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Western Digital vs. NetApp: Which Data Storage Stock is the Better Buy?
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Key Takeaways
WDC gains from AI-led storage demand, with 90% of revenue tied to cloud customers and hyperscale data centers.
WDC targets over 20% revenue CAGR, expanding high-capacity HDD tech and scaling ePMR and HAMR drives.
NetApp is growing cloud, all-flash and storage-as-a-service offerings, but faces macro uncertainty.
The global data storage market is entering a hypergrowth phase, fueled by AI workloads, cloud expansion and exploding data volumes. Two prominent players—Western Digital Corporation (WDC - Free Report) and NetApp, Inc. (NTAP - Free Report) —offer different ways to invest in this trend. Western Digital is primarily a hardware-focused company, specializing in HDDs used in hyperscale data centers, while NetApp provides enterprise data storage, cloud storage and data management solutions, making them indirect competitors benefiting from data center and cloud growth.
Per a report by Fortune Business Insights, the global data storage market is estimated to witness a CAGR of 16.1% and reach $984.6 billion by 2034 from $298.5 billion in 2026. The COVID-19 pandemic increased demand for cloud storage and data centers as remote work and digital transformation led to higher data usage and analytics needs. This surge pushed companies to invest in scalable storage. It accelerated the adoption of software-defined storage, as both public and private sectors shifted to digital services and remote data access.
While both companies operate in the storage ecosystem, their business models, risk profiles and growth drivers differ significantly. Let’s break down which stock may be the better buy.
The Case for WDC
WDC continues to focus on delivering high-capacity storage solutions at scale, driven by technological innovation and strong operational efficiency. Its revenue is closely linked to storage demand cycles and pricing trends. About 90% of revenue comes from cloud customers benefiting from AI-driven demand for high-capacity drives. Western Digital has introduced a customer-focused roadmap to support AI-driven data growth, offering higher capacity, better performance, improved power efficiency and faster deployment, all while maintaining low HDD costs.
The company is advancing both ePMR and HAMR technologies, with 40TB UltraSMR drives expected in volume production in the second half of fiscal 2026 and HAMR drives ramping up in 2027. WD plans to scale ePMR to 60TB and HAMR to 100TB by 2029, utilizing a shared architecture that improves manufacturing efficiency and enables customers to transition without infrastructure disruption. Additionally, the company is expanding its Platforms business with an open software layer, expected in 2027, to help enterprise and mid-scale cloud customers achieve hyperscale-like storage efficiency and simplify large AI storage deployments.
It has announced UltraSMR-enabled JBOD platforms with software partners to expand UltraSMR adoption, providing higher storage density, hyperscale-level performance and more efficient large-scale data analytics. WDC has secured firm purchase orders with its top seven customers through 2026, along with multi-year agreements with three of its top five customers extending into 2027 and 2028. WDC continues to deliver value to shareholders while investing in growth and technology. The company declared a quarterly dividend of 12.5 cents per share and, along with share repurchases, demonstrated confidence in its cash generation and financial stability. Strong free cash flow enabled the company to return more than 100% of its free cash flow to shareholders. In February 2026, the board also authorized an additional $4 billion share repurchase program, with $484 million remaining under the previous authorization.
Its long-term financial model targets sustainable growth over the next three to five years, with revenue expected to witness a more than 20% CAGR driven by strong nearline enterprise demand and stable pricing. It aims for gross margins above 50% and operating margins above 40% through higher-capacity HDDs and operating leverage. With CapEx at 4–6% of revenue and disciplined working capital management, free cash flow margins are projected to exceed 30%, supporting EPS growth to more than $20 through strong cash generation and share repurchases.
Image Source: Zacks Investment Research
However, the data storage market is highly concentrated, with WD heavily reliant on a small number of large customers, making the loss of any major order a significant risk. Macroeconomic uncertainty, tariffs and global trade tensions could also weaken demand across enterprise and retail segments. In addition, the AI-driven surge in storage demand is increasing manufacturing complexity and extending production lead times for high-capacity drives, creating operational risks.
The Case for NTAP
NetApp is a data infrastructure and cloud services company that combines storage hardware with software and subscription-based offerings. It focuses on hybrid cloud, AI data pipelines, and all-flash storage, growing recurring revenue via cloud and subscription services. In the AI era, organizations struggle with security risks, complex architectures, skills shortages and operational challenges that make it hard to fully use their data. NetApp addresses these issues by providing an AI-ready, secure and optimized data platform that helps enterprises modernize infrastructure, improve cyber resilience, support AI innovation and advance cloud strategies.
In the third quarter of fiscal 2026, around 300 customers chose NetApp to prepare their data and build the storage foundation for AI initiatives. NetApp helps customers modernize with a unified data platform across on-premises and cloud, offering high performance, availability and built-in security. Rising data center demands are driving the adoption of all-flash arrays for better density and power efficiency. Strong demand led to record all-flash revenue in the third quarter, up 11% year over year to $1 billion, with an annualized run rate of $4.2 billion.
