Western Digital (WDC +8.62%) stock jumped 7.3% through 11 a.m. ET Friday after the computer memory-maker reported a strong earnings beat last night.
Analysts only expected Western Digital to earn $1.58 per share on $2.7 billion in revenue for its first fiscal quarter 2026, but the company reported $1.78 per share in profit, and sales of $2.8 billion.
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Western Digital Q1 earnings
Revenue surged 27% year over year in Q1 2026, and when it comes to earnings, Western Digital actually performed better when earnings are calculated according to generally accepted accounting principles (GAAP), than under the (usually more forgiving) non-GAAP metric that doesn't count one-time items.
GAAP profits for the quarter ended up at $3.07 per share, up 630% year over year.
"Western Digital continues to execute well in a strong demand environment, driven by growth of data storage in the cloud," explained CEO Irving Tan, citing demand for storage from artificial intelligence (AI) companies as key to the company's growth.
One cautionary note, though: Reported GAAP profit tipped the scales at $1.2 billion, but actual free cash flow was only half that amount: $599 million.
NASDAQ: WDC
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Is Western Digital stock a buy?
Western Digital aims to maintain the momentum into Q2, forecasting 20% sales growth and revenue of about $2.9 billion, plus or minus. GAAP net income is going to come back down to Earth, however, probably more closely approximating FCF this time at about $1.88 per share.
Valued on free cash flow, Western Digital stock now trades for about a 25x multiple. That seems reasonable if the company can maintain a 20%-ish growth rate. While not a screaming bargain, WD stock looks like a reasonable value, and a good way to play the AI trend at a fair price.
