Item 1. Financial Statements (unaudited)

WESTERN DIGITAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

(Unaudited)

			April 3, 2026						June 27, 2025
ASSETS
Current assets:
Cash and cash equivalents			$	2,050					$	2,114
Accounts receivable, net			1,894						1,486
Inventories			1,357						1,291
Retained interest in Sandisk			1,187						354
Other current assets			423						611
Total current assets			6,911						5,856
Property, plant and equipment, net			2,422						2,343
Goodwill			4,321						4,319
Other non-current assets			1,391						1,484
Total assets			$	15,045					$	14,002
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	1,587					$	1,266
Accrued expenses			766						719
Accrued compensation			501						407
Income taxes payable			202						800
Current portion of long-term debt			1,581						2,226
Total current liabilities			4,637						5,418
Long-term debt			—						2,485
Other liabilities			728						559
Total liabilities			5,365						8,462
Commitments and contingencies (Notes 8 and 14)
Convertible preferred stock			—						229
Shareholders’ equity:
Common stock			3						3
Additional paid-in capital			3,747						4,621
Accumulated other comprehensive income			3						20
Retained earnings			6,858						762
Treasury stock			(931)						(95)
Total shareholders’ equity			9,680						5,311
Total liabilities, convertible preferred stock and shareholders’ equity			$	15,045					$	14,002

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

WESTERN DIGITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

(Unaudited)

			Three Months Ended												Nine Months Ended
			April 3, 2026						March 28, 2025						April 3, 2026						March 28, 2025
Revenue, net			$	3,337					$	2,294					$	9,172					$	6,915
Cost of revenue			1,661						1,382						4,889						4,290
Gross profit			1,676						912						4,283						2,625
Operating expenses:
Research and development			294						245						877						732
Selling, general and administrative			147						108						413						444
Litigation matter			—						(201)						—						(198)
Business realignment charges			45						—						103						(7)
Total operating expenses			486						152						1,393						971
Operating income			1,190						760						2,890						1,654
Interest and other income (expense):
Interest income			12						10						41						25
Interest expense			(38)						(91)						(151)						(283)
Gain (loss) on retained interest in Sandisk			2,734						(606)						4,448						(606)
Costs in connection with debt-for-equity exchange			(545)						—						(545)						—
Other income (expense), net			6						1						(25)						(7)
Total interest and other income (expense), net			2,169						(686)						3,768						(871)
Income before taxes			3,359						74						6,658						783
Income tax expense (benefit)			154						(698)						429						(608)
Net income from continuing operations			3,205						772						6,229						1,391
Net income (loss) from discontinued operations, net of taxes			—						(252)						—						216
Net income			$	3,205					$	520					$	6,229					$	1,607
Net income (loss) per common share:
Basic:
Continuing operations			$	9.26					$	2.17					$	17.80					$	3.91
Discontinued operations			—						(0.71)						—						0.62
Net income per common share			9.26						1.46						17.80						4.53
Diluted:
Continuing operations			8.20						2.11						16.05						3.79
Discontinued operations			—						(0.69)						—						0.59
Net income per common share			8.20						1.42						16.05						4.38

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

WESTERN DIGITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(Unaudited)

			Three Months Ended												Nine Months Ended
			April 3, 2026						March 28, 2025						April 3, 2026						March 28, 2025
Net income			$	3,205					$	520					$	6,229					$	1,607
Other comprehensive income (loss), before tax:
Foreign currency translation adjustment			(1)						24						(1)						45
Net unrealized gain (loss) on derivative contracts			(14)						98						(18)						172
Total other comprehensive income (loss), before tax			(15)						122						(19)						217
Income tax benefit (expense) related to items of other comprehensive income (loss), before tax			—						(24)						2						(40)
Other comprehensive income (loss), net of tax			(15)						98						(17)						177
Total comprehensive income			$	3,190					$	618					$	6,212					$	1,784

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

WESTERN DIGITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

			Nine Months Ended
			April 3, 2026						March 28, 2025
Cash flows from operating activities
Net income			$	6,229					$	1,607
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization			276						365
Stock-based compensation			159						220
Deferred income taxes			131						(682)
Gain on business divestiture			—						(113)
(Gain) loss on retained interest in Sandisk			(4,448)						606
Costs in connection with debt-for-equity exchange			545						—
Other non-cash operating activities, net			16						93
Changes in:
Accounts receivable, net			(408)						96
Inventories			(64)						(429)
Accounts payable			289						302
Accrued expenses			29						(316)
Accrued compensation			94						(131)
Income taxes payable			(598)						(80)
Other assets and liabilities, net			290						(593)
Net cash provided by operating activities			2,540						945
Cash flows from investing activities
Purchases of property, plant and equipment			(310)						(341)
Proceeds from the sale of property, plant and equipment			—						5
Net proceeds from business divestiture			—						401
Notes receivable issuances to Flash Ventures			—						(266)
Notes receivable proceeds from Flash Ventures			—						239
Distribution from Flash Ventures			—						175
Strategic investments and other, net			(8)						7
Net cash provided by (used in) investing activities			(318)						220
Cash flows from financing activities
Issuance of stock under employee stock plans			32						69
Taxes paid on vested stock awards under employee stock plans			(197)						(92)
Repurchases of common stock			(1,920)						—
Dividends paid to common shareholders			(120)						—
Dividends paid to preferred shareholders			(10)						—
Repayments of debt			(1,564)						(257)
Proceeds from debt			1,496						2,150
Debt issuance costs			—						(74)
Cash transferred to Sandisk related to Separation			—						(1,366)
Net cash provided by (used in) financing activities			(2,283)						430
Effect of exchange rate changes on cash			(3)						3
Net increase (decrease) in cash and cash equivalents			(64)						1,598
Cash and cash equivalents, beginning of period			2,114						1,879
Cash and cash equivalents, end of period			$	2,050					$	3,477
Supplemental disclosure of cash flow information:
Cash paid for income taxes			$	636					$	762
Cash paid for interest			$	144					$	295

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

WESTERN DIGITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY

(in millions)

(Unaudited)