NetApp’s storage-as-a-service offering, Keystone, continues to gain traction, with revenue rising about 65% year over year in the fiscal third quarter as enterprises adopt more flexible consumption models to support cloud migrations and infrastructure modernization. The company’s hybrid cloud strategy, broad product portfolio and strong balance sheet position it well to capture opportunities in AI, cloud and modern data infrastructure while delivering long-term value for customers and shareholders. Solid momentum in hyperscaler first-party and marketplace storage services has been driving revenues from the Public Cloud.
In addition, NetApp is managing rising memory costs by increasing prices as needed, staying agile with customers and partners, and working closely with multiple suppliers to ensure supply and control costs. Its broad portfolio, including hybrid flash arrays, also helps serve price-sensitive workloads better than all-flash-only competitors. However, management expects continued cautious spending due to macroeconomic uncertainty. The U.S. public sector remains a headwind and has not fully recovered, despite some improvement in the third quarter. Demand was adversely impacted in the second quarter by a government shutdown, and while conditions may improve in the fourth quarter, visibility on a sustained recovery remains uncertain.
Image Source: Zacks Investment Research
Further, NetApp’s ongoing acquisitions increase integration risks and have led to elevated goodwill and intangible assets, which were $2.78 billion, or 27.9% of total assets as of Jan. 23, 2026, putting pressure on the balance sheet. Additionally, macroeconomic uncertainty and cautious spending remain key headwinds.
Price Performance and Valuation for NTAP & WDC
Over the past six months, WDC has soared 153.7% while NTAP declined 11%.
Image Source: Zacks Investment Research
In terms of the forward 12-month price/earnings ratio, NTAP and WDC are trading at 15.06 and 23.25, respectively, compared with the industry’s multiple of 15.87.
Image Source: Zacks Investment Research
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 0.5% to $7.96 over the past 60 days.
Image Source: Zacks Investment Research
WDC’s estimates revisions are on an upward trajectory currently. The Zacks Consensus Estimate for WDC’s earnings for fiscal 2026 has been revised north 15% to $8.96 over the past 60 days.
Image Source: Zacks Investment Research
NTAP or WDC: Which Stock is the Better Buy?
Western Digital and NetApp represent two different investment philosophies. Western Digital is a high-beta AI infrastructure play, powerful but cyclical. NetApp is a steady compounder with strong margins and recurring revenue, but cautious customer spending, along with elevated valuation levels, are likely to weigh on its trajectory.
WDC at present boasts a Zacks Rank #1 (Strong Buy), while NTAP has a Zacks Rank #3 (Hold). Consequently, in terms of Zacks Rank, WDC seems to be a better pick at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here
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Western Digital vs. NetApp: Which Data Storage Stock is the Better Buy?
Key Takeaways
The global data storage market is entering a hypergrowth phase, fueled by AI workloads, cloud expansion and exploding data volumes. Two prominent players—Western Digital Corporation (WDC - Free Report) and NetApp, Inc. (NTAP - Free Report) —offer different ways to invest in this trend. Western Digital is primarily a hardware-focused company, specializing in HDDs used in hyperscale data centers, while NetApp provides enterprise data storage, cloud storage and data management solutions, making them indirect competitors benefiting from data center and cloud growth.
Per a report by Fortune Business Insights, the global data storage market is estimated to witness a CAGR of 16.1% and reach $984.6 billion by 2034 from $298.5 billion in 2026. The COVID-19 pandemic increased demand for cloud storage and data centers as remote work and digital transformation led to higher data usage and analytics needs. This surge pushed companies to invest in scalable storage. It accelerated the adoption of software-defined storage, as both public and private sectors shifted to digital services and remote data access.
While both companies operate in the storage ecosystem, their business models, risk profiles and growth drivers differ significantly. Let’s break down which stock may be the better buy.
The Case for WDC
WDC continues to focus on delivering high-capacity storage solutions at scale, driven by technological innovation and strong operational efficiency. Its revenue is closely linked to storage demand cycles and pricing trends. About 90% of revenue comes from cloud customers benefiting from AI-driven demand for high-capacity drives. Western Digital has introduced a customer-focused roadmap to support AI-driven data growth, offering higher capacity, better performance, improved power efficiency and faster deployment, all while maintaining low HDD costs.
The company is advancing both ePMR and HAMR technologies, with 40TB UltraSMR drives expected in volume production in the second half of fiscal 2026 and HAMR drives ramping up in 2027. WD plans to scale ePMR to 60TB and HAMR to 100TB by 2029, utilizing a shared architecture that improves manufacturing efficiency and enables customers to transition without infrastructure disruption. Additionally, the company is expanding its Platforms business with an open software layer, expected in 2027, to help enterprise and mid-scale cloud customers achieve hyperscale-like storage efficiency and simplify large AI storage deployments.
