Western Digital revenue jumps 35.7% as AI storage demand drives growth

Western Digital fiscal 2026 revenue rose 35.7% to $12.92 billion, with non-GAAP earnings per share reaching $10.22, as artificial intelligence workloads increased demand for hard disk drives. The stock currently trades at approximately 23 times forward earnings, following a sharp selloff in October that left shares 50% below their 52-week high of $799.62.

The company’s performance reflects a decade of volatility that included two significant price declines and a five-year suspension of dividends. Ten years ago, Western Digital completed its acquisition of SanDisk, transforming from a disk-drive manufacturer into a combined flash and hard disk drive giant. This integration exposed the company to NAND pricing cycles, leading to severe earnings hits during the NAND busts of 2018-2019 and 2022-2023. In response to pressure from activist investor Elliott Management, Western Digital spun off its flash unit as Sandisk in February 2025, leaving the parent company as a pure-play hard drive firm.

Management attributes the recent turnaround to the data storage requirements of AI workloads, noting that roughly 80% of data stored in hyperscale data centers resides on hard disk drives. This shift in demand has altered the investment thesis for the stock, which has historically been viewed through the lens of cyclical storage pricing. Over the past decade, reinvested dividends added approximately $1,156 to the value of a hypothetical investment, though nearly all of that gain came from quarterly payouts made through April 2020.

The dividend record highlights the duration of the downturn, with no payments issued between May 2020 and June 2025. The dividend resumed at $0.10 per share and currently stands at $0.15. During the intervening period, the adjusted share price fell 58.8% between March and December 2018 and dropped another 51.6% during 2022. An investor who purchased shares in 2016 at an adjusted price of $39.31 held a position worth only $42.57 five years later before the recent recovery.

The sustainability of this growth depends heavily on the capital expenditure plans of cloud customers, who account for 89% of Western Digital's revenue. Company guidance projects approximately $4.10 billion in revenue and $4.00 in earnings per share for the next quarter. The current valuation assumes that long-term agreements extending toward 2031 will lock in pricing and that AI-driven exabyte demand will continue to grow at a rate of 25% or more.

Risks remain tied to the cyclical nature of storage demand. If hyperscaler spending cools, the stock faces potential pressure similar to previous cycles that halved its value. The recent financial results demonstrate that the company has successfully pivoted toward AI storage needs, but its future performance remains contingent on the continued expansion of data center infrastructure by major cloud providers.