Western Digital published its quarterly report on 5 August 2026. We are writing about it today, 6 August.
What was reported
| Quarter | Prior quarter | Year ago | Y/Y change | |
|---|---|---|---|---|
| Revenue | $3.75bn | +44% | ||
| Gross margin | 54.1% | 50.2% | 41.0% | +13.1pt |
| Operating margin | 41.7% | 35.7% | 26.1% | +15.6pt |
| GAAP diluted EPS | $8.21 | |||
| Non-GAAP EPS | $3.56 |
And on a non-GAAP basis: gross margin 54.4% and operating margin 44.2%.
What those numbers mean
A margin jumping 13 points is not an efficiency story
A company does not improve gross margin by 13 percentage points in a year through efficiency.
That happens when the price rises.
And that is exactly what happened in the storage market: the AI data center build-out is generating demand for storage capacity at a pace drive supply was not prepared for. When demand exceeds supply, the manufacturer sets the price.
And the proof is in the gap between the margins: gross margin rose 13.1 points, and operating margin rose 15.6 - more. Which means fixed costs barely moved while revenue jumped 44%.
That is operating leverage in its purest form.
And the gap worth noting
GAAP EPS: $8.21. Non-GAAP EPS: $3.56.
So GAAP is more than double non-GAAP - the reverse of the usual.
Almost always non-GAAP is higher, because one-off costs and share-based compensation are stripped out. Here the opposite happens, which means GAAP profit contains a significant one-off gain that non-GAAP excludes.
The number describing the business is $3.56. Anyone comparing $8.21 to prior quarters or to analyst estimates is comparing a figure that includes something which will not recur.
The guidance
For the first quarter of fiscal 2027 the company guides to revenue growth of 42% to 49%.
Meaning it is not forecasting a slowdown - it is forecasting continuation at a similar pace. And in a market where the margin derives from scarcity, continued growth at that rate says the scarcity is still here.
And the place in the chain
Western Digital is another point on the same chain we have covered all week.
Caterpillar sells the generator, Arista the network, Tower the optical component, Iron Mountain the real estate - and Western Digital the place the data sits.
And that is the reminder easiest to forget: an AI model does not only compute. It also has to store what it learned and what it produces.
My Angle
A personal opinion of Ilan Abramov - not advice, not a recommendation
This is one of the cleanest reports I read this week, and precisely for that reason it warrants caution.
A gross margin rising from 41% to 54.1% in a single year is not a story about good management. It is a story about scarcity. And that distinction decides everything, because scarcity is temporary by nature.
What is genuinely impressive is the operating leverage: the operating margin rose more than the gross margin, meaning costs did not chase revenue. A company growing revenue 44% without growing its cost base is one being managed well inside a wave.
And what I refuse to quote: $8.21 per share. When GAAP profit is more than double non-GAAP, there is a large one-off item in there. The number I look at is $3.56.
And the real medium-term question is not how much revenue grows but when supply catches demand. In the storage industry, adding capacity takes years - which is exactly what gives companies like Western Digital a window where the margin stays high. The question is how long the window stays open.
