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Western Digital vs. Sandisk: Which Storage Stock is the Better Bet?
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Key Takeaways
WDC's HDD focus targets surging data-center storage demand, led by strong fiscal 2026 results.
SNDK's data-center revenue rose 437%, while NBM agreements aim to improve revenue & cash-flow predictability.
WDC trades at a 7.11 forward P/S ratio versus 4.61 for SanDisk, reflecting differing valuations.
The separation of Sandisk (SNDK - Free Report) from Western Digital Corporation (WDC - Free Report) has created two different ways to invest in the long-term growth of digital storage. Western Digital is now focused primarily on HDDs, particularly high-capacity drives for data centers, while Sandisk is a pure-play flash-storage company with exposure to NAND, SSDs, edge devices and AI infrastructure.
The storage industry has become a booming vertical of the AI infrastructure market. While investors initially focused on GPUs and networking equipment, the rapid growth of AI-generated data is creating another bottleneck: where to store it all. Per a report from Fortune Business Insights, the global data storage market is projected to grow from $298.5 billion in 2026 to $984.6 billion by 2034, representing a CAGR of 16.1%.
Both businesses are benefiting from the explosive growth in data generated by AI, cloud computing and hyperscale data centers. However, their growth drivers, economies, margins and risk profiles are increasingly different. Therefore, the key question for investors now is which stock has greater potential for future earnings growth relative to expectations and valuation.
The Case for WDC Stock
Western Digital has emerged from the separation as a more focused storage infrastructure play centered on HDDs. Its biggest opportunity is the enormous amount of data being generated and retained by hyperscalers and AI data centers. Although flash storage is faster, high-capacity HDDs remain attractive for storing massive datasets where cost per terabyte is critical. WDC's fiscal 2026 results further demonstrate its strength. Revenue reached $12.92 billion, up 36% year over year, while non-GAAP operating income increased 107% to $4.82 billion. For first-quarter fiscal 2027, management projects nearly $4.1 billion of revenue, with non-GAAP gross margin of 55-56% and non-GAAP EPS of around $4.
As AI workloads shift from deployment to sustained use, storage demand is increasingly driven by the compounding growth of data. With roughly 80% of hyperscale data-center data stored on HDDs, WDC is well-positioned to benefit from the scale, cost efficiency and power advantages of hard drives. It is advancing its technology roadmap with a 44TB HAMR drive targeted for the first half of 2027, while its 40TB ePMR drives have entered volume production with two customers. UltraSMR is also ramping, with the technology expected to account for around 60% of nearline exabyte shipments by the end of fiscal 2027. Beyond capacity, Western Digital is developing high-bandwidth drives targeting up to 8x the throughput of current drives without a comparable increase in power consumption, addressing the growing performance needs of AI workloads.
Western Digital exited fiscal 2026 with strong cash generation and a net cash position, supporting its HDD roadmap and shareholder returns. Operating cash flow rose 132% year over year to $3.93 billion, while free cash flow surged 145% to $3.51 billion, a 27% margin. The company returned $3.1 billion to shareholders and completed the monetization of its remaining 1.7 million Sandisk shares by exchanging them for 4.8 million WDC shares. At year-end, WDC held $1.6 billion in cash against $1.1 billion of debt, leaving roughly $500 million in net cash. This financial flexibility supports continued investment and capital returns without relying on additional leverage.
Image Source: Zacks Investment Research
However, Western Digital faces risks from customer concentration and technology transitions. Cloud customers accounted for 89% of fourth-quarter fiscal 2026 revenue, making changes in orders, pricing or product mix capable of causing significant volatility in revenue and margins. At the same time, the company’s growth outlook depends on successful ramps of 40TB ePMR, 44TB HAMR, 50TB products and UltraSMR. Delays in qualification, manufacturing or customer adoption could slow capacity gains and weaken expected cost-per-terabyte improvements, while competition and flash-based alternatives could add further pricing pressure.
