Exchange: LSE | Sector: Technology | Industry: Hardware Equipment Parts
Q4 2025
Published: Aug 14, 2025
Earnings Highlights
Revenue of $2.61B down 36.4% year-over-year
Gross margin of 41.0%
Net income of 257.00M
"Transcript unavailable." - Management
Western Digital Corporation (0QZF.L) QQ4 2025 Results — Revenue Decline in a Soft Storage Market, Margin Resilience and Robust Free Cash Flow
Executive Summary
Western Digital reported QQ4 2025 revenue of $2.605 billion, down 36.39% year over year, with gross profit of $1.067 billion and a gross margin of 41.0%. Operating income was $680 million (operating margin 26.1%), while net income settled at $257 million (net margin 9.87%). The results reflect a challenging storage demand environment, particularly in consumer HDD and enterprise PC segments, offset by meaningful free cash flow generation and a continued focus on deleveraging and capital allocation. Non-operating items contributed to a $333 million negative swing in total other income/expenses, weighing on pre-tax earnings despite sturdy core operating performance.
Cash flow and balance sheet remained solid, with $746 million of cash from operations and free cash flow of $675 million for QQ4 2025. The company generated $2.114 billion in cash at period end and used $1.363 billion of cash during the quarter, driven by substantial debt repayments of $1.837 billion and a modest amount of share repurchases ($149 million) partially offset by $8 million of new stock issued. Net debt stood at approximately $2.60 billion, and the liquidity profile supports ongoing capex and potential continued deleveraging. Management commentary on the call (not provided in the input) would typically address product mix optimization, data-center growth, and competitive pricing dynamics; in the absence of transcript data, the analysis focuses on reported figures and 4Q–LTM trends.
Overall investment stance: Western Digital appears to be generating meaningful free cash flow and advancing its balance sheet even as top-line growth remains challenged by a softer storage cycle. The lack of explicit forward guidance in the provided data requires a cautious stance, but the FCF strength and debt reduction provide a potential runway for capital returns and strategic investments as the data-storage cycle recovers. Investors should monitor industry demand for data-center storage, SSD/HDD mix evolution, pricing discipline, and any further capital allocation signals from the company.
Cost and expense composition:
- Research & Development: $262.0 million
- Selling, General & Administrative: $124.0 million
- Other expenses: $1.0 million
- Operating expenses: $1,925.0 million (cost and expenses)
- Interest expense: $74.0 million
- Depreciation & amortization: $86.0 million
- Income tax expense: $95.0 million; effective tax rate implied around 27.4%
Cash flow and liquidity:
- Operating cash flow: $746.0 million
- Capital expenditures: $71.0 million
- Free cash flow: $675.0 million
- Net change in cash: -$1,363.0 million; cash at period end: $2,114.0 million; cash at period start: $3,477.0 million
- Net cash provided by/used in financing activities: -$2,042.0 million (debt repayments: -$1,837.0 million; common stock issued: $8.0 million; common stock repurchased: -$149.0 million; dividends paid: -$44.0 million)
- Net cash used in investing activities: -$70.0 million
Balance sheet and leverage:
- Total assets: $14.002 billion; Total liabilities: $8.462 billion; Total stockholders’ equity: $5.540 billion
- Cash & cash equivalents: $2.114 billion; Short-term debt: $2.226 billion; Long-term debt: $2.485 billion; Total debt: $4.711 billion
- Net debt: $2.597 billion (net of cash)
- Current ratio: 1.08; Quick ratio: 0.84; Cash ratio: 0.39
- Goodwill: $4.319 billion; Total current assets: $5.856 billion; Total current liabilities: $5.418 billion
- Leverage: Debt-to-equity ~0.85; Debt-to-capital ~0.46; Interest coverage ~9.2x
Efficiency and capital allocation:
- Receivables turnover: 1.75x; Inventory turnover: 1.19x; Payables turnover: 1.22x
- Operating cash flow per share: $2.14; Free cash flow per share: $1.94
- Dividend payout ratio: 17.1%; Dividend yield: 0.20%
- Capital expenditures coverage vs. FCF: favorable; FCF-to-capex ratio indicates strong free-cash flow generation relative to capex
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.61B
-36.39%
0.00%
Gross Profit
1.07B
-31.21%
0.00%
Operating Income
680.00M
-8.36%
0.00%
Net Income
257.00M
-47.87%
0.00%
Key Financial Ratios
currentRatio
1.08
grossProfitMargin
41%
operatingProfitMargin
26.1%
netProfitMargin
9.87%
returnOnAssets
1.84%
returnOnEquity
4.64%
debtEquityRatio
0.85
operatingCashFlowPerShare
$2.14
freeCashFlowPerShare
$1.94
dividendPayoutRatio
17.1%
priceToBookRatio
3.98
priceEarningsRatio
21.43
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Transcript highlights not available in the provided data. No earnings call transcript was included for QQ4 2025, so management commentary and quotable insights from executives could not be extracted. Investors should refer to the official earnings release and the SEC filing for any qualitative guidance or remarks on strategy, product mix, data-center demand, and competitive positioning.
