The data-storage sector is shaped by secular industrial tailwinds such as explosive growth in data volumes driven by cloud migration, AI/ML workloads and edge devices. Western Digital Corporation ((WDC Quick QuoteWDC - Free Report) ) and NetApp Inc. ((NTAP Quick QuoteNTAP - Free Report) ) are leading players in the global data storage industry. While Western Digital focuses on hardware storage solutions like HDDs and SSDs, NetApp specializes in cloud and enterprise data management software — positioning both as key beneficiaries of rising data demand and digital transformation trends.

Per a report by Fortune Business Insights, the global data storage market is estimated to witness a CAGR of 17.2% and reach $774 billion by 2032 from $255.3 billion in 2025. The cloud storage segment, known for its scalability and cost-effectiveness, is expected to hold the highest market share, while the healthcare and life sciences industry is projected to witness the highest CAGR due to the surging volume of unstructured data in healthcare and swift global technological progress. Large enterprises are the leading consumers of these solutions.

Both WDC and NTAP are well-positioned to capitalize on these key trends. But based on fundamentals, valuations, growth prospects and the investors’ risk appetite, which stock offers more upside?

Let’s dig deep into this.

The Case for WDC

Western Digital is a key player in the global data infrastructure, holding a strong position in the HDD market. The company is committed to ongoing technological improvements, especially aiming to make its HDD products denser, faster, more energy-efficient and more cost-effective in terms of total ownership. In a significant corporate move in 2025, the company spun off its flash memory business, SanDisk, a decision aimed at sharpening its focus and potentially boosting shareholder returns. The company is slated to release its fiscal first-quarter earnings today, after the closing bell.

The rapid adoption of AI systems and cloud computing drives WDC’s growth. The rise of Agentic AI across various sectors is creating a significant demand for unstructured data storage, and WDC is leveraging this same AI technology to accelerate its product development. This trend is quickly becoming a global phenomenon, and the enormous amount of data generated by AI is fueling a rapid need for scalable storage solutions. To better serve its customers and accelerate delivery, the company recently opened an expanded 25,600-square-foot System Integration and Test (SIT) Lab. This new facility will enable faster, more reliable testing of its high-capacity HDDs, which remain essential since management notes that nearly 80% of all cloud data is still stored on HDDs.

The company’s ePMR and UltraSMR technologies deliver enhanced reliability, scalability and a low total cost of ownership (TCO). Meanwhile, its next-generation HAMR drives, which are currently undergoing early hyperscale testing, are on track for qualification in 2027. The upcoming ePMR drives are expected to qualify by early 2026, ensuring a seamless transition to the new product. Management expects continued revenue growth and improved profitability, driven by increasing demand for high-capacity HDDs. For the fiscal first quarter, it anticipates non-GAAP revenues of $2.7 billion (+/- $100 million), up 22% year over year at the mid-point of its guidance.

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It has significantly boosted its profitability by focusing on these higher-capacity drives and implementing disciplined cost management, which is improving margins and capacity for reinvestment. For the fiscal first quarter, it expects non-GAAP gross margin in the range of 41-42%, up from 38.5% reported in the prior-year quarter. Management remains focused on enhancing shareholder value through dividends and buybacks. Backed by strong cash flow and a solid balance sheet, the board authorized up to $2 billion in share repurchases and initiated a quarterly dividend.

However, it faces risks from intensified competition, coupled with a mounting debt load. As of June 27, 2025, cash and cash equivalents were $2.1 billion, while long-term debt (including the current portion) was $4.7 billion. The high debt level jeopardizes its ability to pursue accretive acquisitions and other growth endeavors. It is required to constantly generate adequate cash flows to meet debt requirements. In addition, macroeconomic volatility driven by tariffs and global trade tensions adds uncertainty, creating potential demand fluctuations across the enterprise, distribution and retail segments.

Nonetheless, it reduced debt by $2.6 billion in the June quarter through cash utilization and a debt-for-equity exchange, strengthening its balance sheet and achieving its net leverage target of 1–1.5x. Management is also addressing macro and geopolitical challenges with cross-functional teams to reduce disruptions and tariff impacts. It is taking a disciplined approach to evaluating long-term supply chain shifts to stay agile and resilient. Despite uncertainties, demand from hyperscale customers remains strong amid limited supply.

