Western Digital Corporation’s (WDC Quick QuoteWDC - Free Report) shares have skyrocketed 893.2% over the past year, outpacing the 493.5% growth of the Zacks Computer-Storage Devices industry. The stock has also outperformed the Zacks Computer & Technology sector’s and the S&P 500’s growth of 50.2% and 30.8%, respectively. AI is reshaping the global technology landscape, and one of the biggest beneficiaries of this transformation is the data storage industry. Every AI model requires massive amounts of data storage, retrieval and processing power. That trend has pushed storage companies like Western Digital back into the spotlight.

WDC has outgrown its peers from the storage industry, like Teradata (TDC Quick QuoteTDC - Free Report) and its long-time rival in the HDD market, Seagate Technology Holdings plc (STX Quick QuoteSTX - Free Report) . TDC has climbed 41.5%, while STX jumped 660.8% in a year. WDC has underperformed Sandisk Corporation (SNDK Quick QuoteSNDK - Free Report) , which has climbed a stellar 3469.8%.

Image Source: Zacks Investment Research

Seagate is a leading data storage company, with hard disk drives as its core product. Teradata delivers a hybrid cloud analytics and AI data platform, Teradata Vantage, helping enterprises analyze data and innovate at scale. In February 2025, WDC split its HDD and Flash businesses into two public companies, with the new SanDisk positioned to leverage its storage expertise to capitalize on AI-driven opportunities.

WDC recently hit a fresh 52-week high of $525.15. The big question for investors now is, after WDC’s huge rally, does the stock still have upside left?

AI Storage Boom Fuels WDC’s Strong Financial Performance

Western Digital’s latest quarterly results showed how strongly the AI wave is benefiting the company. The company reported revenues of $3.34 billion, growing 45% year over year. Adjusted EPS of $2.72 expanded 97% year over year and 28% sequentially, exceeding the high end of management’s guidance of $2.30 (+/- 15 cents). Driven by strong operating leverage, reduced interest costs and a more efficient tax structure, EPS nearly doubled year over year. These results highlight its focus on advanced innovation and disciplined execution.

As AI shifts from training to large-scale inference, now expected to account for nearly two-thirds of compute data generation, its adoption is accelerating rapidly, driving greater demand for storage. Massive volumes of tokens, prompts and queries must be persistently stored, with HDDs remaining the primary medium. The emergence of agentic AI further amplifies this trend by enabling continuous, workflow-driven execution that significantly increases data creation and retention needs. At the same time, synthetic data and physical AI systems from robotics to autonomous vehicles are producing vast, ever-expanding datasets. Together, these forces create a compounding loop of data generation, reinforcing expectations for long-term storage demand CAGR of above 25%, and positioning WD to benefit from its high-capacity storage solutions.

WDC is advancing areal density gains, accelerating its HAMR and ePMR roadmaps, and driving adoption of higher-capacity and UltraSMR drives. WD shipped 222 exabytes in the quarter, representing a 34% year-over-year increase. This included 4.1 million next-gen ePMR drives, totaling 118 exabytes, with capacities of up to 32TB, highlighting the rapid scaling of new technology to meet strong demand. 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. To support this effort, it acquired intellectual property and talent to strengthen its in-house laser development capabilities.

The company also announced UltraSMR-enabled JBOD platforms in partnership with software ecosystem partners, broadening UltraSMR adoption. These platforms offer significantly higher storage density than conventional drives, delivering hyperscale-level performance while enabling more efficient and sustainable large-scale data analytics.  Firm purchase orders with its top seven customers are secured through 2026, supported by multi-year commercial agreements with three of its top five customers extending into 2027 and 2028. These commitments highlight strong customer relationships and confidence in its capacity to meet growing exabyte-level demand.

WDC Ramps Up Shareholder Rewards After SNDK Monetization

Western Digital’s separation from its flash-memory business, now operating independently as Sandisk, has been an encouraging development. The move allows WDC to focus more directly on HDD and data-center infrastructure opportunities. That sharper focus is translating to improved execution and profitability over time. WD has been actively strengthening its balance sheet while maintaining robust free cash flow generation. This dual focus—reducing financial risk while returning capital—places the company in a strong position to navigate potential macroeconomic uncertainties.

During the fiscal third quarter, Western Digital materially improved its balance sheet by selling 5.8 million SanDisk shares, using the proceeds to reduce debt by $3.1 billion. This move left just $1.6 billion in convertible debt outstanding. With $2 billion in cash and cash equivalents, the company ended the quarter with a net cash position of $450 million, reflecting a significantly stronger financial footing. In February 2026, its board authorized an additional $4 billion for share repurchases, with approximately $484 million remaining under the previous authorization. 

The company also announced a 20% increase in its quarterly dividend, raising it to 15 cents per share. This move signals management’s belief in the durability of cash flows and long-term business stability. In addition to dividends, the company is leveraging strong free cash flow to strengthen its balance sheet—another positive signal for long-term investors. During the quarter, WD repurchased approximately 2.9 million shares for $752 million and paid $43 million in dividends. Since launching the capital return program in fourth-quarter fiscal 2025, the company has returned a total of $2.2 billion to shareholders through buybacks and dividends.

Image Source: Zacks Investment Research

With strong demand, pricing and improved visibility across cloud, consumer and client segments, it expects revenues of $3.65 billion (+/- $100 million), implying about 40% year-over-year growth at the midpoint and non-GAAP earnings of $3.25 (+/- 15 cents).

Despite the bullish outlook, WDC is not risk-free. The storage industry remains highly cyclical and vulnerable to periods of oversupply, which could pressure pricing if hyperscaler spending slows. At the same time, rapid technology shifts pose long-term risks, as greater adoption of advanced flash or newer storage architectures could eventually reduce HDD demand. Intensifying competition from rivals like STX further adds to the uncertainty surrounding Western Digital’s long-term growth outlook.

Upbeat Estimate Revision Trend for WDC

WDC’s estimate revisions are on an upward trajectory currently. The Zacks Consensus Estimate for WDC’s earnings for fiscal 2026 has been revised north 12% to $10.02 over the past 60 days, while the same for fiscal 2027 has gone up 23.3% to $17.19.

Image Source: Zacks Investment Research

Valuation: Is WDC Still Attractive?

Even after its massive rally, some investors still see WDC as attractive due to the long-term AI infrastructure boom. However, the stock is no longer a cheap turnaround bet. Investors are now counting on sustained AI-driven storage demand, strong pricing, improving margins and Western Digital maintaining its technology foothold.

Going by the price/earnings ratio, the company’s shares currently trade at 31.3 forward earnings compared with 12.42 for the industry.

Image Source: Zacks Investment Research

In comparison, the forward 12-month price/earnings multiple for STX, TDC and SNDK are 33.99X, 17.77X and 8.65X, respectively.

Final Verdict: Buy, Hold, or Avoid WDC Stock?

Western Digital appears attractive for long-term investors as AI-driven data growth continues to boost storage demand. Strong earnings, tight supply and rising hyperscaler spending support the bullish outlook, though the stock could remain volatile after its sharp rally. Investors bullish on long-term AI infrastructure growth may consider buying, existing shareholders may hold for continued AI storage exposure and cautious investors may wait for pullbacks before entering.

Overall, WDC appears positioned to remain a major beneficiary of the AI storage boom, but investors should expect both strong upside potential and elevated volatility along the way. Boasting a Zacks Rank #1 (Strong Buy) at present, WDC seems to be a good addition to your portfolio. You can see the complete list of today’s Zacks #1 Rank stocks here.