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WDC's Fiscal Q2 Forecast Improves: What's Fueling the Momentum?
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Key Takeaways
WDC expects Q2 revenue of $5.1 billion, up 16% sequentially and 69% year over year.
Pricing momentum lifted average price per terabyte 28% year over year, while gross margin reached 58.1%.
WDC targets 40TB ePMR and HAMR drives, with HAMR volume shipments expected in first-half fiscal 2027.
Western Digital Corporation (WDC - Free Report) is entering the second quarter of fiscal 2027 with strong momentum, driven by rising demand for high-capacity HDDs, favorable pricing and growing data-storage requirements from cloud and AI infrastructure providers. It appears to be benefiting from both increasing sales and improving profitability. Management expects these trends to continue into the fiscal second quarter, led by strong customer demand, higher-capacity products and improved pricing.
At the midpoint of its guidance, WDC expects revenue of $5.1 billion (+/- $100 million), representing a sequential increase of approximately 16% and a year-over-year rise of 69%. Management projects a non-GAAP gross margin of 60-61%, fueled by a favorable shift toward higher-capacity drives and a strong pricing environment. Non-GAAP EPS is expected to reach $5.8 (+/- 20 cents). WDC expects operating expenses to be between $400 million and $410 million, reflecting a sequential increase due to higher spending on product qualification activities.
A major factor behind Western Digital's stronger outlook is its pricing environment. Pricing momentum remains strong, with average price per terabyte rising 28% year over year and gross margin reaching 58.1% in the quarter. Margins are benefiting from higher-capacity drives, operational efficiencies and contractual price increases. When customers pay more for each terabyte of storage, the company can generate additional revenue without needing an equivalent increase in shipment volumes. Another encouraging development is WDC's improving visibility into future customer demand.
Exabyte growth is expected to accelerate through 2027 and beyond with momentum from new product platforms. Long-term demand remains durable, with good visibility up to 2030-2031 for top customers, supported by expanding cloud and AI workloads. Western Digital is also benefiting from its transition toward higher-capacity hard drives. It is advancing its technology roadmap with 40TB ePMR and next-generation HAMR drives to boost exabyte shipments and higher-capacity storage adoption. HAMR volume shipments are expected to begin in the first half of 2027, with additional hyperscale customer qualifications supporting broader commercialization and second-generation development.
Can Intense Storage Rivalry Derail WDC's Growth Prospect?
Seagate Technology Holdings plc (STX - Free Report) is set to report fiscal first-quarter results today, after market close. Seagate's BTO model points to sustained demand for high-capacity nearline drives amid rising AI adoption. It expects continued revenue and margin growth in the September quarter, backed by the Mozaic rollout and disciplined pricing. Management anticipates fiscal first-quarter revenues of $4.1 billion (+/- $100 million), up 56% year over year at midpoint. Non-GAAP earnings are expected to be $7.3 per share (+/- 20 cents). For the quarter, non-GAAP operating expenses are expected to be around $300 million. At the midpoint of revenue guidance, non-GAAP operating margin is projected to be roughly 50%.
Sandisk (SNDK - Free Report) , a separate flash entity spun off from WDC, is set to report fiscal first-quarter results on Thursday. For the quarter, Sandisk expects revenues of $10.3-$10.8 billion. Sequential growth is projected to come from both bit growth and modest price increases. Non-GAAP gross margin is expected to be between 83% and 85%, with operating expenses of $520-$540 million. Non-GAAP earnings are expected at $44-$46 per share. Sandisk expects fiscal 2027 sellable bit growth in the mid-teens as it carries higher inventory to support customer commitments. Recently, it introduced the SANDISK Guardian Series, a portfolio of high-endurance memory cards designed for continuous recording in dash cams and home security cameras.
Going by the price/earnings ratio, the company’s shares currently trade at 14.57 forward earnings compared with 8.05 for the industry.
Image Source: Zacks Investment Research
WDC’s estimate revisions are currently on an upward trajectory. The Zacks Consensus Estimate for its earnings for fiscal 2027 has been revised upward by 7.3% to $22.13 over the past 60 days, while the same for fiscal 2028 has gone up 0.4% to $40.59.
