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Western Digital (WDC +10%) is heading sharply higher after reporting nice EPS upside with its Q1 (Sep) report last night. Revenue jumped 48.9% yr/yr to $4.095 bln, which was generally in-line, maybe a bit light. But it was within prior guidance of $4.00-4.20 bln. WDC provided in-line EPS and revenue guidance for Q2 (Dec). As a quick housekeeping matter, WDC previously announced it is separating its flash and HDD businesses. WDC continues to expect that to happen by the end of CY24.

• Flash revenue grew 21% yr/yr and 7% sequentially to $1.88 bln, its highest level in nine quarters. Sequential revenue growth was driven by a continued recovery in data center. This was fueled by strong demand for its enterprise SSD applications, which grew 76% sequentially, reaching its highest revenue level since 4QFY22. WDC said the cloud tailwind was offset by ongoing weakness in consumer and in client, with PC OEMs working down inventory and pushing out the refresh purchase cycle.
• Looking ahead to DecQ for flash, WDC expects the continued ramp of its new enterprise SSD offerings to supplement seasonal strength in its consumer end market. Within client, WDC expects PC OEM demand to stabilize. WDC expects a recovery in its consumer and client end markets as it moves through calendar year 2025. Furthermore, WDC is seeing high demand for its enterprise SSD product offering and expects it will serve as the primary driver for revenue growth for the full fiscal year.
• Turning to HDD, revenue grew 85% yr/yr and 10% sequentially to $2.21 bln. WDC achieved record revenue in data center. What stood out was WDC saying it's operating in an environment where demand for its products exceeds supply. To address this, WDC is working with customers to improve visibility into their future needs. WDC is see increasing adoption of its UltraSMR technology.
• Looking ahead to DecQ for HDD, WDC expects continued momentum in data center to drive growth across its nearline portfolio. Adoption of its UltraSMR product line is expanding, particularly among cloud customers. WDC says the HDD business continues to undergo a positive structural transformation. WDC's approach to commercializing its product line, especially UltraSMR, has enabled the company to drive record revenue in the midst of AI's emergence.

Overall, investors clearly like how Western Digital is kicking off its new fiscal year. After trading sharply lower following its JunQ report/guidance in July, this report was notably better. Its industry has been in a downturn, but seems to be making a comeback. Data center has been strong and WDC mentioned improvement in CY25 for its consumer and client markets. The next big thing for WDC is the upcoming split of its flash and HDD units in the next couple of months.