Western Digital, an industry leader in data infrastructure and flash memory, faced financial stagnation due to a challenging market in its second fiscal quarter, ending in December. Despite a 10% sequential revenue increase up to $3 billion, the company reported an operating loss of $91 million, more significant than analysts’ predictions.
In a year-over-year comparison, Western Digital’s quarterly revenue decreased by 2%, but it managed to slightly mitigate operating losses compared to $119 million the previous year. The profitability margin also improved sequentially from 4.1% to 15.5%, contrasting with the 17.4% achieved a year ago, indicating a declining market status. According to company management, business performance sustained last quarter due to low production line utilization. The company suffered losses of $156 million in specific areas.
Western Digital predicts a revenue range of $3.2 to $3.4 billion for the current quarter, a profit margin of 21.5–23.5%, and earnings per share (EPS) of $0.2 or a loss of $0.1 per share. Notably, the company’s revenue was lesser than analyst forecasts in the previous quarter, leading to a 4% decrease in its share value after the market closed. The WD cloud segment saw sequential revenue growth of 23% to $1.1 billion, albeit a 13% year-on-year decrease. The consumer electronics sector saw both sequential (15% to $0.8 billion) and annual (6%) revenue growth.
The flash memory segment reported only a 0.5% year-over-year decrease to $1.665 billion. In this segment, the company maintained a profit margin of 7.9%, and the average selling price sequentially increased by 10% after a declining trend over the previous four quarters. However, the total capacity of solid-state drives (SSDs) sold in Q4 sequentially decreased by 2%, contrasting the double-digit percentage growth over the past six months.
In terms of hard drive shipments, there was a 14% sequential increase in capacity terms. However, the number of units shipped only increased in the cloud segment, from 5.5 to 5.9 million, while the client segment saw a reduction from 4 million to 2.7 million units, and the consumer electronics segment went down from 3.4 million to 2.2 million units. The average selling price of hard drives increased from $99 to $122. Considering the decrease in overall shipment volume from 12.9 million to 10.8 million units, this confirms a trend of manufacturers focusing on more expensive, high-capacity drives. Year-on-year, WD’s hard drive revenue was down 5.7% to $1.367 billion. The profit margin, however, increased from 20.7% to 24.8%.
In the past six months, WD shipped around 1 million hard drives featuring UltraSMR recording technology each quarter. These products are heavily utilized not only by major US clients but also by their Chinese competitors, including video hosting platforms. The company predicts that in the next calendar year, SMR recording technology will primarily drive demand in the nearline hard drive segment.
