What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-08-14 compared with 2025-08-14 · 682 added, 734 removed, 885 unchanged (62% of the section changed)

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Report of Independent Registered Public Accounting Firm (Auditor Firm ID:

Consolidated Balance Sheets — As of June 27, 2025 and June 28, 2024 52

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

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

Consolidated Statements of Convertible Preferred Stock and Shareholders’ Equity — Three Years Ended June 27, 2025 56

Consolidated Balance Sheets — As of July 3, 2026 and June 27, 2025 52

Consolidated Statements of Operations — Three Years Ended July 3, 2026 53

Consolidated Statements of Comprehensive Income (Loss) — Three Years Ended July 3, 2026 54

Consolidated Statements of Cash Flows — Three Years Ended July 3, 2026 55

Consolidated Statements of Convertible Preferred Stock and Shareholders’ Equity — Three Years Ended July 3, 2026 56

Notes to Consolidated Financial Statements

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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 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 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.

We have audited the accompanying consolidated balance sheets of Western Digital Corporation and subsidiaries (the Company) as of July 3, 2026 and June 27, 2025, 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 July 3, 2026, and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of July 3, 2026, 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 July 3, 2026 and June 27, 2025, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended July 3, 2026, in conformity with U.S.

generally accepted accounting principles.

Also in our opinion, the Company maintained, in all material respects, effective 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.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 3, 2026 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

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• 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

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

As described in Note 4 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.

In February 2026, in connection with the separation, and consistent with its original intent to monetize its retained interest in Sandisk, the Company completed an exchange of Sandisk common stock for its Bridge Loan and existing Term Loan A-3.

Additionally, the Company completed exchanges of Sandisk common stock for 4.8 million shares of the Company’s common stock.

Management determined that the separation, debt-for-equity exchanges and equity-for-equity exchanges (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.

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CONSOLIDATED BALANCE SHEETS

(in millions, except par value)

(in millions)

2026 June 27,

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Other current assets 518 611

Current assets of discontinued operations — 3,531

Total current assets 5,634 5,856

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Other non-current assets 1,430 1,484

Non-current assets of discontinued operations — 8,613

Total assets $ 13,861 $ 14,002

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Current portion of long-term debt 1,052 2,226

Current liabilities of discontinued operations — 1,324

Total current liabilities 4,240 5,418

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Other liabilities 757 559

Non-current liabilities of discontinued operations — 368

Total liabilities 4,997 8,462

Commitments and contingencies (Notes 8, 9 and 16)

Convertible preferred stock, $ 0.01 par value;

authorized — 5 shares;

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

Convertible preferred stock — 229

Shareholders’ equity:

Common stock, $ 0.01 par value;

authorized — 750 shares;

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

Common stock 4 3

Additional paid-in capital 961 4,621

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income 23 20

Retained earnings 9,998 762

Treasury stock — common shares at cost;

95 shares in 2025 and 0 shares in 2024

Treasury stock ( 2,122 ) ( 95 )

Total shareholders’ equity 8,864 5,311

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— ( 198 ) 291

Business realignment charges

( 6 ) 209 146

Business realignment charges (credits) 146 ( 6 ) 209

Total operating expenses 1,858 1,358 2,176

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Interest expense ( 165 ) ( 357 ) ( 414 )

Loss on retained interest in Sandisk

Loss on extinguishment of debt

Gain (loss) on retained interest in Sandisk 6,498 ( 772 ) —

Costs in connection with debt-for-equity exchange ( 545 ) ( 100 ) —

Costs in connection with convertible notes transactions ( 108 ) — —

Costs in connection with equity-for-equity exchanges ( 254 ) — —

Other income (expense), net

( 25 ) ( 20 ) 45

Total interest and other expense, net

( 1,204 ) ( 336 ) ( 301 )

Total interest and other income (expense), net 5,452 ( 1,204 ) ( 336 )

Income (loss) before taxes 9,905 1,130 ( 739 )

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Net income (loss) per share 26.92 5.31 ( 2.61 )

5.31 ( 2.61 ) ( 5.37 )

Continuing operations

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Net income (loss) per share 24.28 5.12 ( 2.61 )

5.12 ( 2.61 ) ( 5.37 )

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

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Net income (loss) $ 9,424 $ 1,889 $ ( 798 )

Other comprehensive gain (loss), before tax:

Other comprehensive income (loss), before tax:

Actuarial pension gain 28 3 23

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Net unrealized gain (loss) on derivative contracts ( 20 ) 180 ( 87 )

Total other comprehensive gain (loss), before tax 228 ( 179 ) 62

Income tax benefit (expense) related to items of other comprehensive gain (loss), before tax ( 42 ) 15 ( 31 )

Other comprehensive gain (loss), net of tax 186 ( 164 ) 31

Total other comprehensive income (loss), before tax 7 228 ( 179 )

Income tax benefit (expense) related to items of other comprehensive income (loss), before tax ( 4 ) ( 42 ) 15

Other comprehensive income (loss), net of tax 3 186 ( 164 )

Total comprehensive income (loss) $ 9,427 $ 2,075 $ ( 962 )

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Net income (loss) $ 9,424 $ 1,889 $ ( 798 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operations:

Adjustments to reconcile net income (loss) to net cash provided by operations:

Depreciation and amortization 375 451 568

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Gain on business divestiture — ( 113 ) —

Amortization of debt issuance costs and discounts 23 19 13

Loss on retained interest in Sandisk

Loss on extinguishment of debt

(Gain) loss on retained interest in Sandisk ( 6,498 ) 772 —

Costs in connection with debt-for-equity exchange 545 100 —

Costs in connection with convertible notes transactions 108 — —

Costs in connection with equity-for-equity exchanges 254 — —

Other non-cash operating activities, net 11 103 38

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

Proceeds from business divestiture

Net proceeds from business divestiture — 401 —

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

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Repurchases of common stock ( 2,592 ) ( 149 ) —

Dividends paid to shareholders ( 44 ) — —

Dividends paid to common shareholders ( 174 ) ( 44 ) —

Dividends paid to preferred shareholders ( 10 ) — —

Settlement of convertible notes transactions ( 1,220 ) — —

Debt issuance and equity transaction costs ( 6 ) ( 73 ) ( 36 )

Repurchases of debt

Repayment of debt ( 1,664 ) ( 2,094 ) ( 2,104 )

Proceeds from debt issuance 2,150 3,000 1,180

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

Proceeds from debt 1,946 2,150 3,000

Cash transferred to Sandisk related to Separation

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Shares Amount Shares Amount Shares Amount

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

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

Adoption of new accounting standard — — — — — — ( 128 ) — 91 ( 37 )

Employee stock plans — — 7 — — — 13 — — 13

Stock-based compensation — — — — — — 318 — — 318

Issuance of convertible preferred stock, net of issuance costs 0.9 876 — — — — — — — —

Actuarial pension gain — — — — — — — 9 — 9

Foreign currency translation adjustment — — — — — — — ( 87 ) — ( 87 )

Net unrealized gain on derivative contracts — — — — — — — 109 — 109

Balance at June 30, 2023 0.9 $ 876 322 $ 3 — $ — $ 3,936 $ ( 548 ) $ 7,573 $ 10,964

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

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

Employee stock plans — — 6 — 1 54 ( 90 ) — — ( 36 )

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

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

Common stock dividends — — — — — — 1 — ( 37 ) ( 36 )

Preferred stock dividends — — — — — — — — ( 8 ) ( 8 )

— — — — — — — — ( 8 ) ( 8 )

Common stock dividends ($ 0.10 per share)

— — — — — — 1 — ( 37 ) ( 36 )

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

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Balance at June 27, 2025 0.2 229 349 3 ( 2 ) ( 95 ) 4,621 20 762 5,311

Net income — — — — — — — — 9,424 9,424

Repurchases of common stock — — — — ( 15 ) ( 2,592 ) — — — ( 2,592 )

Conversion of convertible preferred stock ( 0.2 ) ( 229 ) — — 7 796 ( 567 ) — — 229

Employee stock plans — — — — 6 554 ( 866 ) — — ( 312 )

Stock-based compensation — — — — — — 204 — — 204

Convertible notes transactions — — 15 1 6 2,204 ( 2,435 ) — — ( 230 )

Exchange of Sandisk shares to acquire Company common stock — — — — ( 5 ) ( 2,989 ) — — — ( 2,989 )

Common stock dividends — — — — — — 4 — ( 178 ) ( 174 )

Preferred stock dividends — — — — — — — — ( 10 ) ( 10 )

Actuarial pension gain — — — — — — — 23 — 23

Foreign currency translation adjustment — — — — — — — ( 1 ) — ( 1 )

Net unrealized gain on derivative contracts — — — — — — — ( 19 ) — ( 19 )

Balance at July 3, 2026 — $ — 364 $ 4 ( 3 ) $ ( 2,122 ) $ 961 $ 23 $ 9,998 $ 8,864

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 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.

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.

Western Digital Corporation (“Western Digital,” “WD,” 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 globally through its sales personnel, dealers, distributors, retailers, and subsidiaries.

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

“Cloud,” “Client,” and “Consumer.” Cloud is comprised primarily of products for public or private cloud environments and enterprise customers.

Through the Client end market, the Company provides its original equipment manufacturer (“OEM”) and channel customers a broad array of high-performance HDD solutions across desktop and notebooks.

