Western Digital's stock is up over 470% this year after a record quarter. AI demand for hard drives is driving growth.
Revenue grew 44% to $3.75 billion.
The company sees more demand ahead as AI shifts to inference.
What happened
Western Digital (WDC) posted a record fiscal Q4 with revenue up 44% year over year to $3.75 billion and non-GAAP EPS more than doubled to $3.56. The stock still dipped initially because expectations were even higher.
Why it matters
AI demand for high-capacity hard drives, especially from cloud customers (89% of sales), drove the beat. Gross margin expanded 1,320 basis points to 54.4%, showing pricing power. The company guides fiscal Q1 2027 revenue to roughly $4.1 billion and EPS to $4.00.
What to watch
WDC trades at 17.6x forward earnings, below peer Seagate's ~28x. New 40TB drives are shipping, and 44TB HAMR products arrive in early calendar 2027. The convertible notes exchange (about $191 million) closes near September 2.
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Western Digital's record quarter shows that AI demand is not just for chips but also for storage. Cloud revenue now makes up 89% of sales, and gross margin expanded sharply to 54.4%. The company's CEO says 'data creation isn't slowing,' pointing to multiple demand waves from training to inference and physical AI.
Compared with rival Seagate, Western Digital's margin expansion looks earlier stage, which suggests room for upside if execution holds. The company is introducing 40TB drives and plans 44TB HAMR products in 2027, aiming to cut cost per terabyte by about 10% annually. Multi-year customer agreements through 2029–2031 provide visibility.
The main risk is pricing cyclicality in hard drives. However, with exabyte demand expected to grow above 25% annually, the company appears well-positioned for continued growth.
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