Western Digital Corp. (NASDAQ:WDC)

The financial data reveals several notable trends across the examined quarterly periods. Gross profit margins, expressed as a percentage of net revenue, demonstrated considerable volatility. Initially, gross profit remained above 30%, but from late 2017 through 2019, a clear decline is observed, reaching lows below 13%. Although there was some rebound in early 2021 with margins improving above 30%, recent quarters from 2022 onward show gross profit percentages again declining, dipping as low as around 3.4% before a slight recovery.

Cost of revenue showed an inverse relationship to gross profit, increasing steadily from approximately 63% of net revenue in late 2017 to peaks exceeding 96% in some quarters of 2022 and 2023. This indicates rising costs impacting profit margins significantly in recent periods.

Operating expenses

Operating expenses as a percentage of net revenue remained relatively stable around 19-20% in earlier years but showed an increasing trend post-2018, peaking above 27% in multiple quarters of 2022 and 2023. This increase indicates higher spending on research and development, selling, general, and administrative expenses.

Research and development expenses

Research and development consistently accounted for around 11-12% of revenue in earlier periods, but starting in 2019, these costs rose noticeably to levels above 14% and even near 17% in some recent quarters, demonstrating increased investment in innovation or product development.

Selling, general and administrative expenses

SG&A expenses fluctuated moderately, mostly between 5.7% and 9.6% of revenue. Peaks were seen around early 2019 and late 2022, while the lowest ratios appeared in 2021, suggesting some operational efficiency improvements during that period.

Employee termination, asset impairment, and other costs

These costs were minor but showed occasional spikes. Notable is a positive (income) effect of 1.64% in mid-2021, but generally, this category contributed negatively, with proportions typically less than 2% of revenue.

Operating income (loss)

Operating income showed significant variability, with peaks above 17% in late 2017 but deteriorating into negative territory through 2019 and early 2023. The loss margins reached nearly -24% in some quarters, reflecting the combined effects of rising costs and operating expenses. Mid to late 2021 recorded the strongest operating income in recent years, exceeding 15%, but thereafter the figures again declined sharply.

Interest income and expense

Interest income was minor but stable, generally below 0.5% of revenue. In contrast, interest expense showed a declining trend from nearly 4% of revenue in 2017 towards approximately 1.5% to 3.5% in recent quarters, indicating fluctuations in financing costs or debt levels.

Other income (expense), net

This category exhibited irregular values, including a significant negative impact in early 2018 (-17.91%), but mostly minor positive or negative amounts within +/- 1%. This volatility may be due to non-operational gains or charges.

Income before taxes

Income before taxes mirrored the trends in operating income, peaking around 14% in 2017 and 2021, but turning negative and worsening to nearly -27% in some quarters of 2022 and 2023. This reflects the cumulative impact of operational losses and financing costs.

Income tax expense (benefit)

Income tax expense displayed irregular patterns, with occasional significant benefits recorded early in the period (e.g., -29.93% in late 2017) and generally small or negative contributions subsequently. This suggests volatile tax impacts, possibly due to deferred taxes or adjustments.

Net income (loss) and net income attributable to common shareholders

Net income followed the general trend of pre-tax income, with strong positive returns in certain quarters of 2017 and 2021 but deep losses occurring notably from late 2018 through 2019 and again in 2022 and 2023. The losses worsened to over 20% negative net income in several recent quarters. The attributable net income for common shareholders aligns closely with overall net income, reflecting similar patterns without material divergence.

Cumulative dividends allocated to preferred shareholders

Starting only in late 2022, cumulative dividends to preferred shareholders appeared, representing a small but increasing expense of up to approximately 0.56% of revenue.

Overall, the data indicates a period of considerable challenges, with deteriorating gross margins driven by rising cost of revenue, increased operating expenses, and subsequent declines in profitability. Although certain quarters, especially in 2021, showed improvement in operating and net income margins, the recent trend points again toward operational difficulties and elevated losses. The rising research and development expenditures suggest a strategic emphasis on innovation, albeit accompanied by financial strain. Fluctuations in interest expenses and other income categories add complexity to the profit picture but are less significant than core operational performance metrics.