The Consumer end market provides a wide range of retail and other end-user products, which capitalize on the strength of the Company’s product brand recognition and vast presence around the world.

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 .

Information provided herein is presented on a continuing operations basis to reflect the impact of the separation of the Company’s Flash business (the “Separation”) as discussed in further detail in Note 4, 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 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.

Fiscal year 2026, which ended on July 3, 2026, comprised 53 weeks, with the first quarter consisting of 14 weeks and the remaining quarters consisting of 13 weeks.

Fiscal years 2025 and 2024, which ended on June 27, 2025 and June 28, 2024, respectively, each comprised 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

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

Prior to the Separation, 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.

Upon the Separation 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Reclassification

Certain prior year amounts have been reclassified in the Consolidated Statements of Cash Flows to conform to the current year presentation.

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 with consideration given to the potential impacts of tariffs.

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 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.

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

Cash Equivalents

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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.

After Separation, the Company’s retained interest in Sandisk Corporation (“Sandisk”) was less than 20% and the Company did not have the ability to exercise significant influence over Sandisk’s operating and financial policies.

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

The Company also has an immaterial amount of equity securities of other companies 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.

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

The Company values inventories at the lower of cost (first-in, first out) or net realizable value.

The first-in, first-out method is used to value the cost of the majority of the Company’s inventories.

Inventory write-downs are recorded for the valuation of inventory at the lower of cost or net realizable value by analyzing market conditions and estimates of future sales prices as compared to inventory costs and inventory balances.

The Company evaluates inventory balances for excess quantities and obsolescence on a regular basis by analyzing estimated demand, inventory on hand, sales levels and other information and reduces inventory balances to net realizable value for excess and obsolete inventory based on this analysis.

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)

The Company evaluates inventory balances for excess quantities and obsolescence on a regular basis by analyzing estimated demand, inventory on hand, sales levels and other information and reduces inventory balances to net realizable value (“NRV”) for excess and obsolete inventory based on this analysis.

The Company values inventories at the lower of cost (first-in, first-out) or NRV.

The first-in, first-out method is used to value the cost of the majority of the Company’s inventories.

Inventory write-downs are recorded for the valuation of inventory at the lower of cost or NRV by analyzing market conditions and estimates of future sales prices as compared to inventory costs and inventory balances.

Property, Plant and Equipment

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Goodwill and Other Long-Lived Assets

As of both July 3, 2026 and June 27, 2025, the carrying amount of goodwill was $ 4.32 billion.

Goodwill is not amortized.

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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.

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.

As of July 3, 2026 and June 27, 2025, the carrying amount of in-process research and development (“IPR&D”) was $ 77 million and $ 72 million, respectively.

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.

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See Note 5, Supplemental Financial Statement Data , for additional disclosures related to the Company’s other long-lived assets.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue and Accounts Receivable

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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.

The Company’s services revenue is immaterial and mainly includes professional service arrangements and post-contract customer support, warranty as a service and maintenance contracts.

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.

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, based on the underlying Incoterms.

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

The Company has applied the practical expedient to recognize the direct incremental costs of obtaining contracts as an expense when incurred if the amortization period is expected to be one year or less or the amount is not material, with these costs charged to Selling, general and administrative expenses.

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 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.

The Company’s customer payment terms are typically less than two months from the date control over the product or service is transferred to the customer.

The transaction prices allocated to the Company’s remaining performance obligations as of July 3, 2026 and June 27, 2025, were not material.

Contract assets and contract liabilities as of July 3, 2026 and June 27, 2025 were not material.

The Company’s customer payment terms are typically less than two months from the date control over the product is transferred to the customer.

The Company uses the practical expedient and does not recognize a significant financing component for payment considerations of less than one year.

The financing components of contracts with payment terms were not material.

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.

For sales to resellers, the Company’s methodology for estimating variable consideration is based on several factors including historical pricing information, current pricing trends and channel inventory levels.

Differences between the estimated and actual amounts of variable consideration are recognized as adjustments to revenue.

The Company provides distributors and retailers (collectively referred to as “resellers”) with limited price protection for inventories held by resellers at the time of published list price reductions.

The Company also provides resellers and original equipment manufacturers (“OEMs”) with other sales incentive programs.

The Company also provides resellers and OEMs with other sales incentive programs.

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

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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.

Differences between the estimated and actual amounts of variable consideration are recognized as adjustments to revenue.

Marketing development program costs are typically recorded as a reduction of the transaction price and therefore, of revenue.

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The Company records an accrual for estimated warranty costs when revenue is recognized.

The Company generally warrants its products for a period of one to five years , with a small number of products having a warranty ranging up to ten years or more.

The warranty provision considers estimated product failure rates and trends, estimated replacement costs, estimated repair costs which include scrap costs and estimated costs for customer compensatory claims related to product quality issues, if any.

For warranties ten years or greater, including lifetime warranties, the Company uses the estimated useful life of the product to calculate the warranty exposure.

The Company generally warrants its products for a period of up to five years .

The warranty provision considers estimated product failure rates and trends, estimated replacement costs, estimated repair or scrap costs and estimated costs for customer compensatory claims related to product quality issues, if any.

A statistical warranty tracking model is used to help prepare estimates and assist the Company in exercising judgment in determining the underlying estimates.

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

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.

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Each quarter, the Company evaluates the need for a valuation allowance for its deferred tax assets and adjusts the valuation allowance so that the Company records net deferred tax assets only to the extent that it has concluded it is more likely than not that these deferred tax assets will be realized.

The Company accounts for interest and penalties related to income taxes as a component of the provision for income taxes.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company recognizes liabilities for uncertain tax positions based on a two-step process.

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Net Income (Loss) Per Common Share

The Company computes net income (loss) per common share using a two-class method when shares are issued that meet the definition of participating securities.

The Company computes net income (loss) per common share using a two-class method in periods which include shares that meet the definition of participating securities.

The two-class method determines net income (loss) per common share for each class of common stock and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings.

The two-class method requires undistributed earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

The Company’s convertible preferred stock contractually entitles the holders of such shares to participate in dividends but does not contractually require the holders of such shares to participate in the Company’s losses.

The Company’s convertible preferred stock contractually entitled the holders of such shares to participate in dividends but did not contractually require the holders of such shares to participate in the Company’s losses.

The Company computes basic income (loss) per common share by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding during the period.

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”), and shares issuable in connection with the Company’s convertible notes and convertible preferred stock.

Potentially dilutive common shares include dilutive outstanding 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

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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 RSUs and PSUs without market 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.

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

At the end of each reporting period, the Company evaluates the probability that PSUs with a performance condition will be earned and records the related stock-based compensation expense over the service period.

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

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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.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Derivative Contracts

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

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.

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 $ 1.31 billion and $ 1.14 billion at July 3, 2026 and June 27, 2025, 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.

10 unchanged sentences

The measurement date for the plans is the Company’s year-end.

The Company recognizes the funded status of its defined benefit pension and post-retirement plans in the Consolidated Balance Sheets, with actuarial changes in the funded status recognized through accumulated other comprehensive loss in the year in which such changes occur.

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.

10 unchanged sentences

Accounting Pronouncements Recently Adopted

In September 2022, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) No.

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

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.

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

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”).

ASU 2023-09 calls for enhanced income tax disclosure requirements surrounding the tabular rate reconciliation and income taxes paid.

This standard is effective on either a prospective or retrospective basis.

The Company adopted this standard on a prospective basis for the year ended July 3, 2026.

The newly required disclosures are included in Note 9, Income Taxes .

In November 2024, the FASB issued ASU No.

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

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 .

2024-04, “Debt - Debt with Conversions and Other Options (Subtopic 470-20):

Induced Conversions of Convertible Debt Instruments.” This ASU clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

The standard is effective for the year beginning July 4, 2026, with early adoption permitted.

The Company adopted the standard on a prospective basis for the year ended July 3, 2026 and applied it to the exchange transactions of the 2028 Convertible Notes (as defined in Note 7.

Debt, for further details.

Recently Issued Accounting Pronouncements Not Yet Adopted

In May 2026, the FASB issued ASU No.

2026-02, “Environmental Credits and Environmental Credit Obligations (Topic 818),” which introduces specific accounting models for entities that generate, purchase, or hold environmental credits, or have an enforceable regulatory compliance obligation that may be settled with such credits.

Under the new guidance, environmental credits intended for compliance are recorded at cost, while certain non-compliance credits are tested for impairment or can be subject to a fair value accounting policy election.

Additionally, the standard requires gross financial statement presentation, prohibiting the netting of environmental credit assets against related compliance obligations.

This standard is effective for the year beginning July 1, 2028, and interim periods within that year, with early adoption permitted.

Adoption will be applied on a retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings.

The Company is currently assessing the impact of this standard on its consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU No.

2025-10, “Government Grants (Topic 832):

Accounting for Government Grants Received by Business Entities” (“ASU 2025-10”), which establishes guidance on the recognition, measurement, and presentation of government grants.

The standard may be adopted using a full retrospective, modified retrospective, or modified prospective transition method.

ASU 2025-10 is effective for the year beginning June 30, 2029, and interim periods within that year, with early adoption permitted.

The Company is currently assessing the impact of this guidance on its consolidated financial statements and related disclosures.

In November 2025, the FASB issued ASU No.

