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Western Digital's 88% Cloud Revenue Share: Strength or Weakness?
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Key Takeaways
Western Digital's cloud revenues jumped 54% to $3.9 billion in Q1 fiscal 2027, making up 88% of sales.
WDC's 40TB ePMR platform and planned HAMR shipments support growth amid rising cloud storage demand.
WDC's heavy cloud reliance raises hyperscaler spending risks, while limited diversification adds to concerns.
Western Digital Corporation (WDC - Free Report) continues to benefit from robust cloud storage demand, with the end market accounting for an overwhelming share of its revenues.
In the first quarter of fiscal 2027, Cloud end market revenues reached $3.9 billion, representing 88% of total revenues, rising 54% year over year. Growth was driven by sustained demand for high-capacity nearline HDDs, including the initial ramp-up of its latest ePMR platform. Strong pricing trends further reflect the value and total cost of ownership (“TCO”) benefits the company offers its customers.
Overall exabyte shipments increased 22% year over year to 248 exabytes, while average selling price per terabyte rose 28%, highlighting favorable industry supply-demand dynamics.
The company’s transition to higher capacity drives positions it well to capture the increasing market opportunities amid growing storage requirements. On the last earnings call, management noted that WDC’s latest ePMR platform, offering capacities of up to 40TB, is expected to account for nearly 30% of nearline exabyte shipments in fiscal second-quarter 2027 and 50% in the fiscal third quarter of 2027.
WDC further noted that it was on track to finish qualifications with two hyperscale customers for its first-generation HAMR product in the first quarter of calendar year 2027. It remains on track to begin volume shipments in the first half of calendar year 2027 for the same.
Demand visibility remains strong, with management adding that for the top seven customers it has good visibility up to 2030-31. Additionally, growing storage requirements from AI frontier labs, neocloud providers and hybrid cloud solution OEM providers are broadening its customer base. Driven by the tech transition, Western Digital expects exabyte supply growth to accelerate throughout fiscal 2027 and 2028.
However, such a substantial cloud exposure does bring its own set of concerns. Any slowdown in hyperscaler capital expenditures, delays in infrastructure deployments or changes in customer buying decisions could affect revenues.
Although Client and Consumer revenues increased 119% and 19%, respectively, their combined contribution was only 12% of total revenues, offering limited diversification. Moreover, stiff competition in the cloud space from players like Seagate Technology Holdings plc (STX - Free Report) and NetApp (NTAP - Free Report) is a concern.
Mapping the Competitive Terrain
Seagate is also benefiting from increasing storage demand. For the first quarter of fiscal 2027, the data center end market accounted for 81% of total revenues, at $3.4 billion, representing an 18% sequential increase and 63% year-over-year growth. Global cloud customers represented a major share of data center revenues and exabyte demand, a trend expected to persist as Mozaic 4 production ramps.
STX expects HAMR to account for roughly 50% of nearline exabyte shipment run rate by the end of 2026, with Mozaic 4 representing about half of HAMR shipments. Additionally, Microsoft Azure's qualification of Seagate's HAMR-based SMR solution with Broadcom strengthens its hyperscale positioning.
NetApp is positioning its platform around AI-ready data infrastructure, providing unified storage, robust security and a single control plane across hybrid multi-cloud environments. In the first quarter of fiscal 2027, All-flash array revenues reached $1.31 billion, up 47% from the prior-year quarter. Hybrid-flash and other revenues were $510 million compared with $505 million a year ago. Public Cloud revenues grew 28% to a record $206 million, reflecting strong first-party and marketplace storage demand.
At INSIGHT 2026, NetApp announced initiatives with Oracle, SAP and Supermicro to expand cloud storage services, explore deeper integration with SAP Cloud Infrastructure and develop integrated compute and storage solutions for AI workloads.
WDC Price Performance, Valuation and Estimates
In the past month, shares have lost 17.1% compared with the Zacks Computer-Storage Devices industry’s decline of 24.6%.
Image Source: Zacks Investment Research
WDC’s shares are trading at a forward price/earnings multiple of 12.16X, higher than the industry’s 7.44X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for WDC’s earnings for fiscal 2026 has been revised up 21.6% to $24.36 over the past 60 days.
