STX - Western Digital trades lower after Q1 outlook disappoints as weak cloud demand lingers

2023-08-01 08:39:56 ET

Western Digital ( NASDAQ: WDC ) stock fell ~2% premarket on Tuesday after the data storage device maker forecast a wider-than-expected net loss per share for Q1 and revenue below analysts' estimates, as weak demand calls for it to adjust production.

Q4 Non-GAAP loss per share of -$1.98, and Revenue of $2.67B beat analysts expectations.

However Q4 revenue fell -5% Q/Q and -41% Y/Y.

Cloud revenue decreased -53% Y/Y to $994M, mainly due to declines in both hard drive and flash product shipments. Sequentially, the revenue fell -18% Q/Q primarily due to a decrease in capacity enterprise drive shipments, the company added.

When asked about cloud weakness and conversations with the large hyperscalers, Western Digital CEO David Goeckeler said on the Q4 earnings call that, "It's clear that some of them have been in a very severe inventory digestion phase and kind of took a pause on buying anything, but we're back to having conversations with those customers."

Western Digital said revenue from Client segment rose +6% Q/Q to ~$1.04B, steered by growth in bit shipments for gaming consoles. However, the segment's revenue slumped -37% Y/Y due to declines in flash pricing, and lower client SSD and hard drive unit shipments for PC applications.

Consumer segement sales fell Y/Y --19% Y/Y to $643M, driven by price declines in Flash and lower retail hard drive shipments.  Sequentially, the revenue rose +3% Q/Q mainly because of higher retail SSD shipments.

Fiscal full year 2023 total revenue declined 34% Y/Y to ~$12.32B.

Outlook :

Q1 : "In fiscal first quarter, we are continuing to adjust production to better match demand and anticipate underutilization charges to impact both HDD and Flash gross margins along with product mix pressures on Flash ASP," said Wissam Jabre, Western Digital's executive vice president and CFO on the company's Q4 earnings call.

Jabre added that beyond Q1, the company expects both HDD and Flash revenue to improve through the remainder of fiscal year 2024, steered by normalizing demand in storage and  higher average content per unit in Flash.

The company expects fiscal Q1 2024 revenue to be in the range of $2.55B to $2.75B ( consensus $2.75B). Q1 non-GAAP is expected to be between -$2.10 to -$1.80 (consensus -$1.89).

WDD -2.47% to $41.51 premarket Aug. 1

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