Western Digital Highlights Strong Q4 and FY 2024 Results

Western Digital (WDC) has reported solid financial outcomes for the fourth quarter and for the entire fiscal year 2024, achieving Q4 revenues of $3.8 billion and full-year revenues of $13 billion. The company surpassed its gross margin goals across both its Flash and HDD segments and is moving ahead with plans to separate these business lines by year-end.

Looking forward, Western Digital expects ongoing growth fueled by the increasing demand for AI data storage, projecting first-quarter revenues for fiscal year 2025 to fall between $4 billion and $4.2 billion, with anticipated gross margins ranging from 37% to 39%.

Key Highlights

• For Q4, Western Digital recorded revenues of $3.8 billion, a non-GAAP gross margin of 36.3%, and non-GAAP earnings per share of $1.44.
• Total revenue for fiscal year 2024 was $13 billion, a 6% increase compared to the previous year.
• Preparations for separating the Flash and HDD businesses are underway, with a goal for completion by the end of the year.
• The company foresees mid- to high-teens bit growth in Q1 2025 and aims for a double-digit percentage of enterprise SSDs in its mix for fiscal year 2025.
• Both Flash and HDD segments experienced revenue and gross margin growth, with Flash revenues at $1.8 billion and HDD revenues at $2 billion in Q4.
• In Q4, Western Digital cleared the remaining $300 million of its delayed draw term loan.

Company Outlook

• Revenue expectations for Q1 fiscal year 2025 are set between $4 billion and $4.2 billion.
• Projected gross margins during this period are estimated to be between 37% and 39%.
• The AI Data Cycle is anticipated to drive further growth in both the Flash and HDD markets.

Negative Insights

• The NAND business is facing pricing challenges stemming from weakness in the consumer segment, despite a strong quarter in mobile.

Positive Insights

• Growth in cloud, client, and consumer sectors is being driven by heightened demand for enterprise HDDs and improved pricing structures.
• Western Digital is optimistic about enhancing margins through innovative solutions and delivering superior total cost of ownership (TCO) to its clients.

No Notable Misses

• There have been no specific misses reported from the earnings call.

Q&A Highlights

• The company successfully paid off its delayed draw term loan, strengthening its financial position.
• Western Digital is on track to create two competitive, world-class companies through its separation efforts.
• There is substantial interest from hyperscalers and other customers for products tailored to various aspects of the AI Data Cycle.
• The company is committed to boosting densities and reducing TCO for their customers.

In summary, Western Digital is well-positioned for ongoing success, showcasing strong performance in its HDD and Flash sectors, a strategic business split in progress, and a focus on the expanding AI data storage market. The company’s financial stability and strategic direction provide a positive outlook for the upcoming fiscal year.

Additional Insights

Western Digital has shown resilience with its earnings results, but a closer look at its financial health and market position presents a more complex picture.

As of the last twelve months ending Q3 2024, Western Digital’s market capitalization is approximately $21.89 billion, highlighting its significant role in the Technology Hardware, Storage & Peripherals industry. However, the current P/E ratio is negative at -13.12, indicating that investors may have tempered expectations regarding earnings or are cautious about the company’s growth prospects.

Gross profit margins have been reported as weak, with a gross profit of $1.647 billion and a margin of 13.83% during this period. Analysts project that Western Digital may not be profitable this year, as evidenced by a negative operating income of -$1.01 billion and a return on assets of -6.41%.

On a brighter note, Western Digital maintains a strong liquidity position, with liquid assets surpassing short-term obligations. The company has also achieved a total price return of 56.4% over the past year, potentially attracting growth-focused investors.

For further analysis of Western Digital’s financials and market dynamics, more detailed insights can be beneficial for informed investment decisions.

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