View the Zacks #1 Rank List
Image: Bigstock
Western Digital's 88% Cloud Revenue Share: Strength or Weakness?
Key Takeaways
Western Digital Corporation (WDC - Free Report) continues to benefit from robust cloud storage demand, with the end market accounting for an overwhelming share of its revenues.
In the first quarter of fiscal 2027, Cloud end market revenues reached $3.9 billion, representing 88% of total revenues, rising 54% year over year. Growth was driven by sustained demand for high-capacity nearline HDDs, including the initial ramp-up of its latest ePMR platform. Strong pricing trends further reflect the value and total cost of ownership (“TCO”) benefits the company offers its customers.
Overall exabyte shipments increased 22% year over year to 248 exabytes, while average selling price per terabyte rose 28%, highlighting favorable industry supply-demand dynamics.
The company’s transition to higher capacity drives positions it well to capture the increasing market opportunities amid growing storage requirements. On the last earnings call, management noted that WDC’s latest ePMR platform, offering capacities of up to 40TB, is expected to account for nearly 30% of nearline exabyte shipments in fiscal second-quarter 2027 and 50% in the fiscal third quarter of 2027.
Western Digital Corporation Revenue (Quarterly)
Western Digital Corporation revenue-quarterly | Western Digital Corporation Quote
WDC further noted that it was on track to finish qualifications with two hyperscale customers for its first-generation HAMR product in the first quarter of calendar year 2027. It remains on track to begin volume shipments in the first half of calendar year 2027 for the same.
Demand visibility remains strong, with management adding that for the top seven customers it has good visibility up to 2030-31. Additionally, growing storage requirements from AI frontier labs, neocloud providers and hybrid cloud solution OEM providers are broadening its customer base. Driven by the tech transition, Western Digital expects exabyte supply growth to accelerate throughout fiscal 2027 and 2028.
However, such a substantial cloud exposure does bring its own set of concerns. Any slowdown in hyperscaler capital expenditures, delays in infrastructure deployments or changes in customer buying decisions could affect revenues.
Although Client and Consumer revenues increased 119% and 19%, respectively, their combined contribution was only 12% of total revenues, offering limited diversification. Moreover, stiff competition in the cloud space from players like Seagate Technology Holdings plc (STX - Free Report) and NetApp (NTAP - Free Report) is a concern.
Mapping the Competitive Terrain
Seagate is also benefiting from increasing storage demand. For the first quarter of fiscal 2027, the data center end market accounted for 81% of total revenues, at $3.4 billion, representing an 18% sequential increase and 63% year-over-year growth. Global cloud customers represented a major share of data center revenues and exabyte demand, a trend expected to persist as Mozaic 4 production ramps.
STX expects HAMR to account for roughly 50% of nearline exabyte shipment run rate by the end of 2026, with Mozaic 4 representing about half of HAMR shipments. Additionally, Microsoft Azure's qualification of Seagate's HAMR-based SMR solution with Broadcom strengthens its hyperscale positioning.
NetApp is positioning its platform around AI-ready data infrastructure, providing unified storage, robust security and a single control plane across hybrid multi-cloud environments. In the first quarter of fiscal 2027, All-flash array revenues reached $1.31 billion, up 47% from the prior-year quarter. Hybrid-flash and other revenues were $510 million compared with $505 million a year ago. Public Cloud revenues grew 28% to a record $206 million, reflecting strong first-party and marketplace storage demand.
At INSIGHT 2026, NetApp announced initiatives with Oracle, SAP and Supermicro to expand cloud storage services, explore deeper integration with SAP Cloud Infrastructure and develop integrated compute and storage solutions for AI workloads.
WDC Price Performance, Valuation and Estimates
In the past month, shares have lost 17.1% compared with the Zacks Computer-Storage Devices industry’s decline of 24.6%.
Image Source: Zacks Investment Research
WDC’s shares are trading at a forward price/earnings multiple of 12.16X, higher than the industry’s 7.44X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for WDC’s earnings for fiscal 2026 has been revised up 21.6% to $24.36 over the past 60 days.
Image Source: Zacks Investment Research
Currently, Western Digital sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.