Wissam Jabre
Executive Vice President and Chief Financial Officer at Western Digital
Thank you, David, and good afternoon, everyone. Fiscal third quarter results reflected the challenging market environment, with continued pressure on revenue and profitability. Total revenue for the quarter was $2.8 billion, down 10% sequentially and 36% year-over-year. Non-GAAP loss per share was $1.37. Looking at end-markets, cloud represented 43% of total revenue at $1.2 billion, down 2% sequentially, driven by an increase in capacity enterprise drive shipments, which was offset by a decrease in Flash shipments. Nearline bit shipments were 79 exabytes, up 31% sequentially. Year-over-year revenue declined 32%, primarily due to a decline in shipments of both hard drive and flash products, as well as price decreases in Flash. Client represented 35% of total revenue at $1 billion, down 10% sequentially and 44% year-over-year. On both the sequential and year-over-year basis, the decrease was driven by price declines across our Flash products and lower client SSD and hard drive shipments for PC applications.
Finally, consumer represented 22% of total revenue at $0.6 billion, down 22% sequentially and 29% year-over-year. Sequentially, the decrease was due to a seasonal decline in shipments of both retail hard drive and Flash products, as well as price declines in retail flash. The year-over-year decrease was driven by lower retail hard drive shipments and price declines in Flash.
Turning out to revenue by segment. HDD revenue was $1.5 billion, up 3% sequentially and down 30% year-over-year. Sequentially, total HDD exabyte shipments increased 15% and average price per hard drive increased 10% to $109. On a year-over-year basis, total HDD exabyte shipments decreased 23% and average price per unit increased 9%. Flash revenue was $1.3 billion, down 21% sequentially and 42% year-over-year. Sequentially, Flash ASPs were down 10% on a blended basis and 12% on a like-for-like basis. Flash bit shipments decreased 14% sequentially and 1% year-over-year.
Moving to costs and expenses. Please note that my comments will be related to non-GAAP results, unless stated otherwise. Gross margin for the fiscal third quarter was 10.6%, down 6.8 percentage points sequentially and 21.1 percentage points year-over-year. This includes $275 million of charges for manufacturing underutilization, inventory write-downs and other items. HDD gross margin was higher-than-anticipated at 24.3%, up 3.6 percentage points sequentially and down 3.4 percentage points year-over-year. Sequentially, the increase was primarily due to higher capacity enterprise volume, as well as lower manufacturing costs and underutilization related charges.
Underutilization charges were less than projected at approximately $40 million or 2.7 percentage points, partially benefiting from the actions to streamline our manufacturing footprint and offsetting other charges of $22 million. Flash gross margin was negative 5%, down 19.5 percentage points sequentially and 40.6 percentage points year-over-year. Underutilization charges associated with the reduced manufacturing volumes were approximately $160 million or 12.2 percentage points, less than expected as we focused on lowering manufacturing costs. During the quarter, we incurred $53 million of Flash inventory write-down charges resulting from project selling prices falling below the cost of inventory. We continued to tightly manage our operating expenses, which were at $602 million for the quarter, down $57 million sequentially and $138 million year-over-year.
Operating loss in the quarter was $304 million, driven by underutilization charges, inventory write-downs and other items totaling $275 million. Income tax expense was $60 million, despite a consolidated loss, we continued to have taxable income in certain geographies, resulting in taxes payable in those areas. Fiscal third quarter loss per share was $1.37, inclusive of a $9 million dividend costs associated with the convertible preferred equity. Operating cash flow for the third quarter was an outflow of $381 million and free cash flow was an outflow of $527 million. Cash capital expenditures, which include the purchase of property, plant and equipment and activity related to our Flash joint ventures on the cash flow statement, were $146 million. Gross debt outstanding was $7.1 billion at the end of the fiscal third-quarter.
Trailing 12-month adjusted EBITDA at the end of the third quarter, as defined in our credit agreement, was $2.5 billion, resulting in a gross leverage ratio of 2.8 times compared to 2.1 times in the fiscal second quarter. As a reminder, Our credit agreement includes $0.7 billion in depreciation add-back associated with the Flash joint ventures, this is not reflected in our cash flow statement. Please refer to the earnings presentation on the Investor Relations website for further details.
At the end of the quarter, total liquidity was $5.3 billion, including cash and cash equivalents of $2.2 billion, undrawn revolver capacity of $2.25 billion, and unused delayed draw term loan facility of $875 million. Before I cover guidance for the fiscal fourth quarter, I'll discuss the business outlook. We expect HDD revenue to decrease sequentially due to ongoing inventory digestion and cloud customers. We expect Flash revenue to decrease sequentially as modest growth in bit shipments is more than offset by ASP declines. We expect Flash bit shipment growth to accelerate in the first half of fiscal year 2024.
In the fiscal fourth quarter, total gross margin will be negatively impacted by underutilization charges and Flash pricing. We continued to tightly manage our cost structure through this dynamic environment and expect operating expenses to be below $600 million. For fiscal year 2023, we project gross capital expenditures to be approximately $2.2 billion and cash capital expenditures to be approximately $0.8 billion. The projected cash capital expenditures represent more than a 50% reduction from our forecast as we entered fiscal year 2023 and approximately 35% reduction from fiscal year 2022.
I'll now turn to guidance. For the fiscal fourth quarter, our non-GAAP guidance is as follows. We expect revenue to be in the range of $2.4 billion to $2.6 billion. We expect gross margin to be between 3% and 5%, which includes underutilization charges across Flash and HDD, totaling $220 million to $240 million. We expect operating expenses to be between $580 million to $600 million. Interest and other expenses are expected to be approximately $90 million. We expect income tax expense to be between $60 million and $70 million. We expect loss per share of $2.20 to $1.90 assuming approximately $321 million shares outstanding.
I'll now turn the call back over to David.
