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Western Digital (WDC) to Post Q3 Earnings: What to Expect?

Western Digital WDC is scheduled to report third-quarter fiscal 2021 results on Apr 29.

For third-quarter fiscal 2021, the company projects non-GAAP earnings between 55 cents and 75 cents per share. The consensus mark for earnings is pegged at 67 cents per share, which suggests a decline of 21.2% from the year-ago quarter. Notably, the estimate has been stable in the past 30 days.

Western Digital expects revenues in the range of $3.85 billion to $4.05 billion in the fiscal third quarter. The Zacks Consensus Estimate for revenues is currently pegged at $3.97 billion, indicating a decline of almost 5% from the prior-year reported figure.

Factors Likely to Have Influenced Q3 Performance

Uptick in PC shipments triggered by coronavirus crisis induced work-from-home wave and online schooling wave is likely to have contributed to Western Digital’s fiscal third-quarter performance. Per Gartner’s preliminary data, PC shipments rose 32% in the first quarter of calendar year 2021.

Encouraging trend in PC shipments in the first quarter of the calendar year 2021 is likely to have driven sales of the company’s solid-state drives (SSDs) on improving demand from notebooks and video game consoles. Also, incremental adoption of latest high-capacity hard disk drives (HDDs) products with robust storage capabilities might have positively impacted Client Devices’ segment’s fiscal third-quarter performance.

Moreover, Western Digital, currently carrying a Zacks Rank #1 (Strong Buy), is witnessing solid traction for its latest Ultrastar DC HC650 20TB SMR HDD. For instance, the 20TB HDD has been selected by Dropbox DBX to improve customer experience while lowering costs. You can see the complete list of today’s Zacks #1 Rank stocks here.

Also, improvement in capacity enterprise HDD sales is anticipated to have contributed to the top-line growth. Notably, the Zacks Consensus Estimate for Client Devices revenues for the fiscal third quarter is currently pegged at $2.051 billion, which suggests growth of 12% from the year-ago quarter.

Moreover, incremental adoption of latest flash solutions in Microsoft’s MSFT latest Xbox Series X and Sony’s PlayStation 5 gaming consoles is expected to have contributed to the Flash revenue numbers. Also, continued momentum in demand for Enterprise SSDs might get reflected in the Flash portfolio’s fiscal third-quarter top line.

The Zacks Consensus estimate for Flash revenues for the fiscal third quarter stands at $2.061 billion, in line with the prior-year quarter.

Nevertheless, coronavirus induced weakness across small and medium businesses is likely to have limited growth. Also, increasing expenditure on product innovation and development amid stiff competition in the disk drive market from Seagate STX might have weighed on the fiscal third-quarter profitability.

The consensus for revenues from Data Center Devices Solutions stands at $1.044 billion, which indicates a slump of 31.5% from the prior-year quarter.

Also, HDD business is expected to stay under pressured due to ongoing transition to SSDs. The Zacks Consensus Estimate for HDD revenues for the fiscal third quarter is pegged at $1.915 billion,indicating a decline of 9.4% on a year-over-year basis.

However, cloud and hyperscale customers have been witnessing solid demand driven by surge in data consumption as people are increasingly working and studying from home due to the ongoing coronavirus pandemic.

This has led to a spike in bandwidth and latency issues, which has created the need for efficient storage infrastructure at the edge. This, in turn, is anticipated to have bolstered demand for Western Digital data center solutions’ portfolio, which might get reflected in fiscal third-quarter top line. This includes products like NVMe SSDs, Ultrastar DC SN340 and Ultrastar DC SN640.

Additionally, growing demand for the company’s high-capacity drives and 16 and 18-terabyte energy assisted drives is expected to have favored the to-be-reported quarter’s performance.

Notably, the Zacks Consensus Estimate for Client Solutions revenues for the to-be-reported quarter is currently pegged at $903 million, which suggests growth of 10% from the prior-year reported figure.

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