AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 18/10/2026
Moat31
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · Patents, integrated manufacturing and realized product-cost improvements provide meaningful capabilities, but relative cost superiority and durable exclusion are unproven. Explicit interchangeability limits structural differentiation.
durability · 1/4 · Continuing technological investment and lengthy qualifications offer some persistence, but historical excess capacity and HDD underutilization costs demonstrate fragile economic protection through cycles.
customer dependency · 1/4 · Multi-year purchase commitments and qualification requirements create some friction. Interchangeable products and concentrated customers leave strong customer dependence unestablished.
erosion resilience · 1/4 · Recent cost and pricing improvements demonstrate recovery, but realized HDD underutilization charges and exposure to alternative storage show weak protection against erosion. Potential future risks are not treated as realized losses.
Pricing power50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 3/4 · Average selling price per exabyte increased 2% in the January 2026 quarter, 9% in the April quarter and 5% over the nine months through April. These demonstrate realized pricing strength, with product mix and demand contributing. A consumer price decline provides contrary segment evidence; through-cycle pricing power remains unproven.
retention · 2/4 · Substantial multi-period purchase commitments, extended arrangements and increasing shipments support continued customer demand. This assessment uses contracts and indirect operating evidence; no customer-level retention or renewal rate is disclosed, and interchangeability limits lock-in.
margin resilience · 2/4 · GAAP gross margin improved from 38.8% to 48.9% in fiscal 2026 alongside better costs, mix and pricing. Historical HDD underutilization charges prevent treating favorable-period expansion as demonstrated downside resilience.
contractual freedom · 1/4 · Customer price protection and incentives constrain effective pricing freedom, while long-term delivery obligations commit supply. Incentive deductions declined to 9% of gross revenue in fiscal 2026, but contract repricing and termination provisions are absent.
Predictability46
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 50.00
- Revenue growth volatility (pp)
- 27.89
- Positive FCF years (%)
- 60.00
- FCF margin volatility (pp)
- 13.47
Financial strength87
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 100.00
- netDebtEbitGrade
- 100.00
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 46.30
- Debt / FCF (x)
- 0.30
- Net debt / operating income (x)
- -0.12
- Interest coverage (x)
- 26.99
- Current ratio (x)
- 1.33
Capital allocation74
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 24.03
- 3-year average dilution (%)
- -5.87
- 3-year average SBC / revenue (%)
- 2.21
- cashConversionGrade
- 0.00
Management69
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Fiscal 2026 operating cash flow of $3.929 billion, net capital spending of $418 million and completed debt redemptions support discipline. Counterparty transaction discounts, canceled capacity projects with impairments and outstanding shares rising from 347 million to 361 million despite repurchases make the record mixed.
incentive alignment · 3/4 · Existing compensation combines operating and revenue targets with equity tied to adjusted free cash flow, EPS and relative shareholder returns. Ownership retention requirements and restrictions on hedging support alignment. Annual target resets within multi-year awards and change-in-control acceleration temper the assessment; incomplete PSU cycles are not treated as vested outcomes, and actual ownership balances are missing.
execution · 3/4 · Completed business separation and debt redemptions, increased shipment volumes, improved product costs, revenue growth and substantial cash generation demonstrate strong recent execution. Attribution to management is indirect because favorable demand also contributed; nonoperating Sandisk gains are not treated as operating achievement.
governance · 3/4 · An independent chair, independence of all directors other than the CEO, regular independent executive sessions, an independent compensation committee and documented stockholder outreach demonstrate substantive governance practices. Disclosed change-in-control equity acceleration limits the strength of shareholder protection; governance effectiveness is not guaranteed by these structures.
Evidence
We have a wide range of intellectual property (“IP”) assets, including patent portfolios containing approximately 4,700 active patents, covering groundbreaking data storage technologies, magnetic recording and other technology building blocks.
Research and Technology — active patent portfolio · Filed 14/08/2026
We design and manufacture substantially all of the recording head and magnetic media in our HDD products, positioning us as an industry leader in innovations that drive higher areal density and superior performance.
Research and Technology — recording-head and magnetic-media manufacturing · Filed 14/08/2026
Our improvements in HDD capacity, which lower product costs over time, have been enabled largely through advancements in magnetic recording head and media technologies.
Research and Technology — capacity improvements and product costs · Filed 14/08/2026
In addition, because our products are designed to be largely interchangeable with competitors’ products, our demand forecasts may be impacted significantly by the strategic actions of our competitors.
Risk Factors — product interchangeability and competitor actions · Filed 14/08/2026
We also experience competition from other companies that produce alternative storage technologies such as flash memory, particularly in our legacy markets where we participate with our lower capacity, smaller form factor HDDs.
