Western Digital WDC · USD

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: HDD.The following table is a reconciliation of the Company’s measure of segment profit or loss, significant segment expenses and other segment items:202520242023(in millions)Revenue, net$9,520 $6,317 $6,255 Less: Significant expenses and other segment itemsCost of revenue(1)5,771 4,506 4,827 Research and development(1)920 885 916 Selling, general and administrative(1)503 583 656 Litigation matter(179)291 — Business realignment charges(6)209 146 Stock-based compensation167 202 212 Strategic review— 38 42 Interest expense, net312 381 291 Loss on retained interest in Sandisk772 — — Loss on extinguishment of debt100 — — Other expense, net2 14 20 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 RevenueThe Company’s disaggregated revenue by end market is as follows:202520242023(in millions)Revenue by end marketCloud$8,341 $5,052 $4,753 Client556 577 691 Consumer623 688 811 Total revenue$9,520 $6,317 $6,255 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. The following tables summarize the Company’s operations by geographic area:202520242023(in millions)Net revenue (1)United States$4,328 $2,636 $2,694 China1,549 488 471 Hong Kong1,051 1,331 1,139 Rest of Asia792 573 546 Europe, Middle East and Africa1,536 1,067 1,175 Other264 222 230 Total $9,520 $6,317 $6,255 (1) Net revenue is attributed to geographic regions based on the ship-to location of the customer.

Leases and Other Commitments LeasesThe 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:June 27,2025June 28,2024(in millions)Operating lease right-of-use assets (included in Other non-current assets)$123 $143 Operating lease liabilities:Current portion of long-term operating lease liabilities (included in Accrued expenses)31 28 Long-term operating lease liabilities (included in Other liabilities)110 133 Total operating lease liabilities$141 $161 The following table summarizes supplemental disclosures of operating cost and cash flow information related to operating leases:202520242023(in millions)Cost of operating leases$33 $41 $49 Cash paid for operating leases36 44 43 Operating lease assets obtained in exchange for operating lease liabilities18 10 11 The weighted average remaining lease term and discount rate for the Company’s operating leases were as follows:June 27,2025June 28,2024Weighted average remaining lease term in years6.16.6Weighted average discount rate5.0 %5.0 %As of June 27, 2025, minimum lease payments were as follows:Lease Amounts(in millions)2026$36 202730 202823 202918 203012 Thereafter46 Total future minimum lease payments165 Less: imputed interest24 Present value of lease liabilities$141 Purchase Agreements and Other CommitmentsIn the normal course of business, the Company enters into purchase orders with suppliers for the purchase of components used to manufacture its products.

DebtDebt consisted of the following:June 27,2025June 28,2024(in millions)4.75% senior unsecured notes due 2026$500 $2,300 Variable interest rate Term Loan A-2 maturing 2027— 2,588 Variable interest rate Term Loan A-3 maturing 20271,649 — 3.00% convertible notes due 20281,600 1,600 2.85% senior notes due 2029500 500 3.10% senior notes due 2032500 500 Total debt4,749 7,488 Issuance costs(38)(54)Subtotal4,711 7,434 Less: current portion of long-term debt(2,226)(1,750)Long-term debt$2,485 $5,684 Revolving Credit Facility and Term LoansOn February 20, 2025, the Company entered into a fourth amendment to the loan agreement governing the Company’s revolving credit facility maturing in January 2027 (the “2027 Revolving Credit Facility”) and Term Loan Facility (as defined below), dated as of January 7, 2022 (as amended, the “Loan Agreement”) that, among other changes, (a) permitted the Separation, (b) provided for the automatic release, in connection with the Separation, of guarantees and liens on collateral provided by Sandisk and Sandisk Technologies, Inc. under the Loan Agreement, (c) provided for the issuance of a new $2.51 billion Term Loan A-3 maturing in January 2027 (the “Term Loan A-3”) in a noncash exchange to replace the Company’s previously existing Term Loan A-2 (the “Term Loan A-2” and, together with the Term Loan A-3, the “Term Loan Facility”), (d) facilitated the exchange of Sandisk shares retained at the Separation to settle a portion of the Term Loan A-3 in connection with the Sandisk retained interest, and (e) in connection with the Separation, reduced the aggregate commitments under the 2027 Revolving Credit Facility from $2.25 billion to $1.25 billion. In June 2025, the Company settled $800 million of the Term Loan A-3 principal amount, through a non-cash exchange of 21.3 million shares of Sandisk common stock held by the Company, and a $4 million cash payment, resulting in a loss on extinguishment of debt of $100 million.During the year ended June 27, 2025, the Company also made principal repayments aggregating to $138 million on its Term Loan Facility. As of June 27, 2025, the remaining balance of Term Loan A-3 amortizes in quarterly installments of $31 million per quarter beginning with the quarter ending October 3, 2025, and the remaining balance is payable at maturity on January 7, 2027. Issuance costs for the Term Loan Facility are amortized to Interest expense over its term and unamortized costs were $7 million as of June 27, 2025.

