What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-08-14 compared with 2024-08-20 · 591 added, 639 removed, 1028 unchanged (54% of the section changed)

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Consolidated Statements of Operations — Three Years Ended June 27, 2025 53

Consolidated Statements of Comprehensive Loss — Three Years Ended June 28, 2024 56

Consolidated Statements of Comprehensive Income (Loss) — Three Years Ended June 27, 2025 54

Consolidated Statements of Cash Flows — Three Years Ended June 27, 2025 55

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

To the Shareholders and the Board of Directors

Western Digital Corporation:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Western Digital Corporation and subsidiaries (the Company) as of June 28, 2024 and June 30, 2023, the related consolidated statements of operations, comprehensive income (loss), cash flows, convertible preferred stock and shareholders’ equity for each of the years in the three-year period ended June 28, 2024, and the related notes (collectively, the consolidated financial statements).

We have audited the accompanying consolidated balance sheets of Western Digital Corporation and subsidiaries (the Company) as of June 27, 2025 and June 28, 2024, the related consolidated statements of operations, comprehensive income (loss), cash flows, and convertible preferred stock and shareholders’ equity for each of the fiscal years in the three-year period ended June 27, 2025, and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of June 27, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 28, 2024 and June 30, 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended June 28, 2024, in conformity with U.S.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 27, 2025 and June 28, 2024, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended June 27, 2025, in conformity with U.S.

generally accepted accounting principles.

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Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A Controls and Procedures – Management's Report on Internal Control over Financial Reporting .

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of variable consideration for sales to resellers

As discussed in Note 1 to the consolidated financial statements, the Company provides resellers with price protection and other sales incentive programs.

The Company uses judgment in its assessment of variable consideration related to these items in contracts to be included in the transaction price.

The Company’s estimate of variable consideration for sales to resellers is based on several factors, including historical pricing information, current pricing trends, and channel inventory levels.

We identified the assessment of variable consideration for sales to resellers as a critical audit matter.

A high degree of subjective auditor judgment was required to evaluate the Company’s historical pricing information and the level of channel inventory used to determine variable consideration for sales to resellers.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of sufficiency of audit evidence over certain variable consideration reductions to revenue

As discussed in Note 1 to the consolidated financial statements, the Company provides distributors and retailers (collectively referred to as resellers) with limited price protection and resellers and original equipment manufacturers (OEMs) with other sales incentive programs.

The Company records the estimated variable consideration related to these items as a reduction to revenue at the time of revenue recognition.

We identified the evaluation of the sufficiency of audit evidence over certain variable consideration reductions to revenue for sales to resellers and OEMs as a critical audit matter.

This matter required a high degree of auditor effort in performing procedures to assess the reasonableness of certain variable consideration and associated customer-related accruals as such reductions to revenue involve a number of complex integrated information technology (IT) systems.

Therefore, our audit procedures required the involvement of IT professionals with specialized skills and knowledge and auditor judgment was required to determine the nature and extent of audit evidence obtained and to evaluate the results of the procedures.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process for determining the variable consideration, including certain controls related to historical pricing information and the level of channel inventory.

We evaluated historical pricing by inspecting a sample of customer contracts with resellers and comparing the sales incentives earned during the year to the sales incentive program terms and conditions and recalculating amounts paid to the resellers.

We tested the channel inventory levels by comparing the on-hand inventory amounts for a sample of resellers to information obtained from the resellers and evaluated the reasonableness of reconciling items.

• We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process for determining variable consideration.

• We involved IT professionals with specialized skills and knowledge, who assisted in the determination and testing of certain IT general and application controls that are used by the Company to determine variable consideration.

• We assessed certain of the recorded variable consideration by selecting a sample of transactions and comparing the amounts recognized for consistency with underlying documentation.

• We evaluated the overall sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of such evidence.

Tax-free determination of the Flash business separation and the debt-for-equity exchange

As described in Note 3 to the consolidated financial statements, on February 21, 2025, the Company completed the separation of its Flash business through a pro rata distribution of 80.1% of the outstanding shares of Sandisk Corporation (Sandisk) to the Company’s stockholders.

In connection with the separation, the Company completed an external spin-off transaction and an exchange of Sandisk common stock for a portion of the Company’s Term Loan A-3.

Management has determined that the separation and the debt-for-equity exchange (collectively referred to as the Transactions) qualified as tax-free transactions under the applicable sections of the United States (U.S.) Internal Revenue Code.

The determination of the tax consequences of these Transactions required management to make judgments about the application of tax laws and regulations.

We identified the evaluation of income tax treatment of the Transactions as a critical audit matter.

This matter required especially subjective auditor judgment and effort in assessing the significant judgments by management in applying relevant tax laws and regulations in determining the tax-free treatment of the Transactions and in performing procedures and evaluating audit evidence.

Involvement of professionals with specialized tax skills and knowledge was required.

The following are the primary procedures we performed to address this critical audit matter.

• We evaluated the design and tested the operating effectiveness of certain internal controls relating to management’s determination of the tax-free treatment of the Transactions.

• We involved professionals with specialized skills and knowledge to assist in assessing the Company’s identification, interpretation, and application of tax laws and evaluating the Company’s analyses prepared to support management’s determination that the Transactions qualified as tax-free.

We have served as the Company’s auditor since 1970.

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Inventories 1,291 1,387

Retained interest in Sandisk 354 —

Other current assets 611 360

Current assets of discontinued operations — 3,531

Total current assets 5,856 8,060

Property, plant and equipment, net 2,343 2,359

Notes receivable and investments in Flash Ventures 991 1,410

Goodwill 4,319 4,319

Other intangible assets, net 78 80

Other non-current assets 1,484 837

Non-current assets of discontinued operations — 8,613

Total assets $ 14,002 $ 24,188

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Accounts payable $ 1,266 $ 1,054

Accounts payable to related parties 313 292

Accrued expenses 719 1,053

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Current portion of long-term debt 2,226 1,750

Current liabilities of discontinued operations — 1,324

Total current liabilities 5,418 6,087

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Other liabilities 559 1,002

Non-current liabilities of discontinued operations — 368

Total liabilities 8,462 13,141

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authorized — 5 shares;

issued and outstanding — 0.2 shares in 2024 and 0.9 shares in 2023;

issued and outstanding — 0.2 shares as of both June 27, 2025 and June 28, 2024;

aggregate liquidation preference of $ 265 and $ 257 as of June 27, 2025 and June 28, 2024, respectively

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Common stock, $ 0.01 par value;

authorized — 750 shares in 2024 and 450 shares in 2023;

issued and outstanding — 343 shares in 2024 and 322 shares in 2023

authorized — 750 shares;

issued and outstanding — 347 shares as of June 27, 2025 and 343 shares as of June 28, 2024

Additional paid-in capital 4,621 4,752

Accumulated other comprehensive loss ( 712 ) ( 548 )

Accumulated other comprehensive income (loss)

Retained earnings 762 6,775

Treasury stock — common shares at cost;

95 shares in 2025 and 0 shares in 2024

Total shareholders’ equity 5,311 10,818

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2025 June 28,

2024 June 30,

Revenue, net $ 9,520 $ 6,317 $ 6,255

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Litigation matter

Employee termination, asset impairment, and other

Business separation costs

( 198 ) 291 —

Business realignment charges

( 6 ) 209 146

Total operating expenses 1,358 2,176 1,939

Operating income (loss) 2,334 ( 403 ) ( 548 )

Interest and other income:

Interest and other income (expense):

Interest income 45 33 19

Interest expense ( 357 ) ( 414 ) ( 310 )

Other income, net 34 23 78

Total interest and other income, net ( 344 ) ( 265 ) ( 220 )

Loss on retained interest in Sandisk

Loss on extinguishment of debt

Other income (expense), net

( 20 ) 45 ( 10 )

Total interest and other expense, net

( 1,204 ) ( 336 ) ( 301 )

Income (loss) before taxes 1,130 ( 739 ) ( 849 )

Income tax expense 137 134 625

Income tax expense (benefit)

( 513 ) 26 53

Net income (loss) from continuing operations 1,643 ( 765 ) ( 902 )

Net income (loss) from discontinued operations, net of taxes 246 ( 33 ) ( 782 )

Net income (loss) $ 1,889 $ ( 798 ) $ ( 1,684 )

cumulative dividends allocated to preferred shareholders 54 24 —

Net income (loss) attributable to common shareholders $ ( 852 ) $ ( 1,708 ) $ 1,546

Income (loss) per common share

Basic $ ( 2.61 ) $ ( 5.37 ) $ 4.96

Diluted $ ( 2.61 ) $ ( 5.37 ) $ 4.89

Weighted average shares outstanding:

Basic 326 318 312

Diluted 326 318 316

Net income (loss) per common share:

Continuing operations

$ 4.61 $ ( 2.51 ) $ ( 2.91 )

Discontinued operations

0.70 ( 0.10 ) ( 2.46 )

Net income (loss) per share

5.31 ( 2.61 ) ( 5.37 )

Continuing operations

4.45 ( 2.51 ) ( 2.91 )

Discontinued operations

0.67 ( 0.10 ) ( 2.46 )

Net income (loss) per share

5.12 ( 2.61 ) ( 5.37 )

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

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2025 June 28,

2024 June 30,

Net income (loss) $ 1,889 $ ( 798 ) $ ( 1,684 )

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2025 June 28,

2024 June 30,

Cash flows from operating activities

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Amortization of debt issuance costs and discounts 23 19 13

Loss on retained interest in Sandisk

Loss on extinguishment of debt

Other non-cash operating activities, net 80 19 61

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Proceeds from the sale of property, plant and equipment 5 195 14

Proceeds from dispositions of business — — 32

Proceeds from business divestiture

Notes receivable issuances to Flash Ventures ( 266 ) ( 243 ) ( 627 )

Notes receivable proceeds from Flash Ventures 239 482 641

Distribution from Flash Ventures 175 — —

Strategic investments and other, net 8 26 31

Net cash used in investing activities ( 27 ) ( 762 ) ( 1,192 )

Net cash provided by (used in) investing activities

150 ( 27 ) ( 762 )

Cash flows from financing activities

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Proceeds from convertible preferred stock, net of issuance costs

Repurchases of common stock ( 149 ) — —

Dividends paid to shareholders ( 44 ) — —

Repurchases of debt

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Debt issuance costs ( 73 ) ( 36 ) ( 19 )

Cash transferred to Sandisk related to Separation

( 1,366 ) — —

Net cash provided by (used in) financing activities ( 1,612 ) 187 875

Effect of exchange rate changes on cash 6 ( 10 ) ( 9 )

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

235 ( 144 ) ( 304 )

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Cash paid for interest $ 367 $ 396 $ 294

Noncash exchange of Term Loan A-1 for Term Loan A-2 $ — $ — $ 2,104

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

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(in millions)

Convertible Preferred Stock Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Shareholders’ Equity

Convertible Preferred Stock Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss)

Retained Earnings Total Shareholders’ Equity

Shares Amount Shares Amount Shares Amount

Balance at July 1, 2022 — $ — 315 $ 3 — $ — $ 3,733 $ ( 579 ) $ 9,166 $ 12,323

Net income — — — — — — — — 1,546 1,546

Employee stock plans — — 3 — 4 232 ( 201 ) — — 31

Stock-based compensation — — — — — — 326 — — 326

Actuarial pension gain — — — — — — — 24 — 24

Foreign currency translation adjustment — — — — — — — ( 262 ) — ( 262 )

Net unrealized loss on derivative contracts — — — — — — — ( 142 ) — ( 142 )

Balance at July 1, 2022 — — 315 3 — — 3,733 ( 579 ) 9,166 12,323

Net loss — — — — — — — — ( 1,684 ) ( 1,684 )

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Balance at June 28, 2024 0.2 229 343 3 — — 4,752 ( 712 ) 6,775 10,818

Net income — — — — — — — — 1,889 1,889

Distribution in connection with the Separation — — — — — — ( 307 ) 546 ( 7,857 ) ( 7,618 )

Employee stock plans — — 4 — 1 54 ( 90 ) — — ( 36 )

Stock-based compensation — — — — — — 265 — — 265

Repurchases of common stock — — — — ( 3 ) ( 149 ) — — — ( 149 )

Preferred stock dividends

— — — — — — — — ( 8 ) ( 8 )

Common stock dividends ($ 0.10 per share)

— — — — — — 1 — ( 37 ) ( 36 )

Actuarial pension gain — — — — — — — 2 — 2

Foreign currency translation adjustment — — — — — — — 45 — 45

Net unrealized gain on derivative contracts — — — — — — — 139 — 139

Balance at June 27, 2025 0.2 $ 229 347 $ 3 ( 2 ) $ ( 95 ) $ 4,621 $ 20 $ 762 $ 5,311

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

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Organization and Basis of Presentation

Western Digital Corporation (“Western Digital” or the “Company”) is a leading developer, manufacturer, and provider of data storage devices and solutions based on both hard disk drives and NAND flash technologies.

The Company’s broad portfolio of technology and products addresses the following key end markets:

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

The Company manufactures, markets, and sells data storage devices and solutions in the United States (“U.S.”) and in foreign countries through its sales personnel, dealers, distributors, retailers, and subsidiaries.

Its broad portfolio of technology and products addresses the following key end markets:

Cloud, Client, and Consumer.

The Company also generates immaterial license and royalty revenue from its extensive intellectual property (“IP”) portfolio, which is included in each of these three end market categories.

Cloud is comprised primarily of products for public or private cloud environments and enterprise customers.

Through the Client end market, the Company provides its OEM and channel customers a broad array of high-performance HDD solutions across desktop and notebooks.

The Consumer end market provides a broad 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 Company also generates immaterial license and royalty revenue from its extensive intellectual property portfolio, which is included in each of these three end market categories.

Basis of Presentation

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The Company’s significant accounting policies are summarized below.

Information provided herein is presented on a continuing operations basis to reflect the impact of the Separation of the Company’s Flash business as discussed in further detail in Note 3, Discontinued Operations .

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 years 2024, 2023, and 2022, which ended on June 28, 2024, June 30, 2023 and July 1, 2022, respectively, are 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 basis.

Fiscal years 2025, 2024, and 2023, which ended on June 27, 2025, June 28, 2024 and June 30, 2023, respectively, are 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.

Segment Reporting

The Company manages and reports under two reportable segments:

hard disk drives (“HDD”) and flash-based products (“Flash”).

The Chief Executive Officer, who is the Company’s Chief Operating Decision Maker (“CODM”), evaluates the performance of the Company and makes decisions regarding the allocation of resources based on each operating segment’s net revenue and gross margin.

Because of the integrated nature of the Company’s production and distribution activities, separate segment asset measures are either not available or not used as a basis for the CODM to evaluate the performance of or to allocate resources to the segments.

Historically, the Company had been managed and operated under two reportable segments:

HDD and Flash-based products (“Flash”).

As a result of the Separation (as defined in Note 3, Discontinued Operations ) and disposition of the Flash segment, the Company’s continuing operations now consist of a single reportable segment, HDD.

The Chief Executive Officer, who is the Company’s Chief Operating Decision Maker (“CODM”), now evaluates the performance of the Company and makes decisions regarding the allocation of resources based on the Compan y’s consolidated results.

Basis of Consolidation

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dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted average exchange rate for each period for statement of operations items.

Translation adjustments are recorded in Accumulated other comprehensive loss, a component of shareholders’ equity.

Translation adjustments are recorded in Accumulated other comprehensive income (loss), a component of shareholders’ equity.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Business Separation Costs

On October 30, 2023, the Company announced that its Board of Directors had completed its strategic review of its business and, after evaluating a comprehensive range of alternatives, authorized the Company to pursue a plan to separate its HDD and Flash business units to create two independent, public companies.