Transcript unavailable.
— Management
Transcript unavailable.
— Management
Forward Guidance
No explicit forward guidance was provided in the supplied data. Given the current cyclical nature of the storage market, investors should monitor: (i) data-center and cloud storage capex trends and demand for enterprise SSDs/HDDs, (ii) product mix shifts toward higher-margin enterprise solutions, (iii) pricing dynamics and competitive pressures from peers such as Seagate and others in the HDD/SSD space, and (iv) ongoing capital allocation decisions (deleveraging, buybacks, dividends). Qualitatively, a stronger data-center cycle or improved pricing/mix could support revenue stabilization and margin expansion, while continued softness in consumer HDD demand could weigh on top-line growth.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0QZF.L Focus
40.96%
26.10%
4.64%
21.43%
0JT5.L
50.10%
33.70%
17.40%
18.03%
0Z4I.L
19.30%
6.59%
6.54%
10.86%
0KAK.L
34.80%
19.70%
-0.37%
-92.93%
0EV1.L
24.40%
9.43%
3.28%
27.30%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Fundamental view: Western Digital remains a cash-generating balance-sheet powerhouse within a cyclical storage market. The QQ4 2025 results show solid operating performance and cash flow generation despite a material YoY revenue contraction. The ability to reduce net debt while returning cash to shareholders (stock repurchase activity coupled with modest dividends) supports a constructive long-term outlook, particularly if data-center investment stabilizes and the mix shifts toward higher-margin enterprise SSDs. The absence of formal guidance in the data requires a cautious stance until management provides updated targets or an explicit strategic roadmap. Relative to peers, WD exhibits stronger cash flow and leverage management but lower near-term profitability metrics, suggesting a wait-and-see approach until a clearer upcycle or structural margin expansion materializes. Investment stance: Neutral/Hold with monitoring of data-center demand, pricing dynamics, and capital allocation signals.
Key Investment Factors
Growth Potential
Moderate growth potential driven by expanding data-center storage demand, higher-margin SSD architectures, and continued monetization of cloud/storage customer contracts. The trajectory depends on data-center capex cycles and successful migration toward higher-value storage solutions.
Profitability Risk
Key risks include cyclicality in HDD/PC demand, price erosion in storage markets, execution risk in product mix shift, dependence on OEM and hyperscale customers, and potential macroeconomic headwinds affecting IT spend. Non-operating items (e.g., other income/expenses) can also introduce volatility in reported net income.
Financial Position
Strong free cash flow generation ($675M in QQ4 2025) supports deleveraging and potential capital returns. Balance sheet shows solid liquidity with $2.114B cash against $4.711B total debt and a net debt position of $2.597B. Leverage metrics (debt-to-capital ~0.46) remain reasonable for a storage hardware company, and interest coverage (~9.2x) provides a cushion against operating volatility.
SWOT Analysis
Strengths
Leading position in data storage solutions with diversified HDD/SSD product lines (consumer to enterprise).
Solid free cash flow generation and a disciplined capital allocation framework.
Experienced global footprint and established OEM/VAR/channel distribution network.
Visible deleveraging progress and a healthy liquidity profile.
Weaknesses
Revenue declined 36% YoY in QQ4 2025, signaling exposure to a cyclical storage market and consumer HDD softness.
Profitability lag versus select peers (net margin ~9.9% vs peers with higher margins in some periods).
Significant non-operating expense (total other income/expense swing of -$333 million) weighing pretax results.
High goodwill/intangible asset base and exposure to cyclical capex cycles.