The Case for NTAP

NetApp empowers customers by making data infrastructure intelligent, turning disruption into opportunity. It is well-positioned to drive growth across key markets. Its Flash (AFF Series) delivers optimized performance across price points, while the Block (ASA Series) lineup aims to disrupt the mature block market. In the Cloud, NetApp stands out as the only natively integrated provider supporting diverse workloads. Through its AI collaboration with NVIDIA, a large share of the world’s unstructured enterprise data now resides on the NetApp platform.

While management continues to see some macro-driven spending caution, growing enterprise AI adoption is accelerating demand for modern data infrastructure, cloud transformation and stronger cyber resilience. AI workloads require managing massive, scattered data sets, exposing the limits of legacy systems that can’t scale or adapt to new needs.

The company is experiencing strong demand for its modern all-flash portfolio, led by the C-series, ASA block-optimized flash and the new A-series. These products enhance performance for enterprise and Gen AI workloads. Management expects them to drive further share gains in the all-flash market, with 45% of supported systems now all-flash as of the fiscal first quarter 2026. It provides customers with reliable protection and assurance through features such as ransomware recovery, 99.9999% data availability, predictable support costs, media replacement assurance and storage efficiency guarantees. These offerings ensure a secure, efficient and worry-free ownership experience across NetApp AFF, ASA and FAS solutions.

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In addition to strong flash and block demand, NetApp is benefiting from growing interest in its cloud and AI solutions. In the fiscal first quarter, it secured more than 125 AI and data lake deals, expanded its AI ecosystem and introduced the AIPod Mini with Intel to simplify and lower the cost of AI deployment. With new AI reference architectures developed with NVIDIA, Intel, Cisco and Lenovo, and certification for NVIDIA DGX SuperPOD, NetApp is firmly positioned in the enterprise AI space and views fiscal 2026 as a key year for AI-driven storage growth.

NetApp reports revenues under two segments, Hybrid Cloud and Public Cloud.

The Public Cloud segment comprises revenues from products delivered as a service and related support. The portfolio contains cloud automation and optimization services, storage and cloud infrastructure monitoring services. Healthy traction in hyperscaler first-party and marketplace storage services has been driving revenues from this segment. Also, its Keystone storage-as-a-service continues to gain momentum, with revenue up 80% in the last reported quarter. This growth drove an 18% rise in Professional Services revenue to $97 million, while unbilled RPO climbed 40% to $415 million, reflecting a strong and expanding pipeline.

Furthermore, NTAP boasts a strong balance sheet, which allows it to continue its shareholder-friendly initiatives of dividend payouts. It returned $404 million to its shareholders as dividend payouts and share repurchases in the fiscal first quarter. The company returned $1.57 billion to its shareholders as dividend payouts and share repurchases in the fiscal year.

However, NetApp continues to face challenges from macroeconomic uncertainty, inflationary pressures, cautious IT spending and intense market competition. Softness in the U.S. Public Sector and the EMEA weighed on the fiscal first-quarter results, with revenues increasing just 1% year over year. Storage cycles and infrastructure refreshes can be deferred if macro worsens, leading to top-line erosion.

Price Performance and Valuation for NTAP & WDC

Over the past year, WDC has soared 116.5% while NTAP declined 1%.

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In terms of the forward 12-month price/sales ratio, NTAP is trading at 3.3, lower than WDC’s 4.21.

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How Do Zacks Estimates Compare for NTAP & WDC?

The Zacks Consensus Estimate for NTAP’s earnings for fiscal 2026 has been revised up slightly by 0.26% to $7.77 over the past 60 days.

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The Zacks Consensus Estimate for WDC’s earnings for fiscal 2026 has been revised up 2.6% to $6.67 over the past 60 days.

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NTAP or WDC: Which is a Better Pick?

Both WDC and NTAP are poised to capitalize on the emerging data storage industry, capturing growth across multiple end-markets, from AI to enterprise to consumer storage.

WDC at present sports a Zacks Rank #1 (Strong Buy), while NTAP has a Zacks Rank #3 (Hold). Consequently, in terms of Zacks Rank and valuation, WDC seems to be a better pick at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here