			Convertible Preferred Stock															Common Stock												Treasury Stock												Additional Paid-In Capital						Accumulated Other Comprehensive Income						Retained Earnings						Total Shareholders’ Equity
			Shares						Amount									Shares						Amount			Shares						Amount
Balance at June 27, 2025			0.2						$	229								349						$	3					(2)						$	(95)					$	4,621					$	20					$	762					$	5,311
Net income			—						—									—						—						—						—						—						—						1,182						1,182
Employee stock plans			—						—									—						—						1						69						(125)						—						—						(56)
Stock-based compensation			—						—									—						—						—						—						53						—						—						53
Repurchases of common stock			—						—									—						—						(6)						(557)						—						—						—						(557)
Common stock dividends			—						—									—						—						—						—						1						—						(35)						(34)
Preferred stock dividends			—						—									—						—						—						—						—						—						(5)						(5)
Net unrealized loss on derivative contracts, net of taxes			—						—									—						—						—						—						—						(6)						—						(6)
Balance at October 3, 2025			0.2						229									349						3						(7)						(583)						4,550						14						1,904						5,888
Net income			—						—									—						—						—						—						—						—						1,842						1,842
Employee stock plans			—						—									—						—						2						93						(102)						—						—						(9)
Stock-based compensation			—						—									—						—						—						—						53						—						—						53
Repurchases of common stock			—						—									—						—						(4)						(619)						—						—						—						(619)
Common stock dividends			—						—									—						—						—						—						1						—						(44)						(43)
Preferred stock dividends			—						—									—						—						—						—						—						—						(5)						(5)
Net unrealized gain on derivative contracts, net of taxes			—						—									—						—						—						—						—						4						—						4
Balance at January 2, 2026			0.2						229									349						3						(9)						(1,109)						4,502						18						3,697						7,111
Net income			—						—									—						—						—						—						—						—						3,205						3,205
Conversion of convertible preferred stock			(0.2)						(229)									—						—						7						796						(567)						—						—						229
Employee stock plans			—						—									—						—						1						139						(242)						—						—						(103)
Stock-based compensation			—						—									—						—						—						—						53						—						—						53
Repurchases of common stock			—						—									—						—						(3)						(757)						—						—						—						(757)
Common stock dividends			—						—									—						—						—						—						1						—						(44)						(43)
Net unrealized loss on derivative contracts, net of taxes			—						—									—						—						—						—						—						(15)						—						(15)
Balance at April 3, 2026			—						$	—								349						$	3					(4)						$	(931)					$	3,747					$	3					$	6,858					$	9,680

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

WESTERN DIGITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY

(in millions)

(Unaudited)

			Convertible Preferred Stock															Common Stock																		Additional Paid-In Capital						Accumulated Other Comprehensive Income (Loss)						Retained Earnings						Total Shareholders’ Equity
			Shares						Amount									Shares						Amount
Balance at June 28, 2024			0.2						$	229								343						$	3																	$	4,752					$	(712)					$	6,775					$	10,818
Net income			—						—									—						—																		—						—						493						493
Employee stock plans			—						—									3						—																		(64)						—						—						(64)
Stock-based compensation			—						—									—						—																		84						—						—						84
Foreign currency translation adjustment			—						—									—						—																		—						121						—						121
Net unrealized gain on derivative contracts, net of taxes			—						—									—						—																		—						191						—						191
Balance at September 27, 2024			0.2						229									346						3																		4,772						(400)						7,268						11,643
Net income			—						—									—						—																		—						—						594						594
Employee stock plans			—						—									2						—																		36						—						—						36
Stock-based compensation			—						—									—						—																		77						—						—						77
Foreign currency translation adjustment			—						—									—						—																		—						(100)						—						(100)
Net unrealized loss on derivative contracts, net of taxes			—						—									—						—																		—						(133)						—						(133)
Balance at December 27, 2024			0.2						229									348						3																		4,885						(633)						7,862						12,117
Net income			—						—									—						—																		—						—						520						520
Distribution in connection with the Separation			—						—									—						—																		(307)						546						(7,857)						(7,618)
Employee stock plans			—						—									1						—																		5						—						—						5
Stock-based compensation			—						—									—						—																		59						—						—						59
Preferred stock dividends			—						—									—						—																		—						—						(4)						(4)
Foreign currency translation adjustment			—						—									—						—																		—						24						—						24
Net unrealized gain on derivative contracts, net of taxes			—						—									—						—																		—						74						—						74
Balance at March 28, 2025			0.2						$	229								349						$	3																	$	4,642					$	11					$	521					$	5,177

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Organization and Basis of Presentation

Western Digital Corporation (“Western Digital,” “WD,” or the “Company”) is a leading developer, manufacturer, and provider of data storage devices and solutions based on HDD technologies.

The Company manufactures, markets, and sells data storage devices and solutions globally through its sales personnel, dealers, distributors, retailers, and subsidiaries. Its extensive portfolio of technology and products addresses the following key end markets: “Cloud,” “Client,” and “Consumer.” Cloud is comprised primarily of products for public or private cloud environments and enterprise customers. Through the Client end market, the Company provides its original equipment manufacturer (“OEM”) and channel customers a broad array of high-performance HDD solutions across desktop and notebooks. The Consumer end market provides a wide range of retail and other end-user products, which capitalize on the strength of the Company’s product brand recognition and vast presence around the world.

The accounting policies followed by the Company are set forth in Part II, Item 8, Note 1, Organization and Basis of Presentation, of the Notes to Consolidated Financial Statements included in the 2025 Annual Report on Form 10-K. In the opinion of management, all adjustments necessary to fairly state the Condensed Consolidated Financial Statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been made. Such adjustments consist of items of a normal, recurring nature. Certain information and disclosures normally included in the Consolidated Financial Statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in the 2025 Annual Report on Form 10‑K. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year.

Information provided herein for the three and nine months ended March 28, 2025 is presented on a continuing operations basis to reflect the impact of the Separation of the Company’s former Flash business as discussed in further detail in Note 4, Discontinued Operations.

Fiscal Year

The Company’s fiscal year ends on the Friday nearest to June 30 and typically consists of 52 weeks. Approximately every five to six years, the Company reports a 53-week fiscal year to align the fiscal year with the foregoing policy. Fiscal year 2026, which will end on July 3, 2026, will be comprised of 53 weeks, with the first quarter consisting of 14 weeks and the remaining quarters consisting of 13 weeks each. Fiscal year 2025, which ended on June 27, 2025, was comprised of 52 weeks, with all quarters presented consisting of 13 weeks. Unless otherwise indicated, references herein to specific years and quarters are to fiscal years and fiscal quarters, and references to financial information are on a consolidated continuing operations basis.

Use of Estimates

Company management has made estimates and assumptions relating to the reporting of certain assets and liabilities in conformity with U.S. GAAP. These estimates and assumptions have been applied using methodologies that are consistent throughout the periods presented; however, actual results could differ materially.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2. Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2025, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU”) No. 2025-10, “Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities” (“ASU 2025-10”), which establishes guidance on the recognition, measurement, and presentation of government grants. The standard may be adopted using a full retrospective, modified retrospective, or modified prospective transition method. ASU 2025-10 is effective for the year beginning June 30, 2029, and interim periods within that year, with early adoption permitted. The Company is currently assessing the impact of this guidance on its condensed consolidated financial statements and related disclosures.

