Analyst(s): Futurum Research
Publication Date: February 3, 2026
Western Digital’s Q2 FY 2026 performance emphasizes cloud nearline strength, UltraSMR adoption, and roadmap updates in HAMR and ePMR. We also assess longer-term customer agreements, pricing discipline, and the implications for enterprise storage strategies.
What is Covered in this Article:
- Western Digital’s Q2 FY 2026 financial results
- UltraSMR adoption drives nearline mix
- HAMR and ePMR roadmap progress
- Hyperscaler LTAs and pricing discipline
- Guidance and Final Thoughts
The News: Western Digital (NASDAQ: WDC) reported Q2 FY 2026 revenue of $3.0B, up 25% year over year (YoY), versus consensus of $3.0B (+1.9%). Cloud revenue was $2.7B (89% mix), up 28% YoY; Client was $176M (6% mix), up 26% YoY; Consumer was $168M (5% mix), down 3% YoY. Non-GAAP gross margin was 46.1% (+770 basis points YoY). Non-GAAP operating income was $1.0B (+72% YoY), with a 33.8% operating margin (+930 basis points YoY). Non-GAAP diluted net income attributable to common shareholders was $807M (+92% YoY), with non-GAAP diluted EPS of $2.13 (+78% YoY).
“Our business continues to strengthen. We expect strong revenue growth and improved profitability driven by continued data center demand and by the adoption of our high-capacity drives,” said Kris Sennesael, CFO of Western Digital.
Western Digital Q2 FY 2026 Results Beat on Cloud HDD Demand
Analyst Take: Western Digital’s Q2 FY 2026 underscores strengthening structural demand for high-capacity HDDs tied to AI and cloud growth, with pricing stability and mix upshift supporting sustained margin expansion. Ultra Shingled Magnetic Recording (ultraSMR) surpassed half of the nearline mix, while yields and manufacturing efficiency supported cost-per-terabyte declines. The company advanced its Heat-Assisted Magnetic Recording (HAMR) and next-generation energy-assisted perpendicular magnetic recording (ePMR) qualifications and broadened UltraSMR uptake with ecosystem-backed JBOD platforms. Longer-term agreements with hyperscalers improve demand visibility and pricing discipline, aligning capacity ramps to exabyte needs.
Cloud Nearline and UltraSMR Adoption
Cloud contributed 89% of revenue, with nearline demand supported by AI training and inference workloads that favor higher-density HDD tiers. Management shipped over 3.5 million latest-generation ePMR drives in the quarter, representing 103 exabytes, with capacity points up to 26-terabyte conventional magnetic recording (CMR) and 32-terabyte UltraSMR. UltraSMR crossed 50% of nearline exabytes and is expected to rise, with the top three customers fully on board and two to three more progressing toward adoption. UltraSMR offers a 20% capacity uplift over CMR and 10% over standard SMR and, as a software-enabled enhancement, is margin accretive. Pricing per terabyte remained stable to slightly up (+2%–3% last quarter), while cost per terabyte declined roughly 10% YoY, supporting incremental margin near 75%. The takeaway: UltraSMR-led mix and stable pricing provide continued leverage in nearline.
HAMR and ePMR Roadmaps
Western Digital accelerated HAMR development, initiating qualifications in the first half of calendar 2026 and beginning next-generation ePMR qualifications with different hyperscalers. The company acquired IP, assets, and talent to build internal laser capabilities, a key enabler for HAMR maturity. Management said it continues to focus on increasing areal density and improving drive performance and energy efficiency across its technology roadmap. The Rochester SIT Lab is positioned to streamline qualification and ramp readiness for both HAMR and ePMR programmes. Management indicated that both HAMR and next-generation ePMR products are progressing through qualification with hyperscale customers. The takeaway: Western Digital is advancing HAMR and next-generation ePMR in parallel, with qualification activities underway across both technologies.
Customer Agreements and Pricing Discipline
Visibility improved with firm purchase orders from the top seven customers through calendar 2026, and long-term agreements (LTAs) with two of the top five customers through calendar 2027 and one through calendar 2028. These agreements specify exabyte volumes and pricing constructs that reflect TCO value creation for AI-era workloads. Management emphasized a customer-centric operating model with dedicated hyperscaler teams, tighter roadmap alignment, and software ecosystem partnerships (e.g., UltraSMR-enabled JBODs). Yields on ePMR drives remained in the low-90% range, underpinning consistent quality and cost reductions. This commercial and operational alignment reduces volatility for customers while improving margin durability for Western Digital. The takeaway: LTAs and demand visibility support disciplined supply, stable pricing, and margin continuity.
Guidance and Final Thoughts
For Q3 FY 2026, Western Digital guided revenue to $3.2B ± $0.1B (consensus: $3B), non-GAAP gross margin to 47%–48%, and non-GAAP EPS to $2.30 ± $0.15, with operating expenses of $380M–$390M and a ~16% tax rate. Management expects nearline momentum to continue, supported by rising UltraSMR mix, stable pricing, and ongoing cost curve improvements. The company plans to monetize its remaining 7.5 million Sandisk shares before the February 21 anniversary via a debt-for-equity swap, with proceeds targeted to reduce debt. Capital returns continue, with $1.4B returned since Q4 FY 2025 via buybacks and dividends; the board declared a $0.125 per share dividend payable March 18, 2026. Net leverage remains below 1x EBITDA, and free cash flow generation (21.6% margin in Q2) supports ongoing returns and roadmap investments.
See the full press release on Western Digital’s Q2 FY 2026 financial results on the company website.
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