Western Digital Corp. (WDC) reported fiscal third-quarter results after Thursday's closing bell, and on paper, things looked pretty good. The storage company beat Wall Street estimates on both the top and bottom lines, and its guidance for the current quarter came in well above analyst expectations. So why did the stock drop 6.1% in after-hours trading? Let's dig in.

The Numbers

Western Digital reported quarterly earnings of $2.72 per share, comfortably ahead of the $2.39 analysts were looking for. Revenue came in at $3.34 billion, beating the $3.25 billion consensus and up sharply from $2.29 billion in the same period last year. Non-GAAP gross margin hit 50.5% for the quarter.

CEO Irving Tan struck an optimistic tone: "WD started calendar year 2026 with great execution, driving strong sequential and year-over-year revenue growth in all our end markets, while expanding gross and operating margins." He also highlighted the demand drivers: "Virtually every AI workload, from training, inference, agentic AI to physical AI, creates data that is stored persistently and cost-efficiently on HDDs."

Guidance

For the fourth quarter, Western Digital expects adjusted EPS of $3.10 to $3.40, well above the $2.73 analyst estimate. Revenue is forecast in a range of $3.55 billion to $3.75 billion, versus the $3.46 billion consensus. That's a solid beat on both fronts.

So why the sell-off? It's possible investors were hoping for even more, or perhaps the market is taking profits after a strong run. Whatever the reason, the stock was trading at $408 in the extended session, down 6.1% from Thursday's close. For a company that just delivered a beat-and-raise quarter, it's a reminder that sometimes good news isn't enough.