Western Digital Corp. posted financial results that surpassed Wall Street’s expectations today, only to follow up with weak guidance for the current quarter in a sign that demand for memory chips will likely take longer than expected to recover.

The company’s stock initially slumped in extended trading but recovered and ended the day up more than 1%. That came after the stock gained 2% in the regular trading session.

Western Digital reported a net loss for the third quarter of $572 million, down from a profit of $25 million one year earlier. Losses before certain costs such as stock compensation came to $1.37 per share, better than the consensus estimate of a $1.55 per share loss. Revenue for the period declined 10%, to $2.8 billion, surpassing analysts’ forecast of $2.76 billion.

The maker of hard drives and flash storage used in computers, smartphones and other devices had warned investors it was expecting softness three months earlier. The company is a leading player in the memory chip industry, and was among the first to flag a supply glut. It has since been hammered by falling chip prices resulting from lower demand for electrical goods and oversupply.

In a statement, Western Digital Chief Executive David Goeckeler (pictured) said his team has been focused on enhancing its business agility for some time. “The groundwork we laid, combined with the actions we have taken since the beginning of this fiscal year to right-size and refocus our businesses, have enabled us to navigate a dynamic environment,” he said.

Despite steadying the ship, Western Digital can do little but brave the rough seas ahead, for lower cloud spending means that the memory chip market is unlikely to recover any time soon. Recently, Intel Corp. reported that it’s seeing slower cloud spending, and Seagate Technology Holdings, a more direct rival to Western Digital, said last month that it’s experiencing a “more elongated customer inventory correction” than first feared. As a result, Seagate doesn’t expect the market to recover until later in the year.

Western Digital and its competitors have all cut back drastically on production to alleviate oversupply issues, but their hopes of engineering a market recovery have been dented by a weak global economy.

As such, Western Digital said it’s expecting fourth-quarter revenue of between $2.4 billion and $2.6 billion, below the consensus estimate of $2.86 billion. It also forecast a loss of between $1.90 and $2.20 per share, compared with the Street’s forecast of a $1.22-per-share loss.

Constellation Research Inc. analyst Holger Mueller told SiliconANGLE that Western Digital deserves some credit for delivering to guidance, but remains mired in some very choppy waters. “The problem is that all three of its business segments – Cloud, Client and Consumer – shrank in the quarter,” Mueller said. “We know the PC industry is in a slump, but the decline in cloud business is harder to understand. It’s more resilient due to its subscription nature, but not large enough to stabilize the entire company.”

In the meantime, Western Digital remains under pressure from the activist investor Elliott Management Corp., which took a $1 billion stake in the company last year in order to push for a separation of its flash memory and hard-drive businesses. The latest word is that Western Digital is still exploring such a move. There are also persistent reports of a possible merger between it and the Japanese memory chip giant Kioxia Holdings Corp., with talks between the two reportedly still active, despite going on for more than two years.

Photo: Western Digital