5 Must-Read Analyst Questions From Western Digital's Q2 Earnings Call

Western Digital's second quarter was marked by strong demand for high-capacity drives, which management attributed to rapid growth in AI-driven data storage needs and robust adoption among hyperscale cloud customers. CEO Tiang Yew Tan emphasized that the company’s latest ePMR and UltraSMR drives shipped over 1.7 million units, reflecting “one of the shortest qualification and ramp cycles in our history.” The company highlighted that operational discipline and a focus on higher-yield, larger-capacity products helped drive margin improvements and outperformance relative to Wall Street’s expectations.

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While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Western Digital’s Q2 Earnings Call

• Erik Woodring (Morgan Stanley) asked about sequential gross margin expansion and whether the growth rate would slow. CFO Kris Sennesael responded that mix shift to higher-capacity drives remains the main driver, and expressed confidence in ongoing margin improvement as efficiencies build.

• Aaron Rakers (Wells Fargo) questioned the approach to future share repurchases. Sennesael stated that strong free cash flow supports the buyback program and indicated willingness to return more capital as balance sheet strength continues.

• Wamsi Mohan (Bank of America) pressed for clarity on whether historic seasonality still applies given the high cloud revenue mix. CEO Tan explained that with 90% of revenue from cloud customers, business cycles now align more with customer capital expenditure plans than past seasonal patterns.

• Karl Ackerman (BNP Paribas) asked about the adoption curve and limitations for UltraSMR drives. Tan explained that UltraSMR is being qualified by more hyperscale customers, and while some legacy workloads still require lower capacity drives, new workloads are moving to the highest capacity models.

• Asiya Merchant (Citigroup) inquired about potential demand pull-forward due to tariffs. Tan replied that analysis of order linearity and inventory trends indicates no signs of demand distortion or advance ordering linked to tariffs.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will closely watch (1) the pace of adoption for next-generation ePMR and UltraSMR drives, (2) continued gross margin expansion through product mix and operational discipline, and (3) further progress in securing long-term agreements with hyperscale customers. Additionally, the impact of tariffs and the company’s ability to maintain its capital return commitments will be important markers of execution.

Western Digital currently trades at $75.88, up from $71.51 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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