Leading data storage manufacturer Western Digital (NASDAQ: WDC) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 30% year on year to $2.61 billion. Its non-GAAP profit of $1.66 per share was 12.1% above analysts’ consensus estimates.

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Company Overview

Founded in 1970 by a Motorola employee, Western Digital (NASDAQ: WDC) is a leading producer of hard disk drives, SSDs and flash memory.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Western Digital’s demand was weak and its revenue declined by 10.7% per year. This was below our standards and suggests it’s a low quality business. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.

We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Western Digital’s recent performance shows its demand remained suppressed as its revenue has declined by 12.1% annually over the last two years.

This quarter, Western Digital reported robust year-on-year revenue growth of 30%, and its $2.61 billion of revenue topped Wall Street estimates by 4.8%. Beyond the beat, this marks 4 straight quarters of growth, implying that Western Digital is in the middle of its cycle - a typical upcycle generally lasts 8-10 quarters.

Looking ahead, sell-side analysts expect revenue to grow 10.3% over the next 12 months, an improvement versus the last two years. This projection is admirable and indicates its newer products and services will fuel better top-line performance.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

This quarter, Western Digital’s DIO came in at NaN,

Key Takeaways from Western Digital’s Q2 Results

We were impressed by Western Digital’s strong improvement in inventory levels and quarterly guidance, which topped analysts' expectations. We were also excited its revenue, EPS, and adjusted operating income outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 4.2% to $74.49 immediately after reporting.

Western Digital put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.