Data storage giant Western Digital Corp. reported strong third-quarter results today with earnings and revenue that topped expectations and strong guidance for the last quarter of its fiscal year.

The company’s stock edged upward by about 1% after-hours, adding to a much stronger gain of 5% during the regular trading session.

The company reported net income for the period of $25 million, with earnings before certain costs such as stock compensation coming to $1.65 per share. Revenue totaled $4.38 billion, up 6% from the same period a year ago. Wall Street had been looking for earnings of $1.49 per share on sales of $4.34 billion, so it was a strong beat.

Western Digital Chief Executive David Goeckeler (pictured) rightly observed that the company delivered an “excellent financial performance,” all the more so given that it had to navigate a dynamic geopolitical and macroeconomic environment that includes ongoing supply challenges.

“This has all been made possible by the operational and portfolio improvements we have made over the last couple of years, which enable us to unlock the earnings power of the Western Digital model,” the CEO added. “Looking ahead, we are optimistic about the business outlook for calendar year 2022. We believe the secular demand for storage and our new product ramps in HDD and flash will drive growth across our end markets.”

Western Digital is a supplier of storage drives, including hard drives and flash memory chips for personal computers, data center servers, smart cars and various other products.

The company operates three business segments. The Cloud business, which covers products sold to providers of public and private cloud infrastructure, grossed $1.77 billion in sales, up 25% from a year ago and representing 40% of the company’s total. Western Digital said the strong sales here were thanks to its leadership position in 18-terabyte drives and the manufacturing expansion of its newest 20-terabyte drives.

The company’s Client business, which handles products sold directly to original equipment manufacturers and through distribution partners, pulled in $1.73 billion, down 2% from a year ago. Executives said demand from PC OEM customers has improved as they begin to work through supply chain issues.

As for Western Digital’s Consumer segment, which covers retail and end-user products, revenue there fell 8%, to $875 million. The company attributed that drop to lower retail flash shipments.

Western Digital seems to be betting on the growth of its cloud segment going forward and it is in a confident mood. For the fourth quarter, it said, it’s expecting revenue of between $4.5 billion and $4.7 billion, with earnings per share in a range of $1.60 to $1.90. That’s better than expected, with Wall Street earlier forecasting sales of just $4.36 billion and earnings of $1.69 per share.

During the quarter, Western Digital generated $398 million in cash flow from operations and made a discretionary debt payment of $150 million to end the quarter with $2.51 billion in cash and cash equivalents.

Photo: Western Digital