Western Digital Corp. ((WDC)) has held its Q2 earnings call. Read on for the main highlights of the call.
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In its latest earnings call, Western Digital Corp. presented a mixed sentiment as the company reported robust growth in its HDD segment amidst challenges in its Flash segment. While the HDD segment enjoyed record revenues and shipments, the Flash segment faced hurdles due to pricing pressures and a reduced revenue outlook. The strategic progress in business separation emerged as a highlight, albeit tempered by the financial difficulties in the Flash sector.
Record HDD Revenue
Western Digital’s HDD business delivered remarkable performance this quarter, with data center revenue reaching unprecedented levels. The company reported a milestone of 154 exabytes in nearline bit shipments, showcasing the strength and demand for nearline storage solutions. This achievement underscores the company’s solid footing in the HDD market.
Revenue Growth
The company reported a total revenue of $4.3 billion for the quarter, marking a 5% sequential increase and a 41% year-over-year rise. This growth was primarily driven by the strong performance in the HDD segment, highlighting the segment’s contribution to the company’s overall revenue growth.
Successful Business Separation Progress
Western Digital achieved significant progress in the strategic separation of its Flash and HDD businesses. The completion of Form-10 filing and the finalization of key financing activities were crucial milestones achieved during the quarter. This separation is expected to streamline operations and focus on core competencies in each segment.
Flash SSD Growth
Despite challenges in the Flash segment, the company reported a 50% sequential growth in external SSD drive shipments, indicating robust consumer demand. This growth in the SSD market provides a silver lining amidst the pricing pressures faced in the Flash segment.
Flash Segment Pricing Pressure
The Flash segment is encountering temporary headwinds due to pricing pressure, which resulted in a sequential decline in profitability. This issue is a significant concern for the company as it seeks to navigate through these pricing challenges.
Reduced Flash Revenue Outlook
Looking ahead, Western Digital anticipates a sequential decline in Flash revenue by mid-teens percentage for the fiscal third quarter. The decline is attributed to lower average selling prices (ASPs) and increased costs, impacting the revenue outlook for the segment.
Gross Margin Decline
The company’s gross margin for the fiscal second quarter was reported at 35.9%, falling below the guidance range. For the next quarter, gross margins are expected to be between 31.5% and 33.5%, reflecting the ongoing challenges, particularly in the Flash segment.
Forward-Looking Guidance
For the fiscal third quarter, Western Digital anticipates revenue between $3.75 billion and $3.95 billion. The company projects gross margins to range from 31.5% to 33.5%, with earnings per share expected to be between $0.90 and $1.20. The company remains focused on completing the separation of its Flash and HDD businesses in the upcoming fiscal third quarter.
In conclusion, Western Digital’s earnings call showcased a balanced view of the company’s current standing, with significant achievements in the HDD segment and strategic business separation efforts. However, the financial challenges in the Flash segment and the anticipated decline in revenue and gross margins warrant cautious optimism moving forward.
