Western Digital’s (NASDAQ: WDC) current Q2 2025 efficiency was a powerful success, pushed by record-breaking nearline shipments and strong adoption of UltraSMR (shingled magnetic recording) expertise. The corporate’s inventory has surged 10% for the reason that begin of the 12 months (as of Feb. 14), outpacing the S&P 500’s 4% achieve. This spectacular development is basically attributed to the AI increase, which is driving demand for reminiscence and storage, and Western Digital is poised to learn from its AI-targeted storage options. As compared, its peer – Seagate stock (NASDAQ: STX) – has seen a 16% rise over this era.
Picture by Okay. Mishina from Pixabay
The corporate’s Q2 2025 (ended December 27) outcomes had been spectacular, with web gross sales hovering 41% year-over-year (y-o-y) to $4.3 billion, primarily because of greater HDD, SDD, and Flash shipments. Cloud represented 55% of complete income at $2.3 billion and grew greater than double y-o-y, pushed by a rise in nearline HDD shipments. Consumer income was up 4% y-o-y because of greater common promoting costs (ASPs) as bit shipments declined. Nevertheless, Shopper income fell 8% y-o-y in Q2, because of decrease shipments in Flash and HDD and pricing in Flash. Gross margins additionally noticed a major enhance, leaping to 35.4% from 16.2% within the prior 12 months interval. As well as, the corporate’s diluted earnings per share got here in at $1.77 for Q2 2025 in comparison with a lack of 93 cents in Q2 2024. Its adjusted EPS was $1.77 vs ($0.75) in Q2 2024.
The rise in WDC inventory over the past 4-year interval has been removed from constant, with annual returns being significantly extra risky than the S&P 500. Returns for the inventory had been 18% in 2021, -52% in 2022, 66% in 2023, and 14% in 2024. The Trefis High Quality (HQ) Portfolio, with a set of 30 shares, is significantly much less risky. And it has comfortably outperformed the S&P 500 over the past 4-year interval. Why is that? As a bunch, HQ Portfolio shares offered higher returns with much less danger versus the benchmark index; much less of a roller-coaster experience as evident in HQ Portfolio performance metrics.
We’ve revised Western Digital’s Valuation to $76 per share, primarily based on a $5.82 anticipated EPS and a 13.1x P/E a number of for the fiscal 12 months 2025. That mentioned, the corporate’s valuation is sort of 13% greater than the present market value (as of Feb. 14). Additionally, try our evaluation of Western Digital’s Income for extra particulars on the corporate’s key income streams. We consider that the positives round AI demand and the corporate’s storage options are usually not totally priced in for Western Digital. Notably, the common analyst value estimate of $84 for WDC additionally displays an almost 25% upside, implying that the inventory has extra room for development.
Western Digital (WDC) is poised to finish the separation of its Flash and HDD companies in fiscal Q3 2025, with the milestone anticipated to be reached on February 21, 2025. Waiting for Q3, the corporate’s administration has guided $3.75 billion to $3.95 billion in income, with anticipated gross margins starting from 31.5% to 33.5%. Nevertheless, working bills are anticipated to rise within the vary of $700 million to $720 million because of one-time separation prices.
When it comes to section efficiency, the Flash enterprise is anticipated to expertise a mid-teens share income decline in Q3, pushed by decrease ASPs, elevated prices per bit, and underutilization expenses totaling $20 million to $30 million. Bit shipments are forecast to lower by a mid-single-digit share. Conversely, the HDD section is anticipated to witness a mid-to-high single-digit share income decline, albeit with a gross margin enchancment of roughly 50 foundation factors as common costs per unit development upward.
Whereas WDC inventory seems to be like it might see greater ranges, it’s useful to see how Western Digital’s friends fare on metrics that matter. You will see that different priceless comparisons for firms throughout industries at Peer Comparisons.
| Returns | Feb 2025 MTD [1] |
Since begin of 2024 [1] |
2017-25 Complete [2] |
| WDC Return | 4% | 29% | 11% |
| S&P 500 Return | 1% | 28% | 173% |
| Trefis Strengthened Worth Portfolio | -1% | 22% | 726% |
[1] Returns as of two/13/2025
[2] Cumulative complete returns for the reason that finish of 2016
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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
