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Will Strong Cloud and AI Demand Continue Driving WDC's Revenues?
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Key Takeaways
Western Digital shipped 190 exabytes in Q4, up 32% year over year on nearline HDD demand.
Shipments of 26TB CMR and 32TB UltraSMR drives doubled, surpassing 1.7M units in June.
Q4 revenues jumped 30% year over year; Q1 guidance sees $2.7B midpoint, up 22% year over year.
Western Digital Corporation (WDC - Free Report) is seeing strong momentum as cloud adoption and AI continue to reshape global storage needs. The company is benefiting from surging demand for high-capacity drives that support the growing data requirements of hyperscale data centers and AI-driven applications.
Cloud remains the backbone of Western Digital’s business, with nearline hard disk drives (HDDs) playing a central role in meeting large-scale storage requirements. In the fiscal fourth quarter, the company shipped 190 exabytes of storage to customers, up 32% year over year, fueled by strong demand for nearline drives and growing volumes of its 26TB CMR and 32TB UltraSMR products. Also, shipments of its 26TB CMR and 32TB UltraSMR drives more than doubled from the previous quarter, topping 1.7 million units in June. The reliability, scalability and TCO benefits of its ePMR and UltraSMR technologies remain key to its success in the data center market.
Western Digital plans to build on this with its next-generation HAMR drives, which are showing promising results in early tests with two hyperscale customers. The HAMR drives will soon enter the qualification phase, targeting a ramp-up in the first half of 2027. Meanwhile, its next-gen ePMR drives are set to complete qualification by early 2026, ensuring a smooth and cost-effective transition to HAMR. Also, the solid-state drive (SSD) market is rapidly expanding due to faster, more energy-efficient drives that save space, making them ideal for laptops, tablets and servers requiring low latency.
Additionally, the rise of generative and agentic AI has created unprecedented demand for unstructured data storage. These AI agents, tailored for specific tasks, from enterprise chatbots to engineering support, are creating new use cases and generating data at an unprecedented rate. The company is already seeing real benefits from Agentic AI in accelerating product development.
In the fourth quarter of fiscal 2025, the quarterly revenues surged 30% year over year, driven by strong demand for high-capacity storage fueled by cloud computing and generative AI. Sequentially, revenues grew 14%. For the first quarter of fiscal 2026, management anticipates ongoing revenue growth, supported by strong data center demand and better profitability driven by increased adoption of high-capacity drives. At the mid-point of its guidance, Western Digital anticipates non-GAAP revenues of $2.7 billion (+/- $100 million), up 22% year over year. Management projects non-GAAP earnings of $1.54 (+/- 15 cents).
However, customer concentration and leveraged balance sheet remain a concern. . The disk drive industry remains highly competitive and vulnerable to supply-demand fluctuations. Moreover, Western Digital faces stiff competition from Seagate Technology Holdings plc (STX - Free Report) , Pure Storage, Inc. (PSTG - Free Report) , Hitachi, Samsung and Intel in the storage market and from SSD pureplays such as Micron.
Seagate & Pure Storage Strategies for Stronger Revenues
Seagate is witnessing mass capacity demand improvement, with nearline cloud demand picking up pace. In the last reported quarter, mass capacity revenues surged 40% year over year, owing to stronger nearline cloud demand and increasing nearline enterprise sales. Cloud investment cycles and AI-ready data center expansions are fueling HDD demand. Management also highlighted the successful ramp of HAMR-based Mozaic products, with three major cloud customers qualified and more in progress.
Seagate is expanding into the SSD market, offering faster, energy-efficient and compact storage for mobile devices and low-latency servers. Its new LaCie Rugged SSD4 delivers high performance with speeds up to 4000MB/s read and 3800MB/s write, enabling fast transfers across Mac, PC, iPad and mobile devices. For the first quarter of fiscal 2026, Seagate anticipates revenues of $2.5 billion (+/- $150 million). At the midpoint, this indicates a 15% year-over-year improvement. Non-GAAP earnings are expected to be $2.3 per share (+/- 20 cents).
Pure Storage continues to reshape the future of enterprise storage with innovations tailored for modern data workloads, particularly AI, containerization and high-performance computing (HPC). In addition to hardware and architectural innovation, it advanced its cloud-native storage strategy. The company introduced Portworx for KubeVirt in the fiscal second quarter, a virtualization-centric storage solution for Kubernetes. This solution addresses the rising demand for enterprises to manage VM workloads in cloud-native environments.
Pure Storage is also gaining momentum with its FlashBlade solutions, especially FlashBlade//E, as All-Flash Arrays (AFAs) become the data-center standard due to lower costs, power savings and ease of management. For the fiscal third quarter, Pure Storage expects revenues in $950-$960 million band, implying an increase of 15% at the midpoint from the year-ago level. The non-GAAP operating income is expected to be $185-$195 million, with around 14% year-over-year growth at the midpoint.
Image: Bigstock
Will Strong Cloud and AI Demand Continue Driving WDC's Revenues?
