Western Digital (NASDAQ:WDC) Q4 Sales Beat Estimates, Inventory Levels Improve

Leading data storage manufacturer Western Digital (NASDAQ: WDC) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 25.2% year on year to $3.02 billion. On top of that, next quarter’s revenue guidance ($3.2 billion at the midpoint) was surprisingly good and 6.8% above what analysts were expecting. Its non-GAAP profit of $2.13 per share was 10.5% above analysts’ consensus estimates.

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Company Overview

Founded in 1970 by a Motorola employee, Western Digital (NASDAQ: WDC) is a leading producer of hard disk drives, SSDs and flash memory.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Western Digital struggled to consistently generate demand over the last five years as its sales dropped at a 8% annual rate. This wasn’t a great result and is a rough starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.

We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Western Digital’s annualized revenue growth of 15.6% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

This quarter, Western Digital reported robust year-on-year revenue growth of 25.2%, and its $3.02 billion of revenue topped Wall Street estimates by 2.2%. Beyond the beat, this marks 6 straight quarters of growth, showing that the current upcycle has had a good run - a typical upcycle usually lasts 8-10 quarters. Company management is currently guiding for a 39.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 20.6% over the next 12 months, an improvement versus the last two years. This projection is particularly noteworthy for a company of its scale and indicates its newer products and services will spur better top-line performance.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

This quarter, Western Digital’s DIO came in at 75, which is 42 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.

Key Takeaways from Western Digital’s Q4 Results

It was good to see Western Digital beat analysts’ EPS expectations this quarter. We were also excited its adjusted operating income outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $279.62 immediately following the results.

Western Digital put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).