Western Digital Corporation (WDC Quick QuoteWDC - Free Report) highlighted sustained demand for high-capacity hard disk drives (HDDs), favorable pricing and accelerating storage requirements during its first-quarter fiscal 2027 earnings call.

Management emphasized improving demand visibility, higher-capacity product transitions and expanding opportunities tied to artificial intelligence (AI). Executives also addressed competitive capacity concerns and outlined plans to increase storage shipments without expanding drive unit production.

WDC Earnings Beat Estimates as Margins Expand

Western Digital reported non-GAAP earnings of $4.64 per share, exceeding the Zacks Consensus Estimate of $4.09. Revenues reached $4.38 billion, surpassing the Zacks Consensus Estimate of $4.16 billion. Earnings increased 161% year over year, while revenues climbed 55%.

Western Digital Corporation Price, Consensus and EPS Surprise

Western Digital Corporation price-consensus-eps-surprise-chart | Western Digital Corporation Quote

Chief financial officer Kris Sennesael attributed the performance to higher exabyte shipments, improved pricing and disciplined execution. Non-GAAP gross margin expanded 1,420 basis points year over year to 58.1%.

The company shipped 248 exabytes, increasing 22% year over year. Cloud revenues reached $3.9 billion, accounting for 88% of total revenues.

Western Digital Sees Further Pricing Opportunities

Pricing emerged as a central discussion point. Sennesael noted that average selling prices per terabyte increased 28% year over year, accelerating from 18% growth in the preceding quarter.

Responding to Barclays' questions about sustainability, Sennesael indicated further pricing improvement over the next three to four quarters, supported by strong demand and higher-capacity products.

Chief executive officer Irving Tan explained that contractual price adjustments, favorable spot pricing and a richer product mix underpin margin expansion. Management also emphasized increasing exabyte output through areal-density improvements.

WDC Projects Strong Fiscal Second-Quarter Growth

Western Digital expects second-quarter fiscal 2027 revenues of $5.1 billion, plus or minus $100 million, representing approximately 69% year-over-year growth at the midpoint.

Management projects non-GAAP gross margin between 60% and 61%, with adjusted earnings of $5.80 per share, plus or minus 20 cents.

Sennesael expects operating expenses of $400 million to $410 million, reflecting increased product qualification activities. Higher-capacity drives and favorable pricing remain central assumptions supporting the outlook.

Western Digital Advances Its HDD Technology Roadmap

Tan highlighted accelerating adoption of the company's latest energy-assisted perpendicular magnetic recording (ePMR) platform, offering capacities up to 40 terabytes.

The platform is expected to represent approximately 30% of nearline shipments in the fiscal second quarter and 50% in the third quarter.

Heat-assisted magnetic recording (HAMR) technology remains another priority. Western Digital expects to complete qualifications with two hyperscale customers in the first calendar quarter of 2027 and begin volume shipments during the first half of that year.

WDC Highlights Long-Term AI Storage Demand

Management emphasized expanding storage requirements across traditional cloud infrastructure, AI inference, agentic systems and physical AI applications.

Responding to Morgan Stanley, Tan disclosed demand visibility extending into 2030 and 2031 across Western Digital's seven largest customers.

The company is also engaging neocloud providers, AI laboratories and enterprise customers. During discussions with Melius Research, Tan maintained that diversified demand sources could help absorb softness in individual customer categories.

Western Digital Defends Its Capacity Investment Strategy

Competitive supply expansion attracted considerable analyst scrutiny. Responding to Bank of America, Tan reiterated the company's commitment to increasing storage capacity through technological improvements rather than additional drive unit manufacturing capacity.

Sennesael expects capital expenditures to modestly exceed the company's long-term target of 4% to 6% of revenues over the next two years.

Executives clarified that investments will target heads, media technology and factory automation, including manufacturing requirements associated with HAMR transitions.

WDC Maintains Focus on Execution and Cash Generation

Management's overall message centered on sustained pricing strength, disciplined capacity planning and successful technology transitions.

Western Digital generated $1.38 billion in free cash flow and increased its quarterly dividend 17% to $0.175 per share. Management remains focused on supporting customer demand while maintaining capital discipline.

What Do WDC's Zacks Rank and Style Scores Indicate?

Western Digital currently carries a Zacks Rank #1 (Strong Buy), reflecting a favorable earnings estimate revision outlook. Its Growth and Momentum Scores of A indicate strong characteristics in both categories, while its Value Score of D highlights less attractive valuation attributes. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company's VGM Score of B complements its favorable Zacks Rank, indicating an attractive combination of growth, momentum and valuation characteristics overall. However, the Zacks Rank remains subject to changes as analysts revise earnings estimates following the latest quarterly results.