As a result of the plan, the Company has incurred separation and transition costs and expects to incur such costs through the completion of the separation of the businesses.

The separation and transition costs are recorded within Business separation costs in the Consolidated Statements of Operations.

Use of Estimates

Company management has made estimates and assumptions relating to the reporting of certain assets and liabilities in conformity with U.S.

These estimates and assumptions have been applied using methodologies that are consistent throughout the periods presented.

However, actual results could differ materially from these estimates.

These estimates and assumptions have been applied using methodologies that are consistent throughout the periods presented with consideration given to the potential impacts of tariffs.

However, actual results could differ materially from these estimates and be significantly affected by changes in U.S.

trade policies, including tariffs, trade agreements or other trade restrictions imposed by the United States or other governments and possible retaliatory measures on U.S.

Cash Equivalents

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The equity method of accounting is used if the Company’s ownership interest is greater than or equal to 20% but less than a majority, or where the Company has the ability to exercise significant influence over operating and financial policies.

The Company’s equity in the earnings or losses in equity-method investments is recognized in Other income, net, in the Consolidated Statements of Operations and were immaterial for all years presented.

If the Company’s ownership interest is less than 20% and the Company does not have the ability to exercise significant influence over the operating and financial policies of the investee, the Company accounts for these investments at fair value, or if these equity securities do not have a readily determinable fair value, these securities are measured and recorded using the measurement alternative under Accounting Standards Update (“ASU”) No.

The Company’s equity in the earnings or losses in equity-method investments is recognized in Other income (expense), net, in the Consolidated Statements of Operations and were immaterial for all years presented.

The Company’s retained interest in Sandisk is less than 20% and the Company does not have the ability to exercise significant influence over Sandisk’s operating and financial policies.

As such, the Company accounts for this interest at fair value.

The Company also has an immaterial amount of equity securities that do not have a readily determinable fair value.

These securities are measured and recorded using the measurement alternative under Accounting Standards Update (“ASU”) No.

2016-01, “Financial Instruments – Overall (Subtopic 825-10):

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These investments are recorded within Other non-current assets in the Consolidated Balance Sheets and are periodically analyzed to determine whether or not there are indicators of impairment.

Variable Interest Entities

The Company evaluates its investments and other significant relationships to determine whether any investee is a variable interest entity (“VIE”).

If the Company concludes that an investee is a VIE, the Company evaluates its power to direct the activities of the investee, its obligation to absorb the expected losses of the investee and its right to receive the expected residual returns of the investee to determine whether the Company is the primary beneficiary of the investee.

If the Company is the primary beneficiary of a VIE, the Company would consolidate such entity and reflect the non-controlling interest of other beneficiaries of that entity.

For the periods presented, the Company determined that it did not have any VIEs that are required to be consolidated.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fair Value of Financial Instruments

The carrying amounts of cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value for all periods presented because of the short-term maturity of these assets and liabilities.

The carrying value of notes receivable from Flash Ventures also approximates fair value for all periods presented because they bear variable market rates of interest.

The fair value of investments that are not accounted for under the equity method is based on appropriate market information.

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Unanticipated changes in technology or customer demand could result in a decrease in demand for one or more of the Company’s products, which may require a write-down of inventory that could materially affect operating results.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Property, Plant and Equipment

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If the Company concludes from the qualitative assessment that goodwill is more likely than not impaired, the Company is required to perform a quantitative approach to determine the amount of impairment.

The Company’s assessment resulted in no impairment of goodwill in 2024, 2023 or 2022.

The Company is required to use judgment when applying the goodwill impairment test, including the identification of reporting units, assignment of assets, liabilities and goodwill to reporting units, and determination of the fair value of each reporting unit.

In addition, the estimates used to determine the fair value of reporting units may change based on the results of operations, macroeconomic conditions or other factors.

The Company’s assessments resulted in no impairment of goodwill in 2025, 2024 or 2023.

The Company is required to use judgment when applying goodwill impairment tests, including the identification of its reporting unit and the determination of fair value.

In addition, the estimates used to determine the fair value of its reporting unit may change based on the results of operations, macroeconomic conditions or other factors.

Changes in these estimates could materially affect the Company’s assessment of the fair value and goodwill impairment.

If the Company’s stock price decreases significantly, goodwill could become impaired, which could result in a material charge and adversely affect the Company’s results of operations.

IPR&D is an intangible asset accounted as an indefinite-lived asset until the completion or abandonment of the associated research and development effort.

In-process research and development (“IPR&D”) is an intangible asset accounted for as an indefinite-lived asset until the completion or abandonment of the associated research and development effort.

During the development period, the Company conducts an IPR&D impairment test at least annually or whenever events or changes in facts and circumstances indicate that it is more likely than not that the IPR&D is impaired.

Events which might indicate impairment include, but are not limited to, adverse cost factors, strategic decisions made in response to economic, market, and competitive conditions, and the impact of the economic environment on the Company and on its customer base.

If impairment is indicated, the impairment is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

If impairment is indicated, the impairment is measured as the amount by which the carrying amounts of the assets exceed the fair values of the assets.

The Company’s assessment resulted in no impairment of IPR&D in 2025, 2024 or 2023.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other long-lived assets are depreciated or amortized over their estimated useful lives based on the pattern in which the economic benefits are expected to be received.

Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable from undiscounted cash flows.

If impairment is indicated, the impairment is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

If impairment is indicated, the impairment is measured as the amount by which the carrying amounts of the assets exceed the fair values of the assets.

The estimates of fair value require evaluation of future market conditions and product lifecycles as well as projected revenue, earnings and cash flow.

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The Company’s performance obligations are typically not considered constrained based on the Company’s history with similar transactions and the fact that uncertainties are resolved in a fairly short period of time.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Substantially all of the Company’s revenue is from the sale of tangible products for which the performance obligations are satisfied at a point in time, generally upon delivery.

1 unchanged sentence

The performance obligations for the Company’s services are generally satisfied ratably over the service period based on the nature of the service provided and contract terms.

Similarly, revenue from patent licensing arrangements is recognized based on whether the arrangement provides the customer a right to use or right to access the IP.

Revenue for a right-to-use arrangement is recognized at the time the control of the license is transferred to the customer.

Revenue for a right-to-access arrangement is recognized over the contract period using the time lapse method.

For the sales-based royalty arrangements, the Company estimates and recognizes revenue in the period in which customers’ licensable sales occur.

The Company incurs sales commissions and other direct incremental costs to obtain sales contracts.

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The Company had no direct incremental costs to obtain contracts that have an expected benefit of greater than one year.

The Company also applies the practical expedients and does not disclose transaction price allocated to the remaining performance obligations for (i) arrangements that have an original expected duration of one year or less, which mainly consist of the support and maintenance contracts, and (ii) variable consideration amounts for sale-based or usage-based royalties for intellectual property license arrangements, which typically range longer than one year.

The transaction price allocated to the Company’s remaining performance obligations as of June 28, 2024 and June 30, 2023, was not material.

The Company also applies the practical expedients and does not disclose transaction price allocated to the remaining performance obligations for arrangements that have an original expected duration of one year or less, which mainly consist of support and maintenance contracts.

The transaction prices allocated to the Company’s remaining performance obligations as of June 27, 2025 and June 28, 2024, were not material.

The contract assets and contract liabilities for the years ended June 27, 2025 and June 28, 2024 were not material.

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The Company constrains variable consideration until the likelihood of a significant revenue reversal is not probable and believes that the expected value method is the appropriate estimate of the amount of variable consideration based on the fact that the Company has a large number of contracts with similar characteristics.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For sales to OEMs, the Company’s methodology for estimating variable consideration is based on the amount of consideration expected to be earned based on the OEMs’ volume of purchases from the Company or other agreed-upon sales incentive programs.

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If applicable, the Company allocates the transaction price to the performance obligations of each distinct product or service, or distinct bundle, based on their relative standalone selling prices.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company records an allowance for doubtful accounts by analyzing specific customer accounts and assessing the risk of loss based on insolvency or other collection issues.

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See Note 17, Legal Proceedings , for additional disclosures related to the Company’s litigation.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Advertising Expense

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Research and development (“R&D”) expenditures are expensed as incurred.

The Company accounts for income taxes under the asset and liability method, which provides that deferred tax assets and liabilities be recognized for temporary differences between the financial reporting basis and the tax basis of assets and liabilities and expected benefits of utilizing net operating loss (“NOL”) and tax credit carryforwards.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company accounts for income taxes under the asset and liability method, which provides that deferred tax assets and liabilities be recognized for temporary differences between the financial reporting bases and the tax bases of assets and liabilities and expected benefits of utilizing net operating loss (“NOL”) and tax credit carryforwards.

The Company records a valuation allowance when it is more likely than not that the deferred tax assets will not be realized.

13 unchanged sentences

Diluted income (loss) per common share is computed by using diluted net income (loss) attributable to common shareholders, the weighted average number of common shares and potentially dilutive securities outstanding during the period using the treasury stock method or the “if-converted” method based on the nature of the securities.

Potentially dilutive common shares include dilutive outstanding employee stock options, restricted stock unit awards (“RSUs”) and restricted stock unit awards with performance conditions or market conditions (“PSUs”), rights to purchase shares of common stock under the Company’s Employee Stock Purchase Plan (“ESPP”), shares issuable in connection with the Company’s convertible notes and convertible preferred stock.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Potentially dilutive common shares include dilutive outstanding employee stock options, restricted stock unit awards (“RSUs”) and restricted stock unit awards with performance conditions or market conditions (“PSUs”), rights to purchase shares of common stock under the Company’s Employee Stock Purchase Plan (“ESPP”), and shares issuable in connection with the Company’s convertible notes and convertible preferred stock.

Stock-Based Compensation

The Company accounts for all stock-based compensation at fair value.

Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period.

The fair values of RSUs and PSUs with a performance condition are determined based on the closing market price of the Company’s stock on the date of the grant.

The fair values of all ESPP purchase rights are estimated using the Black-Scholes-Merton option pricing model and require the input of highly subjective assumptions.

The fair values of PSUs with a market condition are estimated using a Monte Carlo simulation model.

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period.

Compensation expense is adjusted for forfeitures as they occur.

The fair values of RSUs and PSUs with performance conditions are determined based on the closing market price of the Company’s stock on the date of the grant.

The fair values of all ESPP purchase rights are estimated using the Black-Scholes-Merton option pricing model and require the input of subjective assumptions.

The fair values of PSUs with market conditions are estimated using a Monte Carlo simulation model.

PSUs are granted to certain employees and vest only after the achievement of pre-determined performance or market conditions and completion of a requisite service period.

1 unchanged sentence

Compensation expense for PSUs with market conditions is recognized ratably over the required service period regardless of expected or actual achievement.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other Comprehensive Income (Loss), Net of Tax

Other comprehensive income (loss), net of tax refers to gains and losses that are recorded as an element of shareholders’ equity but are excluded from net income.

The Company’s other comprehensive income (loss), net of tax is primarily comprised of unrealized gains or losses on foreign exchange contracts and interest rate swap agreements designated as cash flow hedges, foreign currency translation, and actuarial gains or losses related to pensions.

The Company’s other comprehensive income (loss), net of tax is primarily comprised of unrealized gains or losses on foreign exchange contracts designated as cash flow hedges, foreign currency translation, and actuarial gains or losses related to pensions.

Derivative Contracts

3 unchanged sentences

The purpose of entering into these hedging transactions is to minimize the impact of foreign currency fluctuations on the Company’s results of operations.

Substantially all of these contract maturity dates do not exceed 12 months.

All contract maturity dates are 12 months or less.

All foreign exchange contracts are for risk management purposes only.

The Company does not purchase foreign exchange contracts for speculative or trading purposes.

The Company had foreign exchange contracts with commercial banks for British pound sterling, European euro, Japanese yen, Malaysian ringgit, Philippine peso, Thai baht, Korean won and Israeli shekel, which had an aggregate notional amount of $ 3.86 billion and $ 5.66 billion at June 28, 2024 and June 30, 2023, respectively.

The Company had foreign exchange contracts with commercial banks for the British pound sterling, European euro, Japanese yen, Malaysian ringgit, Philippine peso, Singaporean dollar and Thai baht, which had an aggregate notional amount of $ 1.14 billion and $ 1.00 billion at June 27, 2025 and June 28, 2024, respectively.

If the derivative is designated as a cash flow hedge and is determined to be highly effective, the change in fair value of the derivative is initially deferred in Other comprehensive income (loss), net of tax.

1 unchanged sentence

Recognized gains and losses on foreign exchange contracts are reported in Cost of revenue and Operating expenses and presented within cash flows from operating activities.

The Company previously had interest rate swaps which were accounted for as designated cash flow hedges to mitigate variations in interest payments under a portion of its variable rate term loans.

The Company paid interest monthly at a fixed rate and received interest monthly at the applicable index rate on the notional amoun t of the contract with realized gains or losses recognized in Interest expense.

Hedge effectiveness is measured by comparing the hedging instrument’s cumulative change in fair value from inception to maturity to the underlying exposure’s terminal value.

The Company determined the ineffectiveness associated with its cash flow hedges to be immaterial to the Consolidated Financial Statements for all years presented.

A change in the fair value of undesignated hedges is recognized in earnings in the period incurred and is reported in Other income, net.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A change in the fair value of undesignated hedges is recognized in earnings in the period incurred and is reported in Other income (expense), net.

Pensions and Other Post-Retirement Benefit Plans

6 unchanged sentences

The Company reports the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period.

In addition, the other components of net benefit cost are presented in Other income, net in the Consolidated Statements of Operations.

In addition, the other components of net benefit cost are presented in Other income (expense), net in the Consolidated Statements of Operations.

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.

4 unchanged sentences

Lease expense is recognized on a straight-line basis over the lease term.

Revision of Previously Issued Financial Statements

As previously disclosed in the Company’s Quarterly Reports on Form 10-Q for the periods ended December 29, 2023 and March 29, 2024, in connection with the preparation of its Condensed Consolidated Financial Statements as of and for the three and six months ended December 29, 2023, the Company identified certain errors related to the Company’s reporting and recording of its interests in its equity method investments in Flash Partners Ltd., Flash Alliance Ltd., and Flash Forward Ltd.

(collectively, “Flash Ventures”).

The errors related to unadjusted differences between Flash Ventures’ application of Japanese generally accepted accounting principles to certain lease-related transactions compared to the applicable U.S.

generally accepted accounting principles.

These unadjusted differences resulted in differences in the equity in earnings from these entities recognized by the Company in Other income (expense), net and the carrying value of the Company’s equity method investments in Flash Ventures.

Based on an analysis of quantitative and qualitative factors in accordance with SAB No.

99, “Materiality,” and SAB No.

108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” and as described further in Note 18, Revision of Previously Issued Financial Statements , the Company evaluated the errors and determined the related impacts were not material to its financial statements for the prior periods when they occurred, but that correcting the cumulative errors in the period detected would have been material to the Company's results of operations for that period.

Accordingly, the Company has revised previously reported financial information presented herein for such immaterial errors.

A summary of revisions to the Condensed Consolidated Financial Statements presented herein is included for comparative purposes in Note 18, Revision of Previously Issued Financial Statements.

WESTERN DIGITAL CORPORATION

4 unchanged sentences

2022-04, “Liabilities-Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations”, which requires annual and interim disclosures for entities that use supplier finance programs in connection with the purchase of goods and services.

The ASU requires the Company to provide disclosure of outstanding obligations to such suppliers for all balance sheet dates presented beginning with the Company’s first quarter of 2024 and to provide certain rollforward information related to those obligations beginning in the Company’s first fiscal quarter of 2025.