The Case for SNDK Stock
Sandisk offers exposure to a different part of the storage market. Its portfolio includes NAND flash, SSDs, embedded storage, removable memory and other flash-based solutions. Its fiscal 2026 revenue reached $20.25 billion, up 175% year over year. Moreover, its data-center business is becoming a major growth engine. Data-center revenue increased 437% year over year to $5.15 billion, while Edge revenue rose 195% to $12.16 billion. The company is also transitioning more of its business toward its New Business Model (NBM) agreements, which are designed to provide customers with greater supply and pricing visibility.
It now has NBMs with eight Datacenter and Edge customers, with a weighted average duration of more than four years. Management expects these agreements to cover more than 50% of bits in fiscal 2027 and about two-thirds in fiscal 2028. Minimum expected revenue from signed NBMs is $93.9 billion at floor pricing, while remaining performance obligations were $59.8 billion at fiscal year-end and would have been $91.1 billion including two agreements signed after quarter-end. Financial guarantees total $16.5 billion. Pricing includes fixed and variable elements with floors and ceilings, and management expects NBM margins around 80%, supporting greater revenue and cash-flow predictability.
Another important development is capital returns. Sandisk authorized an additional $14 billion share repurchase program, leaving $15.5 billion in remaining authorization. Management plans to continue investing in BiCS8 and BiCS10 while returning cash to shareholders. Fiscal 2027 capital spending is expected to rise year over year but to decline to about 6% of revenue, preserving room for technology transitions and buybacks.
Image Source: Zacks Investment Research
However, SNDK has greater exposure to NAND pricing cycles. About two-thirds of fourth-quarter fiscal 2026 sequential revenue growth came from higher pricing. NBM pricing includes fixed and variable elements with floors and ceilings, and margins are expected to be around 80%. Pricing for the non-NBM business will fluctuate with the market. With non-GAAP operating expenses guided at $520-$540 million for first-quarter fiscal 2027, earnings remain sensitive to pricing and end-market mix.
Furthermore, Sandisk faces risks from supply constraints, technology execution and contractual commitments. Demand is expected to outpace supply beyond 2027, limiting the company’s ability to capture upside when demand surges, while rising NBM commitments could further reduce allocation flexibility. At the same time, the BiCS8 and BiCS10 ramps and development of High Bandwidth Flash require successful execution and yields. Dependence on Flash Ventures with Kioxia and $1.2 billion of payments through 2029, along with significant contract and refund liabilities, further limits flexibility and increases execution risk.
Price Performance and Valuation for SNDK & WDC
Over the past six months, SNDK and WDC have registered gains of 109% and 33.7%, respectively, compared with the Zacks Computer-Storage Devices industry’s rise of 67.3%.
Image Source: Zacks Investment Research
WDC trades at a forward 12-month price-to-sales (P/S) ratio of 7.11 compared with SNDK’s 4.61 and the industry’s multiple of 3.01.
Image Source: Zacks Investment Research
How Do Zacks Estimates Compare for SNDK & WDC?
The Zacks Consensus Estimate for SNDK’s earnings for fiscal 2027 has been revised up 10.6% to $213.3 over the past 60 days.
Image Source: Zacks Investment Research
WDC’s estimate revisions are currently on an upward trajectory. The Zacks Consensus Estimate for WDC’s earnings for fiscal 2027 has been revised upward by 8.8% to $20.03 over the past 60 days, while the same for fiscal 2028 has gone up 7.6% to $34.74.
Image Source: Zacks Investment Research
WDC or SNDK: Which Investment Profile Does Each Stock Offer?
Western Digital offers exposure to the long-term expansion of massive data repositories, hyperscale infrastructure and high-capacity HDDs. Its fiscal 2026 results show strong cash generation and significant margin expansion. Sandisk provides more direct exposure to NAND flash, SSDs and the growing storage requirements of AI inference and high-performance data centers. Its recent revenue and profit growth has been substantially faster, although that comes with greater sensitivity to memory pricing and expectations.