2025-09, “Derivatives and Hedging (Topic 815):

Hedge Accounting Improvements” (“ASU 2025-09”), which introduces targeted improvements to better align hedge accounting with entities’ risk management activities.

ASU 2025-09 is effective for the year beginning July 3, 2027, and interim periods within that year, with early adoption permitted.

The Company is currently assessing the impact of this guidance on its consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU No.

2025-07, “Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606):

Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract” (“ASU 2025-07”), which (i) expands the scope exception of Topic 815 to exclude certain contracts with a variable that is based on operations or activities specific to one of the parties to the contract and (ii) clarifies the scope of share-based payments from a customer in a revenue contract.

ASU 2025-07 is effective for the year beginning July 3, 2027, and interim periods within that year.

Early adoption is permitted and must be applied as of the beginning of the fiscal year that includes the interim period.

The Company currently does not expect this standard to have a material impact on its consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU No.

2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Topic 350):

Targeted Improvements to the Accounting for Internal-Use Software” (“ASU 2025-06”).

ASU 2025-06 amends existing references to prescriptive and sequential software development stages to better align with current software development

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

methods, such as agile development.

Under the new standard, entities will begin to capitalize eligible software costs when (i) management has authorized and committed to funding the software project, and (ii) it is probable that the project will be completed and the software will be used to perform the function intended.

ASU 2025-06 is effective for the year beginning July 1, 2028, and interim periods within that year, with early adoption permitted.

The Company is currently assessing the impact of this standard on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU No.

2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses” (“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.

Disaggregation of Income Statement Expenses,” which is intended to improve disclosures about the expenses of public entities.

The new guidance requires more detailed information about the types of expenses in commonly presented expense captions (such as cost of sales and SG&A 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.

This standard can be adopted on either a prospective or retrospective basis.

Annual disclosures will be effective for the Company’s fiscal year ending June 30, 2028 and interim disclosures in the year following adoption.

Early adoption is 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)

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)

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

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 disaggregated revenue by end market is as follows:

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

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

2026 2025 2024

(in millions)

Revenue by end market

Net revenue by end market

Cloud $ 11,490 $ 8,341 $ 5,052

1 unchanged sentence

Consumer 703 623 688

Total revenue

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

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s operations outside the United States include manufacturing facilities in China, Japan, Malaysia, the Philippines and Thailand, as well as sales offices throughout the Americas, Asia Pacific, Europe, the Middle East and Africa.

Total net revenue $ 12,919 $ 9,520 $ 6,317

The Company’s operations outside the U.S.

include manufacturing and/or R&D facilities in China, Japan, Malaysia, the Philippines and Thailand, as well as sales offices throughout the Americas, Asia Pacific, Europe, the Middle East and Africa.

The following tables summarize the Company’s operations by geographic area:

14 unchanged sentences

United States $ 792 $ 807

Malaysia 378 330

Thailand 867 791

Malaysia 443 378

Rest of Asia 260 279

2 unchanged sentences

(1) Long-lived assets include property, plant and equipment and are attributed to the geographic location in which they are located.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Customer Concentration and Credit Risk

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

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

For 2026, three customers accounted for 16 %, 15 %, and 13 %, 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, three customers accounted for 17 %, 12 % and 10 %, respectively, of the Company’s net revenue.

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

For 2026, 2025, and 2024, the Company’s top 10 customers accounted for 73 %, 68 %, and 55 %, respectively, of the Company’s net revenue.

2 unchanged sentences

At any given point in time, the total amount outstanding from any one of a number of its customers may be individually significant to the Company’s financial condition.

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 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.

As of July 3, 2026 and June 27, 2025, net accounts receivable were $ 2.03 billion and $ 1.49 billion, respectively, and reserves for potential credit losses were not material.

As of July 3, 2026, two customers accounted for 25 % and 17 %, respectively, of the Company’s net accounts receivable and as of June 27, 2025, three customers accounted for 20 %, 19 %, and 12 %, respectively, of the Company’s net accounts receivable.

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 only be made with financial institutions or in investment instruments evaluated as highly credit-worthy.

Segment Reporting

The Company’s Chief Executive Officer is the Company’s 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:

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 require that investments be made only with financial institutions or in investment instruments evaluated as highly credit-worthy.

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

2026 2025 2024

(in millions)

$ 12,919 $ 9,520 $ 6,317

Significant expenses and other segment items

Cost of revenue (1)

6,570 5,771 4,506

Research and development (1)

1,071 920 885

Selling, general and administrative (1)

Litigation matter

— ( 179 ) 291

Business realignment charges (credits) (1)

137 ( 6 ) 209

Stock-based compensation

Strategic review

Interest expense, net

Loss on retained interest in Sandisk

( 6,498 ) 772 —

Costs in connection with debt-for-equity exchange 545 100 —

Costs in connection with convertible notes transactions 108 — —

Costs in connection with equity-for-equity exchanges 254 — —

Other expense, net

Other segment items (2)

Income tax expense (benefit)

481 ( 513 ) 26

Net income (loss) from continuing operations

$ 9,424 $ 1,643 $ ( 765 )

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

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

Supplier Concentration

7 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Discontinued Operations

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 to Western Digital stockholders.

The Separation is intended to be tax-free for U.S.

federal income tax purposes.

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.

Following the Separation, as the Company no longer controlled nor had the ability to exert significant influence over Sandisk, the Company measured 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 ).

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

(in millions)

Revenue, net $ 4,361 $ 6,686

Cost of revenue 2,892 5,514

Operating expenses:

Research and development 718 957

Selling, general and administrative 229 102

Gain on business divestiture

Business separation costs 144 97

Business realignment charges (credits) 3 ( 70 )

Operating income 488 86

Total interest and other expense, net ( 36 ) ( 8 )

Income before taxes 452 78

Income tax expense 206 111

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

$ 246 $ ( 33 )

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 select financial information related to cash flows from discontinued operations:

Select Cash Flow Information from Discontinued Operations 2025 2024

(in millions)

Depreciation and amortization

Purchases of property, plant and equipment

Stock-based compensation

Consistent with the Company’s original intent to monetize its retained interest in Sandisk, the Company began executing a series of strategic transactions to optimize its capital structure.

In June 2025, the Company used 21.3 million shares of Sandisk common stock in a tax-free exchange to retire $ 800 million in principal amount of the Company’s Term Loan A-3 maturing in January 2027 (the “Term Loan A-3”).

In February 2026, the Company executed a series of transactions to monetize additional Sandisk shares and further reduce its outstanding debt.

Initially, the Company entered into a $ 1.50 billion Bridge Loan (as defined below), which was utilized to fully redeem all of its Senior Notes (as defined below) and consolidate the broad creditor

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

base to two holders to facilitate a debt-for-equity exchange.

Following the redemptions of the Senior Notes, the Company retired the Bridge Loan and its existing Term Loan A-3 through a tax-free exchange for 5.8 million shares of Sandisk common stock.

See Note 7, Debt , for further details.

Additionally, the Company used its remaining 1.7 million shares of Sandisk common stock to acquire 4.8 million shares of the Company’s common stock.

See Note 13, Shareholders’ Equity and Convertible Preferred Stock , for further details.

As of July 3, 2026, the Company no longer held any shares of Sandisk common stock.

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)

Supplemental Financial Statement Data

Accounts receivable, net

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 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.

2026 June 27,

18 unchanged sentences

Depreciation expense for property, plant and equipment totaled $ 372 million, $ 334 million and $ 347 million in 2026, 2025 and 2024, respectively.

Other intangible assets, net

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 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.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Purchases of property, plant and equipment included in accounts payable and accrued expense were $ 216 million, $ 99 million and $ 117 million, as of July 3, 2026, June 27, 2025 and June 28, 2024, respectively.

Non-current assets

7 unchanged sentences

$ 1,430 $ 1,484

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Product warranty liability

18 unchanged sentences

Other liabilities:

Non-current net tax payable $ — $ 200

Non-current portion of unrecognized tax benefits $ 235 $ 163

1 unchanged sentence

Total other liabilities $ 757 $ 559

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

5 unchanged sentences

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

Total Accumulated Comprehensive Income (Loss)

Total Accumulated Other Comprehensive Income (Loss)

(in millions)

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 income (loss) — — 244 244

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

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

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

Other comprehensive income before reclassifications 3 45 31 79

4 unchanged sentences

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

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.

Other comprehensive income (loss) before reclassifications 28 ( 1 ) ( 20 ) 7

Income tax benefit (expense) related to items of other comprehensive income (loss) ( 5 ) — 1 ( 4 )

Net current-period other comprehensive income (loss) 23 ( 1 ) ( 19 ) 3

Balance at July 3, 2026 $ 39 $ ( 3 ) $ ( 13 ) $ 23

There were no amounts reclassified out of Accumulated other comprehensive income (loss) during 2026.

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

As of July 3, 2026, all existing unrealized 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

8 unchanged sentences

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

The following tables present information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of June 27, 2025 and June 28, 2024, and indicate the fair value hierarchy of the valuation techniques utilized to determine such values:

June 27, 2025

Following the Separation, through the date of disposal of its retained ownership interest in Sandisk common stock, the Company did not control or have the ability to exert significant influence over Sandisk.

Accordingly, the Company measured its retained ownership interest in Sandisk common stock at fair value on a recurring basis over that period.