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WDC's Fiscal Q2 Forecast Improves: What's Fueling the Momentum?
Key Takeaways
Western Digital Corporation (WDC - Free Report) is entering the second quarter of fiscal 2027 with strong momentum, driven by rising demand for high-capacity HDDs, favorable pricing and growing data-storage requirements from cloud and AI infrastructure providers. It appears to be benefiting from both increasing sales and improving profitability. Management expects these trends to continue into the fiscal second quarter, led by strong customer demand, higher-capacity products and improved pricing.
At the midpoint of its guidance, WDC expects revenue of $5.1 billion (+/- $100 million), representing a sequential increase of approximately 16% and a year-over-year rise of 69%. Management projects a non-GAAP gross margin of 60-61%, fueled by a favorable shift toward higher-capacity drives and a strong pricing environment. Non-GAAP EPS is expected to reach $5.8 (+/- 20 cents). WDC expects operating expenses to be between $400 million and $410 million, reflecting a sequential increase due to higher spending on product qualification activities.
A major factor behind Western Digital's stronger outlook is its pricing environment. Pricing momentum remains strong, with average price per terabyte rising 28% year over year and gross margin reaching 58.1% in the quarter. Margins are benefiting from higher-capacity drives, operational efficiencies and contractual price increases. When customers pay more for each terabyte of storage, the company can generate additional revenue without needing an equivalent increase in shipment volumes. Another encouraging development is WDC's improving visibility into future customer demand.
Exabyte growth is expected to accelerate through 2027 and beyond with momentum from new product platforms. Long-term demand remains durable, with good visibility up to 2030-2031 for top customers, supported by expanding cloud and AI workloads. Western Digital is also benefiting from its transition toward higher-capacity hard drives. It is advancing its technology roadmap with 40TB ePMR and next-generation HAMR drives to boost exabyte shipments and higher-capacity storage adoption. HAMR volume shipments are expected to begin in the first half of 2027, with additional hyperscale customer qualifications supporting broader commercialization and second-generation development.
Can Intense Storage Rivalry Derail WDC's Growth Prospect?
Seagate Technology Holdings plc (STX - Free Report) is set to report fiscal first-quarter results today, after market close. Seagate's BTO model points to sustained demand for high-capacity nearline drives amid rising AI adoption. It expects continued revenue and margin growth in the September quarter, backed by the Mozaic rollout and disciplined pricing. Management anticipates fiscal first-quarter revenues of $4.1 billion (+/- $100 million), up 56% year over year at midpoint. Non-GAAP earnings are expected to be $7.3 per share (+/- 20 cents). For the quarter, non-GAAP operating expenses are expected to be around $300 million. At the midpoint of revenue guidance, non-GAAP operating margin is projected to be roughly 50%.
Sandisk (SNDK - Free Report) , a separate flash entity spun off from WDC, is set to report fiscal first-quarter results on Thursday. For the quarter, Sandisk expects revenues of $10.3-$10.8 billion. Sequential growth is projected to come from both bit growth and modest price increases. Non-GAAP gross margin is expected to be between 83% and 85%, with operating expenses of $520-$540 million. Non-GAAP earnings are expected at $44-$46 per share. Sandisk expects fiscal 2027 sellable bit growth in the mid-teens as it carries higher inventory to support customer commitments. Recently, it introduced the SANDISK Guardian Series, a portfolio of high-endurance memory cards designed for continuous recording in dash cams and home security cameras.
WDC Price Performance, Valuation and Estimates
In the past year, shares of WDC have surged 181.2% compared with the Zacks Computer-Storage Devices industry’s growth of 182.2%.
Image Source: Zacks Investment Research
Going by the price/earnings ratio, the company’s shares currently trade at 14.57 forward earnings compared with 8.05 for the industry.
Image Source: Zacks Investment Research
WDC’s estimate revisions are currently on an upward trajectory. The Zacks Consensus Estimate for its earnings for fiscal 2027 has been revised upward by 7.3% to $22.13 over the past 60 days, while the same for fiscal 2028 has gone up 0.4% to $40.59.
Image Source: Zacks Investment Research
Currently, Western Digital has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.