Western Digital Stock Rallies Despite Mixed Q2 Print: Retail Sentiment Flips To Bullish On Spin-Off Hopes

Western Digital Corp. (WDC) shares climbed sharply early on Thursday after the storage devices solutions provider’s positive commentary about an impending spin-off managed to outweigh mixed quarterly results.

The San Jose, California-based company reported fiscal 2025 second-quarter non-GAAP earnings per share (EPS) of $1.77, slightly shy of the $1.78 per share consensus estimate, but marked a reversal from the $0.75 per share loss incurred in the year-ago quarter.

Revenue climbed 41% year-over-year to $4.29 billion, exceeding the consensus estimate of $4.26 billion.

Earlier this month, the company offered a preview of the bottom-line results at the low end of the guidance range of $1.75-$2.05, and revenue at the midpoint of the $4.20 billion to $4.40 billion guidance range.

Western Digital said its cloud revenue climbed 119% YoY and 6% sequentially to $2.35 billion and client revenue rose 4% YoY but slipped 3% from the previous quarter to $1.17 billion. Consumer revenue moved down 8% YoY to $771 million.

The company guided third-quarter non-GAAP EPS to $0.90-$1.20 and revenue to $3.75 billion to $3.95 billion. Wall Street analysts currently model the metrics at $1.25 and $3.91 billion, respectively.

CEO David Goeckeler said, “As we finalize the separation of our businesses, we are confident that both Western Digital and SanDisk will continue driving innovation and providing compelling storage solutions to customers while delivering long-term shareholder value.”

In October 2023, the company announced plans to spin off its HDD and flash businesses, creating two independently traded public companies. 

Goeckeler expects Western Digital’s strong HDD performance and strategic approach to managing its flash business will help both companies to capture the growing demand for storage driven by the artificial intelligence (AI) Data Cycle.

Speaking on the earnings call, he said the company is in the final stages of the spin-off, having completed the Form-10 filing and finalizing key financing activities necessary for the separation, according to Koyfin.

He also mentioned Western Digital and SanDisk management teams would provide more details at their respective Investor Days, scheduled on Feb. 11 and Feb. 12, respectively.

CFO Wissam Jabre said shares of the two companies will likely trade independently shortly after Feb. 21.

On Stocktwits, retail sentiment toward Western Digital stock flipped to ‘bullish’ (62/100) from ‘bearish,’ with message volume remaining at ‘extremely high’ levels.

WDC sentiment and message volume January 30, as of 10:13 am ET | Source: Stocktwits

A retail stock watcher recommended loading up the stock ahead of the spin-off and predicted that Western Digital would rally toward the $70 level.

In early trading, Western Digital stock rose 3.36% to $66.91. The stock rose about 14% in 2024 and has gained over 5% so far in January.

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