In November 2025, the FASB issued ASU No. 2025-09, “Derivatives and Hedging (Topic 815): Hedge Accounting Improvements” (“ASU 2025-09”), which introduces targeted improvements to better align hedge accounting with entities’ risk management activities. ASU 2025-09 is effective for the year beginning July 3, 2027, and interim periods within that year, with early adoption permitted. The Company is currently assessing the impact of this guidance on its condensed consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU No. 2025-07, “Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract” (“ASU 2025-07”), which (i) expands the scope exception of Topic 815 to exclude certain contracts with a variable that is based on operations or activities specific to one of the parties to the contract and (ii) clarifies the scope of share-based payments from a customer in a revenue contract. ASU 2025-07 is effective for the year beginning July 3, 2027, and interim periods within that year. Early adoption is permitted and must be applied as of the beginning of the fiscal year that includes the interim period. The Company currently does not expect this standard to have a material impact on its condensed consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU No. 2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Topic 350): Targeted Improvements to the Accounting for Internal-Use Software” (“ASU 2025-06”). ASU 2025-06 amends existing references to prescriptive and sequential software development stages to better align with current software development methods, such as agile development. Under the new standard, entities will begin to capitalize eligible software costs when (i) management has authorized and committed to funding the software project, and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. ASU 2025-06 is effective for the year beginning July 1, 2028, and interim periods within that year, with early adoption permitted. The Company is currently assessing the impact of this standard on its condensed consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which is intended to improve disclosures about the expenses of public entities. The new guidance requires more detailed information about the types of expenses in commonly presented expense captions (such as cost of sales and selling, general and administrative expenses) and requires public entities to disclose, on an annual and interim basis, the amounts of expenses included in each relevant expense caption presented on the face of the income statement, within continuing operations, in a tabular format. Additionally, public entities will be required to disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, the total amount of selling expenses and, in annual reporting periods, the definition of selling expenses. This standard is effective on either a prospective or retrospective basis with early adoption permitted. The Company is currently compiling the information required for these disclosures and assessing the basis of adoption and expects to adopt the guidance for annual reporting periods in its annual report for the year ending June 30, 2028.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 calls for enhanced income tax disclosure requirements surrounding the tabular rate reconciliation and income taxes paid. This standard is effective on either a prospective or retrospective basis. These incremental disclosures will be required beginning with the Company’s financial statements for the year ending July 3, 2026. The Company is currently compiling the information required for these disclosures and expects to provide any required disclosures in its annual report for the year ending July 3, 2026.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3. Disaggregated Revenue, Geographic Information, Concentrations of Risk, and Segment Reporting

The following table summarizes the Company’s disaggregated revenue:

			Three Months Ended												Nine Months Ended
			April 3, 2026						March 28, 2025						April 3, 2026						March 28, 2025
			(in millions)
Revenue by end market
Cloud			$	2,972					$	2,007					$	8,155					$	6,012
Client			179						137						501						416
Consumer			186						150						516						487
Total revenue			$	3,337					$	2,294					$	9,172					$	6,915
Revenue by geography(1)
Americas			$	1,499					$	1,182					$	3,890					$	3,468
Asia			1,320						753						3,612						2,349
Europe, Middle East and Africa			518						359						1,670						1,098
Total revenue			$	3,337					$	2,294					$	9,172					$	6,915

(1) Net revenue is attributed to geographic regions based on the ship-to location of the customer.

The Company’s top 10 customers accounted for 71% and 74%, respectively, of its net revenue for the three and nine months ended April 3, 2026, compared to 73% and 68%, respectively, of its net revenue for the three and nine months ended March 28, 2025. For the three months ended April 3, 2026, three customers accounted for 17%, 15%, and 11%, respectively, of the Company’s net revenue, and for the nine months ended April 3, 2026, three customers accounted for 16%, 15%, and 13%, respectively, of the Company’s net revenue. For the three months ended March 28, 2025, three customers accounted for 18%, 16%, and 13%, respectively, of the Company’s net revenue, and for the nine months ended March 28, 2025, two customers accounted for 18% and 11%, respectively, of the Company’s net revenue.

As of April 3, 2026 and June 27, 2025, net accounts receivable were $1.89 billion and $1.49 billion, respectively, and reserves for potential credit losses were not material. As of April 3, 2026, two customers accounted for 28% and 12%, respectively, of the Company’s net accounts receivable, and as of June 27, 2025, three customers accounted for 20%, 19%, and 12%, respectively, of the Company’s net accounts receivable.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Segment Reporting

The Company’s Chief Executive Officer, Irving Tan, is the Company’s Chief Operating Decision Maker (“CODM”). The CODM manages the business as a provider of data storage devices and solutions based on HDD technology. The CODM evaluates the performance of the Company and makes decisions regarding the allocation of resources based on the Company’s Net income from continuing operations and Total assets. The Company has therefore, determined that it has one reportable segment: HDD.

The following table is a reconciliation of the Company’s measure of segment profit or loss, significant segment expenses and other segment items:

			Three Months Ended												Nine Months Ended
			April 3, 2026						March 28, 2025						April 3, 2026						March 28, 2025
			(in millions)
Revenue, net			$	3,337					$	2,294					$	9,172					$	6,915
Less: Significant expenses and other segment items
Cost of revenue(1)			1,653						1,374						4,860						4,243
Research and development(1)			272						228						807						680
Selling, general and administrative(1)			125						96						343						398
Litigation matter			—						(207)						—						(179)
Business realignment charges			40						—						95						(7)
Stock-based compensation			53						35						159						122
Interest expense, net			26						81						110						257
(Gain) loss on retained interest in Sandisk			(2,734)						606						(4,448)						606
Costs in connection with debt-for-equity exchange			545						—						545						—
Other expense (income), net			(2)						3						3						5
Other segment items(2)			—						4						40						7
Income tax expense (benefit)			154						(698)						429						(608)
Net income from continuing operations			$	3,205					$	772					$	6,229					$	1,391

(1) Excludes amounts related to stock-based compensation and other segment items which are presented separately in the table above.

(2) Other segment items include activity from strategic investments and other charges.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 4. Discontinued Operations

On February 21, 2025, the Company completed the Separation through a pro rata distribution of 80.1% of the outstanding shares of Sandisk to Western Digital stockholders. The Separation is intended to be tax-free for U.S. federal income tax purposes. To reflect the completion of the Separation, the Company recorded a decrease in shareholders’ equity for the net book value of applicable assets and liabilities derecognized in connection with the Separation, net of the Company’s retained ownership interest, which was initially 19.9% and was based on the net book value of the applicable assets and liabilities derecognized. As a result of the Separation, Sandisk became an independent public company and Western Digital no longer consolidates Sandisk into the Company’s financial results. The historical results of operations of Sandisk are now reported in the Company’s Condensed Consolidated Financial Statements as discontinued operations for all periods prior to the Separation on February 21, 2025.

The following table provides a summary of the historical results of Sandisk for the three and nine months ended March 28, 2025, which have been reflected as Net income (loss) from discontinued operations, net of taxes in the Condensed Consolidated Statements of Operations. Business separation costs represent separation and transition costs the Company incurred in connection with the Separation.

						Three Months Ended						Nine Months Ended
Net Income (Loss) from Discontinued Operations, Net of Taxes						March 28, 2025
						(in millions)
Revenue, net						$	602					$	4,361
Cost of revenue						485						2,892
Operating expenses:
Research and development						185						718
Selling, general and administrative						84						229
Gain on business divestiture						—						(113)
Business separation costs						57						144
Business realignment charges						—						3
Operating income (loss)						(209)						488
Total interest and other income (expense), net						1						(36)
Income (loss) before taxes						(208)						452
Income tax expense						44						236
Net income (loss) from discontinued operations, net of taxes						$	(252)					$	216

Cash flows related to discontinued operations have not been segregated and are included in the Condensed Consolidated Statements of Cash Flows for all periods presented. The following table provides selected financial information related to cash flows from discontinued operations:

												Nine Months Ended
Select Cash Flow Information from Discontinued Operations												March 28, 2025
												(in millions)
Purchases of property, plant and equipment												$	139
Depreciation and amortization												117
Stock-based compensation												98

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Consistent with the Company's original intent to monetize its retained interest in Sandisk, the Company began executing a series of strategic transactions to optimize its capital structure. In June 2025, the Company used 21.3 million shares of Sandisk common stock in a tax-free exchange to retire $800 million principal amount of the Company’s Term Loan A-3 maturing in January 2027 (the “Term Loan A-3”). In February 2026, the Company executed a series of transactions to monetize additional Sandisk shares and further reduce its outstanding debt. Initially, the Company entered into a $1.50 billion Bridge Loan (as defined below), which was utilized to fully redeem all of its Senior Notes (as defined below) and consolidate the broad creditor base to two holders to facilitate a debt-for-equity exchange. Following the redemptions of the Senior Notes, the Company retired the Bridge Loan and its existing Term Loan A-3 through a tax-free exchange for 5.8 million shares of Sandisk common stock. See Note 7, Debt, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further details. As of April 3, 2026, the Company still held 1.7 million shares of Sandisk common stock, which it expects to monetize by the end of 2026 in one or more subsequent exchanges for its outstanding common stock.