Risk Factors — alternative storage technology competition · Filed 14/08/2025
The increase was largely due to an increased volume of shipments, a better cost structure on our newer generation products, a mix shift towards higher capacity drives and improved pricing.
MD&A — fiscal 2026 gross-profit improvement drivers · Filed 14/08/2026
The shift toward higher capacity drives has benefited gross margin through both a better cost structure and improved pricing.
MD&A — higher-capacity product costs and pricing · Filed 14/08/2026
The increase also reflected charges for unabsorbed manufacturing overhead of approximately $155 million in 2024 which were not incurred in 2025.
MD&A — fiscal 2024 unabsorbed manufacturing overhead absent in fiscal 2025 · Filed 14/08/2025
The storage market has in the past experienced, and may in the future experience, periods of excess capacity leading to our factories running below the desired utilization levels, resulting in us taking underutilization charges, inventory write-downs and reductions in average selling prices (“ASPs”), all of which lead to negative impacts on our revenue and gross margins.
Risk Factors — historical excess capacity, write-downs and ASP reductions · Filed 14/08/2026
We incur material capital expenditures to design and manufacture our products that depend on advanced technologies and manufacturing techniques.
Liquidity and Capital Resources — material manufacturing capital expenditures · Filed 14/08/2026
We have entered into long-term agreements with certain customers that commit us to deliver and our customers to purchase substantial volumes of products over multi-quarter or multi-year periods.
Risk Factors — long-term customer volume commitments · Filed 14/08/2026
In response, customers are partnering with us earlier to support their future growth requirements and are extending the duration of their commercial arrangements, which improves our long-term visibility of demand.
MD&A — earlier customer partnering and longer commercial arrangements · Filed 14/08/2026
We participate in a highly competitive industry that is subject to variations in average selling prices (“ASPs”) and demand, technological change and lengthy product qualifications, all of which can negatively impact our business.
Risk Factors — competition, technological change and lengthy product qualifications · Filed 14/08/2025
Our top 10 customers accounted for 71% and 74%, respectively, of our net revenue for the three and nine months ended April 3, 2026, compared to 73% and 68%, respectively, of our net revenue for the three and nine months ended March 28, 2025.
MD&A — top-ten customer revenue concentration · Filed 01/05/2026
Additionally, if there is consolidation among our customer base, our customers may be able to command increased leverage in negotiating prices and other terms of sale, which could negatively impact our profitability.
Risk Factors — potential customer negotiating leverage from consolidation · Filed 14/08/2026
40 Table of Contents Comparison of Three and Nine Months Ended April 3, 2026 to Three and Nine Months Ended March 28, 2025 Net Revenue Net revenue increased by 45% for the three months ended April 3, 2026 from the comparable period in the prior year, driven by a 34% increase in exabytes sold and a 9% increase in average selling price per exabyte, both of which were driven by strong demand across all of our end markets.
MD&A — quarterly revenue, exabyte volume and realized price changes · Filed 01/05/2026
Net revenue increased by 33% for the nine months ended April 3, 2026 from the comparable period in the prior year, driven by a 26% increase in exabytes sold and a 5% increase in average selling price per exabyte.
MD&A — nine-month revenue, volume and realized price changes · Filed 01/05/2026
Net revenue increased by 25% for the three months ended January 2, 2026 from the comparable period in the prior year, driven by a 22% increase in exabytes sold and a 2% increase in average selling price per exabyte.
MD&A — January 2026 quarter realized pricing and volume · Filed 30/01/2026
Consumer revenue decreased by 2% for the six months ended January 2, 2026 from the comparable period in the prior year, driven by a 2% decrease in average selling price per exabyte while volume remained relatively flat, which reflects routine variations in product mix and demand.
MD&A — six-month consumer price decline and flat volume · Filed 30/01/2026
Consistent with standard industry practice, we have sales incentive and marketing programs that provide customers with price protection and other incentives or reimbursements that are recorded as a reduction to gross revenue.
Revenue disclosures — customer price protection and incentives · Filed 14/08/2026
For 2026, 2025 and 2024, these programs represented 9%, 10% and 11%, respectively, of gross revenue.
