Data storage device maker Western Digital (NASDAQ:WDC) reported third-quarter results after the closing bell on Thursday, April 30. It was a mixed report with solid sales and dramatic earnings growth, but analysts had been looking for an even sharper uptick on the bottom line.

Western Digital's first-quarter results by the numbers

Metric

Q1 2020

Q1 2019

Change

Analyst Consensus

Revenue

$4.2 billion

$3.7 billion

14%

$4.2 billion

Free cash flows

$176 million

($110 million)

N/A

N/A

GAAP net income (loss)

$17 million

($581 million)

N/A

N/A

Adjusted earnings (loss) per diluted share

$0.85

$0.17

400%

$0.93

Data source: Western Digital. GAAP = generally accepted accounting principles.

The company posted year-over-year growth in all three of its operating segments, led by 22% higher sales in data center products and a 13% increase in client devices. Western Digital is selling a lot of enterprise-grade solid-state drives (SSD) these days alongside a strong interest in the recently introduced 18-terabyte hard drives. Western Digital also benefits from strong laptop sales as people around the world got ready to work and study from home under COVID-19 lockdowns.

Photo of a traditional three-platter hard drive with the cover opened up.

Image source: Getty Images.

The rising demand for data storage devices met operational difficulties based on coronavirus containment efforts around the world. Western Digital's component and materials supply pipelines were disrupted and manufacturing facilities faced various levels of local restrictions, led by a temporary declaration of martial law in Malaysia. It's also more difficult to move components and finished products around since many passenger flights have been canceled.

"It's gotten more expensive to get to move stuff around. A lot of stuff went on domestic flights," CEO David Goeckeler said on Western Digital's earnings call. "There's a lot fewer of those. So those costs are going up."

What's next for Western Digital?

The operating challenges are easing up, little by little. Western Digital is passing some of the related costs to customers with modest price increases where that makes sense. Goeckeler painted a hopeful picture of the storage device market in the coronavirus era:

"Our technology and products are indispensable to the growth of the public cloud, the seminal technology trend of our era," he said. "I have a strong conviction in the digital transformation that is reshaping every industry, every company, and how all of us live our daily lives. This transition will continue to rapidly increase the amount of data generated, stored, and consumed in the world. Western Digital is uniquely positioned to accelerate and benefit from this transformation as the only company providing a broader array of NAND flash, SSD, and HDD solutions."

I believe that this optimistic outlook is correct and that investors should consider buying Western Digital's stock on sudden dips. Share prices fell as much as 16.6% the morning after this report, for example.