Western Digital Delivers Strong Q4 Results But Stock Slides as Expectations Remain Sky-High

Western Digital Delivers Strong Q4 Results But Stock Slides as Expectations Remain Sky-High

Sun, August 23, 2026

Western Digital (NASDAQ: WDC) reported robust fourth-quarter fiscal 2026 results for the period ended July 3, 2026, with revenue rising 44% year‑over‑year to $3.75 billion and non‑GAAP gross margin expanding to 54.4%, a dramatic 1,310 basis‑point increase from the prior year. Non‑GAAP EPS came in at $3.56, more than doubling from the previous year and beating analyst expectations. Despite the strong performance, the stock plunged on earnings day, reflecting investor concerns over valuation and forward guidance. 

Key metrics from Western Digital’s earnings report include:

  • Revenue: $3.75 billion (+44% year‑over‑year, +12% sequential) 
  • Non‑GAAP gross margin: 54.4% (up 1,310 bps YoY, 390 bps QoQ) 
  • Non‑GAAP operating margin: 44.2% 
  • Non‑GAAP EPS: $3.56 (versus $1.70 a year earlier) 
  • Free cash flow: approximately $1.3 billion in Q4, $3.5 billion for full fiscal year 

Western Digital also provided guidance for Q1 FY2027, expecting revenue of $4.1 billion (±$100M), non‑GAAP gross margin of 55%–56%, and non‑GAAP EPS around $4.00 per share. 

Even with a meaningful beat on both revenue and earnings—8.2% and 1.6% above analyst forecasts respectively—the stock fell sharply. WDC shares declined about 5.4% in regular trading to close near $519, then plunged an additional ~11% in after‑hours to around $461, totaling roughly a 16% intraday drop. 

Market reaction appeared driven not by the company’s fundamentals, but by valuation concerns. After a staggering rally—WDC had surged over 200% year-to-date and over 600% in the past year—investors seemed unwilling to sustain the premium valuation. Even the upbeat guidance failed to meet the sky-high expectations baked into the stock’s prior performance. 

Going forward, Western Digital’s solid margins, strong free cash flow, and AI and cloud-driven demand position it well fundamentally. However, with elevated multiples and limited upside in guidance, investor focus may shift to how the company sustains growth beyond the near term and justifies its rich valuation. 

For shareholders and market watchers, the next key indicators will be how AI and data center demand evolves and whether WD can translate operational excellence into sustained valuation support.