Western Digital cloud sales jump 54% as AI storage demand builds

Western Digital's latest quarter shows how AI workloads are spilling over from chips into storage. As cloud providers, AI developers and enterprises generate and retain more data, demand for high-capacity hard drives is rising. Inference and agentic AI are producing growing volumes of logs, model outputs and performance data, while physical AI applications such as robotics, factory automation and autonomous vehicles add video-intensive workloads.

The company is also shifting its product mix toward higher-capacity drives. Its ePMR platform offers up to 40TB, and Western Digital expects these drives to account for nearly 30% of nearline shipments in the fiscal second quarter and 50% in the fiscal third quarter, supporting exabyte shipment growth through fiscal 2027 and beyond. Management said its seven largest customers have planning visibility extending into 2030 and 2031, though such visibility does not guarantee future orders.

Competitors are making similar bets. Seagate has seen cloud revenue rise for 12 consecutive quarters, and most nearline exabyte supply is allocated through calendar 2028. Western Digital's shares have surged 51.4% in the past year, trailing the Zacks Computer-Storage Devices industry's 69.9% gain, and trade at 8.92 times forward earnings versus 5.21 for the industry. Analysts have raised their fiscal 2027 earnings estimate by 21.6% to $24.36 over the past 60 days.