The following tables present information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of July 3, 2026 and June 27, 2025, and indicate the fair value hierarchy of the valuation techniques utilized to determine such values:

Level 1 Level 2 Level 3 Total

(in millions)

Retained interest in Sandisk

$ 354 $ — $ — $ 354

Cash equivalents – Money market funds $ 67 $ — $ — $ 67

6 unchanged sentences

(in millions)

Retained interest in Sandisk $ 354 $ — $ — $ 354

Cash equivalents – Money market funds 285 — — 285

7 unchanged sentences

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.

These shares were valued based on quoted market prices.

As discussed in Note 7, Debt , the Company exchanged 21.3 million shares of Sandisk to settle a portion of the Company’s Term Loan A-3 and an additional 5.8 million shares to retire the Bridge Loan and the remaining outstanding balance of Term Loan A-3.

As discussed in Note 13, Shareholders’ Equity and Convertible Preferred Stock , the Company used its remaining 1.7 million shares of Sandisk common stock to acquire 4.8 million shares of the Company’s common stock.

As of July 3, 2026, the Company no longer held any shares of Sandisk common stock.

Money Market Funds.

7 unchanged sentences

The market-based observable inputs for the model include forward rates and credit default swap rates.

For more information on the Company’s foreign exchange contracts, see Note 7, Derivative Instruments and Hedging Activities .

Derivative assets and liabilities are reflected in the Company’s Consolidated Balance Sheets under Other current assets and Accrued expenses, respectively.

3 unchanged sentences

Each of the financial instruments presented below was categorized as Level 2 for all periods presented, based on the frequency of trading immediately prior to the end of the fourth quarter of 2026 and the fourth quarter of 2025, respectively.

June 27, 2025 June 28, 2024

July 3, 2026 June 27, 2025

Value Carrying

(in millions)

4.75 % senior unsecured notes due 2026

$ 500 $ 499 $ 2,296 $ 2,253

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

$ 702 $ 10,109 $ 1,575 $ 2,849

Revolving Credit Facility maturing January 2027 350 350 — —

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

4.75 % senior unsecured notes due 2026

2.85 % senior notes due 2029

498 463 496 434

3.10 % senior notes due 2032

496 442 496 407

Total $ 1,052 $ 10,459 $ 4,711 $ 5,908

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Derivative Instruments and Hedging Activities

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.

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 (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 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

Under certain provisions and conditions within agreements with counterparties to the Company’s foreign exchange forward contracts, subject to applicable requirements, the Company has the right of offset associated with the Company’s foreign exchange forward contracts and is allowed to net settle transactions of the same currency with a single net amount payable by one party to the other.

As of June 27, 2025 and June 28, 2024, the effect of rights of offset was not material and the Company did not offset or net the fair value amounts of derivative instruments in its Consolidated Balance Sheets.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Debt consisted of the following:

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(in millions)

4.75 % senior unsecured notes due 2026

3.00 % convertible notes due 2028

$ 710 $ 1,600

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

Revolving Credit Facility maturing January 2027 350 —

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

3.00 % convertible notes due 2028

4.75 % senior unsecured notes due 2026

2.85 % senior notes due 2029

7 unchanged sentences

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 “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 %.

under the Loan Agreement, (c) provided for the issuance of a new $ 2.51 billion Term Loan A-3 in a non-cash 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 Revolving Credit Facility from $ 2.25 billion to $ 1.25 billion.

In September and December 2025, the Company made scheduled principal repayments aggregating to $ 63 million under Term Loan A-3.

In February 2026, the Company executed a series of transactions to further reduce its outstanding debt.

Initially, the Company entered into a $ 1.50 billion bridge loan (the “Bridge Loan”).

The Bridge Loan was utilized to consolidate the holders of the 4.75 % senior unsecured notes due 2026, the 2.85 % senior notes due 2029, and the 3.10 % senior notes due 2032 (collectively, the “Senior Notes”) from a broad creditor base into two holders to facilitate a debt-for-equity exchange.

The proceeds of the Bridge Loan were used to fully redeem all of the Senior Notes in cash, at par plus accrued interest.

In connection with the redemptions, the Company wrote off $ 6 million of remaining unamortized issuance costs.

Following the redemptions, the Company retired the Bridge Loan and its existing Term Loan A-3 through a non-cash, tax-free exchange for 5.8 million shares of Sandisk common stock held by the Company, valued at $ 3.62 billion on the date of exchange.

The exchange resulted in $ 539 million recorded in Costs in connection with debt-for-equity exchange in the Consolidated Statement of Operations.

This amount primarily reflects a discount to the market price of Sandisk shares provided to the counterparties in connection with the exchange and was primarily driven by volatility of Sandisk’s stock price over the period between exchange and settlement.

In 2025, the Company drew and repaid $ 150 million principal amount under the Revolving Credit Facility.

In June 2026, the Company drew $ 450 million in principal amount and repaid $ 100 million thereunder, with $ 350 million remaining outstanding as of July 3, 2026.

The remaining available capacity under the Revolving Credit Facility was $ 900 million as of July 3, 2026, net of an immaterial amount of outstanding letters of credit.

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.

Borrowings under the Loan Agreement bear interest, at the Company’s option, at a per annum rate 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 (as defined in the Loan Agreement).

The Company is also required to pay an unused commitment fee on the Revolving Credit 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 %.

The all-in interest rate for the Revolving Credit Facility was 5.127 % as of July 3, 2026.

The Loan Agreement governing the Revolving Credit Facility requires the Company to maintain a 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 is currently 3.25 times for all periods through maturity.

As of July 3, 2026, 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”).

Convertible Notes

On November 3, 2023, the Company issued $ 1.60 billion in 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”).

Net proceeds from the 2028 Convertible Notes were approximately $ 1.56 billion after deducting issuance costs of approximately $ 37 million.

Debt issuance costs are amortized to interest expense over the term of the 2028 Convertible Notes.

As of July 3, 2026, $ 8 million of issuance costs remained unamortized.

Interest is payable on May 15 and November 15 of each year.

The Company is not required to make principal payments on the 2028 Convertible Notes prior to the maturity date.

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).

The 2028 Convertible Notes are guaranteed by Western Digital Technologies, Inc., the Company’s wholly-owned subsidiary.

The 2028 Convertible Notes are convertible at the option of any holder beginning on August 15, 2028, at a conversion price of approximately $ 37.72 per share of common stock as of July 3, 2026 (which 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.

2 unchanged sentences

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.

The sale price conditional conversion feature of the 2028 Convertible Notes has been triggered since June 30, 2025, which has provided, and continues to provide, the holders of those notes with the right to convert through September 30, 2026, 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.

Accordingly, the Company has classified the 2028 Convertible Notes as current liabilities in the Company’s Consolidated Financial Statements as of July 3, 2026 and June 27, 2025.

In March 2026, holders of $ 32 million in aggregate principal amount of the 2028 Convertible Notes tendered them for conversion (the “Tendered Notes”).

At that same time, the Company made an irrevocable election to settle in cash the conversion obligation in excess of the principal amount of the Tendered Notes, as permitted by the Indenture.

On June 2, 2026,

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.

Net proceeds from the 2028 Convertible Notes were approximately $ 1.56 billion after deducting issuance costs of approximately $ 37 million.

Debt issuance costs are amortized to interest expense over the term of the 2028 Convertible Notes.

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

the Company used $ 360 million in cash to fully settle the Tendered Notes.

The election to settle the conversion premium in cash, instead of shares, required the allocation of a portion of the settlement proceeds to the embedded conversion feature as a derivative instrument pursuant to Accounting Standards Codification 815, Derivatives and Hedging .

Driven by the appreciation of the Company’s common stock from the tendered date through the settlement date, the derivative instrument was remeasured to a fair value of $ 106 million and was recognized in Costs in connection with convertible notes transactions in the Consolidated Statements of Operations.

In June 2026, the Company entered into separate, privately negotiated exchange agreements with certain holders of the 2028 Convertible Notes, in an aggregate principal amount of $ 858 million, pursuant to which the Company fully settled the obligation for an aggregate $ 860 million cash (which reflected principal amount and a small inducement cost) and 21.3 million shares of the Company’s common stock for the conversion premium of $ 12.5 billion.

In connection with these exchange transactions, the Company wrote off $ 10 million of remaining unamortized issuance costs.

The Company accounted for these exchange transactions as induced conversion transactions and recognized an immaterial induced conversion expense in Costs in connection with convertible notes transactions in the Consolidated Statements of Operations.

There was no settlement or modification made to the related capped call transactions in connection with the exchange agreements (see “Capped Calls” below).

As of July 3, 2026, $ 710 million in aggregate principal amount of the 2028 Convertible Notes remained outstanding.

Through July 3, 2026, $ 343 million in aggregate principal amount of these notes had been tendered for conversion.

The Company has elected to issue shares of its common stock to satisfy the conversion obligation in excess of the principal amount for substantially all of these notes, which have settled or are expected to settle in the first quarter of 2027.

The Company continues to retain the right to settle any conversion obligation in excess of the principal amount of any of the remaining 2028 Convertible Notes in cash or shares or a combination thereof, at its election.

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 $ 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.

As of July 3, 2026, the Capped Calls each have a strike price of approximately $ 37.72 per share and a cap price of approximately $ 50.40 per share, each of which has been adjusted from their original price, in accordance with the terms of the agreements.

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.

2 unchanged sentences

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 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.

