Western Digital Reports Wider Q2 Loss, Cites Structural Changes and Cautions on Outlook

Arul Valizers

Jan 29, 2024

Image of Western Digital Reports Wider Q2 Loss, Cites Structural Changes and Cautions on OutlookWestern Digital Reports Wider Q2 Loss, Cites Structural Changes and Cautions on OutlookWestern Digital Reports Wider Q2 Loss, Cites Structural Changes and Cautions on OutlookWestern Digital Reports Wider Q2 Loss, Cites Structural Changes and Cautions on Outlook

Data storage giant Western Digital (NASDAQ: WDC) posted a wider-than-expected adjusted loss for its second fiscal quarter, ended December 29, 2023. The company attributed the loss to ongoing structural changes within its flash and hard disk drive (HDD) businesses, as well as a challenging market environment.

Key Takeaways:

Adjusted loss of 69 cents per share, wider than analysts' estimate of $1.31 per share.

Revenue of $3.03 billion, below analyst expectations of $3.39 billion.

Flash memory business continues to grapple with oversupply, leading to underutilization charges.

HDD business facing headwinds from slowing PC market and cloud data center spending.

Company expects current-quarter adjusted profit between a loss of $0.10 and a profit of $0.20 per share.

Breaking Down the Numbers:

Western Digital's second-quarter results painted a picture of a company in transition. The company's flash memory business, which produces NAND chips used in solid-state drives (SSDs), suffered from a global oversupply, leading to significant underutilization charges. The HDD business, while more stable, faced headwinds from a slowing PC market and cautious spending by cloud data center operators.

Despite the loss, Western Digital's performance was slightly better than its own guidance provided earlier in the quarter. However, the company's outlook for the current quarter remains cautious, with adjusted profit expectations ranging from a loss of $0.10 to a profit of $0.20 per share.

Impact of Structural Changes:

Western Digital is currently undergoing significant structural changes, including the planned spin-off of its flash memory business by the second half of 2024. These changes are aimed at improving operational efficiency and profitability. However, they are also contributing to short-term headwinds, as the company incurs costs associated with the separation process.

Market Reaction:

Investors reacted negatively to the news, with Western Digital's stock price falling around 4% in after-hours trading. Analysts expressed concerns about the company's ability to navigate the challenging market environment and achieve its long-term growth targets.

Looking Ahead:

Western Digital's future remains uncertain. The success of its turnaround plan hinges on several factors, including the execution of the flash memory spin-off, the recovery of the flash market, and the overall health of the HDD market. Investors will be closely watching the company's progress in the coming quarters to gauge its ability to weather the storm and emerge stronger.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.