Revenue disclosures — fiscal 2024–2026 incentive program percentages · Filed 14/08/2026
The following tables present reconciliations of our non-GAAP gross profit, non-GAAP operating income, non-GAAP EPS and adjusted free cash flow to the most directly comparable GAAP measures: (in millions, unaudited) Year Ended July 3, 2026 Year Ended June 27, 2025 Revenue $ 12,919 $ 9,520 Reconciliation of non-GAAP gross profit GAAP gross profit $ 6,311 $ 3,692 Stock-based compensation expense 33 34 Litigation matter — 19 Other 5 4 Non-GAAP gross profit $ 6,349 $ 3,749 GAAP gross margin(1) 48.9 % 38.8 % Non-GAAP gross margin(1) 49.1 % 39.4 % Reconciliation of non-GAAP operating income GAAP operating income $ 4,453 $ 2,334 Stock-based compensation expense 204 167 Litigation matter — (179) Business realignment charges (credits) 137 (6) Other 23 10 Non-GAAP operating income $ 4,817 $ 2,326 Western Digital 2026 Proxy Statement A-1 Proxy Summary Corporate Governance Matters Executive Officers Executive Compensation Equity Compensation Plan Information Stock Ownership Information Audit Committee Matters Additional Information Appendix A (in millions, unaudited) Year Ended July 3, 2026 Year Ended June 27, 2025 Reconciliation of non-GAAP EPS GAAP net income $ 9,424 Operating income adjustments 364 Gain on retained interest in Sandisk (6,498) Costs in connection with debt and equity transactions 907 Other 16 Income tax adjustments (270) Non-GAAP net income 3,943 Amount allocated to preferred shareholders (60) Non-GAAP diluted net income attributable to common shareholders $ 3,883 Diluted weighted average shares: GAAP 383 Benefit of shares related to capped call transactions (3) Non-GAAP 380 Diluted net income per common share GAAP $ 24.28 Non-GAAP $ 10.22 Reconciliation of adjusted free cash flow(2) Cash flows provided by operating activities $ 3,929 Purchases of property, plant and equipment, net (418) Free cash flow $ 3,511 Adjustments to free cash flow(2) 159 Adjusted free cash flow $ 3,670 (1)GAAP and non-GAAP gross margin are calculated by dividing GAAP and non-GAAP gross profit, respectively, by revenue.
Appendix A — operating results and cash-flow reconciliations · Filed 05/10/2026
In February 2026, we executed a series of transactions pursuant to which we used 5.8 million shares of Sandisk common stock to further reduce our debt and fully redeem our previously outstanding 4.75% senior unsecured notes due 2026, 2.85% senior notes due 2029, 3.10% senior notes due 2032 and Term Loan A-3 through a tax-free exchange.
MD&A — completed Sandisk share monetization and debt redemption · Filed 14/08/2026
As of July 3, 2026 and June 27, 2025, there were 364 million and 349 million shares issued, and 361 million and 347 million shares outstanding, respectively, which are net of 3 million and 2 million shares of treasury stock held at cost, respectively.
Notes to Financial Statements — issued and outstanding share counts · Filed 14/08/2026
In connection with these transactions, the company recognized costs primarily related to a discount given to the counterparty of the transaction.
Appendix A — transaction costs primarily related to counterparty discounts · Filed 05/10/2026
In this regard, in 2024, the Company reassessed existing capacity development plans and made a decision to cancel certain projects, including projects to expand capacity in its Penang, Malaysia facility, resulting in the impairment of existing construction in progress, other assets and the recognition of a liability for certain contract termination costs.
Business Realignment Charges — canceled capacity projects and impairments · Filed 14/08/2025
PAY MIX CEO FY26 OTHER NEOs FY26 7% 10% 50% 33% 13% 13% 37% 37% Base Salary Target Bonus Annual PSUs Annual RSUs Base Salary Target Bonus Annual PSUs Annual RSUs 17% 83% 26% 74% Annual Long-Term Incentive Annual Long-Term Incentive 44 2026 Proxy Statement Western Digital Proxy Summary Corporate Governance Matters Executive Officers Executive Compensation Equity Compensation Plan Information Stock Ownership Information Audit Committee Matters Additional Information Appendix A FISCAL 2026 COMPENSATION ELEMENTS Compensation Element Characteristics Purpose Performance Link/ Key Benchmark Base Salary lFixed compensation lAttracts, retains and motivates premier executive talent lCompensates executive officers for sustained individual performance lCompetitive with market and industry practices lAdjusted for experience, responsibility, potential and performance Short-Term Incentives (“STI”) lAnnual performance-based cash incentive compensation lMotivates executive officers to drive annual growth and financial performance lEncourages accountability by rewarding achievement of corporate and individual performance objectives lFocuses our executive officers on value creation through achievement of corporate and individual performance objectives that drive our ability to create value for stockholders lNon-GAAP operating income (70% weighting) lRevenue (30% weighting) lIndividual performance modifier (+/- 20%) tied to specific individual performance goals lIndividual performance modifier does not increase award payout if non-GAAP operating income is below threshold lIncludes ESG measures lSTI payouts are capped at 200% of target PSUs lVariable performance-based equity compensation lThree-year performance period with annual performance targets lAnnual achievements averaged to determine payout lEncourages accountability by rewarding achievement of long-term (over a three-year period) corporate and market-based performance objectives lFocuses our executive officers on value creation through achievement of financial objectives that drive our ability to create long-term value for stockholders lAdjusted Free Cash Flow (50%) lNon-GAAP EPS (50%) lThree-year relative Total Shareholder Return (“TSR”) modifier (+/-10%) lIf absolute TSR performance is negative, the relative TSR modifier may not increase the PSU payout and can only be used to decrease such payout lPSU financial metrics payout capped at 200% of target RSUs lVariable service-based equity compensation lVests with respect to 25% after one year and 6.25% quarterly thereafter lProvides alignment with stockholder interests by focusing executive officers on long-term value creation lProvides retention value lValue based on stock price performance * Blue text indicates new for fiscal 2026 In addition to the elements outlined above, we also provide our executive officers with limited perquisites and certain other indirect benefits, as described in the section below entitled “—Other Program Features and Policies.”