Disclosure of Supplier Finance Program Obligations” (“ASU 2022-04”), which requires annual and interim disclosures for entities that use supplier finance programs in connection with the purchase of goods and services.

ASU 2022-04 requires the Company to provide disclosure of outstanding obligations to such suppliers for all balance sheet dates presented beginning with the Company’s first quarter of 2024 and to provide certain rollforward information related to those obligations beginning in the Company’s first fiscal quarter of 2025.

The ASU does not affect the recognition, measurement, or financial statement presentation of supplier finance program obligations.

The Company adopted the guidance on the first day of fiscal year 2024, except for the rollforward information, which the Company is compiling and intends to provide beginning in fiscal year 2025.

The Company adopted the guidance on the first day of fiscal year 2024.

See Note 16, Supplier Finance Program, of the Notes to Consolidated Financial Statements for information regarding the supplier finance program.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”, which expands on segment reporting requirements primarily through enhanced disclosures surrounding significant segment expenses.

The ASU expands on existing segment reporting requirements to require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to an entity's CODM, a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources.

These incremental disclosures will be required beginning with the Company’s financial statements for the year ending June 27, 2025.

The Company expects to provide any required disclosures at that time.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”.

The ASU calls for enhanced income tax disclosure requirements surrounding the tabular rate reconciliation and income taxes paid.

The amendments are effective for the Company’s fiscal year 2026, with early adoption permitted.

The Company is currently compiling the information required for these disclosures.

These incremental disclosures will be required beginning with the Company’s financial statements for the year ending June 27, 2025.

The Company expects to provide any required disclosures at that time.

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which expands on segment reporting requirements primarily through enhanced disclosures surrounding significant segment expenses.

ASU 2023-07 requires that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to an entity’s CODM, a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources.

These incremental disclosures have been provided in these financial statements, as discussed in Note 4, Segment Reporting, Disaggregated Revenue, Geographic Information, and Concentrations of Risk .

Recently Issued Accounting Pronouncements Not Yet Adopted

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” (“ASU 2024-03”), which is intended to improve disclosures about the expenses of public entities.

ASU 2024-03 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 for fiscal years beginning after December 15, 2026, and interim periods within fiscal years following adoption, 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.

These incremental disclosures will be required beginning with the Company’s financial statements for the year ending July 3, 2026, with early adoption permitted.

The Company is currently compiling the information required for these disclosures and expects to provide required disclosures in the year ending July 3, 2026.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Business Segments, Geographic Information, and Concentrations of Risk

The following table summarizes the operating performance of the Company’s reportable segments:

Discontinued Operations

On October 30, 2023, the Company announced that its Board of Directors had completed its strategic review of the business and, after evaluating a comprehensive range of alternatives, authorized the Company to pursue a plan to separate its HDD and Flash business units to create two independent public companies.

In connection with the Separation (as defined below), the Company has incurred separation and transition costs, which are recorded as Business separation costs within discontinued operations in the Company’s Consolidated Financial Statements, as further detailed in the summary of net income (loss) from discontinued operations, net of taxes, below.

On February 21, 2025, the Company completed the previously announced separation of its Flash business (the “Separation”) through a pro rata distribution of 80.1 % of the outstanding shares of Sandisk Corporation (“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 19.9 % ownership interest, or 28.8 million shares, initially 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 net income of Sandisk and applicable assets and liabilities included in the Separation are now reported in the Company’s Consolidated Financial Statements as discontinued operations for all periods prior to the Separation on February 21, 2025.

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 (see additional information in Note 6, Fair Value Measurements and Investments ).

In June 2025, the Company disposed of 21.3 million shares of its Sandisk common stock, along with $ 4 million in cash, in a tax-free exchange for $ 800 million principal amount of the Company’s Term Loan A-3.

The Company expects to monetize its remaining shares of Sandisk within one year from the Separation Date.

The Company entered into various agreements to effect the Separation and provide for the temporary framework of the relationship between Western Digital and Sandisk following the Separation, including, among others, a separation and distribution agreement, a tax matters agreement, and a transition services agreement.

The transition services agreement provides for transition service support to be provided for various periods of time ranging up to 15 months.

The amounts involved under these agreements were not material for the fiscal year ended June 27, 2025 and are not expected to be material.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table provides a summary of the assets and liabilities classified as discontinued operations:

Assets and Liabilities of Discontinued Operations

(in millions)

Cash and cash equivalents $ 328

Accounts receivable, net 935

Inventories 1,955

Other current assets 313

Current assets of discontinued operations

Property, plant and equipment, net $ 808

Notes receivable and investments in Flash Ventures 991

Goodwill 5,713

Other non-current assets 1,101

Non-current assets of discontinued operations

Accounts payable $ 357

Accounts payable to related parties 313

Accrued expenses 427

Income taxes payable 54

Accrued compensation 173

Current liabilities of discontinued operations

Non-current liabilities of discontinued operations

The following table provides a summary of net income (loss) from discontinued operations, net of taxes:

Net Income (Loss) from Discontinued Operations, Net of Taxes

2025 2024 2023

(in millions, except percentages)

(in millions)

Revenue, net $ 4,361 $ 6,686 $ 6,063

Flash $ 6,687 $ 6,063 $ 9,753

HDD 6,316 6,255 9,040

Total net revenue $ 13,003 $ 12,318 $ 18,793

Gross profit:

Flash $ 1,079 $ 433 $ 3,527

HDD 1,881 1,505 2,661

Total gross profit for segments 2,960 1,938 6,188

Unallocated corporate items:

Stock-based compensation expense ( 49 ) ( 49 ) ( 48 )

Amortization of acquired intangible assets ( 3 ) — ( 66 )

Recovery from contamination incident

Contamination related charges — — ( 207 )

Recoveries from a power outage incident — — 7

Other — ( 2 ) —

Total unallocated corporate items ( 15 ) ( 51 ) ( 314 )

Consolidated gross profit $ 2,945 $ 1,887 $ 5,874

Gross margin:

Flash 16.1 % 7.1 % 36.2 %

HDD 29.8 % 24.1 % 29.4 %

Consolidated gross margin 22.6 % 15.3 % 31.3 %

Cost of revenue 2,892 5,514 5,567

Operating expenses:

Research and development 718 957 1,023

Selling, general and administrative 229 102 163

Gain on business divestiture

Business separation costs 144 97 —

Business realignment charges

Operating income (loss) 488 86 ( 737 )

Total interest and other income (expense), net

( 36 ) ( 8 ) 36

Income (loss) before taxes 452 78 ( 701 )

Income tax expense 206 111 81

Net income (loss) from discontinued operations, net of taxes

$ 246 $ ( 33 ) $ ( 782 )

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash flows related to discontinued operations have not been segregated and are included in the Consolidated Statements of Cash Flows for all periods presented.

The following table provides selected financial information related to cash flows from discontinued operations:

Select Cash Flow Information from Discontinued Operations 2025 2024 2023

(in millions)

Depreciation and amortization

$ 115 $ 221 $ 439

Purchases of property, plant and equipment

Stock-based compensation

On February 21, 2025, prior to the effective time of the Separation, Sandisk entered into a loan agreement (the “Sandisk Loan Agreement”) by and among Sandisk, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and others party thereto.

The Sandisk Loan Agreement comprises a term loan B facility in the principal amount of $ 2 billion (the “Sandisk Term Loan Facility”) and a revolving credit facility in the principal amount of $ 1.5 billion (the “Sandisk Revolving Credit Facility” and together with the Sandisk Term Loan Facility, the “Sandisk Facilities”).

The obligations under this facility were retained by Sandisk upon the Separation.

The Company previously had business ventures with Kioxia Corporation (“Kioxia”), which consisted of three separate legal entities:

Flash Partners Ltd., Flash Alliance Ltd., and Flash Forward Ltd.

The Company also previously had a business venture with Unisplendour Corporation Limited and Unissoft (Wuxi) Group Co.

Ltd., both collectively referred to as the “Unis Venture”.

All business ventures with Kioxia and Unis Venture were distributed to Sandisk in connection with the Separation and are included in discontinued operations.

Prior to the Separation, effective September 28, 2024, the Company sold 80 % of its equity interest in an indirect wholly-owned subsidiary in its Flash business, SanDisk Semiconductor (Shanghai) Co.

(“SDSS”), resulting in a gain on divestiture of $ 113 million.

Net proceeds from the sale received prior to the Separation were $ 401 million.

The rights to the remaining future proceeds from the sale and the 20 % retained interest in SDSS were distributed to Sandisk in connection with the Separation.

During the year ended June 28, 2024, the Company completed a sale and leaseback of its facility in Milpitas, California associated with the Flash business.

The Company received net proceeds of $ 191 million in cash and recorded a gain of $ 85 million on the sale.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Segment Reporting, Disaggregated Revenue, Geographic Information, and Concentrations of Risk

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 (loss) from continuing operations and Total assets.

The Company has therefore, determined that it has one reportable segment:

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

2025 2024 2023

(in millions)

$ 9,520 $ 6,317 $ 6,255

Significant expenses and other segment items

Cost of revenue (1)

5,771 4,506 4,827

Research and development (1)

Selling, general and administrative (1)

Litigation matter

( 179 ) 291 —

Business realignment charges

( 6 ) 209 146

Stock-based compensation

Strategic review

Interest expense, net

Loss on retained interest in Sandisk

Loss on extinguishment of debt

Other expense, net

Other segment items (2)

28 ( 53 ) ( 6 )

Income tax expense (benefit)

( 513 ) 26 53

Net income (loss) from continuing operations

$ 1,643 $ ( 765 ) $ ( 902 )

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

(2) Other segment items include strategic investment activity and other small charges.

Disaggregated Revenue

The Company’s broad portfolio of technology and products address multiple end markets.

Cloud is comprised primarily of products for public or private cloud environments and end customers.

Through the Client end market, the Company provides its original equipment manufacturer (“OEM”) and channel customers a broad array of high-performance HDD and Flash solutions across personal computer, mobile, gaming, automotive, virtual reality headsets, at-home entertainment and industrial spaces.

The Consumer end market is highlighted by the Company’s broad range of retail and other end-user products, which capitalize on the strength of the Company’s product brand recognition and vast points of presence around the world.

The Company’s disaggregated revenue information is as follows:

The Company’s disaggregated revenue by end market is as follows:

2025 2024 2023

21 unchanged sentences

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

License and royalty revenue is attributed to countries based upon the location of the headquarters of the licensee.

2025 June 28,

(in millions)

2 unchanged sentences

Malaysia 378 330

China 338 397

Thailand 791 825

4 unchanged sentences

Customer Concentration and Credit Risk

The Company sells its products to computer manufacturers and OEMs, cloud service providers, resellers, distributors and retailers throughout the world.

For 2024, 2023 and 2022, no customer accounted for 10% or more of the Company’s net revenue.

The Company sells its products to cloud service providers, OEMs, resellers, distributors and retailers throughout the world.

For 2025, three customers accounted for 17 %, 12 % and 10 %, respectively, of the Company’s net revenue.

For 2024 and 2023, no single customer accounted for 10% or more of the Company’s net revenue.

For 2025, 2024 and 2023, the Company’s top 10 customers accounted for 68 %, 55 % and 56 %, respectively, of the Company’s net revenue.

3 unchanged sentences

As of June 27, 2025 and June 28, 2024, net accounts receivable were $ 1.49 billion and $ 1.23 billion, respectively, and reserves for potential credit losses were not material.

As of June 28, 2024, one customer accounted for 15 % of the Company’s net accounts receivable and as of June 30, 2023, two customers accounted for 15 % and 13 % of the Company’s net accounts receivable.

As of June 27, 2025, three customers accounted for 20 %, 19 %, and 12 %, respectively, of the Company’s net accounts receivable and as of June 28, 2024, one customer accounted for 23 % of the Company’s net accounts receivable.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company also has cash equivalent and investment policies that limit the amount of credit exposure to any one financial institution or investment instrument and requires that investments be made only with financial institutions or in investment instruments evaluated as highly credit-worthy.

The Company also has cash equivalent and investment policies that limit the amount of credit exposure to any one financial institution or investment instrument and require that investments be made only with financial institutions or in investment instruments evaluated as highly credit-worthy.

Supplier Concentration

All of the Company’s Flash require silicon wafers for the memory and controller components.

The Company’s flash memory wafers are currently supplied almost entirely from Flash Ventures and the Company’s controller wafers are all manufactured by third-party sources.

The failure of any of these sources to deliver silicon wafers could have a material adverse effect on the Company’s business, financial condition and results of operations.

In addition, some key components are purchased from single source vendors for which alternative sources are currently not available.

Some key components are purchased from single source vendors for which alternative sources are currently not available.

Shortages could occur in these essential materials due to an interruption of supply or increased demand in the industry.

3 unchanged sentences

This could lead to product shortages or quality assurance problems that could increase the manufacturing costs of the Company’s products and have material adverse effects on the Company’s operating results.

The following table provides a summary of goodwill activity for the period:

Flash HDD Total

(in millions)

Balance at June 30, 2023 $ 5,716 $ 4,321 $ 10,037

Foreign currency translation adjustment ( 3 ) ( 2 ) ( 5 )

Balance at June 28, 2024 $ 5,713 $ 4,319 $ 10,032

Management performed its annual goodwill impairment assessment for both reporting units as of the first day of its fourth quarter ended June 28, 2024 and concluded that there were no impairment indicators as of June 28, 2024.

The Company also did no t incur any impairment charges for 2023 or 2022.

WESTERN DIGITAL CORPORATION

3 unchanged sentences

From time to time, in connection with factoring agreements, the Company sells trade accounts receivable without recourse to third-party purchasers in exchange for cash.

In 2024, 2023 and 2022, the Company sold trade accounts receivable aggregating $ 623 million, $ 776 million and $ 400 million, respectively.

The discounts on the trade accounts receivable sold during the periods were not material and were recorded within Other income, net in the Consolidated Statements of Operations.

No factored receivables were outstanding as of June 28, 2024, and $ 150 million of factored receivables remained outstanding as of June 30, 2023.

In 2025, the Company sold no trade accounts receivable.

In 2024 and 2023, the Company sold trade accounts receivable aggregating to $ 284 million and $ 406 million, respectively.

The discounts on the trade accounts receivable sold during the periods were not material and were recorded within Other income (expense), net in the Consolidated Statements of Operations.

As of June 27, 2025 and June 28, 2024, no factored receivables were outstanding.

2025 June 28,

19 unchanged sentences

Other intangible assets, net

As part of prior acquisitions, the Company recorded at the time of the acquisition acquired IPR&D for projects in progress that had not yet reached technological feasibility.

IPR&D is initially accounted for as an indefinite-lived intangible asset.

The Company has acquired IPR&D for projects in progress that had not yet reached technological feasibility at the time of acquisition.

IPR&D is initially accounted for as an indefinite-lived intangible asset at the time of acquisition.

Once a project reaches technological feasibility, the Company reclassifies the balance to existing technology and begins to amortize the intangible asset over its estimated useful life.

As of June 28, 2024 and June 30, 2023, IPR&D included in intangible assets, net was $ 72 million and $ 80 million, respectively.

During the year ended June 28, 2024, one IPR&D project reached technological feasibility and $ 8 million was reclassified from IPR&D to existing technology and commenced amortization over an estimated useful life of three years .

As of both June 27, 2025 and June 28, 2024, Other non-current assets included $ 72 million of IPR&D.

During 2025, 2024 and 2023, the Company did no t record any impairment charges related to IPR&D.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Amortizable intangible assets are amortized over the estimated useful lives based on the pattern in which the economic benefits are expected to be received.

As of June 28, 2024 and June 29, 2023, intangible assets had been substantially fully amortized and were not material.