In connection with the Separation, the Company entered into a series of transition services agreements to provide transition service support for various periods of time ranging up to 15 months. The amounts involved under these agreements have not been and are not expected to be material.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5. Supplemental Financial Statement Data

Inventories

			April 3, 2026						June 27, 2025
			(in millions)
Inventories:
Raw materials and component parts			$	184					$	227
Work-in-process			803						785
Finished goods			370						279
Total inventories			$	1,357					$	1,291

Property, plant and equipment, net

			April 3, 2026						June 27, 2025
			(in millions)
Property, plant and equipment:
Land and improvements			$	225					$	225
Buildings and improvements			1,589						1,550
Machinery and equipment			6,754						6,488
Computer equipment and software			282						257
Furniture and fixtures			36						33
Construction-in-process			464						532
Property, plant and equipment, gross			9,350						9,085
Accumulated depreciation			(6,928)						(6,742)
Property, plant and equipment, net			$	2,422					$	2,343

Non-current assets

			April 3, 2026						June 27, 2025
			(in millions)
Non-current assets:
Deferred tax assets			$	878					$	1,007
Other non-current assets			513						477
Total non-current assets			$	1,391					$	1,484

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Product warranty accrual

Changes in the warranty accrual were as follows:

			Three Months Ended												Nine Months Ended
			April 3, 2026						March 28, 2025						April 3, 2026						March 28, 2025
			(in millions)
Warranty accrual, beginning of period			$	177					$	121					$	152					$	142
Charges to operations			40						24						96						73
Utilization			(21)						(18)						(58)						(61)
Changes in estimate related to pre-existing warranties			(6)						(11)						—						(38)
Warranty accrual, end of period			$	190					$	116					$	190					$	116

The current portion of the warranty accrual was classified in Accrued expenses and the long-term portion was classified in Other liabilities, as noted below:

			April 3, 2026						June 27, 2025
			(in millions)
Warranty accrual:
Current portion			$	39					$	57
Long-term portion			151						95
Total warranty accrual			$	190					$	152

Other liabilities

			April 3, 2026						June 27, 2025
			(in millions)
Other liabilities:
Non-current portion of unrecognized tax benefits			$	228					$	163
Other non-current liabilities			500						396
Total other liabilities			$	728					$	559

Goodwill

Goodwill is not amortized. Instead, it is tested for impairment annually as of the beginning of the Company’s fourth quarter, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Management performed goodwill impairment assessments and concluded there were no impairment indicators for either of the three or nine months ended April 3, 2026 and March 28, 2025. The carrying amount of goodwill was $4.32 billion as of both April 3, 2026 and June 27, 2025.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accumulated other comprehensive income

Accumulated other comprehensive income refers to expenses, gains, and losses that are recorded as an element of shareholders’ equity but are excluded from net income. The components of Accumulated other comprehensive income were as follows:

			Actuarial Pension Gains						Foreign Currency Translation Adjustment												Unrealized Gains (Losses) on Derivative Contracts						Total Accumulated Other Comprehensive Income
			(in millions)
Balance at June 27, 2025			$	16					$	(2)											$	6					$	20
Other comprehensive loss before reclassifications			—						(1)												(14)						(15)
Amounts reclassified from accumulated other comprehensive income			—						—												(4)						(4)
Income tax benefit related to items of other comprehensive loss			—						—												2						2
Net current-period other comprehensive loss			—						(1)												(16)						(17)
Balance at April 3, 2026			$	16					$	(3)											$	(10)					$	3

During the three and nine months ended April 3, 2026, the amounts reclassified from Accumulated other comprehensive income were losses related to foreign exchange contracts that were substantially charged to Cost of revenue in the Condensed Consolidated Statements of Operations.

As of April 3, 2026, all existing net losses related to cash flow hedges recorded in Accumulated other comprehensive income are expected to be reclassified to earnings within the next twelve months.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 6. Fair Value Measurements and Investments

Financial Instruments Carried at Fair Value

Financial assets and liabilities that are remeasured and reported at fair value at each reporting period are classified and disclosed in one of the following three levels:

Level 1. Quoted prices in active markets for identical assets or liabilities.

Level 2. Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3. Inputs that are unobservable for the asset or liability and that are significant to the fair value of the assets or liabilities.

Following the Separation, as the Company no longer controls or has the ability to exert significant influence over Sandisk, the Company measures its retained ownership interest in Sandisk common stock at fair value on a recurring basis.

The following tables present information about the Company’s financial instruments that were measured at fair value on a recurring basis for the periods presented and indicate the fair value hierarchy of the valuation techniques utilized to determine such values:

			April 3, 2026
			Level 1						Level 2						Level 3						Total
			(in millions)
Assets:
Retained interest in Sandisk			$	1,187					$	—					$	—					$	1,187
Cash equivalents - Money market funds			93						—						—						93
Certificates of deposit			20						—						—						20
Foreign exchange contracts			—						5						—						5
Total assets at fair value			$	1,300					$	5					$	—					$	1,305
Liabilities:
Foreign exchange contracts			$	—					$	29					$	—					$	29
Total liabilities at fair value			$	—					$	29					$	—					$	29

			June 27, 2025
			Level 1						Level 2						Level 3						Total
			(in millions)
Assets:
Retained interest in Sandisk			$	354					$	—					$	—					$	354
Cash equivalents - Money market funds			285						—						—						285
Foreign exchange contracts			—						10						—						10
Total assets at fair value			$	639					$	10					$	—					$	649
Liabilities:
Foreign exchange contracts			$	—					$	4					$	—					$	4
Total liabilities at fair value			$	—					$	4					$	—					$	4

During the periods presented, the Company had no transfers of financial instruments between levels and there were no changes in valuation techniques or the inputs used in the fair value measurement.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Financial Instruments Not Carried at Fair Value

For financial instruments where the carrying value (which includes principal adjusted for any unamortized issuance costs and discounts or premiums) differs from fair value (which is based on quoted market prices), the following table represents the related carrying value and fair value for each of the Company’s outstanding financial instruments. Each of the financial instruments presented below were categorized as Level 2 for all periods presented, based on the frequency of trading immediately prior to the end of the third quarter of 2026 and the fourth quarter of 2025, respectively.