Bank National Association, as trustee (the “Senior Notes Trustee”), as supplemented by the first supplemental indenture dated as of December 10, 2021 (the “Senior Notes First Supplemental Indenture”) between the Company and the Senior Notes Trustee.

As used herein, “Indenture” means the Base Indenture, as supplemented by the Senior Notes First Supplemental Indenture.

Interest for both the 2029 Senior Notes and 2032 Senior Notes is payable on February 1 and August 1 of each year.

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.

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.

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”).

The original 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 June 2026, in connection with the settlement of the Tendered Notes, the Company received an immaterial number of shares of its common stock from the settlement of a pro rata amount of the Capped Calls.

As of July 3, 2026, the outstanding Capped Calls had an aggregate notional value of $ 1.57 billion.

Subsequent to July 3, 2026, in connection with the additional $ 343 million in aggregate principal amount of the 2028 Convertible Notes tendered for conversion, the Company has received or will receive additional shares of its common stock in the first quarter of 2027 from the settlement of a pro rata amount of the Capped Calls.

In December 2021, the Company issued $ 500 million in aggregate principal amount of 2.850 % senior notes due February 1, 2029 and $ 500 million in aggregate principal amount of 3.100 % senior notes due February 1, 2032.

As discussed above, in February 2026, the outstanding principal balances of these notes were fully redeemed in cash using the proceeds of the Bridge Loan.

In February 2018, the Company issued $ 2.30 billion in aggregate principal amount of 4.750 % senior unsecured notes due February 15, 2026.

In April 2025, the Company redeemed, at its election, $ 1.80 billion in aggregate principal amount of these notes at par plus accrued interest.

As discussed above, in February 2026, the remaining outstanding principal balance of these notes was fully redeemed in cash using the proceeds of the Bridge Loan.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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;

Collateral and Restrictive Covenants

Historically, under the terms of the Loan Agreement, the Revolving Credit Facility and Term Loan Facility were unconditionally guaranteed by Western Digital Technologies, Inc.

(the “Guarantor”) and were 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.

During the third quarter of 2026, the Company obtained investment-grade ratings from two rating agencies, and therefore, pursuant to the terms of the Loan Agreement, the guarantee and the lien on the Collateral on the Revolving Credit Facility have been fully released.

The indenture governing the 2028 Convertible Notes contains 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;

create liens;

and incur, assume or guarantee additional indebtedness, and are subject to a number of limitations and exceptions.

Maturity of Debt

As of June 27, 2025, the Company is subject to required principal payment or earlier conversion, at the option of the holder, as follows:

Contractual Maturity (1)

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Leases and Other Commitments

The Company leases certain domestic and international facilities and data center space under long-term, non-cancelable operating leases that expire at various dates through 2034.

These leases include no material variable or contingent lease payments.

Operating lease assets and liabilities are recognized based on the present value of the remaining lease payments discounted using the Company’s incremental borrowing rate.

Operating lease assets also include prepaid lease payments minus any lease incentives.

Extension or termination options present in the Company’s lease agreements are included in determining the right-of-use asset and lease liability when it is reasonably certain the Company will exercise those options.

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

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

2026 June 27,

(in millions)

2031 and thereafter 500

Total debt maturities 4,749

Issuance costs

Net carrying value $ 4,711

(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.

Operating lease right-of-use assets (included in Other non-current assets )

Operating lease liabilities:

Current portion of long-term operating lease liabilities (included in Accrued expenses )

Long-term operating lease liabilities (included in Other liabilities )

Total operating lease liabilities

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

2026 2025 2024

(in millions)

Cost of operating leases $ 37 $ 33 $ 41

Cash paid for operating leases 36 36 44

Operating lease assets obtained in exchange for operating lease liabilities 29 18 10

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

2026 June 27,

Weighted average remaining lease term in years

Weighted average discount rate

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Lease Amounts

(in millions)

Thereafter 34

Total future minimum lease payments 160

imputed interest

Present value of lease liabilities $ 139

Purchase Agreements and Other Commitments

In the normal course of business, the Company enters into purchase orders with suppliers for the purchase of components used to manufacture its products.

These purchase orders generally cover forecasted component supplies needed for production during the next quarter, are recorded as a liability upon receipt of the components, and generally may be changed or canceled at any time prior to shipment of the components.

The Company also enters into long-term agreements with suppliers that contain fixed future commitments, which are contingent on certain conditions such as performance, quality and technology of the vendor’s components.

As of July 3, 2026, the Company had the following minimum long-term commitments:

Long-term Commitments

(in millions)

Thereafter 71

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Income (Loss) Before Taxes

The domestic and foreign components of Income (loss) before taxes were as follows:

2026 2025 2024

(in millions)

Foreign $ 925 $ 2,602 $ ( 492 )

Domestic 8,980 ( 1,472 ) ( 247 )

Income (loss) before taxes $ 9,905 $ 1,130 $ ( 739 )

Income Tax Expense (Benefit)

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

2026 2025 2024

(in millions)

Foreign $ 189 $ 213 $ 77

Domestic - Federal 125 90 34

Domestic - State 38 ( 1 ) 6

Foreign ( 64 ) ( 1 ) ( 8 )

Domestic - Federal 193 ( 773 ) ( 68 )

Domestic - State — ( 41 ) ( 15 )

129 ( 815 ) ( 91 )

Income tax expense (benefit)

$ 481 $ ( 513 ) $ 26

Previously, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the ability to deduct R&D expenditures in the year incurred, requiring capitalization and amortization under Internal Revenue Code Section 174.

In July 2025, the One Big Beautiful Bill Act of 2025 was signed into law, which includes broad tax reform provisions that extend and modify key elements of the TCJA.

Notably, the new legislation now allows an option for the immediate expensing of domestic R&D expenditures, beginning with 2026.

The legislation also includes favorable modifications to international tax provisions, including changes to the Global Intangible Low-Taxed Income regime and enhancements to the Foreign Derived Deduction Eligible Income (“FDDEI”) deduction that will become effective for the Company in 2027.

In August 2022, the Inflation Reduction Act of 2022 was signed into law, which contained, among other things, a corporate alternative minimum tax (“CAMT”) of 15% on corporations with three-year average annual adjusted financial statement income (“AFSI”) exceeding $1.0 billion.

Although CAMT went into effect in 2024, the Company was not subject to CAMT in 2024 and 2025.

The Company is not subject to CAMT in 2026 as its average annual AFSI did not exceed $1.0 billion for the preceding three-year period.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In December 2021, the Organization for Economic Co-operation and Development G20 (“OECD/G20”) Inclusive Framework on Base Erosion and Profit Shifting released Model Global Anti-Base Erosion rules under Pillar Two.

Several non-U.S.

jurisdictions have either enacted legislation or announced their intention to enact future legislation to adopt certain or all components of Pillar Two, also known as Global Minimum Tax (“GMT”).

For 2026, the Company is subject to GMT in Malaysia and Thailand.

Deferred Taxes

Temporary differences and carryforwards, which give rise to a significant portion of deferred tax assets and liabilities were as follows:

2026 June 27,

(in millions)

Deferred tax assets:

Sales related reserves and accrued expenses not currently deductible $ 71 $ 38

Accrued compensation and benefits not currently deductible 101 75

Net operating loss carryforward 114 133

Business credit carryforward 562 562

Long-lived assets 748 796

Interest and hedging costs not currently deductible 22 166

Total deferred tax assets 1,662 1,799

Deferred tax liabilities:

Long-lived assets ( 69 ) ( 40 )

Unremitted earnings of certain non-U.S.

entities ( 114 ) ( 149 )

Other ( 1 ) ( 12 )

Total deferred tax liabilities ( 184 ) ( 201 )

Valuation allowances ( 611 ) ( 598 )

Deferred tax assets, net $ 867 $ 1,000

The decrease in the deferred tax assets is attributable primarily to the utilization of interest expense carryforwards that had been previously deferred due to interest expense limitations.

This decrease includes the interest paid in connection with the IRS settlement for years 2008 through 2015 that was previously deferred.

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

After weighing both the positive and negative evidence available, including, but not limited to, earnings history, projected future outcomes, industry and market trends and the nature of each of the deferred tax assets, the Company determined that it is able to realize its deferred tax assets except for certain loss and credit carryforwards.

The Company is permanently reinvested with respect to certain foreign earnings.

There is no unrecognized deferred tax liability associated with the repatriation of these foreign undistributed earnings as it can be achieved without additional federal tax consequences.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Effective Tax Rate

The following table reconciles the income tax provision with the amount calculated using the U.S.

federal statutory rate applied to pretax income, reflecting the adoption of ASU 2023-09 (amounts in millions, except for percentages):

Amount Percent

US Federal Statutory Income Tax Rate $ 2,080 21 %

State and Local Income Taxes, Net of Federal Income Tax Effect (1)

Foreign Tax Effects

Tax Holiday Exempt Income ( 140 ) ( 1 )

Pillar Two 82 1

Other ( 17 ) —

Other Foreign Jurisdictions ( 30 ) ( 1 )

Effect of Changes in Tax Laws or Rates Enacted in the Current Period — —

Effect of Cross-Border Tax Laws

FDDEI Deduction ( 112 ) ( 1 )

Other ( 20 ) —

Tax Credits ( 64 ) ( 1 )

Valuation Allowance — —

Non-taxable or Non-deductible Items:

Stock-based Compensation (2)

( 202 ) ( 2 )

Tax-free disposition of retained interest in Sandisk ( 1,199 ) ( 12 )

Uncertain Tax Positions (3)

Other ( 38 ) ( 1 )

Total Tax Provision and Effective Tax Rate $ 481 5 %

(1) State taxes in Illinois, New Jersey, and Utah comprised greater than 50% of the tax effect in this category.