Amortization expense for intangible assets subject to amortization totaled $ 3 million, $ 133 million and $ 221 million in 2024, 2023 and 2022, respectively.

Non-current assets

2025 June 28,

(in millions)

Non-current assets:

Deferred tax assets

$ 1,007 $ 225

Other non-current assets

Total non-current assets

$ 1,484 $ 837

Product warranty liability

8 unchanged sentences

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

2025 June 28,

(in millions)

4 unchanged sentences

Other liabilities

2025 June 28,

(in millions)

4 unchanged sentences

Total other liabilities $ 559 $ 1,002

Management performed its annual goodwill impairment assessment as of the first day of its fourth quarter ended June 27, 2025 and concluded there were no impairment indicators as of June 27, 2025.

The Company also did not incur any impairment charges for 2025, 2024 or 2023.

The carrying amount of goodwill was $ 4.32 billion as of both June 27, 2025 and June 28, 2024.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accumulated other comprehensive loss

Accumulated other comprehensive loss (“AOCL”), net of tax, refers to expenses, gains and losses that are recorded as an element of shareholders’ equity but are excluded from net income.

The following table illustrates the changes in the balances of each component of AOCL:

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income (loss), net of tax, refers to expenses, gains and losses that are recorded as an element of shareholders’ equity but are excluded from net income.

The following table illustrates the changes in the balances of each component of Accumulated other comprehensive income (loss):

Actuarial Pension Gains (Losses)

Foreign Currency Translation Adjustment Unrealized Gains (Losses) on Derivative Contracts

Total Accumulated Comprehensive Loss

Total Accumulated Comprehensive Income (Loss)

(in millions)

Balance at July 1, 2022 $ ( 11 ) $ ( 302 ) $ ( 266 ) $ ( 579 )

Balance at June 30, 2023 $ ( 2 ) $ ( 389 ) $ ( 157 ) $ ( 548 )

Other comprehensive income (loss) before reclassifications 23 ( 115 ) ( 331 ) ( 423 )

Amounts reclassified from accumulated other comprehensive loss — — 351 351

Amounts reclassified from accumulated other comprehensive income (loss) — — 244 244

Income tax benefit (expense) related to items of other comprehensive income (loss) ( 7 ) ( 1 ) 23 15

1 unchanged sentence

Balance at June 28, 2024 14 ( 505 ) ( 221 ) ( 712 )

Other comprehensive income (loss) before reclassifications 23 ( 115 ) ( 331 ) ( 423 )

Amounts reclassified from accumulated other comprehensive loss — — 244 244

Income tax benefit (expense) related to items of other comprehensive loss ( 7 ) ( 1 ) 23 15

Net current-period other comprehensive loss 16 ( 116 ) ( 64 ) ( 164 )

Other comprehensive income before reclassifications 3 45 31 79

Amounts reclassified from accumulated other comprehensive income (loss) — — 149 149

Income tax expense related to items of other comprehensive income ( 1 ) — ( 41 ) ( 42 )

Net current-period other comprehensive income 2 45 139 186

Distribution in connection with the Separation — 458 88 546

Balance at June 27, 2025 $ 16 $ ( 2 ) $ 6 $ 20

During 2024, the amounts reclassified out of AOCL included losses of $ 244 million related to foreign exchange contracts.

During 2023, the amounts reclassified out of AOCL included losses of $ 361 million related to foreign exchange contracts, and gains of $ 10 million related to interest rate swaps.

The gains and losses related to interest rate swaps were charged to Interest expense and losses related to foreign contracts were substantially all charged to Cost of revenue in the Consolidated Statements of Operations.

As of June 28, 2024, substantially all existing net losses related to cash flow hedges recorded in AOCL are expected to be reclassified to earnings within the next twelve months.

During 2025 and 2024, the amounts reclassified out of Accumulated other comprehensive income (loss) included losses of $ 149 million and $ 244 million, respectively, related to foreign exchange contracts.

As of June 27, 2025, all existing net losses related to cash flow hedges recorded in Accumulated other comprehensive income (loss) are expected to be reclassified to earnings within the next twelve months.

WESTERN DIGITAL CORPORATION

12 unchanged sentences

(in millions)

Retained interest in Sandisk

$ 354 $ — $ — $ 354

Cash equivalents – Money market funds 285 — — 285

13 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Retained Interest in Sandisk.

The Company retained 28.8 million shares of Sandisk at the Separation.

These shares are valued based on quoted market prices.

As discussed in Note 8, Debt , the Company exchanged 21.3 million shares of Sandisk to settle a portion of the Company’s Term Loan A-3.

As of June 27, 2025, the Company still held 7.5 million shares of Sandisk.

Money Market Funds.

16 unchanged sentences

(in millions)

1.50 % convertible notes due 2024

$ — $ — $ 1,099 $ 1,067

3.00 % convertible notes due 2028

1,568 2,556 — —

4.75 % senior unsecured notes due 2026

1 unchanged sentence

Variable interest rate Term Loan A-2 maturing 2027 — — 2,578 2,539

Variable interest rate Term Loan A-3 maturing 2027 1,642 1,655 — —

3.00 % convertible notes due 2028

1,575 2,849 1,568 2,556

2.85 % senior notes due 2029

7 unchanged sentences

As of June 27, 2025, the Company had outstanding foreign exchange forward contracts that were designated as either cash flow hedges or non-designated hedges.

Substantially all of the contract maturity dates of these foreign exchange forward contracts do not exceed twelve months .

All of the contract maturity dates of these foreign exchange forward contracts are 12 months or less.

As of June 27, 2025, the Company did not have any derivative contracts with credit risk related contingent features.

Changes in fair values of the non-designated foreign exchange contracts are recognized in Other income, net and are largely offset by corresponding changes in the fair values of the foreign-currency denominated monetary assets and liabilities.

Changes in fair values of the non-designated foreign exchange contracts are recognized in Other income (expense), net and are largely offset by corresponding changes in the fair values of the foreign-currency denominated monetary assets and liabilities.

For each of 2025, 2024 and 2023, total net realized and unrealized transaction and foreign exchange contract currency gains and losses were not material to the Company’s Consolidated Financial Statements.

Unrealized gains or losses on designated cash flow hedges are recognized in AOCL.

For more information regarding cash flow hedges, see Note 4, Supplemental Financial Statement Data – Accumulated other comprehensive loss.

Unrealized gains or losses on designated cash flow hedges are recognized in Accumulated other comprehensive income (loss).

For more information regarding cash flow hedges, see Note 5, Supplemental Financial Statement Data – Accumulated other comprehensive income (loss).

Netting Arrangements

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Debt consisted of the following as of June 28, 2024 and June 30, 2023:

Debt consisted of the following:

2025 June 28,

(in millions)

1.50 % convertible notes due 2024

3.00 % convertible notes due 2028

4.75 % senior unsecured notes due 2026

$ 500 $ 2,300

Variable interest rate Term Loan A-2 maturing 2027 — 2,588

Variable interest rate Term Loan A-3 maturing 2027 1,649 —

3.00 % convertible notes due 2028

2.85 % senior notes due 2029

5 unchanged sentences

Long-term debt $ 2,485 $ 5,684

Revolving Credit Facility and Term Loans

On February 20, 2025, the Company entered into a fourth amendment to the loan agreement governing the Company’s revolving credit facility maturing in January 2027 (the “2027 Revolving Credit Facility”) and Term Loan Facility (as defined below), dated as of January 7, 2022 (as amended, the “Loan Agreement”) that, among other changes, (a) permitted the Separation, (b) provided for the automatic release, in connection with the Separation, of guarantees and liens on collateral provided by Sandisk and Sandisk Technologies, Inc.

under the Loan Agreement, (c) provided for the issuance of a new $ 2.51 billion Term Loan A-3 maturing in January 2027 (the “Term Loan A-3”) in a noncash exchange to replace the Company’s previously existing Term Loan A-2 (the “Term Loan A-2” and, together with the Term Loan A-3, the “Term Loan Facility”), (d) facilitated the exchange of Sandisk shares retained at the Separation to settle a portion of the Term Loan A-3 in connection with the Sandisk retained interest, and (e) in connection with the Separation, reduced the aggregate commitments under the 2027 Revolving Credit Facility from $ 2.25 billion to $ 1.25 billion.

In June 2025, the Company settled $ 800 million of the Term Loan A-3 principal amount, through a non-cash exchange of 21.3 million shares of Sandisk common stock held by the Company, and a $ 4 million cash payment, resulting in a loss on extinguishment of debt of $ 100 million.

During the year ended June 27, 2025, the Company also made principal repayments aggregating to $ 138 million on its Term Loan Facility.

As of June 27, 2025, the remaining balance of Term Loan A-3 amortizes in quarterly installments of $ 31 million per quarter beginning with the quarter ending October 3, 2025, and the remaining balance is payable at maturity on January 7, 2027.

Issuance costs for the Term Loan Facility are amortized to Interest expense over its term and unamortized costs were $ 7 million as of June 27, 2025.

The Term Loan A-3 Loan bears interest, at the Company’s option, at a per annum rate equal to either (x) the Adjusted Term SOFR (as defined in the Loan Agreement) plus an applicable margin varying from 1.125 % to 2.000 % or (y) a base rate plus an applicable margin varying from 0.125 % to 1.000 %, in each case depending on the corporate family ratings of the Company from at least two of the Credit Rating Agencies (as defined in the Loan Agreement), with an initial interest rate of Adjusted Term SOFR plus 1.500 %.

The all-in interest rate for Term Loan A-3 as of June 27, 2025 was 5.918 %.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the year ended June 27, 2025, the Company drew and repaid $ 150 million principal amount under its $ 1.25 billion 2027 Revolving Facility.

Loans under the 2027 Revolving Facility bear interest at a per annum rate, at the Company’s option, equal to either (x) the Adjusted Term SOFR Rate (as defined in the Loan Agreement) plus an applicable margin varying from 1.125 % to 2.000 % or (y) a base rate plus an applicable margin varying from 0.125 % to 1.000 %, in each case depending on the corporate family ratings of the Company from at least two of the Credit Rating Agencies, with an interest rate of Adjusted Term SOFR plus 1.375 %.

The Company is also required to pay an unused commitment fee on the 2027 Revolving Facility ranging from 0.120 % to 0.350 % based on the corporate family ratings of the Company from at least two of the Credit Rating Agencies, with an initial unused commitment fee of 0.200 %.

As of June 27, 2025, the Company had an insignificant amount of issued standby letters of credit.

The Loan Agreement governing the 2027 Revolving Credit Facility and the term loan facility requires the Company to maintain a ratio (“Leverage Ratio”) of total funded debt to Consolidated Adjusted EBITDA (as defined in the Loan Agreement) below a maximum, at the end of each quarter, which was 3.75 times through June 27, 2025 and will be 3.25 times thereafter.

As of June 27, 2025, the Company was in compliance with all financial covenants under the Loan Agreement.

The Loan Agreement also requires the Company to comply with customary covenants that include, among others, limitations on the incurrence of additional debt, liens on property, acquisitions and investments, loans and guarantees, mergers, consolidations, liquidations and dissolution, asset sales, dividends and distribution, and other payments in respect of the Company’s capital stock, prepayments of certain debt, transactions with affiliates and certain modifications of organizational documents and certain debt agreements.

In February 2018, the Company issued $ 2.30 billion aggregate principal amount of senior unsecured notes due February 15, 2026 (the “2026 Senior Unsecured Notes”).

The 2026 Senior Unsecured Notes bear interest at an annual rate of 4.750 % with interest payable on February 15 and August 15 of each year.

The Company is not required to make principal payments on the 2026 Senior Unsecured Notes prior to the maturity date.

In April 2025 however, the Company redeemed, at its election, $ 1.80 billion aggregate principal amount of its 2026 Unsecured Notes at par plus accrued interest.

On November 3, 2023, the Company issued $ 1.60 billion aggregate principal amount of convertible senior notes 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 Company is not required to make principal payments on the 2028 Convertible Notes prior to the maturity date.

The 2028 Convertible Notes are jointly and severally guaranteed by each of the Company’s wholly-owned subsidiaries that guarantees the 4.75 % senior unsecured notes due 2026 (currently, Western Digital Technologies, Inc., Sandisk Technologies, Inc.

and Sandisk Corporation).

The 2028 Convertible Notes are convertible at the option of any holder beginning on August 15, 2028 at an initial conversion price of approximately $ 52.20 per share of common stock.

Prior to that date, 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 that date upon the occurrence of certain corporate events.

The 2028 Convertible Notes are guaranteed by Western Digital Technologies, Inc., the Company’s wholly-owned subsidiary that also guarantees the 2026 Senior Unsecured Notes.

The 2028 Convertible Notes are convertible at the option of any holder beginning on August 15, 2028, at a conversion price of approximately $ 37.82 per share of common stock (which conversion price has been adjusted from its original conversion price of approximately $ 52.20 in accordance with the Indenture, as a result of the Separation and dividends paid on the Company’s common stock).

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.

During the three months ended June 28, 2024, the conditional conversion feature above of the 2028 Convertible Notes was triggered, based on the price of the Company’s common stock, as the last reported sale price of the Company’s common stock was greater than or equal to 130 % of the then-applicable conversion price for the 2028 Convertible Notes for at least 20 trading days during the period of 30 consecutive trading days ending on June 28, 2024, the last trading day of the applicable calendar quarter.

Accordingly, the 2028 Convertible Notes are convertible through September 30, 2024, at which point the common stock price will be re-evaluated to determine if the 2028 Convertible Notes will continue to be convertible in the subsequent calendar quarter.

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.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the calendar quarter ended June 30, 2025, the sale price conditional conversion feature of the 2028 Convertible Notes was triggered.

As a result, the holders of the 2028 Convertible Notes have the right to convert the 2028 Convertible Notes during the next succeeding calendar quarter, through September 30, 2025, at which point the common stock price will be re-evaluated to determine whether the 2028 Convertible Notes will continue to be convertible in the subsequent calendar quarter.

The Company has classified the 2028 Convertible Notes as current liabilities in the Company’s Consolidated Financial Statements as of June 27, 2025.

2 unchanged sentences

As of June 27, 2025, issuance costs of $ 25 million remained unamortized.

For the year ended June 28, 2024, the total interest expense was $ 37 million with coupon interest expense of $ 32 million and the amortization of debt discount and issuance costs of $ 5 million, respectively.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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”).

The Capped Calls each have a strike price of approximately $ 52.20 per share, subject to certain adjustments, which correspond to the initial conversion price of the 2028 Convertible Notes.

The Capped Calls have initial cap prices of $ 70.26 per share, subject to certain adjustments.

The Capped Calls cover, subject to anti-dilution adjustments, approximately 8 million shares of the Company’s common stock.

The Capped Calls each have a strike price of approximately $ 37.82 per share, which has been adjusted from its original strike price of approximately $ 52.20 , in accordance with the terms of the agreements, and corresponds to the current conversion price of the 2028 Convertible Notes.

The Capped Calls are subject to the same adjustments applicable to the conversion price of the convertible notes, which the Company expects will result in adjusted cap prices of approximately $ 50.53 per share, subject to certain adjustments.

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.

However, 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.

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 stockholders’ equity and are not accounted for as derivatives.

As these transactions met certain accounting criteria, the Capped Calls were recorded in shareholders’ equity and are not accounted for as derivatives.

The cost of the Capped Calls of $ 155 million, net of $ 37 million in deferred tax assets, was recorded as a decrease to Additional paid-in capital on the Company’s Consolidated Balance Sheets.

In February 2018, the Company issued $ 1.10 billion aggregate principal amount of convertible senior notes due February 1, 2024 (the “2024 Convertible Notes”).