Compensation Discussion and Analysis — fiscal 2026 incentive metrics and vesting design · Filed 05/10/2026
FY2026 FY2027 FY2028 Three-Year Average Payout % (0%-200%) TBD Fiscal 2026 - 2028 PSU Awards One-Year Adjusted Free Cash Flow and non-GAAP EPS Payout 200% One-Year Adjusted Free Cash Flow and non-GAAP EPS Payout TBD One-Year Adjusted Free Cash Flow and non-GAAP EPS Payout TBD Three-Year Relative TSR Modifier (+/-10%) Two-Year Average Payout % (0%-200%) TBD Fiscal 2026 - 2027 CEO Grant One-Year Adjusted Free Cash Flow and non-GAAP EPS Payout 200% One-Year Adjusted Free Cash Flow and non-GAAP EPS Payout TBD Two-Year Relative TSR Modifier (+/-10%) The actual number of units to be earned from these awards will be determined by averaging the achievement levels over the entire two- or three-year performance cycle subject to the applicable payout percentage cap.
Compensation Discussion and Analysis — incomplete multi-year PSU performance cycles · Filed 05/10/2026
Maintain and adhere to robust executive stock ownership guidelines set at or above market levels, with a retention requirement until compliance is achieved.
Compensation policies — executive ownership guidelines and retention requirement · Filed 05/10/2026
No hedging, pledging or short-sale or derivative transactions by executive officers or directors.
Compensation policies — restrictions on hedging, pledging and derivatives · Filed 05/10/2026
The responsibilities of our Chair of the Board include the following: lLeads our Board in oversight of management and company strategy lCalls and chairs Board and stockholder meetings lSets meeting schedules and agendas lFacilitates communication among directors and with management between meetings lConvenes executive sessions of independent directors lRepresents our company in communications with stockholders and other stakeholders as appropriate Executive Sessions All members of our Board of Directors, other than our CEO, are independent.
Corporate Governance — independent chair responsibilities and board independence · Filed 05/10/2026
In order to assure that our independent directors are not inappropriately influenced by management, the independent directors meet without management in executive sessions led by our independent Chair of the Board in conjunction with each regularly scheduled meeting of our Board, and otherwise as deemed necessary by our Chair of the Board or our other independent directors.
Corporate Governance — independent director executive sessions · Filed 05/10/2026
All members of the committee during fiscal 2026 were independent directors and none of them were our employees or former employees or had any relationship with us requiring disclosure of certain transactions with related persons under SEC rules.
Compensation committee — fiscal 2026 independence and related relationships · Filed 05/10/2026
Year-Round Stockholder Engagement In fiscal 2026, as part of our regular stockholder engagement program, we contacted stockholders representing approximately 65% of our shares of common stock outstanding and conducted calls with stockholders representing approximately 32% of our shares of common stock outstanding, including separate discussions with both the passive and active investment teams of certain investors.
Corporate Governance — actual fiscal 2026 stockholder outreach · Filed 05/10/2026
l100% vesting of any unvested outstanding equity awards granted to the executive officer by us, with any performance-based equity awards as to which the applicable performance period has not ended becoming vested at the target level (or, if more favorable, as otherwise provided in the agreement providing for a change in control)
Change-in-control severance — equity acceleration and performance award treatment · Filed 05/10/2026
In the previous fiscal year, on February 21, 2025, we completed the Separation to create two independent public companies, with WD continuing our existing HDD business and Sandisk, formerly a wholly-owned subsidiary of the Company, operating the Flash business.
MD&A — completed February 2025 separation of HDD and Flash businesses · Filed 14/08/2026