(2) Includes amounts related to non-deductible stock-based compensation, in addition to excess tax benefits or shortfalls from stock-based compensation.

Our tax provision includes $ 155 million of tax windfalls from stock-based compensation.

(3) Changes in unrecognized tax benefits are presented on an aggregated basis for all jurisdictions.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash paid for income taxes, net of refunds received, by jurisdiction, pursuant to the disclosure requirements of ASU 2023-09, is as follows:

(in millions)

Federal $ 506

Cash paid for income taxes, net of refunds received $ 734

Reconciliation of the U.S.

Federal statutory rate to the Company’s effective tax rate is as follows:

Federal statutory rate 21 % 21 %

Tax rate differential on international income ( 36 ) ( 22 )

Tax effect of U.S.

foreign income inclusion 1 ( 1 )

Tax effect of U.S.

foreign minimum tax 25 ( 6 )

Tax effect of U.S.

stock-based compensation ( 2 ) ( 1 )

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

Tax effect of U.S.

permanent differences — 5

State income tax, net of federal tax — 2

Change in valuation allowance 6 ( 3 )

Unremitted earnings of certain non-U.S.

entities ( 2 ) ( 2 )

Foreign income tax credits ( 8 ) 1

R&D tax credits ( 6 ) 5

return to provision 1 —

Tax reserves 1 ( 3 )

Inter-entity asset transfer ( 61 ) —

Other ( 1 ) —

Effective tax rate ( 45 ) % ( 4 ) %

The tax rate differential on international income is comprised primarily of reduced tax rates from the Company tax holidays.

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 beginning in the first quarter of 2027 through 2033.

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

The Company’s tax holiday in Malaysia expired on November 1, 2023.

The Company has applied for a new incentive and is engaged in active discussions with the Malaysian Investment Development Authority.

Because no formal agreement is in place, the Company is applying the Malaysia corporate statutory tax rate on its post-expiration Malaysian income.

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

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

One of the Company’s tax holidays in Thailand is scheduled to expire on August 31, 2026.

While the Company’s earnings in Thailand for the current fiscal year remain eligible for this incentive, certain deferred tax balances are scheduled to reverse after the expiration date.

The Company is in active discussions with the Thailand Board of Investment regarding an extension;

however, because no formal agreement is in place, the Company has measured these reversing deferred taxes using the Thailand statutory corporate tax rate.

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

The direct tax impact of these tax holidays and tax incentives was an increase to the Company’s net earnings by $ 60 million, or $ 0.16 per diluted share, $ 551 million, or $ 1.54 per diluted share, and $ 209 million, or $ 0.64 per diluted share, in 2026, 2025 and 2024, respectively.

The direct tax impact of these tax holidays and tax incentives amount was reduced for GMT in Thailand, which became applicable for the Company in 2026.

Tax Carryforwards

As of July 3, 2026, 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.

Following is a summary of the Company’s federal and state NOL/tax credit carryforwards and the related expiration dates of these NOL/tax credit carryforwards:

Jurisdiction NOL/Tax Credit Carryforward Amount Expiration

(in millions)

Federal NOL (Pre 2017 Act Generation) $ 546 2027 to 2038

California NOL

353 2028 to 2047

Other State NOL

Federal tax credits 49 2027 to 2035

State tax credits 774 No expiration

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 to be ultimately realized will be reduced because of these provisions by $ 116 million and $ 240 million, respectively.

The Company expects the total amount of federal and state credits ultimately realized will be reduced because of these provisions by $ 27 million and $ 2 million, respectively.

As of July 3, 2026, the Company had varying amounts of foreign NOL carryforwards that do not expire or, if not used, expire in various years, depending on the country.

The major jurisdictions that the Company receives foreign NOL carryforwards and the related amounts and expiration dates of these NOL carryforwards are as follows:

Jurisdiction NOL Carryforward Amount Expiration

(in millions)

Malaysia $ 76 2029

Uncertain Tax Positions

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

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits excluding accrued interest and penalties:

2026 2025 2024

(in millions)

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

Gross increases related to current year tax positions 13 11 25

Gross increases related to prior year tax positions 34 26 73

Gross decreases related to prior year tax positions — ( 13 ) ( 32 )

Settlements ( 4 ) ( 40 ) ( 363 )

Lapse of statute of limitations ( 2 ) ( 10 ) ( 3 )

Distribution in connection with the Separation

Unrecognized tax benefit, ending balance $ 610 $ 569 $ 721

As of July 3, 2026, June 27, 2025 and June 28, 2024, the portion of the gross unrecognized tax benefits, if recognized, that would affect the effective tax rate is $ 455 million, $ 416 million and $ 555 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 July 3, 2026, June 27, 2025 and June 28, 2024 was $ 130 million, $ 82 million and $ 181 million, respectively.

As of July 3, 2026, June 27, 2025 and June 28, 2024, the Company’s payables related to unrecognized tax benefits, including accrued interest and penalties, were $ 585 million, $ 498 million and $ 736 million, respectively.

Of these amounts, approximately $ 349 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 July 3, 2026.

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 July 3, 2026 and June 27, 2025.

The potential cash payments of $ 349 million is expected to be netted with offsetting favorable tax receivables totaling $ 213 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 potential net cash payments of $ 136 million.

These tax receivables are classified in Other current assets on the Consolidated Balance Sheets as of July 3, 2026.

In connection with Internal Revenue Service (“IRS”) 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 approximately $ 166 million.

Of this amount, $ 65 million of interest savings from the interest paid with respect to years 2008 through 2015 that were previously classified as a deferred tax asset due to interest expense limitation rules have been utilized during the fiscal year.

The Company files U.S.

Federal, U.S.

state and foreign tax returns.

For both federal and state tax returns, with few exceptions, the Company is subject to examination for 2016 through 2025.

The Company is no longer subject to examination by the IRS for periods prior to 2016, although carry forwards generated prior to those periods may still be adjusted upon examination by the IRS or state taxing authority if they either have been or will be used in a subsequent period.

In the following major foreign jurisdictions, the Company could be subject to examination as noted below:

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Jurisdiction Period Subject to Examination

China (calendar) 2015-2025

India (fiscal) 2018-2025

Japan (fiscal) 2017-2025

Malaysia (fiscal) 2019-2025

Thailand (fiscal) 2015-2025

Singapore (fiscal) 2022-2025

United Kingdom (fiscal) 2024-2025

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

The outcome of such tax examinations, however, cannot be predicted with certainty.

If any issues addressed in the Company’s tax examinations are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.

As of July 3, 2026, with the exception of the net potential cash payment of $ 136 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.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Business Realignment Charges (Credits)

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

These actions have resulted in charges for employee termination benefits and charges from the impairment of intangible assets and other long-lived assets.

In 2026, the Company canceled certain facility projects and impaired related construction in progress assets as realigned resources to optimize capacity to support recent growth.

In 2024, the Company reassessed capacity development plans at that time 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 may also periodically record credits related to gains upon the sale of property in connection with these activities.

The Company recorded the following charges related to these actions:

2026 2025 2024

(in millions)

Cash-based employee termination benefits $ 97 $ 2 $ 34

Stock-based employee termination benefits 9 — —

Asset impairments and recoveries, net 33 — 146

Contract termination and other 7 ( 8 ) 29

Total business realignment charges (credits) $ 146 $ ( 6 ) $ 209

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

Employee Termination Benefits Contract Termination and Other

(in millions)

Accrual balance as of June 27, 2025 $ 1 $ 9 $ 10

Charges 97 7 104

Cash payments ( 98 ) ( 3 ) ( 101 )

Accrual balance as of July 3, 2026 $ — $ 13 $ 13

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Pension and Other Post-Retirement Benefit Plans

11 unchanged sentences

Interest cost 7 7 6

Plan amendments — — —

Actuarial gain

18 unchanged sentences

Net amount recognized $ 48 $ 68

The accumulated benefit obligation for the Pension Plans was $ 272 million at June 27, 2025.

As of June 27, 2025, the accumulated other income pension balance was $ 27 million.

There were no material prior service credits for the Pension Plans recognized in Accumulated other comprehensive income (loss) in the Consolidated Balance Sheet as of June 27, 2025.

The accumulated benefit obligation for the Pension Plans was $ 237 million at July 3, 2026.

As of July 3, 2026, the accumulated other income pension balance was $ 53 million.

There were no material prior service credits for the Pension Plans recognized in Accumulated other comprehensive income (loss) in the Consolidated Balance Sheet as of July 3, 2026.

Net periodic benefit costs were not material for 2026, 2025 and 2024.

15 unchanged sentences

The Company’s estimates of future rates of return on assets is based in large part on the projected rate of return from the respective investment managers using a long-term view of historical returns, as well as actuarial recommendations using the most current generational and mortality tables and rates.

As of June 27, 2025, the Pension Plans’ assets materially consisted of plan assets related to the Japan pension plan and, as such, the assumption used herein is primarily related to the Japan pension plan.

As of July 3, 2026, the Pension Plans’ assets materially consisted of plan assets related to the Japan pension plan and, as such, the assumption used herein is primarily related to the Japan pension plan.

