Western Digital Corp. beat expectations with its fiscal fourth-quarter results today, despite posting another alarming decline in revenue stemming from an ongoing supply glut that continues to dog the computer storage industry.

The company reported a net loss of $715 million, growing from the $651 million loss it delivered a year earlier. That resulted in a loss before certain costs such as stock compensation of $1.98 per share.

Despite the loss, the results were better than expected, with Wall Street looking for a slightly wider loss of $2 per share. The company’s revenue declined 41% from a year earlier, to $2.67 billion, but also beat Wall Street’s target of $2.51 billion.

For the full year, Western Digital’s total loss came to $1.71 billion, while its revenue totaled $12.32 billion, down 34% from the prior year.

Western Digital is a leading player in the memory chip industry and a major supplier of hard drives and flash storage used in personal computers, smartphones, servers and other devices. The company has struggled for more than a year now amid an ongoing supply glut that hit the industry as the COVID-19 pandemic wound down. Customers had stockpiled storage products during the pandemic in the same way they were hoarding chips, but now the world has reopened, devices are no longer selling like hotcakes and they’re struggling to shift the enormous inventories they built up earlier.

The supply glut has hammered memory chip prices, sending Western Digital into a tailspin over the last year.

Nevertheless, Chief Executive David Goeckeler (pictured) has managed to steady the ship somewhat by delivering to expectations. “Throughout the fiscal fourth quarter and fiscal year, Western Digital continued to optimize our operations and successfully execute our innovative product roadmap, priming ourselves for greater profitability when demand rebounds across hard drives and flash,” he said in a statement.

Western Digital derives its revenue from three segments. They include Cloud, which covers products sold to cloud infrastructure providers such as Amazon Web Services Inc. and Microsoft Corp. Sales there plunged 53%, to $994 million, during the quarter. The Client business segment, which handles products sold directly to original equipment manufacturers and through distribution partners, generated $1.035 billion in revenue, down 37% from a year ago.

The smallest business is the Consumer segment, which covers retail and end-user products such as USB drives. Revenue there fell 19%, to $643 million.

The numbers make for depressing reading, but Goeckeler pointed out that on a sequential basis, revenue from its Client and Consumer segments actually grew by 6% and 3%, respectively. That suggests there may be light at the end of the tunnel.

“Our two largest end markets, Client and Consumer, are returning to growth, inventories are normalizing, content per unit is increasing and price declines have been moderating,” Goeckeler said.

Holger Mueller of Constellation Research Inc. said Western Digital did well to surpass Wall Street’s expectations, and said that happened because it has been able to adjust to the new reality of the storage market. “For the longest time it was enterprise and cloud that drove its business, but the baton has now been passed to consumers,” he said. “Enterprises are reducing IT spend and Western Digital feels it, and Goeckeler and his team will need to adjust their cost base in response and continue delivering to expectations.”

As such, Western Digital offered a somewhat optimistic forecast, saying it’s looking at a fiscal 2024 first-quarter loss of between $2.10 and $1.80 per share, ahead of Wall Street’s consensus estimate of a $2 loss. In terms of revenue, the company is looking at a range of $2.55 billion to $2.75 billion versus Wall Street’s $2.75 billion target.

Western Digital’s stock was down just over a percentage point after the report.

Photo: Western Digital