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what it is
Western Digital makes the hard drives that store the data AI systems, cloud giants, and companies keep piling up.
how it gets paid
Last year Western Digital made $9.5B in revenue.
why it's growing
Revenue grew 265.5% last year. Cloud demand stayed hot and exabyte shipments hit records.
what just happened
Fiscal Q2 2026 revenue hit $3.02B, up 25% vs. prior year, and EPS of $2.13 beat the $1.93 consensus.
At a glance
B+ balance sheet — decent shape, but not bulletproof
5/100 earnings predictability — expect surprises
53.2x trailing p/e — you're paying up for this one
0.2% dividend yield — cash in your pocket every quarter
35.0% return on capital — every dollar works hard here
xvary composite: 51/100 — below average
What they do
Western Digital makes the hard drives that store the data AI systems, cloud giants, and companies keep piling up.
This is a scale business. Bigger drive makers spread factory costs over more units, and Western Digital posted a 24.5% operating margin versus a money-losing $0.20 a share in fiscal 2024. Three customers were 39% of 2025 revenue, which sounds risky, but it also tells you the biggest buyers already trust these drives with their data.
How they make money
$9.5B
annual revenue · their business grew +265.5% last year
total revenue
$9.5B
+265.5%
The products that matter
high-capacity data center hdd
Ultrastar DC HC670 HDD
26TB capacity
This is the kind of drive sitting inside the 215 exabytes Western Digital ships annually. If hyperscalers keep buying bulk capacity, this is where the money shows up first.
AI demand
enterprise flash storage
BiCS8 218L 3D NAND
2TB+ densities
Management's $20+ EPS target over 3–5 years needs flash to matter more, because better mix is how this stops looking like just another HDD cycle.
margin mix
quarterly business mix
HDD and Flash
$1.81B vs $1.21B
The split matters because HDD is larger and growing faster, while flash is smaller and more competitive. Same company. Two very different economics.
60/40 split
Key numbers
35.0%
return on capital
Return on capital → profit earned on money invested → so what: Western Digital is turning each dollar tied up in the business into $0.35 of operating profit.
24.5%
operating margin
Operating margin → profit after running the business → so what: this is no longer a break-even storage vendor.
$16B
2027 revenue est
Revenue estimate → expected sales → so what: the base case says sales rise from $9.5B to $16B, a very large jump for a mature hardware company.
53.2x
trailing p/e
P/E → price divided by last year's earnings → so what: your stock is priced on recovery earnings that already happened, not on cheapness.
Financial health
B+
strength
- balance sheet grade B+ — solid but not elite
- risk rank 3 — safer than 50% of stocks
- price stability 20 / 100
- long-term debt $2.4B (3% of capital)
- net profit margin 31.7% — keeps 32 cents of every dollar in revenue
- return on equity 38% — $0.38 profit for every $1 investors have put in
B+ — functional but not a standout on the balance sheet.
Total return vs. market
You invested $10,000 in WDC 3 years ago → it's now worth $93,980.
The index would have given you $14,540.
source: institutional data · total return
What just happened
beat estimates
Fiscal Q2 2026 revenue hit $3.02B, up 25% vs. prior year, and EPS of $2.13 beat the $1.93 consensus.
Cloud demand stayed hot and exabyte shipments hit records. Gross margin reached 45.7%, which is how you get 81% earnings growth on 25% sales growth.
$3.02B
revenue
$2.13
eps
45.7%
gross margin
the number that mattered
45.7% gross margin mattered most because margin expansion, not just volume, is what turned a cyclical rebound into a profit surge.
-
western digital stock has been at the forefront of the artificial intelligence (ai) boom.the race to build out ai infrastructure has fueled a dizzying bull market in a number of data storage and memory related stocks, including seagate and micron.
-
over the past year, western digital shares have been even more popular with investors than the latter two, more than sextupling in price, including an advance of 52% so far in calendar 2026.
-
the company’s prospects continue to brighten.
-
december-quarter sales and earnings rose 25% and 81% from the prior-year period, surpassing management’s earlier expectations of 16%–25% and 47%–72%.
-
this performance, combined with wdc’s better-than-expected outlook for the march period, has prompted us to raise our fiscal-2026 estimates by $500 million and $1.00 a share. (year ends june 27th.) moreover, the company is confident that the current ai-driven upturn has a long way to run.
source: company earnings report, 2026
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What could go wrong
The top risk here is AI storage demand cooling before valuation resets. Western Digital is trading at 53.2x trailing earnings after a 540% run. That leaves very little room for a normal storage slowdown.
med
hyperscaler spending slows
The current setup assumes cloud and AI customers keep buying bulk storage at elevated levels. If that capex pace cools, the market loses the duration argument holding up an $89B market cap.
The pressure would show up first in the multiple. A 53.2x trailing p/e is pricing future earnings power, not just the latest quarter.
med
flash stays competitive
Flash brought in $1.21B last quarter, or 40% of revenue, but it does not have the same scarcity profile as high-capacity HDD. If pricing weakens there, the mix shift story gets harder.
That would hit the 45.7% gross margin recovery the bull case is leaning on.
med
sold-out capacity proves temporary
Management says HDD capacity is sold out through 2026. Great for pricing. Less great if new supply arrives or customers digest inventory faster than expected.
If that happens, the 35% HDD growth rate and the $20+ EPS path over 3–5 years both start to look aggressive.
Three risks matter most: AI spending duration, flash pricing, and whether HDD tightness lasts through 2026. All three feed directly into the margin and earnings numbers investors are already paying for.
source: institutional data · regulatory filings · risk analysis
Pay attention to
earnings
Q3 FY2026 earnings report
Estimated April 29, 2026. You want to see whether the $2.13 EPS quarter was a stepping stone or a peak.
margin
45.7% gross margin
This is the number carrying the rerating. If it keeps climbing toward the 47–48% area management discussed, the bull case stays intact.
mix
HDD growth versus flash growth
Last quarter it was 35% for HDD and 15% for flash. If that gap narrows for the wrong reason, the AI storage narrative loses some force.
risk
"sold out through 2026" language
That phrase is doing a lot of work. If management softens it, investors will start questioning how durable this cycle really is.
Analyst rankings
earnings predictability
5 / 100
In human-speak, analysts do not view Western Digital as a steady earner. This is a cycle, and cycles surprise people.
xvary composite
51 / 100
Middle-of-the-road overall. Good operating momentum is being offset by valuation, volatility, and a business model that still depends on storage pricing staying favorable.
source: institutional data
Institutional activity
institutions have been net buying for 3 consecutive quarters — 535 buyers vs. 301 sellers in 4q2025. total institutional holdings: 0.4B shares. net buying for 3 quarters.
source: institutional data
Price targets
3-5 year target range
$90
$372
$262
current price
$231
target midpoint · 12% from current · 3-5yr high: $405 (+55% · 12% ann'l return)
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