Western Digital’s opportunity is less dependent on sustaining extraordinary NAND pricing and is increasingly tied to the structural need for massive data-center storage capacity. This makes WDC potentially suitable for investors seeking AI-storage exposure with greater emphasis on HDD demand and free cash flow, while its structural AI-data-center exposure could support a stronger investment case. WDC at present carries a Zacks Rank #2 (Buy), while SNDK has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
View the Zacks #1 Rank List
Image: Shutterstock
Western Digital vs. Sandisk: Which Storage Stock is the Better Bet?
Key Takeaways
The separation of Sandisk (SNDK - Free Report) from Western Digital Corporation (WDC - Free Report) has created two different ways to invest in the long-term growth of digital storage. Western Digital is now focused primarily on HDDs, particularly high-capacity drives for data centers, while Sandisk is a pure-play flash-storage company with exposure to NAND, SSDs, edge devices and AI infrastructure.
The storage industry has become a booming vertical of the AI infrastructure market. While investors initially focused on GPUs and networking equipment, the rapid growth of AI-generated data is creating another bottleneck: where to store it all. Per a report from Fortune Business Insights, the global data storage market is projected to grow from $298.5 billion in 2026 to $984.6 billion by 2034, representing a CAGR of 16.1%.
Both businesses are benefiting from the explosive growth in data generated by AI, cloud computing and hyperscale data centers. However, their growth drivers, economies, margins and risk profiles are increasingly different. Therefore, the key question for investors now is which stock has greater potential for future earnings growth relative to expectations and valuation.
The Case for WDC Stock
Western Digital has emerged from the separation as a more focused storage infrastructure play centered on HDDs. Its biggest opportunity is the enormous amount of data being generated and retained by hyperscalers and AI data centers. Although flash storage is faster, high-capacity HDDs remain attractive for storing massive datasets where cost per terabyte is critical. WDC's fiscal 2026 results further demonstrate its strength. Revenue reached $12.92 billion, up 36% year over year, while non-GAAP operating income increased 107% to $4.82 billion. For first-quarter fiscal 2027, management projects nearly $4.1 billion of revenue, with non-GAAP gross margin of 55-56% and non-GAAP EPS of around $4.
As AI workloads shift from deployment to sustained use, storage demand is increasingly driven by the compounding growth of data. With roughly 80% of hyperscale data-center data stored on HDDs, WDC is well-positioned to benefit from the scale, cost efficiency and power advantages of hard drives. It is advancing its technology roadmap with a 44TB HAMR drive targeted for the first half of 2027, while its 40TB ePMR drives have entered volume production with two customers. UltraSMR is also ramping, with the technology expected to account for around 60% of nearline exabyte shipments by the end of fiscal 2027. Beyond capacity, Western Digital is developing high-bandwidth drives targeting up to 8x the throughput of current drives without a comparable increase in power consumption, addressing the growing performance needs of AI workloads.
Western Digital exited fiscal 2026 with strong cash generation and a net cash position, supporting its HDD roadmap and shareholder returns. Operating cash flow rose 132% year over year to $3.93 billion, while free cash flow surged 145% to $3.51 billion, a 27% margin. The company returned $3.1 billion to shareholders and completed the monetization of its remaining 1.7 million Sandisk shares by exchanging them for 4.8 million WDC shares. At year-end, WDC held $1.6 billion in cash against $1.1 billion of debt, leaving roughly $500 million in net cash. This financial flexibility supports continued investment and capital returns without relying on additional leverage.
Image Source: Zacks Investment Research
However, Western Digital faces risks from customer concentration and technology transitions. Cloud customers accounted for 89% of fourth-quarter fiscal 2026 revenue, making changes in orders, pricing or product mix capable of causing significant volatility in revenue and margins. At the same time, the company’s growth outlook depends on successful ramps of 40TB ePMR, 44TB HAMR, 50TB products and UltraSMR. Delays in qualification, manufacturing or customer adoption could slow capacity gains and weaken expected cost-per-terabyte improvements, while competition and flash-based alternatives could add further pricing pressure.
The Case for SNDK Stock
Sandisk offers exposure to a different part of the storage market. Its portfolio includes NAND flash, SSDs, embedded storage, removable memory and other flash-based solutions. Its fiscal 2026 revenue reached $20.25 billion, up 175% year over year. Moreover, its data-center business is becoming a major growth engine. Data-center revenue increased 437% year over year to $5.15 billion, while Edge revenue rose 195% to $12.16 billion. The company is also transitioning more of its business toward its New Business Model (NBM) agreements, which are designed to provide customers with greater supply and pricing visibility.
