%. With revenue expressed in millions of dollars, revenue per EB rose from 2,818 ÷ 204 ≈ $13.8137 million in the year-earlier quarter to 4,381 ÷ 248 ≈ $17.6653 million in the current quarter. That is an increase of about 27.8824%, or roughly 28% when rounded.
However, the roughly 28% figure is not an HDD price increase. Because the company-wide figure is affected by factors such as product mix, the contribution of price alone to individual product selling prices cannot be isolated. CFO Kris Sennesael explained that strong growth in shipped capacity and improved pricing supported the results. The company's explanation and the calculated figure point in the same direction, but neither is grounds for concluding that all products were raised in price by 28%.
By breakdown, nearline capacity rose from 183EB to 223EB and non-nearline from 21EB to 25EB. The combined 248EB is the denominator in this calculation. It is not a count of units shipped, and it cannot be used to work out growth in unit volumes or factory production capacity.
Gross margin of 58.1%, operating expenses up only 3%
Higher revenue alone does not determine profit growth. Operating profit depends on how much gross profit remains after subtracting cost of revenue from sales, and how much in operating expenses is then deducted from that. At WD this quarter, gross margin rose and operating expenses grew more slowly than revenue.
On a non-GAAP basis, which adjusts U.S. GAAP figures for company-designated items such as stock-based compensation, gross margin rose 14.2 percentage points, from 43.9% in the year-earlier quarter to 58.1%. Non-GAAP operating expenses, meanwhile, rose only about 3%, from $381 million to $391 million. A higher share of the 55% revenue increase was left as gross profit than before, and the expenses deducted afterward grew only slightly.
As a result, non-GAAP operating profit rose 152%, from $856 million to $2.153 billion, and operating margin increased from 30.4% to 49.1%. This link between higher sales and higher operating profit can be confirmed in the earnings release and presentation. Restraint in operating expenses boosted not gross margin but the operating margin further down the income statement.
The improvement is not limited to adjusted figures. GAAP gross margin also rose, from 43.5% in the year-earlier quarter to 57.8%, and GAAP operating profit increased 158%, from $792 million to $2.046 billion. GAAP operating margin was 46.7%.
Pricing improvement is a factor the company cites, but the materials this time offer no basis for strictly allocating the rise in gross margin among price, product mix and manufacturing cost. What can be confirmed is a two-step improvement: the share of revenue left as gross profit increased, and growth in operating expenses came in well below revenue growth.
Net income down 44%, but core business profit still up
Compared with the previous quarter as well, revenue growth and operating profit growth continued. Revenue rose 17% from $3.747 billion in the prior quarter, and total HDD shipped capacity grew from 231EB to 248EB. Non-GAAP gross margin rose 3.7 percentage points, from 54.4% to 58.1%. Profitability in the business therefore improved not only year over year but also from the prior quarter. GAAP net income fell 44%, from $3.195 billion in the prior quarter to $1.779 billion, and earnings per share (EPS) dropped from $8.21 to $4.63. Those figures alone would suggest a sharp decline in profit, but they diverge from the operating results.
According to the reconciliation table in the earnings release, the prior quarter included a $2.05 billion gain on its Sandisk equity stake, versus zero in the current quarter. That gain on the shareholding had boosted net income in the prior quarter. The Item 2.02 and Exhibit 99.1 of the Form 8-K filed the same day also confirm the announcement date, the period covered and the same results figures.
Meanwhile, non-GAAP net income rose 29%, from $1.382 billion in the prior quarter to $1.779 billion, and non-GAAP EPS rose 30%, from $3.56 to $4.64. Non-GAAP operating profit also increased 30% from $1.655 billion in the prior quarter. Even as net income comparisons were swayed by the presence or absence of equity-related gains, operating profit kept expanding.
However, the non-GAAP figures adjust not only for the Sandisk equity gain but also for stock-based compensation, restructuring and taxes. Subtracting only the $2.05 billion equity gain from the prior quarter's GAAP net income and calling the remainder core profit does not hold up. Operating profit and net income, and GAAP and non-GAAP, each need to be compared using the same measure.
How to read next quarter's 60%-plus gross margin and investment
As of October 22, WD's guidance for the second quarter of fiscal 2027 calls for revenue of $5.0 billion to $5.2 billion, non-GAAP gross margin of 60% to 61%, and non-GAAP EPS of $5.60 to $6.00. The midpoint of the revenue range is $5.1 billion, and the range represents growth of 66% to 72% year over year. While it anticipates further margin improvement, the company states plainly that a full reconciliation to GAAP guidance is difficult, so the guidance cannot be compared directly with GAAP actuals.
The ability to convert profit into cash also strengthened. Operating cash flow for the quarter was $1.604 billion, and subtracting $227 million in net purchases of property, plant and equipment gives free cash flow of $1.377 billion. That is up 130% year over year and 7% from the prior quarter, and equals 31.4% of the $4.381 billion in revenue (1,377 ÷ 4,381). Net purchases rose from $73 million in the year-earlier quarter, but cash remained even after subtracting them.
The company stated in its presentation that it is ramping production of its next-generation ePMR platform. However, the materials this time do not allow us to determine the share of 40TB products or the timing of HAMR volume production. To judge progress toward higher capacity, product plans need to be tracked separately from actual shipped capacity and capital spending.
Concentration of demand also deserves attention. Cloud accounted for 88% of revenue in the quarter, and that is not the share of AI-specific sales. WD itself lists among its risks dependence on the cloud market and top customers, a limited number of suppliers, and delays in introducing or manufacturing products with new technologies. Even if strong demand continues, results could change depending on whether new products can be supplied on schedule.
In the next results, the key tests will be whether the 60% to 61% gross margin guidance is achieved and whether WD can keep revenue per unit of capacity while increasing shipped capacity. If it can also sustain cash generation after capital spending, that would confirm this quarter's operating profit growth is accompanied by the strength to support future supply.