The 2024 Convertible Notes bore interest at an annual rate of 1.50 % with interest payable on February 1 and August 1 of each year.

Contemporaneously with the issuance of the 2028 Convertible Notes as noted above, the Company entered into individually negotiated transactions with certain holders of the Company’s 2024 Convertible Notes to repurchase approximately $ 508 million aggregate principal amount of such notes at an immaterial discount.

On February 1, 2024, the Company settled all remaining 2024 Convertible Notes in accordance with their original terms for an aggregate cash principal payment of $ 592 million plus interest.

During the year ended June 28, 2024, the Company entered into a third amendment (“Amendment No.

3”) to the Company’s Amended and Restated Loan Agreement, dated as of January 7, 2022 which governs the Term-Loan A-2 and the revolving credit facility maturing in January 2027 (as amended, the “Credit Agreement”).

Amendment No.

3 extended the time period during which certain real property is excluded from the collateral package supporting the obligations under the Credit Agreement.

The Credit Agreement requires the Company to maintain a ratio (“Leverage Ratio”) of total funded debt to Consolidated Adjusted EBITDA (as defined in the Credit Agreement) below a maximum at the end of each quarter as follows:

Quarter ending Leverage ratio

June 28, 2024 5.25 to 1.00

September 27, 2024 5.00 to 1.00

December 27, 2024 4.50 to 1.00

March 28, 2025 4.00 to 1.00

June 25, 2025 3.75 to 1.00

Thereafter 3.25 to 1.00

For the purpose of the Leverage Ratio, Consolidated Adjusted EBITDA is calculated on a trailing twelve-month basis, except that for the quarters ended June 28, 2024 and September 27, 2024, Consolidated Adjusted EBITDA shall be (i) for the quarter ending June 28, 2024, Consolidated Adjusted EBITDA for such quarter and the immediately preceding quarter multiplied by two and (ii) for the quarter ending September 27, 2024, Consolidated Adjusted EBITDA for such quarter and the two immediately preceding quarters multiplied by four-thirds.

In addition, as of June 28, 2024, the Credit Agreement requires the Company and its subsidiaries to maintain minimum liquidity (defined as the sum of cash and cash equivalents plus available unused capacity under its 2027 Revolving Facility less the aggregate principal amount of indebtedness that matures within 12 months of such date) of $ 2.00 billion at the end of each quarter through September 27, 2024.

As of June 28, 2024, the Company was in compliance with all financial covenants under the Credit Agreement.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Credit Agreement also requires the Company to comply with customary covenants that include, among others, limitations on the incurrence of additional debt, liens on property, acquisitions and investments, loans and guarantees, mergers, consolidations, liquidations and dissolution, asset sales, dividends and distribution, and other payments in respect of the Company’s capital stock, prepayments of certain debt, transactions with affiliates and certain modifications of organizational documents and certain debt agreements.

The Term Loan A-2 Loan bears interest, at the Company’s option, at a per annum rate equal to either (x) the Adjusted Term SOFR (as defined in the Loan Agreement) plus an applicable margin varying from 1.125 % to 2.000 % or (y) a base rate plus an applicable margin varying from 0.125 % to 1.000 %, in each case depending on the corporate family ratings of the Company from at least two of Standard & Poor’s Ratings Services (“S&P”), Moody’s Investors Service, Inc.

(“Moody’s”) and Fitch Ratings, Inc.

(“Fitch”), with an interest rate of Adjusted Term SOFR plus 1.500 %.

The annualized interest rate for Term Loan A-2 as of June 28, 2024 was 6.942 %.

During the year ending June 28, 2024, the Company made scheduled payments aggregating $ 113 million on its Term Loan A-2.

As of June 28, 2024, the remaining balance of Term Loan A-2 amortizes in quarterly installments of $ 38 million per quarter beginning with the quarter ending September 27, 2024, and the remaining balance is payable at maturity on January 7, 2027.

Issuance costs for Term Loan A-2 are amortized to Interest expense over its term and unamortized costs were $ 9 million as of June 28, 2024.

During the year ended June 28, 2024, the Company drew and repaid $ 800 million principal amount under its $ 2.25 billion revolving credit facility maturing in January 2027 (the “2027 Revolving Facility”).

The Company has issued standby letters of credit of $ 33 million as of June 28, 2024, which reduced the Company’s 2027 Revolving Facility’s capacity by the same amount to $ 2.22 billion as of that date.

Loans under the 2027 Revolving Facility bear interest at a per annum rate, at the Company’s option, equal to either (x) the Adjusted Term SOFR Rate (as defined in the Loan Agreement) plus an applicable margin varying from 1.125 % to 2.000 % or (y) a base rate plus an applicable margin varying from 0.125 % to 1.000 %, in each case depending on the corporate family ratings of the Company from at least two of S&P, Moody’s and Fitch, with an interest rate of Adjusted Term SOFR plus 1.375 %.

The Company is also required to pay an unused commitment fee on the 2027 Revolving Facility ranging from 0.120 % to 0.350 % based on the corporate family ratings of the Company from at least two of S&P, Moody’s and Fitch, with an initial unused commitment fee of 0.200 %.

Under the term of the Credit Agreement, the 2027 Revolving Facility and Term Loan A-2 (the “Credit Facilities”) are unconditionally guaranteed by Western Digital Technologies, Inc., Sandisk Technologies, Inc.

and Sandisk Corporation (the “Guarantors”) and are secured on a first-priority basis (subject to permitted liens) by a lien on substantially all assets and properties of the Company and the Guarantors (the “Collateral”), subject to certain exceptions.

Furthermore, the obligations under the Company’s 2.850 % Senior Notes due 2029 and 3.100 % Senior Notes due 2032 have been secured by the Collateral on an equal and ratable basis to the obligations under the Credit Facilities for so long as and to the extent required under the terms of the Indenture, and the obligations under the Company’s 2026 Senior Unsecured Notes have been guaranteed by the Guarantors pursuant to the First Supplemental Indenture dated as of June 20, 2023 and the Second Supplemental Indenture dated as of April 26, 2024 (the “2026 Senior Notes Supplemental Indentures”) for so long as and to the extent required under the terms of the indenture governing such notes and the 2026 Senior Notes Supplemental Indentures.

In August 2023, the Company drew $ 600 million under a delayed draw term loan agreement, which was repaid in full in June 2024.

That delayed draw term loan agreement is now terminated.

Borrowings under that delayed draw term loan agreement bore interest, at a rate based on SOFR Rate plus an applicable margin.

In December 2021, the Company issued $ 500 million aggregate principal amount of 2.850 % senior notes due February 1, 2029 (the “2029 Senior Notes”) and issued $ 500 million aggregate principal amount of 3.100 % senior notes due February 1, 2032 (the “2032 Senior Notes”), pursuant to the terms of an indenture, dated as of December 10, 2021 (the “Base Indenture”) between the Company and U.S.

3 unchanged sentences

The Company is not required to make principal payments on either the 2029 Senior Notes or 2032 Senior Notes prior to their maturity dates.

In February 2018, the Company issued $ 1.10 billion aggregate principal amount of convertible senior notes due February 1, 2024 (the “2024 Convertible Notes”).

The 2024 Convertible Notes bore interest at an annual rate of 1.50 % with interest payable on February 1 and August 1 of each year.

On February 1, 2024, the Company settled all remaining 2024 Convertible Notes in accordance with their original terms for an aggregate cash principal payment of $ 592 million plus interest.

Collateral and Restrictive Covenants

Under the terms of the Loan Agreement, the 2027 Revolving Facility and Term Loan Facility (together, the “Credit Facilities”) are unconditionally guaranteed by Western Digital Technologies, Inc.

(the “Guarantor”) and are secured on a first-priority basis (subject to permitted liens) by a lien on substantially all assets and properties of the Company and the Guarantor (the “Collateral”), subject to certain exceptions.

Furthermore, under the terms of the applicable indentures, the obligations under the Company’s 2.850 % Senior Notes due 2029 and 3.100 % Senior Notes due 2032 have been secured by the Collateral on an equal and ratable basis to the obligations under the Credit Facilities, and the obligations under the Company’s 2026 Senior Unsecured Notes have been guaranteed by the Guarantor pursuant to the First Supplemental Indenture dated as of June 20, 2023 and the Second Supplemental Indenture dated as of April 26, 2024 (the “2026 Senior Notes Supplemental Indentures”).

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In February 2018, the Company issued $ 2.30 billion aggregate principal amount of senior unsecured notes due February 15, 2026 (the “2026 Senior Unsecured Notes”).

The 2026 Senior Unsecured Notes bear interest at an annual rate of 4.750 % with interest payable on February 15 and August 15 of each year.

The Company is not required to make principal payments on the 2026 Senior Unsecured Notes prior to the maturity date.

Issuance costs for the 2026 Senior Unsecured Notes are amortized to interest expense over the term of the 2026 Senior Unsecured Notes and as of June 28, 2024, issuance costs of $ 4 million remained unamortized.

The indentures and supplemental indentures, as applicable, governing the Company’s 2029 Senior Notes, 2032 Senior Notes, 2026 Senior Unsecured Notes and the 2028 Convertible Notes each contain various restrictive covenants, which can include limitations on the Company’s and its subsidiaries’ ability to, among other things, consolidate, merge or sell all or substantially all of their assets;

9 unchanged sentences

Net carrying value $ 4,711

(1) As of June 28, 2024, the holders of the 2028 Convertible Notes have the option to convert the notes through September 30, 2024.

(1) As of June 30, 2025, the holders of the 2028 Convertible Notes will have the option to convert the notes from July 1, 2025 through September 30, 2025.

As such, the principal portion of these notes is reflected as current in the table above.

7 unchanged sentences

Obligations and Funded Status

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

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

2025 2024 2023

92 unchanged sentences

The fair value of other fixed income securities is typically estimated using pricing models and quoted prices of securities with similar characteristics and is generally classified as Level 2.

Cash equivalents includes money market accounts that are valued at their cost plus interest on a daily basis, which approximates fair value.

Cash equivalents include money market accounts that are valued at their cost plus interest on a daily basis, which approximates fair value.

Short-term investments represent securities with original maturities of one year or less.

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Related Parties and Related Commitments and Contingencies

Flash Ventures

The Company procures substantially all of its flash-based memory wafers from its business ventures with Kioxia Corporation (“Kioxia”), which consists of three separate legal entities:

Flash Partners Ltd.

(“Flash Partners”), Flash Alliance Ltd.

(“Flash Alliance”) and Flash Forward Ltd.

(“Flash Forward”), collectively referred to as “Flash Ventures”.

The Company has a 49.9 % ownership interest and Kioxia has a 50.1 % ownership interest in each of these entities.

Through Flash Ventures, the Company and Kioxia collaborate in the development and manufacture of flash-based memory wafers, which are manufactured by Kioxia at its wafer fabrication facilities located in Japan using semiconductor manufacturing equipment individually owned or leased by each Flash Ventures entity.

Each Flash Ventures entity purchases wafers from Kioxia at cost and then resells those wafers to the Company and Kioxia at cost plus a markup .

Flash Partners .

Flash Partners was formed in 2004 in connection with the construction of Kioxia’s “Y3” 300-millimeter wafer fabrication facility located in Yokkaichi, Japan.

Flash Alliance.

Flash Alliance was formed in 2006 in connection with the construction of Kioxia’s “Y4” 300-millimeter wafer fabrication facility located in Yokkaichi, Japan.

Flash Forward .

Flash Forward was formed in 2010 in connection with the construction of Kioxia’s “Y5” 300-millimeter wafer fabrication facility located in Yokkaichi, Japan.

Y5 was built in two phases of approximately equal size.

The Company has a facility agreement with Kioxia related to the construction and operation of Kioxia’s “New Y2” 300-millimeter wafer fabrication facility located in Yokkaichi, Japan.

New Y2 primarily provided additional clean room space to convert a portion of 2-dimensional (“2D”) flash-based wafer production capacity to 3-dimensional (“3D”) flash-based wafer production capacity.

Production of flash-based wafers in New Y2 started in 2016.

The Company also has a facility agreement with Kioxia related to the construction and operation of Kioxia’s “Y6” 300-millimeter wafer fabrication facility in Yokkaichi, Japan.

Y6 is primarily intended to provide clean room space to continue the transition of existing 2D flash-based wafer capacity to 3D flash-based wafer production capacity.

Production of flash-based wafers in Y6 started in 2018.

The Company also has a facility agreement with Kioxia related to the construction and operation of Kioxia’s “K1” 300-millimeter wafer fabrication facility in Kitakami, Japan.

The primary purpose of K1 is to provide clean room space to continue the transition of existing flash-based wafer capacity to newer technology nodes.

Production of flash-based wafers in K1 started in 2019.

In January 2022, the Company entered into additional agreements regarding Flash Ventures’ investment in a new wafer fabrication facility in Yokkaichi, Japan, referred to as “Y7”.

The primary purpose of Y7 is to provide clean room space to continue the transition of existing flash-based wafer capacity to newer flash technology nodes.

Production of flash-based wafers in Y7 started in 2022.

In June 2024, the Company entered into additional agreements regarding Flash Ventures’ investment in a new wafer fabrication facility in Kitakami, Japan, referred to as “K2”.

The primary purpose of K2 is to provide clean room space to continue the transition of existing flash-based wafer capacity to newer flash technology nodes.

Output from K2 is expected to begin in the first half of fiscal year 2026.

In connection with the start-up of the K1, K2 and Y7 facilities, the Company has made prepayments over time, and as of June 28, 2024, $ 523 million remain to be credited against future building depreciation charges.

As of June 28, 2024, the Company is also committed to make additional building depreciation prepayments of $ 610 million, based on Japanese yen to U.S.

dollars exchange rate of 160.44 as of such date, payable as follows:

$ 372 million in fiscal year 2025, $ 29 million in fiscal year 2026, $ 109 million in fiscal year 2027, $ 87 million in fiscal year 2028 and $ 13 million in fiscal year 2029.

As of June 28, 2024, in addition to the requirements to make building depreciation prepayments, the Company will also make payments for building depreciation of approximately $ 290 million at varying dates through fiscal year 2035.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company accounts for its ownership position of each entity within Flash Ventures under the equity method of accounting.

The financial and other support provided by the Company in all periods presented was either contractually required or the result of a joint decision to expand wafer capacity, transition to new technologies or refinance existing equipment lease commitments.

Entities within Flash Ventures are VIEs.

The Company evaluated whether it is the primary beneficiary of any of the entities within Flash Ventures for all periods presented and determined that it is not the primary beneficiary of any of the entities within Flash Ventures because it does not have a controlling financial interest in any of those entities.

In determining whether the Company is the primary beneficiary, the Company analyzed the primary purpose and design of Flash Ventures, the activities that most significantly impact Flash Ventures’ economic performance, and whether the Company had the power to direct those activities.

The Company concluded, based upon its 49.9 % ownership, the voting structure and the manner in which the day-to-day operations are conducted for each entity within Flash Ventures, that the Company lacked the power to direct most of the activities that most significantly impact the economic performance of each entity within Flash Ventures.

The following table presents the notes receivable from, and equity investments in, Flash Ventures as of June 28, 2024 and June 30, 2023:

2024 June 30,

(in millions)

Notes receivable, Flash Partners $ 1 $ 37

Notes receivable, Flash Alliance 5 48

Notes receivable, Flash Forward 485 709

Investment in Flash Partners 149 161

Investment in Flash Alliance 216 276

Investment in Flash Forward 135 179

Total notes receivable and investments in Flash Ventures $ 991 $ 1,410

During 2024, 2023 and 2022, the Company made net payments to Flash Ventures of $ 3.35 billion, $ 4.20 billion and $ 4.70 billion, respectively, for purchased flash-based memory wafers and net loans.

