$3.09 billion! Western Digital plans to sell a portion of its SanDisk stake

On February 18, Western Digital, a hard drive manufacturer, announced plans to sell a portion of its stake in its subsidiary SanDisk through a secondary offering, with a transaction size of approximately $3.09 billion (about 21.3 billion RMB).

According to a statement released by SanDisk, Western Digital plans to exchange its holdings of SanDisk stock for Western Digital debt held by Morgan Stanley Securities and Bank of America Securities affiliates, which will then be sold by underwriters in the secondary market after the exchange. The shares to be sold amount to about 5.8 million, with the final price range set at $545 per share, representing a discount of approximately 7.7% compared to SanDisk’s Tuesday closing price. SanDisk itself is not participating in the issuance.

This reduction in holdings was expected by the market. During a previous earnings call, Western Digital CFO Kris Sennesael stated that the company planned to sell the remaining 7.5 million SanDisk shares before the one-year anniversary of the spin-off on February 24. According to registration documents filed with the U.S. Securities and Exchange Commission last year, Western Digital must complete the share sale by February 21 to avoid tax consequences.

Evercore ISI analyst stated that this transaction significantly accelerates Western Digital’s deleveraging process, and the company may shift toward a net cash position in the future. By repurchasing shares to reduce circulating stock, this transaction is expected to boost Western Digital’s earnings per share by 4% to 6% in the short to medium term.

In terms of market performance, SanDisk’s stock has performed remarkably well in recent months. Since its spin-off from Western Digital in February 2025, the stock has increased by over 1500%. In 2026 alone, SanDisk’s stock rose nearly 150%, ranking first among S&P 500 components, while Western Digital’s stock increased by 65%, ranking third.

On January 29, Western Digital announced its second-quarter financial results for fiscal year 2026, ending January 2, 2026, after the U.S. stock market closed. Benefiting from the explosive demand for memory in artificial intelligence (AI) data centers, Western Digital’s performance exceeded expectations.

The company’s second-quarter revenue grew 25% year-over-year to $3.02 billion, surpassing Wall Street’s forecast of $2.92 billion; gross margin increased from 38.4% last year to 46.1%; net profit was $1.842 billion, a 209% surge year-over-year; excluding one-time expenses, adjusted earnings per share were $2.13, also higher than the Wall Street estimate of $1.91.

Looking ahead to the third quarter of fiscal year 2026, Western Digital expects revenue of around $3.2 billion (±$100 million), exceeding the analyst consensus of $2.96 billion; adjusted earnings per share are forecasted to be around $2.30 (±$0.15), also above the market expectation of $1.96.

During the subsequent earnings call, Western Digital CEO Irving Tan stated that capacity for 2026 has been sold out, and the company has signed formal purchase orders with its top seven customers. Additionally, the company has entered into long-term agreements with two of these customers for 2027 and with another for 2028. Irving Tan emphasized that AI inference applications will drive structural growth in HDD demand, as inference processes generate massive amounts of new data that need to be stored at low cost.