Western Digital Corp. (NASDAQ:WDC)

The quarterly financial data exhibits several notable trends across revenue, expenses, and profitability over the analyzed periods.

Revenue and Gross Profit Trends

Net revenue demonstrates a general downward trend from late 2017 through the end of 2023, peaking around the end of 2021 at approximately US$5,051 million before declining to near US$3,032 million in the latest quarter. Correspondingly, gross profit follows a similar trajectory, declining sharply after the peak in 2021. There is a significant drop in gross profit beginning in late 2018, reaching a low point in 2019, followed by a recovery that peaks around 2021 and then another decline in 2022 and 2023.

Cost Structure and Operating Expenses

Cost of revenue shows fluctuations but generally remains high, correlating with the decreasing revenue trend in later quarters. Although the cost of revenue decreases modestly in later periods, the reduction is not sufficient to support gross profit levels seen in earlier years. Operating expenses, comprising research and development (R&D), selling, general and administrative expenses (SG&A), employee terminations, asset impairments, and other costs, reveal a downward trend in absolute values over time. R&D expenses demonstrate a gradual reduction from the high $590 million range in 2017-2018 to around $440 million by late 2023. SG&A expenses also decline from the $360 million range to below $200 million by the final period, indicating some cost control efforts.

Profitability and Operating Income

Operating income exhibits substantial volatility. The company experienced strong positive operating income during 2017 and early 2018, followed by a significant operating loss period from late 2018 through mid-2019. Operating income recovered moderately after that, peaking again around late 2021 but dropping sharply in 2022 and 2023, with losses returning toward the end of the dataset. The losses in recent quarters coincide with the continued decline in gross profit and revenue.

Interest and Other Income / Expense

Interest expense remains relatively steady, decreasing gradually from about $205 million in 2017 to around $108 million by late 2023. Interest income is modest and fairly stable but low in comparison to interest expense, resulting in a consistent net interest cost burden. Other income and expense show irregular patterns with some quarters reporting net income and others incurring expenses, contributing minor fluctuations to the overall income before taxes.

Net Income and Earnings Trends

Net income aligns closely with trends in operating income and revenue. The company posted positive net income in most quarters of 2017 and early 2018, followed by several quarters of net losses between late 2018 and early 2020. Earnings gradually improved through 2021 but again deteriorated starting in 2022, with significant net losses in most recent quarters. The net income attributable to common shareholders mirrors this pattern, reflecting the overall financial performance challenges the company faced in recent years.

Additional Observations

There are occasional spikes in employee termination, asset impairment, and other related expenses, particularly notable in late 2017, mid-2018, and some quarters in 2022 and 2023, which negatively impacted operating expenses. Business separation costs appeared only in the final quarter, indicating a one-time event affecting that period's financials. Dividends allocated to preferred shareholders appear in the last few quarters, representing a recurring cash outflow not reflected in early periods.

Overall, the data indicates a company experiencing cyclical challenges with declining revenues and profit margins, intermittent operating losses, and ongoing efforts to reduce operating expenses. Despite periods of recovery, the more recent quarters show persistent declines in top-line performance and profitability, possibly signaling market pressures or operational difficulties. Cost management appears incremental but may not be sufficient to offset revenue declines, leading to recurring losses at the net income level.