Western Digital Corporation Common Stock Ex-distribution When-Issued

Very strong Q3 FY2026 performance (above high end of guidance) - Revenue: $3.3B, +45% YoY (and above the top end of guidance). - EPS: $2.72, nearly 2x YoY (also above guidance). - Deliveries / capacity: 222 exabytes, +34% YoY; includes 4.1M+ drives delivering 118 exabytes of latest ePMR (up to 32TB capacity points). - Gross margin: 50.5%, +1,040 bps YoY and +440 bps sequentially (notably achieved above guidance). - Operating leverage: Operating income $1.3B (+116% YoY) → operating margin 38.6% (+1,260 bps YoY).

Q4 outlook (key forecast numbers investors should anchor on) - Revenue: $3.65B ± $100M (≈ +40% YoY at midpoint). - Gross margin: 51%–52% (continuing upward trend). - Operating expenses: $385M–$395M. - Tax rate: ~16%. - Diluted EPS: $3.25 ± $0.15 (using ~385M non-GAAP share count). - Management emphasis: incremental gross margin strength has been consistently strong recently (not “one-off”), though guidance is only one quarter at a time.

Demand & “structural tailwind” narrative: AI → inference/agentic/physical AI increases persistent HDD data - CEO argues HDD demand is driven by three ongoing data-generation cycles: 1) Training/retraining data stored for improved model quality, 2) Inference + agentic execution generating new data that must be stored for feedback/references, 3) Physical AI producing real-world and synthetic data streams that feed training loops. - Surprising/strong claim: agentic AI expected to create a step-function increase in capacity-oriented storage demand (especially cloud & enterprise). - Long-term growth expectation reiterated: >25% long-term CAGR in exabytes. - Important “capacity constraint” stance: company states no need to increase unit capacity; focus remains on higher aerial density + mix + technology transitions.