In November 2021, stockholders approved the Western Digital Corporation 2021 Long-Term Incentive Plan (as amended and restated, the “2021 Plan”). Upon the effective date of the 2021 Plan, no new awards were granted under the Western Digital Corporation Amended and Restated 2017 Performance Incentive Plan (the “2017 Plan”). The types of awards that may be granted under the 2021 Plan include stock options, stock appreciation rights (“SARs”), RSUs, PSUs, restricted stock and other forms of awards granted or denominated in the Company’s common stock or units of the Company’s common stock, as well as cash awards. Persons eligible to receive awards under the 2021 Plan include officers and employees of the Company or any of its subsidiaries, directors of the Company and certain consultants and advisors to the Company or any of its subsidiaries. The vesting of awards under the 2021 Plan and the 2017 Plan is determined at the date of grant. Each award expires on a date determined at the date of grant; however, the maximum term of options and SARs is ten years after the grant date of the award. RSUs typically vest over periods ranging from two to four years from the date of grant. PSUs are granted to certain employees and vest only after the achievement of pre-determined performance conditions or market conditions and completion of requisite service periods. Once the performance conditions or market conditions are met, the employee’s vesting of PSUs is generally subject to continued service.

Outstanding RSU and PSU awards have dividend equivalent rights which entitle holders of such outstanding awards to the same dividend value per share as holders of common stock. Dividend equivalent rights are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs and PSUs. Dividend equivalent rights are accumulated and paid in additional shares when the underlying shares vest.

Under the Company’s ESPP, eligible employees may authorize payroll deductions of up to 10% of their eligible compensation, subject to IRS limitations, during prescribed offering periods to purchase shares of the Company’s common stock at 95% of the fair market value of common stock either at the beginning of that offering period or on the applicable exercise date, whichever is less. A participant may participate in only one offering period at a time, and a new offering period generally begins each June 1st and December 1st. Each offering period is generally 24 months and consists of four exercise dates (each, generally six months following the start of the offering period or the preceding exercise date, as the case may be). If the fair market value of the Company’s common stock is less on a given exercise date than on the date of grant, employee participation in that offering period ends and participants are automatically re-enrolled in the next new offering period.

In connection with the Separation (as discussed in Note 4, Discontinued Operations), on February 21, 2025, all outstanding stock-based compensation awards associated with continuing Western Digital employees were adjusted with the intent to preserve the intrinsic value of each award immediately before and after the Separation. The adjustments were determined using a ratio calculated based on the closing price of the Company’s common stock immediately before the Separation and the average of the closing price on each of the first five days of trading after the Separation. In addition, for PSUs, the conditions related to the Company’s performance for the 2025 measurement period were modified and fixed at target. The remaining terms of the outstanding awards are unchanged and any unvested stock awards will continue to vest over the original vesting periods. An incremental value of approximately $40 million resulting from the adjustment of the unvested awards will be recognized ratably over the remaining service periods. Upon the Separation, approximately 3.1 million unvested stock-based compensation awards were retained by Sandisk employees and will vest upon completion of any remaining service period with Sandisk and approximately 3.5 million awards were cancelled from the Company’s incentive plans.

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



	2026		2025		2024
	(in millions)

RSUs and PSUs	$	188	$	151	$	182
ESPP	16		16		20
Total	$	204	$	167	$	202

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 July 3, 2026:


	Unamortized Compensation Costs		Weighted Average Service Period
	(in millions)		(years)

RSUs and PSUs (1)	$	276	1.8
ESPP	16		0.5
Total unamortized compensation cost	$	292

The following table summarizes RSU and PSU activity under the Company’s incentive plans:


	Number of Shares	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value at Vest Date
	(in millions)			(in millions)



















RSUs and PSUs outstanding at June 30, 2023	13.8	$	46.56
Granted	6.6	42.29

Vested	(5.8)	48.26		$	297
Forfeited	(1.6)	45.62
RSUs and PSUs outstanding at June 28, 2024	13.0	44.42
Granted	5.5	40.99

Vested	(6.5)	41.08		$	379
Forfeited	(1.4)	50.91
Share conversion due to Separation	2.6	52.15
Awards cancelled due to Separation	(3.5)	52.32
RSUs and PSUs outstanding at June 27, 2025	9.7	33.56
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

The fair value of ESPP purchase rights issued is estimated at the date of grant of the purchase rights using the Black-Scholes-Merton option pricing model. The Black-Scholes-Merton option pricing model requires the input of assumptions such as the expected stock price volatility and the expected period until options are exercised. Purchase rights under the ESPP are generally granted on either June 1st or December 1st of each year.

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



	2026	2025	2024
Weighted-average expected term (in years)	1.25	1.16	1.25
Risk-free interest rate	3.68%	4.19%	4.93%
Stock price volatility	0.59	0.39	0.39
Dividend yield	0.25%	0.01%	—%
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.

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.

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 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 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.

On April 29, 2025, the Company’s Board of Directors authorized the adoption of a quarterly cash dividend program. Under the cash dividend program, holders of the Company’s common stock will receive dividends when and as declared by the Board of Directors. During the year ended 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.

The Company may modify, suspend, or cancel its cash dividend program in any matter and at any time. The amount of future dividends under the Company’s cash dividend program, and the declaration and payment thereof, will be based upon all relevant factors, including the Company’s financial position, results of operations, cash flows, capital requirements and restrictions under the Company’s Loan Agreement and other financing agreements, and shall be in compliance with applicable law.