Western Digital's 1Q FY2027 results: Implications for Japan's electronic components sector

J.P. Morgan analyzes Western Digital's July-September 2026 (1Q FY2027) results and their implications for Japan's electronic components sector. Sales totaled US$4.38bn, up 56% YoY and 17% QoQ, above the US$4.10bn guidance midpoint and the US$4.15bn Bloomberg consensus. Non-GAAP gross margin was 58.1%, versus guidance of 55.5% and consensus of 55.9%. For 2Q FY2027, management guides sales to a US$5.10bn midpoint, up 69% YoY and 16% QoQ, well above the US$4.59bn consensus, with a 60.5% gross margin midpoint versus 57.8% expected. J.P. Morgan views the results and guidance as significantly ahead of expectations, with earnings growth accelerating and demand visibility extending through 2030-2031 across Western Digital's seven largest customers. The company continues to shift toward higher-capacity drives through areal density gains and higher per-TB pricing while refraining from adding unit-based production capacity, implying unit volume growth is unlikely to be the main driver for HDD com