Key Takeaways
Western Digital Corporation (WDC - Free Report) is seeing strong momentum as cloud adoption and AI continue to reshape global storage needs. The company is benefiting from surging demand for high-capacity drives that support the growing data requirements of hyperscale data centers and AI-driven applications.
Cloud remains the backbone of Western Digital’s business, with nearline hard disk drives (HDDs) playing a central role in meeting large-scale storage requirements. In the fiscal fourth quarter, the company shipped 190 exabytes of storage to customers, up 32% year over year, fueled by strong demand for nearline drives and growing volumes of its 26TB CMR and 32TB UltraSMR products. Also, shipments of its 26TB CMR and 32TB UltraSMR drives more than doubled from the previous quarter, topping 1.7 million units in June. The reliability, scalability and TCO benefits of its ePMR and UltraSMR technologies remain key to its success in the data center market.
Western Digital plans to build on this with its next-generation HAMR drives, which are showing promising results in early tests with two hyperscale customers. The HAMR drives will soon enter the qualification phase, targeting a ramp-up in the first half of 2027. Meanwhile, its next-gen ePMR drives are set to complete qualification by early 2026, ensuring a smooth and cost-effective transition to HAMR. Also, the solid-state drive (SSD) market is rapidly expanding due to faster, more energy-efficient drives that save space, making them ideal for laptops, tablets and servers requiring low latency.
Additionally, the rise of generative and agentic AI has created unprecedented demand for unstructured data storage. These AI agents, tailored for specific tasks, from enterprise chatbots to engineering support, are creating new use cases and generating data at an unprecedented rate. The company is already seeing real benefits from Agentic AI in accelerating product development.
In the fourth quarter of fiscal 2025, the quarterly revenues surged 30% year over year, driven by strong demand for high-capacity storage fueled by cloud computing and generative AI. Sequentially, revenues grew 14%. For the first quarter of fiscal 2026, management anticipates ongoing revenue growth, supported by strong data center demand and better profitability driven by increased adoption of high-capacity drives. At the mid-point of its guidance, Western Digital anticipates non-GAAP revenues of $2.7 billion (+/- $100 million), up 22% year over year. Management projects non-GAAP earnings of $1.54 (+/- 15 cents).
However, customer concentration and leveraged balance sheet remain a concern. . The disk drive industry remains highly competitive and vulnerable to supply-demand fluctuations. Moreover, Western Digital faces stiff competition from Seagate Technology Holdings plc (STX - Free Report) , Pure Storage, Inc. (PSTG - Free Report) , Hitachi, Samsung and Intel in the storage market and from SSD pureplays such as Micron.
Seagate & Pure Storage Strategies for Stronger Revenues
Seagate is witnessing mass capacity demand improvement, with nearline cloud demand picking up pace. In the last reported quarter, mass capacity revenues surged 40% year over year, owing to stronger nearline cloud demand and increasing nearline enterprise sales. Cloud investment cycles and AI-ready data center expansions are fueling HDD demand. Management also highlighted the successful ramp of HAMR-based Mozaic products, with three major cloud customers qualified and more in progress.
Seagate is expanding into the SSD market, offering faster, energy-efficient and compact storage for mobile devices and low-latency servers. Its new LaCie Rugged SSD4 delivers high performance with speeds up to 4000MB/s read and 3800MB/s write, enabling fast transfers across Mac, PC, iPad and mobile devices. For the first quarter of fiscal 2026, Seagate anticipates revenues of $2.5 billion (+/- $150 million). At the midpoint, this indicates a 15% year-over-year improvement. Non-GAAP earnings are expected to be $2.3 per share (+/- 20 cents).
Pure Storage continues to reshape the future of enterprise storage with innovations tailored for modern data workloads, particularly AI, containerization and high-performance computing (HPC). In addition to hardware and architectural innovation, it advanced its cloud-native storage strategy. The company introduced Portworx for KubeVirt in the fiscal second quarter, a virtualization-centric storage solution for Kubernetes. This solution addresses the rising demand for enterprises to manage VM workloads in cloud-native environments.
Pure Storage is also gaining momentum with its FlashBlade solutions, especially FlashBlade//E, as All-Flash Arrays (AFAs) become the data-center standard due to lower costs, power savings and ease of management. For the fiscal third quarter, Pure Storage expects revenues in $950-$960 million band, implying an increase of 15% at the midpoint from the year-ago level. The non-GAAP operating income is expected to be $185-$195 million, with around 14% year-over-year growth at the midpoint.
WDC Price Performance, Valuation and Estimates
In the past year, shares have gained 67.1% compared with the Zacks Computer-Storage Devices industry’s growth of 28.8%.
Image Source: Zacks Investment Research
In terms of forward price/earnings, WDC’s shares are trading at 17.76X, lower than the industry’s 22.06X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for WDC’s earnings for fiscal 2026 has been revised up 10.1% to $6.52 over the past 60 days.
Image Source: Zacks Investment Research
Currently, Western Digital sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.