It now has NBMs with eight Datacenter and Edge customers, with a weighted average duration of more than four years. Management expects these agreements to cover more than 50% of bits in fiscal 2027 and about two-thirds in fiscal 2028. Minimum expected revenue from signed NBMs is $93.9 billion at floor pricing, while remaining performance obligations were $59.8 billion at fiscal year-end and would have been $91.1 billion including two agreements signed after quarter-end. Financial guarantees total $16.5 billion. Pricing includes fixed and variable elements with floors and ceilings, and management expects NBM margins around 80%, supporting greater revenue and cash-flow predictability.
Another important development is capital returns. Sandisk authorized an additional $14 billion share repurchase program, leaving $15.5 billion in remaining authorization. Management plans to continue investing in BiCS8 and BiCS10 while returning cash to shareholders. Fiscal 2027 capital spending is expected to rise year over year but to decline to about 6% of revenue, preserving room for technology transitions and buybacks.
Image Source: Zacks Investment Research
However, SNDK has greater exposure to NAND pricing cycles. About two-thirds of fourth-quarter fiscal 2026 sequential revenue growth came from higher pricing. NBM pricing includes fixed and variable elements with floors and ceilings, and margins are expected to be around 80%. Pricing for the non-NBM business will fluctuate with the market. With non-GAAP operating expenses guided at $520-$540 million for first-quarter fiscal 2027, earnings remain sensitive to pricing and end-market mix.
Furthermore, Sandisk faces risks from supply constraints, technology execution and contractual commitments. Demand is expected to outpace supply beyond 2027, limiting the company’s ability to capture upside when demand surges, while rising NBM commitments could further reduce allocation flexibility. At the same time, the BiCS8 and BiCS10 ramps and development of High Bandwidth Flash require successful execution and yields. Dependence on Flash Ventures with Kioxia and $1.2 billion of payments through 2029, along with significant contract and refund liabilities, further limits flexibility and increases execution risk.
Price Performance and Valuation for SNDK & WDC
Over the past six months, SNDK and WDC have registered gains of 109% and 33.7%, respectively, compared with the Zacks Computer-Storage Devices industry’s rise of 67.3%.
Image Source: Zacks Investment Research
WDC trades at a forward 12-month price-to-sales (P/S) ratio of 7.11 compared with SNDK’s 4.61 and the industry’s multiple of 3.01.
Image Source: Zacks Investment Research
How Do Zacks Estimates Compare for SNDK & WDC?
The Zacks Consensus Estimate for SNDK’s earnings for fiscal 2027 has been revised up 10.6% to $213.3 over the past 60 days.
Image Source: Zacks Investment Research
WDC’s estimate revisions are currently on an upward trajectory. The Zacks Consensus Estimate for WDC’s earnings for fiscal 2027 has been revised upward by 8.8% to $20.03 over the past 60 days, while the same for fiscal 2028 has gone up 7.6% to $34.74.
Image Source: Zacks Investment Research
WDC or SNDK: Which Investment Profile Does Each Stock Offer?
Western Digital offers exposure to the long-term expansion of massive data repositories, hyperscale infrastructure and high-capacity HDDs. Its fiscal 2026 results show strong cash generation and significant margin expansion. Sandisk provides more direct exposure to NAND flash, SSDs and the growing storage requirements of AI inference and high-performance data centers. Its recent revenue and profit growth has been substantially faster, although that comes with greater sensitivity to memory pricing and expectations.
Western Digital’s opportunity is less dependent on sustaining extraordinary NAND pricing and is increasingly tied to the structural need for massive data-center storage capacity. This makes WDC potentially suitable for investors seeking AI-storage exposure with greater emphasis on HDD demand and free cash flow, while its structural AI-data-center exposure could support a stronger investment case. WDC at present carries a Zacks Rank #2 (Buy), while SNDK has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.