The Company develops the rate of compensation increase assumptions using local compensation practices and historical rates of increases.

10 unchanged sentences

Fair Value Measurements

The following tables present the Pension Plans’ major asset categories and their associated fair values and net asset values as of June 27, 2025 and June 28, 2024:

June 27, 2025

The following tables present the Pension Plans’ major asset categories and their associated fair values and net asset values as of July 3, 2026 and June 27, 2025:

Level 1 Level 2 Level 3 Total

38 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Leases and Other Commitments

The Company leases certain domestic and international facilities and data center space under long-term, non-cancelable operating leases that expire at various dates through 2034.

These leases include no material variable or contingent lease payments.

Operating lease assets and liabilities are recognized based on the present value of the remaining lease payments discounted using the Company’s incremental borrowing rate.

Operating lease assets also include prepaid lease payments minus any lease incentives.

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

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

2025 June 28,

(in millions)

Operating lease right-of-use assets (included in Other non-current assets )

Operating lease liabilities:

Current portion of long-term operating lease liabilities (included in Accrued expenses )

Long-term operating lease liabilities (included in Other liabilities )

Total operating lease liabilities

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

2025 2024 2023

(in millions)

Cost of operating leases $ 33 $ 41 $ 49

Cash paid for operating leases 36 44 43

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

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

Weighted average discount rate

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of June 27, 2025, minimum lease payments were as follows:

Lease Amounts

(in millions)

Thereafter 46

Total future minimum lease payments 165

imputed interest

Present value of lease liabilities $ 141

Purchase Agreements and Other Commitments

In the normal course of business, the Company enters into purchase orders with suppliers for the purchase of components used to manufacture its products.

As of June 27, 2025, the Company had the following minimum long-term commitments:

Long-term Commitments

(in millions)

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Western Digital Corporation 401(k) Plan

5 unchanged sentences

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 U.S.

Internal Revenue Service (“IRS”) limitations.

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.

1 unchanged sentence

Contributions, including the Company’s matching contribution to the Plan, are recorded as soon as administratively possible after the Company makes payroll deductions from Plan participants.

Effective February 18, 2023, the Company announced its decision to suspend its previous practice of matching contributions.

The Company later resumed matching contributions effective January 1, 2024.

For 2026, 2025 and 2024, the Company made Plan contributions of $ 23 million, $ 22 million and $ 8 million, respectively.

16 unchanged sentences

Dividend equivalent rights are accumulated and paid in additional shares when the underlying shares vest.

As of June 27, 2025, the maximum number of shares of the Company’s common stock that was authorized for award grants under the 2021 Plan was 34.8 million shares.

As of July 3, 2026, the maximum number of shares of the Company’s common stock that was authorized for award grants under the 2021 Plan was 34.8 million shares.

The 2021 Plan will terminate on November 22, 2031, unless terminated earlier by the Company’s Board of Directors.

26 unchanged sentences

Selling, general and administrative 75 60 101

Business realignment charges 9 — —

Subtotal 204 167 202

1 unchanged sentence

Total $ 168 $ 144 $ 172

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.

Any excess windfall tax benefits and tax deficiencies for shortfalls related to the vesting and exercise of stock-based awards are recognized as a component of the Company’s Income tax expense (benefit).

As of July 3, 2026, excess windfall tax benefits were $ 155 million.

Excess windfall tax benefits and tax deficiencies for shortfalls were immaterial for the earlier periods presented.

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:

The following table presents the unamortized compensation cost and weighted average service period of all unvested outstanding awards as of July 3, 2026:

Unamortized Compensation Costs Weighted Average Service Period

6 unchanged sentences

Plan Activities

Stock Options

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

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

RSUs and PSUs

2 unchanged sentences

(in millions) (in millions)

RSUs and PSUs outstanding at July 1, 2022 15.4 $ 52.89

Granted 6.6 41.27

Vested ( 6.6 ) 54.05 $ 274

Forfeited ( 1.6 ) 54.56

RSUs and PSUs outstanding at June 30, 2023 13.8 $ 46.56

9 unchanged sentences

RSUs and PSUs outstanding at June 27, 2025 9.7 33.56

Granted 2.6 85.14

Vested ( 5.1 ) 35.77 $ 1,117

Forfeited ( 0.6 ) 42.96

RSUs and PSUs outstanding at July 3, 2026 6.6 $ 52.21

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.

16 unchanged sentences

Fair value $ 87.23 $ 13.32 $ 15.08

The Company is authorized to issue 750 million shares of common stock, $ 0.01 par value per share.

As of July 3, 2026 and June 27, 2025, there were 364 million and 349 million shares issued, and 361 million and 347 million shares outstanding, respectively, which are net of 3 million and 2 million shares of treasury stock held at cost, respectively.

Convertible Preferred Stock

On January 31, 2023, the Board of Directors of the Company authorized the designation of 900,000 shares of Series A Convertible Perpetual Preferred Stock, par value $ 0.01 per share (the “Preferred Shares”) from the Company’s existing 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.

The Preferred Shares had an initial stated value of $ 1,000 per share and accrued a cumulative preferred dividend at an annual rate of 6.25 % per annum, compounded on a quarterly basis.

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

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

Pursuant to their terms, the Company had an option to convert the Preferred Shares after January 31, 2026, if the closing price per share of the Company’s common stock exceeded 150 % of the conversion price for at least 20 out of 30 consecutive trading days immediately before the Company’s conversion notice.

On February 17, 2026, the Company exercised this option and converted all remaining outstanding Preferred Shares into 7 million shares of the Company’s common stock based on the conversion price in effect at that time.

Immediately prior to conversion, the Preferred Shares outstanding had an aggregate liquidation preference of $ 267 million, which included previous dividends paid in-kind of $ 32 million.

On February 24, 2026, the Company filed a Certificate of Elimination with the Secretary of State of the State of Delaware with respect to the Preferred Shares, pursuant to which the Preferred Shares were eliminated and returned to the status of authorized and unissued preferred shares of the Company.

Through December 31, 2024, the Company paid quarterly dividends on the Preferred Shares in-kind through an increase to the stated value.

Subsequently, quarterly dividends on the Preferred Shares were made in cash, which included $ 8 million declared and paid in 2025, and $ 8 million declared and paid in 2026 prior to conversion.

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

As of June 27, 2025, 235,000 Preferred Shares were outstanding, with an aggregate liquidation preference of $ 265 million, including accumulated dividends in-kind of $ 30 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 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.

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 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.

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.

Subsequent adjustments to increase or decrease the carrying values to the ultimate redemption value will be made only if and when it becomes probable that such a fundamental change in the business will occur.

The Preferred Shares will vote, to the extent permitted under the Nasdaq listing rules, on an as-converted equivalent basis along with holders of the Company’s common stock.

Liquidation preference

In the event of any voluntary or involuntary liquidation, holders of the Preferred Shares will be senior to the holders of the Company’s common stock and the liquidation preference is the greater of (i) the sum of an amount in cash equal to 110 % of the Accumulated Stated Value plus accrued and unpaid dividends and (ii) the payment that the holders of the Preferred Shares would have received had all the Preferred Shares been converted into common stock immediately prior to such liquidation, before any distributions are made to common shareholders and all other classes of junior capital stock of the Company.

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.

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, and on February 2, 2026, the Company’s Board of Directors authorized the repurchase of up to an additional $ 4.0 billion of the Company’s common stock (collectively, the “Share Repurchase Program”).

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.

For the year ended July 3, 2026, the Company repurchased 14.7 million shares for a total cost of $ 2.59 billion.

The remaining amount available to be repurchased under the Company’s share repurchase program as of July 3, 2026 was $ 3.26 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 Company expects share repurchases to be funded primarily 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.

Apart from share repurchases under the Share Repurchase Program, in the fourth quarter of 2026, the Company completed two separate equity-for-equity exchanges, which used the Company’s remaining 1.7 million shares of Sandisk common stock, valued at $ 3.24 billion based on the market price on the date of settlement, to acquire 4.8 million shares of the Company’s common stock valued at $ 2.99 billion based on the market price on the date of settlement.

The exchanges resulted in $ 254 million recorded in Costs in connection with equity-for-equity exchanges in the Consolidated Statement of Operations.

This amount reflects the difference between the fair market value of the Sandisk common stock exchanged and the Company’s common stock acquired on the settlement date.

Stock Reserved for Issuance

The following table summarizes all common stock reserved for issuance at June 27, 2025:

The following table summarizes all common stock reserved for issuance at July 3, 2026:

Number of Shares

2 unchanged sentences

Outstanding awards and shares available for award grants 26

Convertible preferred stock

Dividends to Common Shareholders

1 unchanged sentence

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)

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.

During the year ended July 3, 2026, the Company paid aggregate cash dividends of $ 0.50 per share of its outstanding common stock, totaling $ 174 million, plus $ 2 million paid to holders of the Company’s then-outstanding Preferred Shares in accordance with their participation rights.

During the year ended June 27, 2025, the Company paid cash dividends of $ 0.10 per share of its outstanding common stock, totaling $ 35 million, plus $ 1 million paid to holders of the Company’s then-outstanding Preferred Shares in accordance with their participation rights.

Subsequent to year-end, on August 4, 2026, the Board of Directors declared a cash dividend of $ 0.15 per share of the Company’s common stock, which will be paid on September 17, 2026 to shareholders of record as of the close of business on September 8, 2026.

