Standard & Poor's Upgrades Western Digital's Rating Due to Debt Reduction

LootboxPhobia · 2026-02-25T12:06:44+00:00

Standard & Poor's upgraded Western Digital's rating to "BBB-" due to its debt reduction and achievement of a net cash position. By fiscal year 2026, the company is expected to grow revenue by over 20%, with free cash flow exceeding $2.5 billion, primarily used for dividends and share buybacks.

LootboxPhobia

2026-02-25 12:06:44

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Investing.com - Standard & Poor’s Global Ratings upgraded Western Digital Corp. (NASDAQ:WDC) from a lower rating to “BBB-” on Monday, citing the company’s debt reduction and expected net cash position. The outlook is stable.

Last week, Western Digital exchanged 5.8 million shares of Sandisk for debt at a price of $545 per share. Since the Sandisk spin-off, the company has been paying down debt. Last year, Western Digital exchanged some A-3 term loans for Sandisk shares and used cash to redeem $1.8 billion of 4.75% notes due 2026.

Standard & Poor’s expects the only remaining debt for Western Digital to be $1.6 billion of convertible notes, and it will maintain a net cash position. The company also has an unused $1.25 billion revolving credit facility. Its $265 million preferred stock has been converted to common stock.

Standard & Poor’s forecasts that revenue for fiscal year 2026 ending July 3, 2026, will grow over 20%. The rating agency expects EBITDA margins to expand by 700 basis points this fiscal year, driven by strong demand, stable pricing, and the adoption of technologies like UltraSMR and ePMR, as well as operating leverage. Robust data storage demand, including AI training and inference, has increased demand for hard drives.

Standard & Poor’s projects free cash flow will exceed $2.5 billion in fiscal year 2026, up from $1.2 billion in 2025. The rating agency expects the company to use all free cash flow for dividends and share repurchases. Western Digital’s products for the 2026 calendar year are nearly sold out, and it has been signing long-term agreements for the 2027 calendar year.

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