The Company makes, or will make, loans to Flash Ventures to fund equipment investments for new process technologies and additional wafer capacity.

The Company aggregates its Flash Ventures’ notes receivable into one class of financing receivables due to the similar ownership interest and common structure in each Flash Venture entity.

For all reporting periods presented, no loans were past due and no loan impairments were recorded.

The Company’s notes receivable from each Flash Ventures entity, denominated in Japanese yen, are secured by equipment owned by that Flash Ventures entity.

As of June 28, 2024 and June 30, 2023, the Company had Accounts payable balances due to Flash Ventures of $ 313 million and $ 292 million, respectively.

The Company’s maximum reasonably estimable loss exposure (excluding lost profits) as a result of its involvement with Flash Ventures, based upon the Japanese yen to U.S.

dollar exchange rate at June 28, 2024, is presented below.

Investments in Flash Ventures are denominated in Japanese yen, and the maximum estimable loss exposure excludes any cumulative translation adjustment due to revaluation from the Japanese yen to the U.S.

(in millions)

Notes receivable $ 491

Equity investments 500

Operating lease guarantees 1,299

Inventory and prepayments 1,069

Maximum estimable loss exposure $ 3,359

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of June 28, 2024 and June 30, 2023, the Company’s retained earnings included cumulative undistributed earnings of Flash Ventures of $ 158 million and $ 219 million, respectively.

The Company is obligated to pay for variable costs incurred in producing its share of Flash Ventures’ flash-based memory wafer supply, based on its three-month forecast, which generally equals 50 % of Flash Ventures’ output.

The Company is not able to estimate its total wafer purchase commitment obligation beyond its rolling three-month purchase commitment because the price is determined by reference to the future cost of producing the semiconductor wafers.

In addition, the Company is obligated to pay for half of Flash Ventures’ fixed costs regardless of the output the Company chooses to purchase.

The Company is also committed to fund 49.9 % to 50.0 % of each Flash Ventures entity’s capital investments to the extent that Flash Ventures entity’s operating cash flow is insufficient to fund these investments.

Flash Ventures has historically operated near 100 % of its manufacturing capacity.

During 2024 and 2023, as a result of flash business conditions, the Company temporarily reduced its utilization of its share of Flash Ventures’ manufacturing capacity to an abnormally low level to more closely align the Company’s flash-based wafer supply with projected demand.

In 2024 and 2023, the Company incurred costs of $ 249 million and $ 286 million, respectively, associated with the reduction in utilization related to Flash Ventures, which was recorded as a charge to Cost of revenue.

In February 2022, contamination of certain material used in manufacturing processes occurred at Flash Ventures’ fabrication facilities in both Yokkaichi and Kitakami, Japan which resulted in damage to inventory units in production, a temporary disruption to production operations and a reduction in the Company’s flash wafer availability.

During 2022, the Company incurred charges of $ 207 million related to this contamination incident that were recorded in Cost of revenue and primarily consisted of scrapped inventory and rework costs, decontamination and other costs needed to restore the facilities to normal capacity, as well as charges for under absorption of overhead costs.

During 2024, the Company received a recovery of $ 36 million related to this incident from its insurance carriers, which was recorded in Cost of revenue.

The Company continues to pursue recovery of its remaining losses associated with this event;

however, the total amount of recovery cannot be estimated at this time.

Inventory Purchase Commitments with Flash Ventures.

Purchase orders placed under Flash Ventures for up to three months are binding and cannot be canceled.

Research and Development Activities.

The Company participates in common R&D activities with Kioxia and is contractually committed to a minimum funding level.

R&D commitments are immaterial to the Consolidated Financial Statements.

Off-Balance Sheet Liabilities

Flash Ventures sells to and leases back from a consortium of financial institutions a portion of its tools and has entered into equipment lease agreements of which the Company guarantees half or all of the outstanding obligations under each lease agreement.

The lease agreements are subject to customary covenants and cancellation events related to Flash Ventures and each of the guarantors.

The occurrence of a cancellation event could result in an acceleration of Flash Ventures’ obligations and a call on the Company’s guarantees.

The following table presents the Company’s portion of the remaining guarantee obligations under the Flash Ventures’ lease facilities in both Japanese yen and U.S.

dollar-equivalent, based upon the Japanese yen to U.S.

dollar exchange rate as of June 28, 2024.

Lease Amounts

(Japanese yen, in billions) (U.S.

dollar, in millions)

Total guarantee obligations ¥ 208,382 $ 1,299

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table details the breakdown of the Company’s remaining guarantee obligations between the principal amortization and the purchase option exercise price at the end of the term of the Flash Ventures lease agreements, in annual installments as of June 28, 2024 in U.S.

dollars, based upon the Japanese yen to U.S.

dollar exchange rate as of June 28, 2024:

Annual Installments Payment of Principal Amortization Purchase Option Exercise Price at Final Lease Terms Guarantee Amount

(in millions)

2025 $ 285 $ 74 $ 359

2026 359 111 470

2027 164 95 259

2028 58 92 150

2029 11 50 61

Total guarantee obligations $ 877 $ 422 $ 1,299

The Company and Kioxia have agreed to mutually contribute to, and indemnify each other and Flash Ventures for, environmental remediation costs or liability resulting from Flash Ventures’ manufacturing operations in certain circumstances.

The Company has not made any indemnification payments, nor recorded any indemnification receivables, under any such agreements.

As of June 28, 2024, no amounts have been accrued in the Consolidated Financial Statements with respect to these indemnification agreements.

The Company has a joint venture with Unisplendour Corporation Limited and Unissoft (Wuxi) Group Co.

(“Unis”), referred to as the “Unis Venture”, to market and sell the Company’s products in China and to develop data storage systems for the Chinese market in the future.

The Unis Venture is 49 % owned by the Company and 51 % owned by Unis.

The Company accounts for its investment in the Unis Venture under the equity method of accounting.

Revenue on products distributed by the Unis Venture is recognized upon sell through to third-party customers.

For the years ended June 28, 2024, June 30, 2023 and July 1, 2022, the Company recognized approximately 3 %, 3 % and 4 % of its consolidated revenue on products distributed by the Unis Venture, respectively.

The outstanding accounts receivable due from the Unis Venture were 7 % and 8 % of Accounts receivable, net as of June 28, 2024 and June 30, 2023, respectively.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Leases and Other Commitments

14 unchanged sentences

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

2024 June 30,

2025 2024 2023

(in millions)

2 unchanged sentences

Operating lease assets obtained in exchange for operating lease liabilities 18 10 11

Decrease in operating lease liabilities and right-of-use assets due to lease remeasurement 71 — —

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

2025 June 28,

Weighted average remaining lease term in years

9 unchanged sentences

Present value of lease liabilities $ 141

Sale-Leaseback

During the year ended June 28, 2024, the Company completed a sale and leaseback of its facility in Milpitas, California.

The Company received net proceeds of $ 191 million in cash and recorded a gain of $ 85 million on the sale.

In connection with the sale, the Company agreed to lease back the facility at an annual lease rate of $ 16 million for the first year, increasing by 3 % per year thereafter through January 1, 2039.

The lease includes three 5-year renewal options and one 4-year renewal option for the ability to extend through December 2057.

The supplemental balance sheet information and supplemental disclosures of operating cost and cash flow information related to the lease are included in the tables above.

Purchase Agreements and Other Commitments

5 unchanged sentences

(in millions)

Thereafter 110

WESTERN DIGITAL CORPORATION

2 unchanged sentences

The Company maintains the Western Digital Corporation 401(k) Plan (the “Plan”).

The Plan covers substantially all domestic employees, subject to certain eligibility requirements.

The Plan covers substantially all U.S.

employees, subject to certain eligibility requirements.

Eligible employees receive employer matching contributions immediately upon hire.

Eligible employees do not include individuals that are covered by a collective bargaining agreement, provide services as a consultant, interns, independent contractors, leased or temporary employees, or who otherwise are not treated as common-law employees.

Eligible employees are able to contribute up to 85 % of their eligible compensation on a combined pre-tax and Roth basis regardless of age, and 10 % of their eligible compensation on an after-tax basis, all subject to Internal Revenue Service limitations.

Internal Revenue Service (“IRS”) limitations.

The Company may make a basic matching contribution equal to 50 % of each eligible participant’s contribution that does not exceed 6 % of the eligible participant’s annual compensation in the year of contribution.

33 unchanged sentences

Stock-based Compensation Expense

The following tables present the Company’s stock-based compensation for equity-settled awards by type and financial statement line as well as the related tax benefit included in the Company’s Consolidated Statements of Operations:

In connection with the Separation (as discussed in Note 3, Discontinued Operations ), on February 21, 2025, all outstanding stock-based compensation awards associated with continuing Western Digital employees were adjusted with the intent to preserve the intrinsic value of each award immediately before and after the Separation.

The adjustments were determined using a ratio calculated based on the closing price of the Company’s common stock immediately before the Separation and the average of the closing price on each of the first five days of trading after the Separation.

In addition, for PSUs, the conditions related to the Company’s performance for the 2025 measurement period were modified and fixed at target.

The remaining terms of the outstanding awards are unchanged and any unvested stock awards will continue to vest over the original vesting periods.

An incremental value of approximately $ 40 million resulting from the adjustment of the unvested awards will be recognized ratably over the remaining service periods.

Upon the Separation, approximately 3.1 million unvested stock-based compensation awards were retained by Sandisk employees and will vest upon completion of any remaining service period with Sandisk and approximately 3.5 million awards were cancelled from the Company’s incentive plans.

The following tables present the Company’s stock-based compensation for equity-settled awards by type and financial statement line items as well as the related tax benefit included in the Company’s Consolidated Statements of Operations:

2025 2024 2023

12 unchanged sentences

Any shortfalls or excess windfall tax benefits related to the vesting and exercise of stock-based awards, which are recognized as a component of the Company’s Income tax expense, were not material for the periods presented.

Compensation cost related to unvested RSUs, PSUs and rights to purchase shares of common stock under the ESPP will generally be amortized on a straight-line basis over the remaining average service period.

Compensation costs related to unvested RSUs, PSUs and rights to purchase shares of common stock under the ESPP will generally be 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 June 27, 2025:

8 unchanged sentences

Stock Options

The following table summarizes stock option activity under the Company’s incentive plans:

Number of Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life Aggregate Intrinsic Value

(in millions) (in years) (in millions)

Options outstanding at July 2, 2021 1.5 $ 72.84

Exercised ( 0.2 ) 43.80 $ 3

Canceled or expired ( 0.4 ) 97.65

Options outstanding at July 1, 2022 0.9 66.76

Canceled or expired ( 0.6 ) 80.72

Options outstanding at June 30, 2023 0.3 44.95 0.10

Canceled or expired ( 0.3 ) 44.95

Options outstanding at June 28, 2024 — $ —

No options were granted in 2024, 2023 or 2022.

No options were granted or exercised in 2025, 2024 or 2023.

As of June 27, 2025, there were no remaining outstanding options.

7 unchanged sentences

Forfeited ( 1.6 ) 54.56

RSUs and PSUs outstanding at July 1, 2022 15.4 52.89

RSUs and PSUs outstanding at June 30, 2023 13.8 46.56

Granted 6.6 42.29

5 unchanged sentences

Forfeited ( 1.4 ) 50.91

Share conversion due to Separation 2.6 52.15

Awards cancelled due to Separation ( 3.5 ) 52.32

RSUs and PSUs outstanding at June 27, 2025 9.7 $ 33.56

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.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fair Value Valuation Assumptions

RSU and PSU Grants

The fair value of the Company’s RSU and PSU awards with a performance condition is determined based upon the closing price of the Company’s stock price on the date of grant.

The fair value of the Company’s RSU and PSU awards is determined based upon the closing price of the Company’s stock price on the date of grant.

The fair value of PSU awards with a market condition is estimated using a Monte Carlo simulation model on the date of grant.

3 unchanged sentences

Purchase rights under the ESPP are generally granted on either June 1st or December 1st of each year.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The fair values of ESPP purchase rights have been estimated at the date of grant using a Black-Scholes-Merton option pricing model with the following weighted average assumptions:

7 unchanged sentences

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 five million authorized but unissued shares of preferred stock and issued the Preferred Shares through a private placement for an aggregate purchase price of $ 900 million, less issuance costs of $ 24 million.

During the year ended June 28, 2024, 665,000 of the Preferred Shares were converted into approximately 15 million shares of common stock in accordance with the original term of the agreement.

As of June 28, 2024 and June 30, 2023, 235,000 and 900,000 of the Preferred Shares were outstanding, respectively.

Dividend provisions

The Preferred Shares have a stated value of $ 1,000 per share and accrue a cumulative preferred dividend at an annual rate of 6.25 % per annum (increasing to 7.25 % per annum on January 31, 2030 and to 8.25 % per annum on January 31, 2033) compounded on a quarterly basis.

During the year ended June 28, 2024, 665,000 of the Preferred Shares were converted into approximately 15 million shares of common stock in accordance with the original terms of the Preferred Shares.

As of both June 27, 2025 and June 28, 2024, 235,000 Preferred Shares were outstanding.

Preferred dividend provisions

The Preferred Shares have an initial stated value of $ 1,000 per share and accrue a cumulative preferred dividend at an annual rate of 6.25 % per annum (increasing to 7.25 % per annum on January 31, 2030 and to 8.25 % per annum on January 31, 2033) compounded on a quarterly basis.

Such dividends are payable on a quarterly basis in cash or in-kind through an increase to the stated value.

Dividends in-kind were declared from the date of issuance of the Preferred Shares through December 31, 2024.

Preferred dividends in cash of $ 8 million were declared and paid in 2025.

The Preferred Shares also participate in any dividends declared for common shareholders on an as-converted equivalent basis.

No dividends have been declared or paid since the issuance of the Preferred Shares.

As of June 28, 2024 and June 30, 2023, unpaid and undeclared cumulative dividends payable with respect to the Preferred Shares were $ 22 million and $ 24 million, respectively.

During the year ended June 28, 2024, $ 56 million in unpaid and undeclared cumulative dividends payable were included in the aggregate liquidation preference of the 665,000 of the Preferred Shares that were converted into approximately 15 million shares of common stock, as noted above.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of June 27, 2025 and June 28, 2024, accumulated dividends in-kind were $ 30 million and $ 22 million, respectively.

Conversion rights

The Preferred Shares are convertible into shares of the Company’s common stock at an initial conversion rate of $ 47.75 per share (the “Conversion Price”) (subject to anti-dilution adjustments and certain other one-time adjustments upon the occurrence of various specified spin-off transactions) applied to the aggregate sum of the stated value of the Preferred Shares plus any cumulative accrued but unpaid dividends (the “Accumulated Stated Value”).

In the event of a standalone spin-off transaction, the holders of the Preferred Shares may have one third of their Preferred Shares converted to a similar class of preferred shares of the spin-off entity.

The Preferred Shares will be convertible at the option of the Company after January 31, 2026 if the closing price per share of the Company’s common stock exceeds 150 % of the Conversion Price for at least 20 out of 30 consecutive trading days immediately prior to the Company’s conversion notice.

As of June 28, 2024 and June 30, 2023, the Preferred Shares outstanding would have been convertible, if otherwise permitted, into 5 million and 19 million shares of common stock, respectively.

The Preferred Shares are convertible into shares of the Company’s common stock at a conversion rate of approximately $ 35.51 per share (the “Conversion Price”).

The conversion rate was adjusted from the initial conversion rate of $ 47.75 per share as a result of the Separation, in accordance with the Certificate of Designations for the Preferred Shares, using a ratio of the closing price of the Company’s and Sandisk’s common stock over the first 10 trading days after the Separation.

