Western Digital embarks on a storage "super cycle" Q3 performance exceeds expectations, triggering a post-market surge of over 10%

According to the Zhitong Finance APP, Western Digital (WDC.US), a global leader in data storage manufacturing, announced its third-quarter results for the 2025 calendar year after the market closed on Thursday, Eastern Time. The company exceeded analysts' expectations in revenue, operating profit, and earnings per share. Overall, the performance report was impressive, and after the announcement, the company's stock price surged by 12.6%, reaching $151.3, up 9.5% as of the time of writing. Data shows that Western Digital's Q3 revenue grew by 27.4% year-on-year, reaching $2.82 billion, surpassing analysts' expectations of $2.74 billion by 2.8%. The adjusted earnings per share (EPS) was $1.78, exceeding the analysts' forecast of $1.58 by 12.9%. The adjusted operating profit was $856 million, higher than the analysts' expectation of $756.4 million (operating profit margin of 30.4%, exceeding expectations by 13.2%). The operating profit margin was 28.1%, up from 15.1% in the same period last year. Free cash flow was $599 million, a significant improvement from a negative $61 million in the same period last year. Inventory turnover days were 80 days, an increase from 76 days in the previous quarter. Western Digital's CEO Irving Tan stated, "In a strong market environment driven by growing demand for cloud data storage, Western Digital continues to maintain good operations. In the first quarter of this fiscal year, our revenue and gross margin both exceeded the upper limit of our guidance range, while achieving strong free cash flow." Founded in 1970 by an employee of Motorola, Western Digital is a leading manufacturer of hard disk drives (HDD), solid-state drives (SSD), and flash memory products. Over the past five years, Western Digital has experienced weak demand, with an average annual revenue decline of 9.4%, which is below industry standards, indicating relatively low business quality. The semiconductor industry is cyclical, requiring preparation to cope with the industry's pattern of "alternating high growth periods and revenue contraction periods." Some analysts believe that historical performance over five years may not reflect new demand cycles or industry trends such as artificial intelligence (AI). In the past two years, Western Digital's annualized revenue growth rate was 1.8%, which, while higher than the five-year trend, still fell short of expectations. Notably, the company has achieved five consecutive quarters of growth, indicating that Western Digital is in the rising phase of the industry cycle, which typically lasts 8 to 10 quarters in the semiconductor industry. Looking ahead, sell-side analysts expect Western Digital's revenue to grow by 14.9% over the next 12 months, an improvement compared to the growth rate of the past two years. This forecast is particularly noteworthy for a company of Western Digital's size, suggesting that its new products and services will provide stronger momentum for revenue growth. Generative AI will have a significant impact on the operating models of large enterprises. Although NVIDIA (NVDA.US) and AMD (AMD.US) stocks are nearing historical highs, Western Digital, a lesser-known but profitable stock benefiting from the rise of AI, has also gained market favor From the perspective of product demand and inventory status, Days Inventory Outstanding (DIO) is a key indicator for chip manufacturers, reflecting both the capital intensity of the enterprise and the cyclical characteristics of supply and demand in the semiconductor industry. In a market environment with tight supply, inventory usually remains stable, allowing chip manufacturers to maintain pricing power; however, a continuous increase in Days Inventory Outstanding may serve as a warning signal of weak demand, and if inventory continues to rise, companies may need to reduce production capacity. In this quarter, Western Digital's Days Inventory Outstanding was 80 days, which is 34 days lower than the five-year average. Data shows that although Days Inventory Outstanding has slightly increased compared to the previous quarter, there are currently no signs indicating excessive inventory accumulation