Income TaxesIncome (Loss) Before Taxes The domestic and foreign components of Income (loss) before taxes were as follows:202520242023(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:202520242023(in millions)Current:Foreign$213 $77 $27 Domestic - Federal90 34 28 Domestic - State(1)6 (8)302 117 47 Deferred:Foreign(1)(8)10 Domestic - Federal(773)(68)1 Domestic - State(41)(15)(5)(815)(91)6 Income tax expense (benefit)$(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. The legislation also includes favorable modifications to international tax provisions, including changes to the Global Intangible Low-Taxed Income regime and enhancements to the Foreign-Derived Intangible Income deduction. Because the OBBBA provisions are not effective for the Company until fiscal year 2026 and the enactment date occurred after the balance sheet date, the tax effects of the OBBBA are not included in the operating results for the fiscal year ended June 27, 2025.On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, which contained, among other things, a corporate alternative minimum tax (“CAMT”) of 15% on corporations with three-year average annual adjusted financial statement income (“AFSI”) exceeding $1.00 billion. The CAMT became effective for the Company beginning with fiscal year 2024. The Company was not subject to CAMT in fiscal year 2024 and does not expect to be subject to CAMT for fiscal year 2025 as its average annual AFSI did not exceed $1.00 billion for the preceding three-year period.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.

At Western Digital, our management team is charged with managing risk and bringing to our Board of Directors’ attention all material risk exposures to our company. Our enterprise risk management (“ERM”) process is designed to facilitate the identification, assessment, management, reporting and monitoring of material risks our company may face over the short-term and long-term and promote regular communication with our Board of Directors and its committees regarding these risks. Through our ERM process, we have determined that the compromise, damage and interruption of our technology infrastructure, information systems or products by cybersecurity incidents are key risks to our company that may have a material negative impact on our business. To help mitigate the potential impact of cybersecurity incidents on our business and protect against cybersecurity threats, we have established organizational structures, procedural measures and response plans that define roles and responsibilities related to cybersecurity risk management.Our Information Security organization addresses cybersecurity risks with a broad spectrum of technologies, controls, and processes that focus on mitigating these risks. Our cybersecurity strategy is designed to be dynamic and adaptive to combat the rapidly-evolving cybersecurity threat landscape and is influenced by commonly leveraged frameworks such as the NIST-CSF (National Institute of Standard and Technologies – CyberSecurity Framework). Our program includes, but is not limited to, advanced systems and network security protocols, electronic communications protections, vulnerability management programs, least-privilege access controls, third-party risk management procedures, workforce education and training exercises, and compliance programs. Our dedicated 24x7 Security Operations Center incorporates specialized systems and processes for handling security incidents into its regular work and operates a robust, modern security infrastructure with appropriate security sensors and event monitoring capabilities. Upon detection of a cybersecurity incident, the Security Operations Center determines the severity of the incident in accordance with a pre-established incident severity matrix, initiates the appropriate notification and escalation protocols and begins triage. Predefined severity tiers serve as a guide to match our response to each incident’s determined severity or risk level.

Legal ProceedingsIntellectual Property LitigationOn 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. Patent Nos. 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. Patent Nos. 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. (“SPEX”) filed a lawsuit in the Central District Court against the Company and two of the Company’s current or former wholly-owned subsidiaries, Western Digital Technologies, Inc. and HGST Inc., alleging infringement of U.S. Patent Nos. 6,088,802 and 6,003,135, both of which allegedly relate to moving a security mechanism (e.g., the encrypting/decrypting mechanism) from a host computer or a separate device to a peripheral device that provides data storage. As the case progressed, SPEX dismissed its allegations relating to U.S. Patent No.

Discontinued OperationsOn 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.

Supplier Finance ProgramThe Company maintains a voluntary supplier finance program that provides participating suppliers with enhanced receivable options. The program allows participating suppliers of the Company, at their sole discretion and cost, to sell their receivables due from the Company to a third-party financial institution and receive early payment at terms negotiated between the supplier and the third-party financial institution. The Company’s vendor payment terms and amounts are not impacted by a supplier’s decision to participate in this program.The Company’s current payment terms with its suppliers under these programs generally range from 60 to 90 days and payment terms that the Company negotiates with its suppliers are not impacted by whether a supplier participates in the program. 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.