Western Digital Surges 540% in a Year: Is the Stock Worth Buying?

Western Digital Corporation’s WDC shares have skyrocketed 539.5% over the past year, outpacing the 246.4% return in the Zacks Computer-Storage Devices industry. The stock has also outperformed the Zacks Computer & Technology sector, as well as the S&P 500’s growth of 38.2% and 26%, respectively. The surge is propelled by explosive demand for storage infrastructure tied to AI, cloud computing and hyperscale data centers.

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WDC has outgrown its peers from the storage industry, like Super Micro Computer SMCI and Teradata TDC. TDC has climbed 24.3%, and SMCI lost 18.7% during the same interval. The company has also surpassed its long-time rival in the HDD market, Seagate Technology Holdings plc STX, which surged 350.8% in the past 12 months.

Seagate provides data storage technology, with HDDs as its core product. Super Micro Computer develops server and storage systems for data centers, cloud, AI and edge workloads. Teradata delivers a hybrid cloud analytics and AI data platform, Teradata Vantage, helping enterprises analyze data and innovate at scale.

WDC has a 52-week high of $309.9. Such a dramatic rise naturally raises an important question for investors: after a 540% rally, is Western Digital still a buy, or has the opportunity already passed? Let’s explore the drivers behind the surge, the company’s long-term growth prospects, potential risks and whether the stock still offers investment upside.

What Sent WDC Shares Soaring?

Western Digital’s surge is the result of several structural and company-specific catalysts. It is advancing areal density gains while accelerating its ePMR and HAMR roadmaps and driving adoption of higher-capacity UltraSMR drives. In the fiscal second quarter, it shipped more than 3.5 million latest-generation ePMR drives supporting up to 26TB CMR and 32TB UltraSMR capacities, reflecting strong customer demand. Total shipments reached 215 exabytes, up 22% year over year.

Building on this momentum, the company is advancing next-generation HAMR drives and has acquired intellectual property and talent to enhance its in-house laser development capabilities. Western Digital also introduced UltraSMR-enabled JBOD platforms with software ecosystem partners, delivering higher storage density and more efficient large-scale data analytics. Strong demand visibility remains, with firm purchase orders from its top seven customers secured through 2026 and multi-year agreements with three of its top five customers extending into 2027 and 2028.

AI is generating massive data volumes, prompting WD to introduce a customer-centric roadmap focused on higher capacity, performance, power efficiency and faster deployment while preserving the cost advantages of HDDs. The company reaffirmed its dual-path strategy in ePMR and HAMR technologies. WD’s 40TB UltraSMR ePMR HDD is currently being qualified by two hyperscalers, with volume production expected in the second half of fiscal 2026, while HAMR drives are targeted to ramp in 2027. The roadmap extends ePMR to 60TB and scales HAMR to 100TB by 2029.

To improve throughput for AI workloads, WD is developing High Bandwidth Drive and Dual Pivot technologies. High Bandwidth Drive is already under customer validation, while Dual Pivot HDDs are expected around 2028. The company also plans power-optimized drives entering qualification in 2027, creating a new cost-efficient storage tier for AI data. Additionally, WD is expanding its Platforms business with an open-API software layer expected in 2027, enabling enterprises and mid-scale cloud providers to deploy hyperscale-like storage infrastructure more easily and cost-effectively.

WDC Targets Strong Growth While Boosting Shareholder Returns

Western Digital has been improving its balance sheet and generating strong cash flows. In the fiscal second quarter, the company generated $745 million in cash from operations compared with $403 million in the prior-year quarter. Free cash flow amounted to $653 million, up 95%. This robustness allowed management to return more than 100% of its free cash flow to shareholders through a combination of share repurchases and dividends, underscoring the strength in the company’s cash-generation profile.

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During the quarter, it repurchased approximately 3.8 million shares for $615 million and paid $48 million in dividends. Since launching the capital return program in fourth-quarter fiscal 2025, the company has returned a total of $1.4 billion to shareholders through buybacks and dividends. In February 2026, its board authorized an additional $4 billion for share repurchases, with approximately $484 million remaining under the previous authorization.

At its Innovation Day 2026, WD has outlined its long-term financial model — path to durable growth. Over the next three to five years, WD targets revenue growth above 20% CAGR, driven by nearline enterprise demand expanding at a mid-20s pace and supported by stable pricing. The model calls for gross margins exceeding 50% through a richer mix of higher-capacity HDDs and ongoing cost improvements, while operating margins above 40% are expected from strong operating leverage.

With disciplined working-capital management and CapEx maintained at 4–6% of revenue, free cash flow margins are projected to surpass 30%. This financial leverage, combined with share repurchases, positions EPS to rise beyond $20, underscoring a strategy built on execution, technology leadership and sustained, durable growth.

Nonetheless, even strong growth stocks face risks. The data-storage market is highly concentrated, dominated primarily by WD and Seagate. Reliance on a limited number of large customers makes the loss of any single order a significant risk, putting pressure on the company to maintain strong relationships. Also, macroeconomic volatility, tariffs and rising global trade tensions could trigger demand fluctuations across enterprise, distribution and retail segments. The rapid AI-driven surge in data storage demand is also increasing manufacturing complexity and lengthening production lead times for higher-capacity drives.

Estimate Revision Trend of WDC

WDC’s estimates revisions are on an upward trajectory currently. The Zacks Consensus Estimate for WDC’s earnings for fiscal 2026 has been revised north 17% to $8.96 over the past 60 days, while the same for fiscal 2027 has gone up 38.4% to $14.55.

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Is WDC Overvalued After the Rally?

Going by the price/earnings ratio, the company’s shares currently trade at 21.48 forward earnings compared with 15.53 for the industry.

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In comparison, the forward 12-month price/sales multiple for STX, TDC and SMCI are 23.81X, 15.53X and 13.53X, respectively.

Should Investors Buy WDC Stock Now?

As AI reshapes the global digital economy, data storage has become one of the most critical infrastructure layers, and WD sits at the center of that transformation. The company’s strong earnings growth, long-term contracts and AI-driven demand provide a compelling long-term story. However, the stock’s meteoric rise means future returns may be more moderate and volatile. For long-term investors who believe the AI data boom is still in its early stages, it could remain an attractive opportunity. For short-term traders, however, patience and careful timing may be essential after such an extraordinary rally.

Investors should balance long-term technology tailwinds with near-term market risks when making decisions. Boasting a Zacks Rank #1 (Strong Buy) at present, WDC seems to be a good buy. You can see the complete list of today’s Zacks #1 Rank stocks here.

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