This rate is subject to future anti-dilution adjustments and certain other one-time adjustments in the event of various specified spin-off-related transactions.

This Conversion Price applies to the total of the stated value of the Preferred Shares plus any cumulative accrued but unpaid dividends (the “Accumulated Stated Value”).

In the case of future standalone spin-off transactions, the holders of the Preferred Shares may convert one-third of their Preferred Shares into a similar class of preferred shares of the spin-off entity.

The Company may opt to convert the Preferred Shares after January 31, 2026, if the closing price per share of the Company’s common stock exceeds 150 % of the Conversion Price for at least 20 out of 30 consecutive trading days immediately before the Company’s conversion notice.

As of June 27, 2025 and June 28, 2024, the Preferred Shares outstanding would have been convertible, if otherwise permitted, into 7 million and 5 million shares of common stock, respectively, based on the conversion rate in effect at each such date.

After January 31, 2030, the Company will have the right, but not the obligation, to redeem the Preferred Shares for an amount in cash equal to 110 % of the Accumulated Stated Value.

Redemption is contingently mandatory in the event of a fundamental change in the business as defined in the designation of the Preferred Shares.

The Preferred Shares has been classified as mezzanine equity in the Company’s Consolidated Balance Sheets because, in the event of certain fundamental change in the business that are not solely within the control of the Company, the Preferred Shares would become redeemable at the option of the holders.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Preferred Shares have been classified as mezzanine equity in the Company’s Consolidated Balance Sheets because, in the event of certain fundamental changes in the business that are not solely within the control of the Company, the Preferred Shares would become redeemable at the option of the holders.

The Company did not adjust the carrying values of the Preferred Shares to the current redemption value of such shares since a liquidation event was not probable at any of the balance sheet dates.

4 unchanged sentences

As of June 27, 2025 and June 28, 2024, the total aggregate liquidation preference was $ 265 million and $ 257 million, respectively.

Share Repurchase Program

On May 9, 2025, the Company’s Board of Directors authorized a share repurchase program for the repurchase of up to $ 2.0 billion of the Company’s common stock.

There is no expiration date for the share repurchase program.

For the year ended June 27, 2025, the Company repurchased 2.8 million shares for a total cost of $ 149 million.

The remaining amount available to be repurchased under the Company’s share repurchase program as of June 27, 2025 was $ 1.85 billion.

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 share repurchases 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.

Stock Reserved for Issuance

5 unchanged sentences

Convertible preferred stock

Dividends to Common Shareholders

On April 29, 2025, the Company’s Board of Directors authorized the adoption of a quarterly 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 year ended June 27, 2025, the Company paid cash dividends of $ 0.10 per share of its outstanding common stock, totaling $ 36 million, including payment to holders of the Company’s Series A Preferred Stock in accordance with their participation rights.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Dividends to Shareholders

The Company issued a quarterly cash dividend from the first quarter of 2013 up to the third quarter of 2020.

In April 2020, the Company suspended its dividend to reinvest in the business and to support its ongoing deleveraging efforts .

Subsequent to year-end, on July 29, 2025, the Board of Directors declared a cash dividend of $ 0.10 per share of the Company’s common stock, which will be paid on September 18, 2025 to shareholders of record as of the close of business on September 4, 2025.

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 CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Income Tax Expense

Income (Loss) Before Taxes

5 unchanged sentences

Income (loss) before taxes $ 1,130 $ ( 739 ) $ ( 849 )

Income Tax Expense

The components of the income tax expense were as follows:

Income Tax Expense (Benefit)

The components of Income tax expense (benefit) were as follows:

2025 2024 2023

7 unchanged sentences

( 815 ) ( 91 ) 6

Income tax expense $ 137 $ 134 $ 625

The Tax Cuts and Jobs Act (the “2017 Act”), enacted on December 22, 2017, includes a broad range of tax reform proposals affecting businesses.

The Company completed its accounting for the tax effects of the enactment of the 2017 Act during the second quarter of 2019.

However, the U.S.

Treasury and the Internal Revenue Services (“IRS”) have issued tax guidance on certain provisions of the 2017 Act since the enactment date, and the Company anticipates the issuance of additional regulatory and interpretive guidance.

The Company applied a reasonable interpretation of the 2017 Act along with the then-available guidance in finalizing its accounting for the tax effects of the 2017 Act.

Any additional regulatory or interpretive guidance would constitute new information, which may require further refinements to the Company’s estimates in future periods.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which contained significant law changes related to tax, climate, energy and health care.

The tax measures include, among other things, a corporate alternative minimum tax (“CAMT”) of 15% on corporations with three-year average annual adjusted financial statement income (“AFSI”) exceeding $1.00 billion.

The corporate alternative minimum tax is effective for the Company beginning with 2024.

The Company is not subject to the CAMT of 15% for fiscal year 2024 as its average annual AFSI did not exceed $1.00 billion for the preceding three-year period.

Income tax expense (benefit)

$ ( 513 ) $ 26 $ 53

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 fiscal year 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 Intangible Income deduction.

Because the OBBBA provisions are not effective for the Company until fiscal year 2026 and the enactment date occurred after the balance sheet date, the tax effects of the OBBBA are not included in the operating results for the fiscal year ended June 27, 2025.

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 $1.00 billion.

The CAMT became effective for the Company beginning with fiscal year 2024.

The Company was not subject to CAMT in fiscal year 2024 and does not expect to be subject to CAMT for fiscal year 2025 as its average annual AFSI did not exceed $1.00 billion for the preceding three-year period.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On December 20, 2021, the Organization for Economic Co-operation and Development 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”), some of which are effective for the Company in fiscal year 2025.

For fiscal year 2025, the Company currently expects to be able to meet certain transitional safe harbors and does not expect any material GMT taxes.

As most of the jurisdictions in which the Company operates have adopted this legislation for fiscal year 2026, the Company expects there will be increases in the Company’s future tax obligations in these jurisdictions.

Deferred Taxes

18 unchanged sentences

Deferred tax assets, net $ 1,000 $ 225

The increase in the deferred tax assets is attributable primarily to the IRS interest payments made in connection with the notice of deficiency received for years 2008 through 2011 that are not currently deductible under § 163(j) of the Internal Revenue Code of 1986, as amended, and the unamortized original issue discount (“OID”) related to the premium paid to purchase Capped Calls in connection with the offering of the 2028 Convertible Notes.

As described in Note 7, Debt , the deferred tax asset related to the unamortized OID was recorded as a decrease to Additional paid-in capital.

The assessment of valuation allowances against deferred tax assets requires estimations and significant judgment.

The increase in the deferred tax assets is attributable primarily to one-time deferred tax benefits related to the inter-entity asset transfer in conjunction with the Separation and the mandatory capitalization of R&D expenditures.

While the OBBBA allows for the immediate expensing of domestic R&D expenditures, these provisions are not effective for Company until fiscal year 2026.

As such, the Company is required to capitalize a portion of its R&D expenditures in fiscal year 2025 under the prior law.

The change in the deferred tax liabilities is attributable primarily to a remeasurement of the Company’s California taxes associated with its un-remitted earnings of its non-U.S.

This change is offset entirely by an equal and offsetting change in the valuation allowance.

The Company continues to assess and adjust its valuation allowance based on operating results and market conditions.

15 unchanged sentences

Tax effect of U.S.

foreign derived intangible income 3 4 ( 1 )

Tax effect of U.S.

non-deductible stock-based compensation ( 1 ) ( 1 ) 1

stock-based compensation ( 2 ) ( 1 ) ( 1 )

Tax effect of non-deductible loss on retained interest in Sandisk 16 — —

Tax effect of U.S.

permanent differences — 5 ( 1 )

IRS Settlement ( 1 ) 1 15

State income tax, net of federal tax — 2 ( 1 )

Change in valuation allowance 6 ( 3 ) 1

5 unchanged sentences

Tax reserves 1 ( 3 ) ( 3 )

Inter-entity asset transfer ( 61 ) — —

Other ( 1 ) — ( 1 )

Effective tax rate ( 45 ) % ( 4 ) % ( 6 ) %

The tax rate differentials on international income are comprised primarily of reduced tax rates from the Company tax holidays and tax incentive programs in the Philippines and Thailand in fiscal years 2025 and 2024, and in Malaysia, the Philippines, and Thailand in fiscal 2023.

Tax Holidays and Carryforwards

A substantial portion of the Company’s manufacturing operations in Malaysia, the Philippines and Thailand operate under various tax holidays and tax incentive programs, which will expire in whole or in part at various dates during 2025 through 2031.

A substantial portion of the Company’s manufacturing operations in the Philippines and Thailand operate under various tax holidays and tax incentive programs, which will expire in whole or in part at various dates during 2026 through 2033.

Certain tax holidays and tax incentive programs may be extended if specific conditions are met.

On November 1, 2023, one of the Company’s tax holidays in Malaysia expired.

The Company has applied for an extension and anticipates this extension, if granted, will be applied retroactively and begin on November 2, 2023.

Because the exact terms of the extension are not currently known, the Company is applying the Malaysia corporate statutory tax rate on the expired tax holiday income.

If a retroactive extension is granted, the Company will make an adjustment to its effective tax rate in that period.

The net impact of these tax holidays and tax incentives was an increase to the Company’s net earnings by $ 209 million, or $ 0.64 per diluted share, $ 140 million, or $ 0.44 per diluted share, and $ 566 million, or $ 1.79 per diluted share, in 2024, 2023 and 2022, respectively.

On November 1, 2023, the Company’s tax holiday in Malaysia expired.

The Company has applied for an extension and continues to be engaged in active discussions with the Malaysian Investment Development Authority.

Because the exact terms of an extension are not currently known, the Company is applying the Malaysia corporate statutory tax rate on its Malaysian income for the full fiscal year.

If an extension is granted, the Company will make an adjustment to its effective tax rate in that period.

The direct tax impact of these tax holidays and tax incentives was an increase to the Company’s net earnings by $ 551 million, or $ 1.54 per diluted share, $ 209 million, or $ 0.64 per diluted share, and $ 140 million, or $ 0.44 per diluted share, in 2025, 2024 and 2023, respectively.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of June 27, 2025, the Company had varying amounts of federal and state NOL/tax credit carryforwards that do not expire or, if not used, expire in various years.

3 unchanged sentences

Federal NOL (Pre 2017 Act Generation) $ 563 2026 to 2038

State NOL 342 2037 to 2045

California NOL

348 2040 to 2047

Other State NOL

Federal tax credits 89 2027 to 2036

State tax credits 750 No expiration

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The federal and state NOLs and credits relating to various acquisitions are subject to limitations under Sections 382 and 383 of the Internal Revenue Code.

The federal and state NOLs and credits relating to various acquisitions are subject to limitations under Sections 382 and 383 of the U.S.

Internal Revenue Code.

The Company expects the total amount of federal and state NOLs ultimately realized will be reduced as a result of these provisions by $ 116 million and $ 240 million, respectively.

4 unchanged sentences

(in millions)

Belgium $ 114 No expiration

Malaysia 108 2028 to 2030

Japan 61 2025 to 2026

Spain 46 No expiration

Netherlands 12 2026

Malaysia $ 69 2029

Japan 42 2026

Uncertain Tax Positions

9 unchanged sentences

Lapse of statute of limitations ( 10 ) ( 3 ) ( 3 )

Distribution in connection with the Separation

Unrecognized tax benefit, ending balance $ 569 $ 721 $ 1,021

As of June 28, 2024, June 30, 2023 and July 1, 2022, the portion of the gross unrecognized tax benefits, if recognized, that would affect the effective tax rate is $ 555 million, $ 855 million and $ 903 million, respectively.

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 June 28, 2024, June 30, 2023 and July 1, 2022 was $ 181 million, $ 289 million and $ 254 million, respectively.

As of June 28, 2024, June 30, 2023 and July 1, 2022, the Company’s payables related to unrecognized tax benefits, including accrued interest and penalties, were $ 736 million, $ 1.14 billion and $ 1.16 billion, respectively.

Of these amounts, the Company believes it is reasonably likely that payments of $ 185 million may be made within the next twelve months and have classified that portion of these unrecognized tax benefits, including interest, in Income taxes payable on the Consolidated Balance Sheets as of June 28, 2024.

The remaining payables related to unrecognized tax benefits are included in Other liabilities on the Consolidated Balance Sheets as of June 28, 2024, June 30, 2023 and July 1, 2022.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of June 27, 2025, June 28, 2024 and June 30, 2023, the portion of the gross unrecognized tax benefits, if recognized, that would affect the effective tax rate is $ 416 million, $ 555 million and $ 855 million, respectively.

It is the Company’s policy to include interest and penalties related to its gross unrecognized tax benefits as a component of the provision for income taxes.

Accrued interest and penalties included in the Company’s liability related to unrecognized tax benefits as of June 27, 2025, June 28, 2024 and June 30, 2023 was $ 82 million, $ 181 million and $ 289 million, respectively.

As of June 27, 2025, June 28, 2024 and June 30, 2023, the Company’s payables related to unrecognized tax benefits, including accrued interest and penalties, were $ 498 million, $ 736 million and $ 1.14 billion, respectively.

Of these amounts, approximately $ 332 million, including interest and penalties, could result in potential cash payments to be made within the next twelve months and have been included in Income taxes payable on the Consolidated Balance Sheets as of June 27, 2025.

The remaining payables related to unrecognized tax benefits, including accrued interest and penalties, are included in Other liabilities on the Consolidated Balance Sheets as of June 27, 2025 and June 28, 2024.

This potential cash payment is expected to be netted with offsetting favorable tax receivables totaling $ 148 million, including among other things, a reduction to our mandatory deemed repatriation tax obligations related to the settlement for the years 2008 through 2015, for a potential net cash payment of $ 184 million.

These tax receivables are classified in Other current assets on the Consolidated Balance Sheets as of June 27, 2025.

The Company files U.S.

6 unchanged sentences

China (calendar) 2014-2024

Ireland (fiscal) 2020-2023

India (fiscal) 2017-2024

Israel (fiscal) 2014-2023

Japan (fiscal) 2016-2024

3 unchanged sentences

United Kingdom (fiscal) 2023-2024

The Company had previously reached a final agreement with the IRS regarding notices of deficiency with respect to years 2008 through 2012 and in February 2024, reached a final agreement for resolving the notices of proposed adjustments with respect to years 2013 through 2015.

During 2024, the Company made payments of $ 363 million for tax and $ 161 million for interest with respect to years 2008 through 2012 and recognized adjustments to align with IRS calculations, resulting in a remaining liability of $ 185 million related to all years from 2008 through 2015.

The Company expects to pay any remaining balance with respect to this matter within the next twelve months.

In connection with settlements for the years 2008 through 2015, the Company expects to realize reductions to its mandatory deemed repatriation tax obligations and tax savings from interest deductions in future years aggregating to $ 165 million.

Of this amount, $ 34 million of the interest savings from the interest paid with respect to years 2008 through 2012 is classified as a deferred tax asset due to interest expense limitation rules.

The Company had previously reached a final agreement with the IRS regarding notices of deficiency with respect to years 2008 through 2012 and in February 2024, the Company also reached a final agreement for resolving the notices of proposed adjustments with respect to years 2013 through 2015.

During the year ended June 27, 2025, the Company made payments of $ 130 million for interest with respect to years 2008 through 2012 and $ 32 million for tax and interest with respect to years 2013 through 2015, resulting in no remaining liability as of June 27, 2025 related to all years from 2008 through 2015.

Of this amount, $ 65 million of interest savings from the interest paid with respect to years 2008 through 2015 is classified as a deferred tax asset due to interest expense limitation rules.

The Company believes that adequate provision has been made for any adjustments that may result from any other tax examinations.