It has announced UltraSMR-enabled JBOD platforms with software partners to expand UltraSMR adoption, providing higher storage density, hyperscale-level performance and more efficient large-scale data analytics. WDC has secured firm purchase orders with its top seven customers through 2026, along with multi-year agreements with three of its top five customers extending into 2027 and 2028. WDC continues to deliver value to shareholders while investing in growth and technology. The company declared a quarterly dividend of 12.5 cents per share and, along with share repurchases, demonstrated confidence in its cash generation and financial stability. Strong free cash flow enabled the company to return more than 100% of its free cash flow to shareholders. In February 2026, the board also authorized an additional $4 billion share repurchase program, with $484 million remaining under the previous authorization.
Its long-term financial model targets sustainable growth over the next three to five years, with revenue expected to witness a more than 20% CAGR driven by strong nearline enterprise demand and stable pricing. It aims for gross margins above 50% and operating margins above 40% through higher-capacity HDDs and operating leverage. With CapEx at 4–6% of revenue and disciplined working capital management, free cash flow margins are projected to exceed 30%, supporting EPS growth to more than $20 through strong cash generation and share repurchases.
Image Source: Zacks Investment Research
However, the data storage market is highly concentrated, with WD heavily reliant on a small number of large customers, making the loss of any major order a significant risk. Macroeconomic uncertainty, tariffs and global trade tensions could also weaken demand across enterprise and retail segments. In addition, the AI-driven surge in storage demand is increasing manufacturing complexity and extending production lead times for high-capacity drives, creating operational risks.
The Case for NTAP
NetApp is a data infrastructure and cloud services company that combines storage hardware with software and subscription-based offerings. It focuses on hybrid cloud, AI data pipelines, and all-flash storage, growing recurring revenue via cloud and subscription services. In the AI era, organizations struggle with security risks, complex architectures, skills shortages and operational challenges that make it hard to fully use their data. NetApp addresses these issues by providing an AI-ready, secure and optimized data platform that helps enterprises modernize infrastructure, improve cyber resilience, support AI innovation and advance cloud strategies.
In the third quarter of fiscal 2026, around 300 customers chose NetApp to prepare their data and build the storage foundation for AI initiatives. NetApp helps customers modernize with a unified data platform across on-premises and cloud, offering high performance, availability and built-in security. Rising data center demands are driving the adoption of all-flash arrays for better density and power efficiency. Strong demand led to record all-flash revenue in the third quarter, up 11% year over year to $1 billion, with an annualized run rate of $4.2 billion.
NetApp’s storage-as-a-service offering, Keystone, continues to gain traction, with revenue rising about 65% year over year in the fiscal third quarter as enterprises adopt more flexible consumption models to support cloud migrations and infrastructure modernization. The company’s hybrid cloud strategy, broad product portfolio and strong balance sheet position it well to capture opportunities in AI, cloud and modern data infrastructure while delivering long-term value for customers and shareholders. Solid momentum in hyperscaler first-party and marketplace storage services has been driving revenues from the Public Cloud.
In addition, NetApp is managing rising memory costs by increasing prices as needed, staying agile with customers and partners, and working closely with multiple suppliers to ensure supply and control costs. Its broad portfolio, including hybrid flash arrays, also helps serve price-sensitive workloads better than all-flash-only competitors. However, management expects continued cautious spending due to macroeconomic uncertainty. The U.S. public sector remains a headwind and has not fully recovered, despite some improvement in the third quarter. Demand was adversely impacted in the second quarter by a government shutdown, and while conditions may improve in the fourth quarter, visibility on a sustained recovery remains uncertain.
Image Source: Zacks Investment Research
Further, NetApp’s ongoing acquisitions increase integration risks and have led to elevated goodwill and intangible assets, which were $2.78 billion, or 27.9% of total assets as of Jan. 23, 2026, putting pressure on the balance sheet. Additionally, macroeconomic uncertainty and cautious spending remain key headwinds.
Price Performance and Valuation for NTAP & WDC
Over the past six months, WDC has soared 153.7% while NTAP declined 11%.
Image Source: Zacks Investment Research
In terms of the forward 12-month price/earnings ratio, NTAP and WDC are trading at 15.06 and 23.25, respectively, compared with the industry’s multiple of 15.87.
Image Source: Zacks Investment Research
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 0.5% to $7.96 over the past 60 days.
Image Source: Zacks Investment Research
WDC’s estimates revisions are on an upward trajectory currently. The Zacks Consensus Estimate for WDC’s earnings for fiscal 2026 has been revised north 15% to $8.96 over the past 60 days.
Image Source: Zacks Investment Research
NTAP or WDC: Which Stock is the Better Buy?
Western Digital and NetApp represent two different investment philosophies. Western Digital is a high-beta AI infrastructure play, powerful but cyclical. NetApp is a steady compounder with strong margins and recurring revenue, but cautious customer spending, along with elevated valuation levels, are likely to weigh on its trajectory.
WDC at present boasts a Zacks Rank #1 (Strong Buy), while NTAP has a Zacks Rank #3 (Hold). Consequently, in terms of Zacks Rank, WDC seems to be a better pick at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here