Western Digital Riding on AI & Cloud Boom to Power Growth

Western Digital Corporation WDC is riding on a powerful wave of AI and cloud adoption, both of which are rapidly reshaping global data consumption patterns and driving sustained demand for high-density storage. As AI evolves — from large-scale model training to inference and increasingly to agentic AI use cases — the volume and complexity of data generation are rising at an unprecedented pace, making scalable and cost-efficient storage infrastructure more critical than ever.

To capitalize on this trend, Western Digital is closely aligning with hyperscale cloud customers, delivering high-capacity drives at scale with strong performance and optimized total cost of ownership. The company continues to push technological boundaries through areal density improvements and accelerated development of its ePMR and HAMR roadmaps, while also driving adoption of higher-capacity and UltraSMR-based solutions. In the fiscal second quarter, it shipped more than 3.5 million latest-generation ePMR drives, offering up to 26TB CMR and 32TB UltraSMR capacities, reflecting strong customer uptake. Total shipments reached 215 exabytes, up 22% year over year, underscoring robust cloud-led demand.

Western Digital is strengthening its position with a clear innovation roadmap. Its 40TB UltraSMR ePMR drives are currently in qualification with hyperscalers, with volume production targeted in the second half of fiscal 2026. At the same time, HAMR technology is progressing toward a 2027 ramp, with long-term scalability of 100TB by 2029.

AI workloads are also pushing the need for higher throughput and energy-efficient storage. In response, the company is introducing High Bandwidth Drive and Dual Pivot technologies, alongside power-optimized drives that create a new, cost-effective storage tier for sustainable AI deployments. Additionally, UltraSMR-enabled JBOD platforms and an upcoming intelligent software layer aim to extend hyperscale-level efficiency to a broader range of enterprise customers.

The proliferation of generative and agentic AI is expected to drive long-term growth across edge devices such as smartphones, PCs and gaming systems. Western Digital expects continued momentum in the fiscal third quarter, supported by sustained data center demand and further adoption of high-capacity drives. The company expects non-GAAP revenues of $3.2 billion (+/- $100 million), up 40% year over year at the midpoint.

Taking a Look at What’s Driving Competitors’ Growth

Seagate Technology Holdings plc STX is gaining from rapid expansion of AI-led data generation and disciplined areal-density roadmap execution. The company operates in a solid demand environment, led by data center markets, with sustained growth in high-capacity nearline drives across global cloud customers and improving enterprise edge demand, which is expected to continue based on the build-to-order pipeline. The shift to higher-capacity HAMR drives is expected to improve margins and cost efficiency, boosting its long-term value proposition. For the fiscal third quarter, it expects revenues of $2.9 billion (+/- $100 million), up 34% at midpoint.

Everpure, Inc. PSTG is advancing enterprise storage through AI-focused innovations, treating storage as high technology rather than a commodity. Its unified Purity platform and Evergreen architecture, along with Fusion’s global data control plane, enable enterprise-wide data cloud management with consistent policies. Growing demand is driven by AI, HPC and modern workloads. The planned acquisition of 1touch will enhance data discovery, governance and cyber resilience, strengthening AI-ready data capabilities. For first-quarter fiscal 2027, the company expects revenues of $990 million to $1.01 billion, up about 28% year over year at the midpoint. Everpure has entered fiscal 2027 with strong momentum and expects 47% of revenue in the first half, up 2 points year over year. At the midpoint, revenue expectations of $4.3–$4.4 billion suggest 18.8% year-over-year growth.

WDC Price Performance, Valuation and Estimates

In the past month, shares have gained 6.7% compared with the Zacks Computer-Storage Devices industry’s rise of 3.6%.

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In terms of forward price/earnings, WDC’s shares are trading at 23.67X, up from the industry’s 16.15X.

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The Zacks Consensus Estimate for WDC’s earnings for fiscal 2026 has been revised up 15% to $8.96 over the past 60 days.

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Currently, Western Digital has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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Western Digital Corporation (WDC): Free Stock Analysis Report

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