1 unchanged sentence

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.

As of June 28, 2024, with the exception of the final agreement with the IRS, it was not possible to estimate the amount of change, if any, in the unrecognized tax benefits that is reasonably possible within the next twelve months.

As of June 27, 2025, with the exception of the net potential payment of $ 183 million, it was not possible to estimate the amount of change, if any, in the unrecognized tax benefits that is reasonably possible within the next twelve months.

Any significant change in the amount of the Company’s liability for unrecognized tax benefits would most likely result from additional information relating to the examination of the Company’s tax returns.

5 unchanged sentences

(in millions, except per share data)

Net income (loss) $ ( 798 ) $ ( 1,684 ) $ 1,546

cumulative dividends allocated to preferred shareholders 54 24 —

Net income (loss) attributable to common shareholders $ ( 852 ) $ ( 1,708 ) $ 1,546

Weighted average shares outstanding:

Net income (loss) from continuing operations $ 1,643 $ ( 765 ) $ ( 902 )

dividends allocated to preferred shareholders 17 54 24

income attributable to participating securities 28 — —

Net income (loss) from continuing operations attributable to common shareholders - basic

1,598 ( 819 ) ( 926 )

Net income (loss) from discontinued operations, net of taxes, attributable to common shareholders

242 ( 33 ) ( 782 )

Net income (loss) attributable to common shareholders - basic

$ 1,840 $ ( 852 ) $ ( 1,708 )

Net income (loss) from continuing operations attributable to common shareholders - basic

$ 1,598 $ ( 819 ) $ ( 926 )

Re-allocation of participating securities considered potentially dilutive securities 1 — —

Net income (loss) from continuing operations attributable to common shareholders - diluted

1,599 ( 819 ) ( 926 )

Net income (loss) from discontinued operations, net of taxes, attributable to common shareholders

242 ( 33 ) ( 782 )

Net income (loss) attributable to common shareholders - diluted

$ 1,841 $ ( 852 ) $ ( 1,708 )

Weighted average shares:

Basic 347 326 318

Employee stock options, RSUs, PSUs and ESPP

RSUs, PSUs, ESPP, and the convertible notes

Diluted 359 326 318

Net income (loss) per common share:

Basic $ ( 2.61 ) $ ( 5.37 ) $ 4.96

Diluted $ ( 2.61 ) $ ( 5.37 ) $ 4.89

Continuing operations - basic

$ 4.61 $ ( 2.51 ) $ ( 2.91 )

Discontinued operations - basic

0.70 ( 0.10 ) ( 2.46 )

Net income (loss) per common share - basic

5.31 ( 2.61 ) ( 5.37 )

Continuing operations - diluted

4.45 ( 2.51 ) ( 2.91 )

Discontinued operations - diluted

0.67 ( 0.10 ) ( 2.46 )

Net income (loss) per common share - diluted

5.12 ( 2.61 ) ( 5.37 )

Anti-dilutive potential common shares excluded — 22 14

3 unchanged sentences

The treasury stock method is used to determine the dilutive impact of unvested equity awards.

For 2024 and 2023, the Company recorded a net loss and all shares subject to outstanding equity awards were excluded from the calculation of diluted shares for the period because their impact would have been anti-dilutive.

For 2022, the Company excluded common shares subject to certain outstanding equity awards from the calculation of diluted shares because their impact would have been anti-dilutive based on the Company’s average stock price during those periods.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Employee Termination, Asset Impairment, and Other

Business Realignment

The Company periodically incurs charges to realign its operations with anticipated market demand, primarily consisting of organization rationalization designed to streamline its business, reduce its cost structure and focus its resources.

The Company may also record credits related to gains upon sale of property in connection with these activities.

For 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.

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.

In this regard, in 2024, the Company reassessed existing capacity development plans and made a decision to cancel certain projects, including projects to expand capacity in its Penang, Malaysia facility, resulting in the impairment of existing construction in progress, other assets and the recognition of a liability for certain contract termination costs.

The Company has also taken actions to reduce the amount of capital invested in facilities, including the sale-leaseback of its facility in Milpitas, California in 2024.

The Company may also periodically record credits related to gains upon ultimate sale of property in connection with these activities.

The Company recorded the following charges related to these actions:

6 unchanged sentences

Contract termination and other 2 29 5

Gain on sale-leaseback of facility ( 85 ) — —

Total employee termination, asset impairment, and other

Recovery of non-cancellable purchase orders ( 10 ) — —

Total business realignment charges

$ ( 6 ) $ 209 $ 146

The following table presents an analysis of the components of these activities against the reserve during the year ended June 28, 2024:

The following table presents an analysis of the components of these activities against the reserve (included in Accrued expenses) during the year ended June 27, 2025:

Employee Termination Benefits Contract Termination and Other

3 unchanged sentences

Cash payments ( 1 ) ( 11 ) ( 12 )

Recovery of non-cancellable purchase orders

— ( 10 ) ( 10 )

Accrual balance at June 27, 2025 $ 1 $ 9 $ 10

7 unchanged sentences

The Company does not provide any guarantees to any third parties, and no assets are pledged in connection with the arrangements.

The Company’s outstanding payment obligations to vendors eligible to participate under its supplier finance program were $ 37 million and $ 38 million as of June 28, 2024 and June 30, 2023, respectively, and are included within Accounts payable on the Company’s Consolidated Balance Sheets.

The Company’s outstanding payment obligations to vendors eligible to participate under its supplier finance program were $ 39 million and $ 37 million as of June 27, 2025 and June 28, 2024, respectively, and are included within Accounts payable on the Company’s Consolidated Balance Sheets with the associated payments reflected in the operating activities section of the Consolidated Statements of Cash Flows.

The roll-forward of the Company’s outstanding obligations confirmed as valid under its supplier finance program for the year ended June 27, 2025 is as follows (in millions):

Confirmed obligation outstanding at the beginning of the year

Invoices confirmed during the year

Confirmed invoices paid during the year

Confirmed obligations outstanding at the end of the year

WESTERN DIGITAL CORPORATION

1 unchanged sentence

Legal Proceedings

For disclosures regarding statutory notices of deficiency issued by the IRS on June 28, 2018 and December 10, 2018, and the status of resolution with respect to certain matters, see Note 13, Income Tax Expense.

Intellectual Property Litigation

Unless otherwise stated, for each of the matters described below, the Company has either recorded an accrual for losses that are probable and reasonably estimable or has determined that, while a loss is reasonably possible (including potential losses in excess of the amounts accrued by the Company), a reasonable estimate of the amount of loss or range of possible losses with respect to the claim or in excess of amounts already accrued by the Company cannot be made.

The ability to predict the ultimate outcome of such matters involves judgments, estimates and inherent uncertainties.

The actual outcome of such matters could differ materially from management’s estimates.

On August 26, 2022, MR Technologies, GmbH (“MRT”) filed an action in the United States District Court for the Central District of California (the “Central District Court”) against the Company’s wholly-owned subsidiary, Western Digital Technologies, Inc., alleging infringement of U.S.

9,978,413, 9,928,864, 11,133,031 and 11,138,997, each of which relate to hard disk drive media.

As the case progressed, MRT dropped its claims with respect to U.S Patent Nos.

9,978,413 and 11,133,031, and the case proceeded to trial on the remaining two patents (together, the “MRT Patents”).

The trial commenced on July 16, 2024 and concluded on July 26, 2024, and the jury awarded MRT a lump sum of $ 262 million for use of the MRT Patents in the past and through their remaining lives.

9,978,413, 9,928,864, 11,133,031 and 11,138,997, each of which relate to HDD media.

As the case progressed, MRT dropped its claims with respect to U.S.

9,978,413 and 11,133,031, and the case proceeded to trial in July 2024 on the remaining two patents (together, the “MRT Patents”).

The trial concluded on July 26, 2024, and the jury awarded MRT a lump sum of $ 262 million for use of the MRT Patents in the past and through their remaining lives.

MRT also requested and was awarded prejudgment interest totaling $ 117 million in a judgment entered on August 15, 2024.

We anticipate that MRT will also request costs, attorney’s fees and post-judgment interest.

The Company has recognized an aggregate liability for this matter of $ 384 million within Accrued expenses on the Company’s Consolidated Balance Sheets as of June 28, 2024.

Of this amount, $ 291 million was recognized as Litigation matter under Operating expenses on the Company’s Consolidated Statements of Operations for the year ended June 28, 2024 and $ 93 million recognized within Other non-current assets on the Company’s Consolidated Balance Sheets as of June 28, 2024, to be amortized over the remaining lives of the MRT Patents.

The Company believes it has meritorious defenses, plans to file post-trial motions, and if not successful, plans to appeal the judgment and continue to defend itself vigorously.

In addition, MRT requested attorney’s fees and post-judgment interest.

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 an Operating expense 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.

Subsequently, in April 2025, pursuant to a confidential agreement, MRT and the Company reached a global settlement of $ 130 million for all pending legal disputes.

The settlement resulted in the dismissal of the MRT matter, as well as a second patent litigation matter MRT filed on August 22, 2024 against the Company.

As a result of the settlement, the Company reversed $ 201 million of previously recorded charges in Operating expense under Litigation matter and $ 6 million of post-judgment interest previously recorded in Other income (expense), net.

On September 28, 2016, SPEX Technologies, Inc.

3 unchanged sentences

As the case progressed, SPEX dismissed its allegations relating to U.S.

6,003,135 and narrowed its case to three claims under U.S.

6,088,802 asserted against certain HDD products that may include certain encryption capabilities.

Trial is scheduled to commence on October 8, 2024, and the Company intends to defend itself vigorously.

6,003,135 and narrowed its case to one claim related to U.S.

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.

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 June 27, 2025.

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 probable 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.

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.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revision of Previously Issued Financial Statements

As described in Note 1, in connection with the preparation of its Condensed Consolidated Financial Statements as of and for the three and six months ended December 29, 2023, the Company identified certain errors related to the Company’s reporting and recording of its interests in its equity method investments in Flash Ventures.

These errors related to unadjusted differences between the Flash Ventures’ application of Japanese generally accepted accounting principles to certain lease-related transactions compared to the applicable U.S.

generally accepted accounting principles.

The following tables provide a summary of the revisions made to the Company’s Condensed Consolidated Financial Statements for the periods presented.

Year Ended July 1, 2022

Condensed Consolidated Statement of Operations

As Previously Reported

Quarterly Results of Operations (unaudited)

As discussed in Note 1, as a result of the Separation, the historical net income (loss) of Sandisk is reported in the Company’s consolidated financial statements as discontinued operations.

The below provides unaudited summarized quarterly financial information on this basis to allow for a meaningful comparison of continuing operations:

First Second Third Fourth

(in millions, except per share amounts)

Operating income

$ 2,391 $ — $ 2,391

Interest and other income:

Interest income 6 — 6

Interest expense ( 304 ) — ( 304 )

Other income, net 30 48 78

Total interest and other income, net

( 268 ) 48 ( 220 )

Income before taxes

Revenue, net $ 2,212 $ 2,409 $ 2,294 $ 2,605

Gross profit 806 907 912 1,067

Net income from continuing operations

153 466 772 252

Income tax expense 623 2 625

493 594 520 282

Net income per common share:

Basic $ 4.81 $ 0.15 $ 4.96

Diluted $ 4.75 $ 0.14 $ 4.89

Year Ended June 30, 2023

Condensed Consolidated Statement of Operations

As Previously Reported

(in millions, except per share amounts)

Operating loss $ ( 1,285 ) $ — $ ( 1,285 )

Interest and other income:

Interest income 24 — 24

Interest expense ( 312 ) — ( 312 )

Other income, net 13 10 23

Total interest and other income, net

( 275 ) 10 ( 265 )

Loss before taxes ( 1,560 ) 10 ( 1,550 )

Income tax expense 146 ( 12 ) 134

Net loss ( 1,706 ) 22 ( 1,684 )

cumulative dividends allocated to preferred shareholders 24 — 24

Net loss attributable to common shareholders $ ( 1,730 ) $ 22 $ ( 1,708 )

Net loss per common share:

Basic $ ( 5.44 ) $ 0.07 $ ( 5.37 )

Diluted $ ( 5.44 ) $ 0.07 $ ( 5.37 )

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Year Ended July 1, 2022

Condensed Consolidated Statement of Comprehensive Income

As Previously Reported

Adjustment As Revised

(in millions)

$ 1,500 $ 46 $ 1,546

Other comprehensive loss, before tax:

Actuarial pension gain

Foreign currency translation adjustment ( 239 ) ( 23 ) ( 262 )

Net unrealized loss on derivative contracts

( 180 ) — ( 180 )

Total other comprehensive loss, before tax

( 393 ) ( 23 ) ( 416 )

Income tax benefit related to items of other comprehensive loss, before tax

Other comprehensive loss, net of tax

Continuing operations - basic

$ 0.43 $ 1.32 $ 2.17 $ 0.70

Total comprehensive income

Earnings per common share - basic

1.40 1.68 1.46 0.78

Year Ended June 30, 2023

Condensed Consolidated Statement of Comprehensive Loss

As Previously Reported

Adjustment As Revised

(in millions)

Net loss $ ( 1,706 ) $ 22 $ ( 1,684 )

Other comprehensive income, before tax:

Actuarial pension gain

Foreign currency translation adjustment ( 81 ) ( 7 ) ( 88 )

Net unrealized gain on derivative contracts

Total other comprehensive income, before tax 69 ( 7 ) 62

Income tax expense related to items of other comprehensive income, before tax ( 31 ) — ( 31 )

Other comprehensive income, net of tax 38 ( 7 ) 31

Total comprehensive loss $ ( 1,668 ) $ 15 $ ( 1,653 )

Year Ended July 1, 2022

Condensed Consolidated Statement of Cash Flows

As Previously Reported

Adjustment As Revised

(in millions)

Cash flows from operating activities

Continuing operations - diluted

0.42 1.28 2.11 0.67

Deferred income taxes 114 2 116

Other non-cash operating activities, net 67 ( 48 ) 19

Other assets and liabilities, net ( 349 ) — ( 349 )

Net cash provided by operating activities

Earnings per common share - diluted

1.35 1.63 1.42 0.75

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Year Ended June 30, 2023

Condensed Consolidated Statement of Cash Flows

As Previously Reported

Adjustment As Revised

(in millions)

Cash flows from operating activities

Net loss $ ( 1,706 ) $ 22 $ ( 1,684 )

Deferred income taxes ( 34 ) ( 14 ) ( 48 )

Other non-cash operating activities, net 71 ( 10 ) 61

Other assets and liabilities, net ( 185 ) 2 ( 183 )

Net cash used in operating activities

First Second Third Fourth

(in millions, except per share amounts)

Revenue, net $ 1,194 $ 1,367 $ 1,752 $ 2,004

Gross profit 244 313 519 697

Net income (loss) from continuing operations ( 365 ) ( 146 ) ( 8 ) ( 246 )

Net income (loss) ( 685 ) ( 287 ) 135 39

Net income (loss) per common share:

Continuing operations - basic

$ ( 1.18 ) $ ( 0.49 ) $ ( 0.07 ) $ ( 0.77 )

Condensed Consolidated Statement of Shareholders’ Equity

As Previously Reported

Adjustment As Revised

(in millions)

Retained earnings as of:

Earnings (loss) per common share - basic

( 2.17 ) ( 0.92 ) 0.35 0.08

Accumulated other comprehensive loss as of:

Continuing operations - diluted

( 1.18 ) ( 0.49 ) ( 0.07 ) ( 0.77 )

Foreign currency translation adjustment for the year ended June 30, 2023

Earnings (loss) per common share - diluted

( 2.17 ) ( 0.92 ) 0.35 0.08

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data