			April 3, 2026												June 27, 2025
			Carrying Value						Fair Value						Carrying Value						Fair Value
			(in millions)
4.75% senior unsecured notes due 2026			$	—					$	—					$	500					$	499
Variable interest rate Term Loan A-3 maturing 2027			—						—						1,642						1,655
3.00% convertible notes due 2028			1,581						12,507						1,575						2,849
2.85% senior notes due 2029			—						—						498						463
3.10% senior notes due 2032			—						—						496						442
Total			$	1,581					$	12,507					$	4,711					$	5,908

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 7. Debt

Debt consisted of the following:

			April 3, 2026						June 27, 2025
			(in millions)
4.75% senior unsecured notes due 2026			$	—					$	500
Variable interest rate Term Loan A-3 maturing 2027			—						1,649
3.00% convertible notes due 2028			1,600						1,600
2.85% senior notes due 2029			—						500
3.10% senior notes due 2032			—						500
Total debt			1,600						4,749
Issuance costs			(19)						(38)
Subtotal			1,581						4,711
Less: current portion of long-term debt			(1,581)						(2,226)
Long-term debt			$	—					$	2,485

During the nine months ended April 3, 2026, the Company made scheduled repayments of $63 million under Term Loan A-3. In February 2026, the Company executed a series of transactions to reduce its outstanding debt, including entering into a $1.50 billion bridge loan (the “Bridge Loan”). The Bridge Loan was utilized to consolidate the holders of the 4.75% senior unsecured notes due 2026, the 2.85% senior notes due 2029, and the 3.10% senior notes due 2032 (collectively, the “Senior Notes”) from a broad creditor base into two holders to facilitate a debt-for-equity exchange. The proceeds of the Bridge Loan were used to fully redeem all of the Senior Notes in cash, at par plus accrued interest. In connection with the redemptions, the Company wrote off $6 million of remaining unamortized issuance costs. Following the redemptions, the Company retired the Bridge Loan and its existing Term Loan A-3 through a non-cash, tax-free exchange for 5.8 million shares of Sandisk common stock held by the Company, valued at $3.62 billion on the date of exchange. The exchange resulted in $539 million recorded in Costs in connection with debt-for-equity exchange in the Condensed Consolidated Statement of Operations. This amount primarily reflects a discount on Sandisk shares provided to the counterparties in connection with the exchange. The need for the discount was primarily driven by volatility of the Sandisk stock price in the period of the exchange.

As of April 3, 2026, the Company had no outstanding standby letters of credit and the available capacity under the revolving credit facility maturing in January 2027 was $1.25 billion.

The loan agreement governing the revolving credit facility (the “Loan Agreement”) requires the Company to comply with a financial leverage ratio covenant. As of April 3, 2026, the Company was in compliance with the financial covenant.

As of April 3, 2026, the Company had outstanding $1.60 billion aggregate principal amount of convertible senior notes pursuant to an indenture dated as of November 3, 2023 (the “Indenture”), which bear interest at an annual rate of 3.00% and mature on November 15, 2028, unless earlier repurchased, redeemed or converted (the “2028 Convertible Notes”).

The 2028 Convertible Notes are convertible at the option of any holder beginning August 15, 2028, at a conversion price of approximately $37.72 per share of common stock as of April 3, 2026. Prior to August 15, 2028, if the trading price of the Company’s common stock remains above 130% of the conversion price for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading-day period prior to the end of a calendar quarter, holders of the 2028 Convertible Notes would have the right to convert the 2028 Convertible Notes during the next succeeding calendar quarter. The 2028 Convertible Notes are also convertible prior to August 15, 2028 upon the occurrence of certain corporate events. Upon any conversion of the 2028 Convertible Notes, the Company will pay cash for the aggregate principal amount of the notes to be converted and pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination thereof, at the Company’s election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the notes being converted.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

During the calendar quarter ended March 31, 2026, the sale price conditional conversion feature of the 2028 Convertible Notes was triggered, which provides the holders of those notes with the right to convert through June 30, 2026. During the three months ended April 3, 2026, holders tendered for conversion a portion of the 2028 Convertible Notes, aggregating to $32 million in principal amount (the “Tendered Notes”). The Company made an irrevocable election to settle in cash the conversion obligation in excess of the principal amount of the Tendered Notes, as permitted by the Indenture. This election requires bifurcation and separate accounting of the embedded conversion feature as a derivative instrument pursuant to Accounting Standards Codification 815. The derivative is remeasured to fair value at each reporting period, with changes recognized in Other income (expense), net in the Condensed Consolidated Statements of Operations. For the three months ended April 3, 2026, the Company recorded an immaterial gain related to this remeasurement. Settlement is scheduled for June 2026. The Company retains the right to settle any conversion obligation in excess of the principal amount of the remaining 2028 Convertible Notes in cash or shares or a combination thereof, at its election.

Because holders of the 2028 Convertible Notes have the right to convert through the calendar quarter ending June 30, 2026, the Company classified the 2028 Convertible Notes, including the Tendered Notes, in the Current portion of long-term debt in the Condensed Consolidated Balance Sheet as of April 3, 2026, consistent with each quarter since the quarter ended June 27, 2025. The Company will continue to evaluate the conversion feature quarterly to determine if the 2028 Convertible Notes remain convertible in future periods.

The sale price conditional conversion feature of the 2028 Convertible Notes was also triggered in the calendar quarter ended June 30, 2025, which then provided the holders with the right to convert during the succeeding calendar quarter ended September 30, 2025. Consequently, the Company likewise classified the 2028 Convertible Notes in the Current portion of long-term debt in the Condensed Consolidated Financial Statements as of June 27, 2025.

On or after November 15, 2026, the Company may redeem for cash, at par plus accrued interest, all or any portion of the 2028 Convertible Notes, at its option, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 10 trading days during any 20 consecutive trading day period immediately preceding the date of the Company’s redemption notice.

In connection with the issuance of the 2028 Convertible Notes, the Company also entered into privately negotiated capped call transactions with certain counterparties (the “Capped Calls”). As of April 3, 2026, the Capped Calls each have a strike price of approximately $37.72 per share and a cap price of approximately $50.41 per share. The Capped Calls are generally intended to reduce or offset the potential dilution to the Company’s common stock upon any conversion of the 2028 Convertible Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. If the market price per share of the Company’s common stock, as measured under the terms of the Capped Calls, exceeds the cap prices of the Capped Calls, there would not be an offset for the excess. The Capped Calls are separate transactions and not part of the terms of the 2028 Convertible Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in shareholders’ equity and are not accounted for as derivatives.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 8. Leases and Other Commitments

Leases

The Company leases certain domestic and international facilities and data center space under long-term, non-cancelable operating leases that expire at various dates through 2034. These leases include no material variable or contingent lease payments. Operating lease assets and liabilities are recognized based on the present value of the remaining lease payments discounted using the Company’s incremental borrowing rate. Operating lease assets also include prepaid lease payments minus any lease incentives. Extension or termination options present in the Company’s lease agreements are included in determining the right-of-use asset and lease liability when it is reasonably certain the Company will exercise those options. Lease expense is recognized on a straight-line basis over the lease term.

