QS Research · Michael Burry's Scion Capital analyst template · 2006
WESTERN DIGITAL CORP (WDC)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: SHORT
Conviction medium · base case -55% · downside -63% · upside 0%
The market is capitalizing TTM peak EBITDA of $6.10B at WDC's own 16.2x EV/EBITDA, which supports about $263/share, essentially today's price; there is no upside left if peak margins persist. On the six-year cycle, average EBITDA is $2.25B and normalized EBITDA on TTM revenue is $2.76B; at the same 16.2x that is about $119/share, 55% below the close. The upside case (TTM EBITDA at 16.2x) is roughly flat, while the downside (six-year average EBITDA at 16.2x) is about $97/share. With insiders one-way sellers and Q2 FY2027 guidance requiring 60%-61% gross margins, this is a short, not a value long.
Key numbers
- Share price: $263.78
- Market cap: $98.74B
- Latest financial period: TTM to Oct 2, 2026
- Revenue (TTM): $14.48B
- EV / EBITDA (TTM): 16.2x
- P/E (TTM): 10.0x
- Price / book: 10.56x
The 15 boxes
- ✓ 1. Long-form business notes
Western Digital is now an HDD-only business sold into three end markets (Cloud, Client, Consumer), where Cloud is the largest and fastest growing; the FY2021 10-K described a two-technology company spanning HDD and flash, with flash and its suppliers now framed as competition rather than product. The cycle is extreme and documented in the six-year XBRL: revenue $18.79B in FY2022 fell to $6.25B in FY2023 and rebuilt to $12.92B in FY2026, with operating income going from $2.39B to -$548.0M to $4.45B. FY2026 net income to common of $9.29B is far above what operations produced: pre-tax income of $9.90B versus operating income of $4.45B, a $5.45B gap the data source does not break out, so the year should be valued on the operating line and cash flow, not on reported net income. Cash generation follows the cycle: operating cash flow -$408.0M in FY2023 versus $3.93B in FY2026, on capex of $821.0M and $418.0M respectively.
- ✓ 2. Competitive advantage
WDC has some scale, manufacturing know-how and about 4,700 active patents in HDD, but the sources show strong competition from Seagate, Toshiba and NAND flash suppliers and heavy customer concentration (Cloud 89%, top 10 73% of FY2026 revenue). The margin record is cyclical, not durable: operating income swung from $2.39B in FY2022 to -$548M in FY2023 and -$403M in FY2024 before $4.45B in FY2026. FY2026 net income to common of $9.29B is far above operating income, so it should not be read as proof of a durable operating advantage. Net: a narrow, cycle-dependent advantage at best.
- ✓ 3. 10-Q takeaways
Q1 FY2027 (quarter ended 2026-10-02) was the strongest quarter in the file: revenue $4,381M, up 55% Y/Y, with Cloud at 88% of revenue and gross margin 57.8% versus 43.5%. Operating income of $2,046M (46.7% GAAP, 49.1% non-GAAP margin) is operating-driven, not a one-off: GAAP diluted EPS $4.63 is essentially equal to non-GAAP $4.64, and the $611M Sandisk mark-to-market gain sat in the prior-year quarter (Q1 FY2026), not this one. Cash from operations was $1,604M with $1.38B free cash flow; the company bought back $1.00B of stock, raised the dividend 17% to $0.175, and guided Q2 FY2027 revenue up 66%-72% Y/Y.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
Sign in with a QuantSignals Premium or Gold plan to read every box: each point linked to the SEC filing it came from, the bull and bear case, and the comparables. QS Research powers the signals behind FST, our autonomous trading agent.