QS Research · Michael Burry's Scion Capital analyst template · 2006
WESTERN DIGITAL CORP (WDC)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: SHORT
Conviction high · base case -67% · downside -90% · upside -61%
Section 13's base is normalized EBITDA of ~$2.04B (FY2021-FY2026 average EBIT $1.57B plus average D&A $0.465B), not TTM peak EBITDA of $6.10B. At $260.04, base 16.0x gives ~$86 (86/260.04-1 = -66.9%), downside 5.2x SNDK gives ~$27 (-89.6%), and upside 18.8x STX gives ~$101 (-61.2%); even the 26.6x KLAC outlier gives ~$144 (-44.6%). The market is capitalizing an HDD shortage upcycle and a TTM net income of $9.91B that exceeds TTM EBIT of $5.71B, while FY2026 pre-tax income of $9.90B exceeds operating income of $4.45B by ~$5.45B. Normalized earning power and cash flow are far below TTM: average operating income $1.57B and average FCF $0.72B vs TTM EBIT $5.71B and FCF $4.29B. I would short: the rule is met with all three cases below today's price, and conviction is high because base, downside and upside point the same way.
Key numbers
- Share price: $260.04
- Market cap: $97.34B
- Latest financial period: TTM to Oct 2, 2026
- Revenue (TTM): $14.48B
- EV / EBITDA (TTM): 16.0x
- P/E (TTM): 9.8x
- Price / book: 10.41x
The 15 boxes
- ✓ 1. Long-form business notes
Western Digital today is a pure HDD maker (FY2026 10-K describes the business solely as HDD-based) selling high-capacity drives into three end markets — Cloud, Client, Consumer — with Cloud the largest and fastest growing. The cycle is violent: revenue went $18.79B (FY2022) to $6.25B (FY2023) and back to $12.92B (FY2026), with operating income of -$548.0M in FY2023 versus $4.45B in FY2026. FY2026 net income of $9.29B is not an operating number: pre-tax income of $9.90B exceeds operating income of $4.45B by roughly $5.45B, and these sources do not identify the non-operating item behind that gap. Cash generation at the FY2026 peak was $3.93B of operating cash flow against only $418.0M of capex, versus negative operating cash flow in FY2023 and FY2024.
- ✓ 2. Competitive advantage
The 10-K claims a leading HDD product portfolio, differentiated innovation, global manufacturing and leadership in areal density and cost efficiency, against Seagate, Toshiba and NAND-flash alternatives. The record does not show a durable advantage: FY2023 revenue fell to $6.25B and operating income was -$548.0M, FY2024 was also negative, and FY2026 net income of $9.29B sits far above operating income of $4.45B. Customer concentration is extreme—Cloud was 89% and top 10 customers 73% of FY2026 net revenue—and long-term pricing agreements and supplier dependence limit pricing and cost control. Net: scale/manufacturing position yes; durable moat not demonstrated by these sources.
- ✓ 3. 10-Q takeaways
Q1 FY2027 (quarter ended 2026-10-02) shows a sharp cyclical upswing: revenue rose 55% to $4,381M, gross margin jumped to 57.8%, and operating income reached $2,046M. Cloud drove the quarter at 88% of revenue, up 54% YoY, with higher exabytes and pricing. Cash flow improved to $1,604M from operations, while the company used $1.00B for buybacks and reduced convertible debt; the prior-year net income included a $611M non-recurring Sandisk gain.
- ✓ 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.
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