The following table presents right-of-use lease assets and lease liabilities included in the Company’s Condensed Consolidated Balance Sheets:

			April 3, 2026						June 27, 2025
			(in millions)
Operating lease right-of-use assets (included in Other non-current assets)			$	127					$	123
Operating lease liabilities:
Current portion of long-term operating lease liabilities (included in Accrued expenses)			32						31
Long-term operating lease liabilities (included in Other liabilities)			111						110
Total operating lease liabilities			$	143					$	141

The following table summarizes supplemental disclosures of operating cost and cash flow information related to operating leases:

			Three Months Ended												Nine Months Ended
			April 3, 2026						March 28, 2025						April 3, 2026						March 28, 2025
			(in millions)
Cost of operating leases			$	10					$	7					$	28					$	24
Cash paid for operating leases			9						8						28						28
Operating lease assets obtained in exchange for operating lease liabilities			3						6						26						18

The weighted average remaining lease term and discount rate for the Company’s operating leases were as follows:

			April 3, 2026						June 27, 2025
Weighted average remaining lease term in years			5.8						6.1
Weighted average discount rate			5.1		%				5.0		%

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of April 3, 2026, minimum lease payments were as follows:

			Lease Amounts
			(in millions)
Remaining three months of 2026			$	10
2027			36
2028			29
2029			23
2030			18
Thereafter			49
Total future minimum lease payments			165
Less: imputed interest			22
Present value of lease liabilities			$	143

Purchase Obligations and Other Commitments

In the normal course of business, the Company enters into purchase orders with suppliers for the purchase of components used to manufacture its products. These purchase orders generally cover forecasted component supplies needed for production during the next quarter, are recorded as a liability upon receipt of the components, and generally may be changed or canceled at any time prior to shipment of the components. The Company also enters into long-term agreements with suppliers that contain fixed future commitments, which are contingent on certain conditions, such as performance, quality and technology of the vendor’s components. As of April 3, 2026, the Company had the following minimum long-term commitments:

			Long-Term Commitments
			(in millions)
Remaining three months of 2026			$	20
2027			57
Total			$	77

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 9. Income Taxes

Previously, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the ability to deduct research and development (“R&D”) expenditures in the year incurred, requiring capitalization and amortization under Internal Revenue Code Section 174. On July 4, 2025, the One Big Beautiful Bill Act of 2025 (“OBBBA”) was signed into law, which includes broad tax reform provisions that extend and modify key elements of the TCJA. Notably, the new legislation now allows an option for the immediate expensing of domestic R&D expenditures, beginning with 2026. The legislation also includes favorable modifications to international tax provisions, including changes to the Global Intangible Low-Taxed Income regime and enhancements to the Foreign-Derived Deduction Eligible Income (“FDDEI”) deduction that will become effective for the Company in 2027.

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, which contained, among other things, a corporate alternative minimum tax (“CAMT”) of 15% on corporations with three-year average annual adjusted financial statement income (“AFSI”) exceeding $1.0 billion. Although CAMT became effective for the Company beginning with 2024, the Company was not subject to CAMT in 2024 and 2025. The Company does not expect to be subject to CAMT in 2026 as its average annual AFSI did not exceed $1.0 billion for the preceding three-year period.

On December 20, 2021, the Organization for Economic Co-operation and Development G20 (“OECD/G20”) Inclusive Framework on Base Erosion and Profit Shifting released Model Global Anti-Base Erosion rules under Pillar Two. Several non-U.S. jurisdictions have either enacted legislation or announced their intention to enact future legislation to adopt certain or all components of Pillar Two, also known as Global Minimum Tax (“GMT”). For 2026, the Company is subject to GMT in Malaysia, Thailand, and the Philippines.

The following table presents the Company’s Income tax expense (benefit) and the effective tax rate:

			Three Months Ended												Nine Months Ended
			April 3, 2026						March 28, 2025						April 3, 2026						March 28, 2025
			($ in millions)
Income before taxes			$	3,359					$	74					$	6,658					$	783
Income tax expense (benefit)			154						(698)						429						(608)
Effective tax rate			5%						(943)%						6%						(78)%

The primary drivers of the difference between the effective tax rate for the three and nine months ended April 3, 2026 and the U.S. Federal statutory rate of 21% are the relative mix of earnings and losses by jurisdiction, the deduction for FDDEI, tax credits, and the gain on the retained interest in Sandisk being tax-free due to the Separation. These resulted in decreases to the Company’s effective tax rate below the U.S. Federal statutory rate for the three and nine months ended April 3, 2026. The Company’s income tax provision for the three and nine months ended April 3, 2026 includes GMT for Malaysia as well as Thailand and the Philippines, countries for which the Company maintains tax holidays.

The primary drivers of the difference between the effective tax rate for the three and nine months ended March 28, 2025 and the U.S. Federal statutory rate of 21% were the relative mix of earnings and losses by jurisdiction, tax credits, and tax holidays in the Philippines and Thailand that will expire at various dates between 2026 and 2033. These tax holidays resulted in decreases to the Company’s effective tax rate below the U.S. Federal statutory rate for the three and nine months ended March 28, 2025. However, the tax effects of the mandatory capitalization of R&D expenses offset these decreases, resulting in the Company’s effective tax rate being close to the U.S. Federal statutory rate for the three and nine months ended March 28, 2025. In anticipation of operating as a standalone HDD business in a GMT environment, the Company executed an inter-entity asset transfer in conjunction with the Separation. This resulted in the recognition of one-time deferred tax benefits to continuing operations of $711 million for the three and nine months ended March 28, 2025.

Liability for Uncertain Tax Positions

With the exception of certain unrecognized tax benefits that are directly associated with the tax position taken, unrecognized tax benefits are presented gross in the Condensed Consolidated Balance Sheets.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following is a reconciliation of the total amounts of unrecognized tax benefits excluding accrued interest and penalties for the nine months ended April 3, 2026 (in millions):

Accrual balance as of June 27, 2025			$	569
Gross increases related to current year tax positions			8
Gross increases related to prior year tax positions			30
Settlements			(3)
Lapse of statute of limitations			(1)
Accrual balance as of April 3, 2026			$	603

In addition to the amounts noted above, interest and penalties related to unrecognized tax benefits are recognized in liabilities recorded for uncertain tax positions and are recorded in the provision for income taxes. Accrued interest and penalties included in the Company’s liability related to unrecognized tax benefits as of April 3, 2026 was $123 million. Of the aggregate unrecognized tax benefits, including interest and penalties, approximately $133 million could result in potential cash payments to be made within the next twelve months.

The Company believes that an adequate provision has been made for any adjustments that may result from any other tax examinations; however, the outcome of such tax examinations cannot be predicted with certainty. If any issues addressed in the Company’s tax examinations are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 10. Business Realignment Charges

The Company periodically incurs charges to realign its business operations with anticipated market demand, primarily consisting of organization rationalization designed to streamline its business, reduce its cost structure, and focus its resources. These actions may result in charges for employee termination benefits or charges from the impairment of intangible assets and other long-lived assets.

The Company recorded the following net charges related to these actions for the periods presented:

			Three Months Ended												Nine Months Ended
			April 3, 2026						March 28, 2025						April 3, 2026						March 28, 2025
			(in millions)
Cash-based employee termination benefits			$	40					$	—					$	95					$	—
Stock-based employee termination benefits			5						—						8						—
Contract termination and other			—						—						—						(7)
Total business realignment charges			$	45					$	—					$	103					$	(7)

As a result of the above actions, the Company expects to record incremental employee termination costs of approximately $5 million in the remainder of 2026.