The Company may modify, suspend, or cancel its cash dividend program in any matter and at any time.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Income (Loss) Before Taxes

The domestic and foreign components of Income (loss) before taxes were as follows:

2025 2024 2023

(in millions)

Foreign $ 2,602 $ ( 492 ) $ ( 696 )

Domestic ( 1,472 ) ( 247 ) ( 153 )

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

Income Tax Expense (Benefit)

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

2025 2024 2023

(in millions)

Foreign $ 213 $ 77 $ 27

Domestic - Federal 90 34 28

Domestic - State ( 1 ) 6 ( 8 )

Foreign ( 1 ) ( 8 ) 10

Domestic - Federal ( 773 ) ( 68 ) 1

Domestic - State ( 41 ) ( 15 ) ( 5 )

( 815 ) ( 91 ) 6

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.

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

Temporary differences and carryforwards, which give rise to a significant portion of deferred tax assets and liabilities were as follows:

2025 June 28,

(in millions)

Deferred tax assets:

Sales related reserves and accrued expenses not currently deductible $ 38 $ 34

Accrued compensation and benefits not currently deductible 75 75

Net operating loss carryforward 133 134

Business credit carryforward 562 520

Long-lived assets 796 42

Interest and hedging costs not currently deductible 166 187

Total deferred tax assets 1,799 1,003

Deferred tax liabilities:

Long-lived assets ( 40 ) ( 33 )

Unremitted earnings of certain non-U.S.

entities ( 149 ) ( 218 )

Other ( 12 ) —

Total deferred tax liabilities ( 201 ) ( 251 )

Valuation allowances ( 598 ) ( 527 )

Deferred tax assets, net $ 1,000 $ 225

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.

The Company is permanently reinvested with respect to certain foreign earnings.

There is no unrecognized deferred tax liability associated with the repatriation of these foreign undistributed earnings as it can be achieved without additional federal tax consequences.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Effective Tax Rate

Reconciliation of the U.S.

Federal statutory rate to the Company’s effective tax rate is as follows:

2025 2024 2023

Federal statutory rate 21 % 21 % 21 %

Tax rate differential on international income ( 36 ) ( 22 ) ( 22 )

Tax effect of U.S.

foreign income inclusion 1 ( 1 ) ( 1 )

Tax effect of U.S.

foreign minimum tax 25 ( 6 ) —

Tax effect of U.S.

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 )

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

Change in valuation allowance 6 ( 3 ) 1

Unremitted earnings of certain non-U.S.

entities ( 2 ) ( 2 ) ( 1 )

Foreign income tax credits ( 8 ) 1 —

R&D tax credits ( 6 ) 5 4

return to provision 1 — ( 1 )

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

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

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.

Following is a summary of the Company’s federal and state NOL/tax credit carryforwards and the related expiration dates of these NOL/tax credit carryforwards:

Jurisdiction NOL/Tax Credit Carryforward Amount Expiration

(in millions)

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

California NOL

348 2040 to 2047

Other State NOL

Federal tax credits 89 2027 to 2036

State tax credits 750 No expiration

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.

The Company expects the total amount of federal and state credits ultimately realized will be reduced as a result of these provisions by $ 27 million and $ 2 million, respectively.

As of June 27, 2025, the Company had varying amounts of foreign NOL carryforwards that do not expire or, if not used, expire in various years, depending on the country.

The major jurisdictions that the Company receives foreign NOL carryforwards and the related amounts and expiration dates of these NOL carryforwards are as follows:

Jurisdiction NOL Carryforward Amount Expiration

(in millions)

Malaysia $ 69 2029

Japan 42 2026

Uncertain Tax Positions

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

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits excluding accrued interest and penalties:

2025 2024 2023

(in millions)

Unrecognized tax benefit, beginning balance $ 721 $ 1,021 $ 1,047

Gross increases related to current year tax positions 11 25 7

Gross increases related to prior year tax positions 26 73 22

Gross decreases related to prior year tax positions ( 13 ) ( 32 ) ( 47 )

Settlements ( 40 ) ( 363 ) ( 5 )

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

Distribution in connection with the Separation

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

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.

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.

Federal, U.S.

state and foreign tax returns.

For both federal and state tax returns, with few exceptions, the Company is subject to examination for 2016 through 2024.

In the following major foreign jurisdictions where there is no tax holiday, the Company could be subject to examination as noted below:

Jurisdiction Period Subject to Examination

China (calendar) 2014-2024

India (fiscal) 2017-2024

Japan (fiscal) 2016-2024

Malaysia (fiscal) 2018-2024

Thailand (fiscal) 2014-2024

Singapore (fiscal) 2021-2024

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, 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.

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 approximately $ 166 million.

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.

However, the outcome of such tax examinations cannot be predicted with certainty.

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.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Net Income (Loss) Per Common Share

5 unchanged sentences

Income attributable to participating securities (1)

( 126 ) ( 28 ) —

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

1 unchanged sentence

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

242 ( 33 ) ( 782 )

Net income (loss) attributable to common shareholders - basic

2 unchanged sentences

$ 9,286 $ 1,598 $ ( 819 )

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

Re-allocation of participating securities considered potentially dilutive 12 1 —

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

1 unchanged sentence

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

242 ( 33 ) ( 782 )

Net income (loss) attributable to common shareholders - diluted

5 unchanged sentences

Net income (loss) per common share:

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 )

Continuing operations $ 26.92 $ 4.61 $ ( 2.51 )

Discontinued operations — 0.70 ( 0.10 )

Net income (loss) per common share 26.92 5.31 ( 2.61 )

Continuing operations 24.28 4.45 ( 2.51 )

Discontinued operations — 0.67 ( 0.10 )

Net income (loss) per common share 24.28 5.12 ( 2.61 )

Anti-dilutive potential common shares excluded — — 22

Basic income (loss) per share attributable to common shareholders is computed using (i) net income (loss) less (ii) dividends paid to holders of Preferred Shares less (iii) net income (loss) attributable to participating securities divided by (iv) weighted average basic shares outstanding.

Diluted net income (loss) per share attributable to common shareholders is computed as (i) basic net income (loss) attributable to common shareholders plus (ii) diluted adjustments to income allocable to participating securities divided by (iii) weighted average diluted shares outstanding.

The “if-converted” method is used to determine the dilutive impact for the convertible notes and the Preferred Shares.

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

(1) Participating securities consisted of Preferred Shares prior to their conversion in February 2026, because they participated on a pro rata basis in any dividends declared on shares of common stock.

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

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.

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 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:

2025 2024 2023

(in millions)

Employee termination benefits $ 2 $ 34 $ 130

Asset impairments — 146 19

Other charges (gains):

Gain on disposition of assets and other charges — — ( 8 )

Contract termination and other 2 29 5

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 (included in Accrued expenses) during the year ended June 27, 2025:

Employee Termination Benefits Contract Termination and Other

(in millions)

Accrual balance at June 28, 2024 $ — $ 28 $ 28

Charges 2 2 4

Cash payments ( 1 ) ( 11 ) ( 12 )

Recovery of non-cancellable purchase orders

— ( 10 ) ( 10 )

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

Basic net income (loss) per common share is computed using (i) net income (loss) less (ii) dividends allocated to preferred shareholders less (iii) net income (loss) attributable to participating securities divided by (iv) basic weighted average shares outstanding.

Diluted net income (loss) per common share is computed as (i) basic net income (loss) attributable to common shareholders plus (ii) diluted adjustments to income allocable to participating securities divided by (iii) diluted weighted average shares outstanding.

The “if-converted” method is used to determine the dilutive impact for the convertible notes and, for the periods they were outstanding, the Preferred Shares.

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

Potentially dilutive common shares include dilutive outstanding RSUs and PSUs, rights to purchase shares of common stock under the Company’s ESPP, shares issuable in connection with the Company’s convertible notes, and Preferred Shares.

For 2026 and 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.

For 2024, 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.

WESTERN DIGITAL CORPORATION

6 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 $ 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):

The Company’s outstanding payment obligations to vendors eligible to participate under its supplier finance program were $ 76 million and $ 39 million as of July 3, 2026 and June 27, 2025, 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 July 3, 2026 is as follows (in millions):

Confirmed obligation outstanding at the beginning of the year

6 unchanged sentences

Intellectual Property Litigation

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 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.

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.

11 unchanged sentences

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.

In August 2022, MRT filed an action against the Company, alleging infringement of certain patents related to HDD media.

Following a jury trial and judgment in favor of the plaintiff, in the fourth quarter of 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.

In April 2025, the Company reached a global settlement of $ 130 million for all pending matters with MRT.

Other Matters

4 unchanged sentences

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

WESTERN DIGITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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)

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

493 594 520 282

Net income per common share:

Continuing operations - basic

$ 0.43 $ 1.32 $ 2.17 $ 0.70

Earnings per common share - basic

1.40 1.68 1.46 0.78

Continuing operations - diluted

0.42 1.28 2.11 0.67

Earnings per common share - diluted

1.35 1.63 1.42 0.75

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 )

Earnings (loss) per common share - basic

( 2.17 ) ( 0.92 ) 0.35 0.08

Continuing operations - diluted

( 1.18 ) ( 0.49 ) ( 0.07 ) ( 0.77 )

Earnings (loss) per common share - diluted

( 2.17 ) ( 0.92 ) 0.35 0.08

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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