Western Digital: HDD Supply Crunch Through 2027

Western Digital's business has shifted sharply from consumer and PC markets, which historically were more tied to economic conditions and unit cycles. According to CFO Kris Sennesael, roughly 90% of the company's business is now tied to cloud customers, where demand is driven by expanding data storage requirements.

Unlike prior industry cycles, Sennesael said Western Digital does not currently see an AI infrastructure "digestion" period. Customer conversations have produced stronger demand signals and longer-term visibility, and exabyte demand is expected to grow at a compound annual rate of more than 25% over the next five years, though he noted growth will not necessarily be uniform every year. He said the company is currently supply constrained.

Western Digital is preparing several technology transitions to increase shipments: it is ramping 32TB ePMR drives and developing up to 40TB ePMR, first-generation HAMR drives of up to 44TB, and subsequent products exceeding 50TB. First-generation HAMR drives are expected to ship in the first half of 2027, while high-bandwidth HDDs are being developed to improve performance for AI workloads. The supply constraint is likely to keep pricing firm; price per terabyte rose about 18% to 19% year over year in the latest quarter, with gross margins in the mid-50% range and excess cash flow directed primarily toward buybacks and dividends.