The following table presents an analysis of the components of these activities against the reserve (included in Accrued expenses) during the nine months ended April 3, 2026:

			Employee Termination Benefits						Contract Termination and Other						Total
			(in millions)
Accrual balance as of June 27, 2025			$	1					$	9					$	10
Charges			95						—						95
Cash payments			(73)						(3)						(76)
Accrual balance as of April 3, 2026			$	23					$	6					$	29

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 11. Pension and Other Post-Retirement Benefit Plans

The Company has pension and other post-retirement benefit plans in various countries. The Company’s principal pension plans are in Japan, Thailand, and the Philippines. All pension and other post-retirement benefit plans outside of the Company’s Japan, Thailand, and the Philippines defined benefit pension plans (the “Pension Plans”) are immaterial to the Condensed Consolidated Financial Statements. The expected long-term rate of return on the Pension Plans’ assets is 2.5%.

Obligations and Funded Status

The following table presents the unfunded status of the benefit obligations for the Pension Plans:

			April 3, 2026						June 27, 2025
			(in millions)
Benefit obligation at end of period			$	251					$	272
Less: Fair value of plan assets at end of period			176						204
Unfunded status			$	75					$	68

The following table presents the unfunded amounts related to the Pension Plans as recognized on the Company’s Condensed Consolidated Balance Sheets:

			April 3, 2026						June 27, 2025
			(in millions)
Current liabilities (included in Accrued expenses)			$	1					$	1
Non-current liabilities (included in Other liabilities)			74						67
Net amount recognized			$	75					$	68

Net periodic benefit costs were immaterial for the three and nine months ended April 3, 2026 and March 28, 2025.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 12. Shareholders’ Equity and Convertible Preferred Stock

Stock-based Compensation Expense

The following tables present the Company’s stock-based compensation for equity-settled awards by type (i.e., restricted stock units (“RSUs”), restricted stock unit awards with performance conditions or market conditions (“PSUs”), and rights to purchase shares of common stock under the Company’s Employee Stock Purchase Plan (“ESPP”)) and financial statement line items as well as the related tax benefit included in the Company’s Condensed Consolidated Statements of Operations:

			Three Months Ended												Nine Months Ended
			April 3, 2026						March 28, 2025						April 3, 2026						March 28, 2025
			(in millions)
RSUs and PSUs			$	49					$	34					$	147					$	110
ESPP			4						1						12						12
Total			$	53					$	35					$	159					$	122

			Three Months Ended												Nine Months Ended
			April 3, 2026						March 28, 2025						April 3, 2026						March 28, 2025
			(in millions)
Cost of revenue			$	9					$	7					$	26					$	26
Research and development			21						17						67						52
Selling, general and administrative			18						11						58						44
Business realignment charges			5						—						8						—
Subtotal			53						35						159						122
Tax benefit			(7)						(4)						(20)						(15)
Total			$	46					$	31					$	139					$	107

Any excess windfall tax benefits and tax deficiencies for shortfalls related to the vesting and exercise of stock-based awards are recognized as a component of the Company’s Income tax expense (benefit). During the three and nine months ended April 3, 2026, excess windfall tax benefits were $47 million and $76 million, respectively. Excess windfall tax benefits and tax deficiencies for shortfalls were immaterial for the three and nine months ended March 28, 2025.

Compensation cost related to unvested RSUs, PSUs, and rights to purchase shares of common stock under the ESPP are generally amortized on a straight-line basis over the remaining average service period. The following table presents the unamortized compensation cost and weighted average service period of all unvested outstanding awards as of April 3, 2026:

			Unamortized Compensation Cost						Weighted Average Service Period
			(in millions)						(years)
RSUs and PSUs (1)			$	317					1.9
ESPP			14						0.7
Total unamortized compensation cost			$	331

(1) Weighted average service period assumes the performance conditions are met for the PSUs.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Plan Activities

RSUs and PSUs

The following table summarizes RSU and PSU activity under the Company’s incentive plans:

			Number of Shares						Weighted Average Grant Date Fair Value						Aggregate Intrinsic Value at Vest Date
			(in millions)												(in millions)
RSUs and PSUs outstanding at June 27, 2025			9.7						$	33.56
Granted			2.6						83.26
Vested			(3.9)						35.13						$	593
Forfeited			(0.6)						42.37
RSUs and PSUs outstanding at April 3, 2026			7.8						$	49.49

RSUs and PSUs are generally settled in an equal number of shares of the Company’s common stock at the time of vesting of the units.

Common Stock

The Company is authorized to issue 750 million shares of common stock, $0.01 par value per share. As of April 3, 2026 and June 27, 2025, there were 349 million shares issued, and 345 million and 347 million shares outstanding, respectively, which are net of 4 million and 2 million shares of treasury stock held at cost, respectively.

Convertible Preferred Stock

On January 31, 2023, the Board of Directors of the Company authorized the designation of 900,000 shares of Series A Convertible Perpetual Preferred Stock, par value $0.01 per share (the “Preferred Shares”), from the Company’s existing 5,000,000 authorized but unissued shares of preferred stock and issued the Preferred Shares through a private placement. As of June 27, 2025, 235,000 Preferred Shares were outstanding, with an aggregate liquidation preference of $265 million, including previous dividends paid in-kind.

The Preferred Shares had an initial stated value of $1,000 per share and accrued a cumulative preferred dividend at an annual rate of 6.25% per annum, compounded on a quarterly basis. Through December 27, 2024, the Company paid quarterly dividends on the Preferred Shares in-kind through an increase to the stated value. Subsequently, quarterly dividends on the Preferred Shares were made in cash, including $8 million paid in the nine months ended April 3, 2026. The Preferred Shares also participated in any dividends declared for common shareholders on an as-converted equivalent basis.

On February 17, 2026, the Company converted all remaining outstanding Preferred Shares into 7 million shares of the Company’s common stock pursuant to a mandatory conversion in accordance with the terms of the Company’s Certificate of Designations, Preferences and Rights of the Preferred Shares. Immediately prior to conversion, the Preferred Shares outstanding had an aggregate liquidation preference of $267 million, which included previous dividends paid in-kind of $32 million. On February 24, 2026, the Company filed a Certificate of Elimination with the Secretary of State of the State of Delaware with respect to the Preferred Shares, pursuant to which the Preferred Shares were eliminated and returned to the status of authorized and unissued preferred shares of the Company.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Share Repurchase Program

On May 9, 2025, the Company’s Board of Directors authorized a share repurchase program for the repurchase of up to $2.00 billion of the Company’s common stock, and on February 2, 2026, the Company’s Board of Directors authorized the repurchase of up to an additional $4.00 billion of the Company's common stock (collectively, the “Share Repurchase Program”). There is no expiration date for the Share Repurchase Program. During the three months ended April 3, 2026, the Company repurchased 2.9 million shares under the Share Repurchase Program for a total cash cost of $752 million plus $5 million for accrued excise taxes. During the nine months ended April 3, 2026, the Company repurchased 13.1 million shares under the Share Repurchase Program for a total cash cost of $1.92 billion plus $13 million for accrued excise taxes. As of April 3, 2026, the Company had $3.93 billion available for repurchases pursuant to the Share Repurchase Program. Repurchases under the Share Repurchase Program may be made in the open market or in privately negotiated transactions and may be made under a Rule 10b5-1 plan. The Company expects shares repurchased under the Share Repurchase Program to be funded principally by operating cash flows. The amount and timing of share repurchases will depend on market conditions and other corporate considerations. The Company may suspend or discontinue the Share Repurchase Program at any time.

Dividends to Common Shareholders

On April 29, 2025, the Company’s Board of Directors authorized the adoption of a cash dividend program. Under the cash dividend program, holders of the Company’s common stock will receive dividends when and as declared by the Board of Directors. During the three months ended April 3, 2026, the Company paid cash dividends of $0.125 per share of its outstanding common stock, totaling $43 million. During the nine months ended April 3, 2026, the Company paid aggregate cash dividends of $0.35 per share of its outstanding common stock, totaling $120 million, plus $2 million paid to holders of the Company’s Preferred Shares in accordance with their participation rights.

Subsequent to quarter-end, on April 29, 2026, the Board of Directors declared a cash dividend of $0.15 per share of the Company’s common stock, which will be paid on June 17, 2026 to shareholders of record as of the close of business on June 5, 2026.

The Company may modify, suspend, or cancel its cash dividend program in any matter and at any time. The amount of future dividends under the Company’s cash dividend program, and the declaration and payment thereof, will be based upon all relevant factors, including the Company’s financial position, results of operations, cash flows, capital requirements and restrictions under the Company’s Loan Agreement and other financing agreements, and shall be in compliance with applicable law.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 13. Net Income Per Common Share

The following table presents the computation of basic and diluted income per common share:

			Three Months Ended												Nine Months Ended
			April 3, 2026									March 28, 2025						April 3, 2026						March 28, 2025
			(in millions, except per share data)
Net income from continuing operations			$	3,205								$	772					$	6,229					$	1,391
Dividends allocated to preferred shareholders			(2)									(4)						(12)						(12)
Income attributable to participating securities(1)			(35)									(13)						(111)						(25)
Net income from continuing operations attributable to common shareholders - basic			3,168									755						6,106						1,354
Net income (loss) from discontinued operations, net of taxes, attributable to common shareholders			—									(248)						—						213
Net income attributable to common shareholders - basic			$	3,168								$	507					$	6,106					$	1,567
Net income from continuing operations attributable to common shareholders - basic			$	3,168								$	755					$	6,106					$	1,354
Re-allocation of participating securities considered potentially dilutive			4									—						10						1
Net income from continuing operations attributable to common shareholders - diluted			3,172									755						6,116						1,355
Net income (loss) from discontinued operations, net of taxes, attributable to common shareholders			—									(248)						—						213
Net income attributable to common shareholders - diluted			$	3,172								$	507					$	6,116					$	1,568
Weighted average shares:
Basic			342									348						343						346
RSUs, PSUs, ESPP, and convertible notes			45									10						38						12
Diluted			387									358						381						358
Net income (loss) per common share:
Basic:
Continuing operations			$	9.26								$	2.17					$	17.80					$	3.91
Discontinued operations			—									(0.71)						—						0.62
Net income per common share			9.26									1.46						17.80						4.53
Diluted:
Continuing operations			8.20									2.11						16.05						3.79
Discontinued operations			—									(0.69)						—						0.59
Net income per common share			8.20									1.42						16.05						4.38

(1) Participating securities consisted of Preferred Shares because, prior to their conversion, they participated on a pro rata basis in any dividends declared on shares of common stock.

Basic net income per common share is computed using (i) net income less (ii) dividends allocated to preferred shareholders less (iii) net income attributable to participating securities divided by (iv) basic weighted average shares outstanding. Diluted net income per common share is computed as (i) basic net income attributable to common shareholders plus (ii) diluted adjustments to income allocable to participating securities divided by (iii) diluted weighted average shares outstanding. The “if-converted” method is used to determine the dilutive impact for the convertible notes and the preferred shares. The treasury stock method is used to determine the dilutive impact of unvested equity awards.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Potentially dilutive common shares include dilutive outstanding RSUs and PSUs, rights to purchase shares of common stock under the Company’s ESPP, shares issuable in connection with the Company’s convertible notes, and Preferred Shares. For the three and nine months ended April 3, 2026 and March 28, 2025, based on the Company’s average stock price during the period, an insignificant number of common shares subject to outstanding equity awards were anti-dilutive.

WESTERN DIGITAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 14. Legal Proceedings

Intellectual Property Litigation

On September 28, 2016, SPEX Technologies, Inc. (“SPEX”) filed a lawsuit in the Central District Court against the Company and two of the Company’s current or former wholly-owned subsidiaries, Western Digital Technologies, Inc. and HGST Inc., alleging infringement of U.S. Patent Nos. 6,088,802 and 6,003,135, both of which allegedly relate to moving a security mechanism (e.g., the encrypting/decrypting mechanism) from a host computer or a separate device to a peripheral device that provides data storage. As the case progressed, SPEX dismissed its allegations relating to U.S. Patent No. 6,003,135 and narrowed its case to one claim related to U.S. Patent No. 6,088,802 and asserted this against certain HDD products that may include certain encryption capabilities. The trial commenced on October 8, 2024, and concluded on October 18, 2024, and the jury awarded SPEX damages of $316 million for the use of one claim related to U.S. Patent No. 6,088,802 in the past, prior to its expiration in 2017. On January 8, 2025, the Court entered judgment for SPEX in accordance with the verdict and also awarded SPEX prejudgment interest of $237 million and legal costs. On June 16, 2025, the Court ruled on the Company’s post-trial motions, finding that SPEX did not present sufficient evidence on which a damages award could be determined and therefore awarded nominal damages of $1. On June 27, 2025, the Court entered an amended judgment awarding SPEX nominal damages of $1 with no prejudgment interest and no legal costs. The Company has appealed the infringement finding, and SPEX has appealed damages-related issues. Based on available appellate arguments, the Company believes a loss is not probable and has not accrued a liability as a result of the jury verdict or the entry of amended judgment in its financial statements as of April 3, 2026.

In August 2022, MR Technologies, GmbH (“MRT”) filed an action against the Company, alleging infringement of certain patents related to hard disk drive media. Following a jury trial and judgment in favor of the plaintiff, in the fourth quarter of fiscal year 2024, the Company recognized an aggregate liability for this matter of $384 million with $291 million recognized as Operating expenses under Litigation matter for the year ended June 28, 2024 and $93 million recognized as Other non-current assets for the patent licenses, to be amortized over their remaining lives.

In April 2025, the Company reached a global settlement of $130 million for all pending matters with MRT. As a result of the settlement, in the three- and nine-month periods ended March 28, 2025, the Company reversed $201 million and $198 million, respectively, of previously recorded charges in Operating expenses under Litigation matter.

Other Matters

In the normal course of business, the Company is subject to legal proceedings, lawsuits and other claims. Although the ultimate aggregate amount of reasonably possible monetary liability or financial impact with respect to these other matters is subject to many uncertainties, management believes that any monetary liability or financial impact to the Company from these matters, individually and in the aggregate, would not be material to the Company’s financial condition, results of operations or cash flows. However, any monetary liability and financial impact to the Company from these matters could differ materially from management’s expectations.

The ability to predict the ultimate outcome of any legal proceeding involves judgments, estimates and inherent uncertainties. The actual outcome of these matters could differ materially from management’s estimates.