Morningstar

Western Digital Earnings: Pricing Drives Record Earnings, Volume Growth Slows

The next quarter’s revenue guide was above the FactSet consensus.

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Securities in This Article
Western Digital Corp
(WDC)

Key Morningstar Metrics for Western Digital

  • Fair Value Estimate
    : $420.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : None
  • Morningstar Uncertainty Rating
    : High

What We Thought of Western Digital’s Earnings

Western Digital’s WDC fiscal first-quarter revenue rose 55% year over year to $4.4 billion, beating guidance by the widest margin since the SanDisk split. This was entirely driven by pricing. The second-quarter revenue guide was 13% above FactSet consensus.

Why it matters: Margin gains now rest almost entirely on price, while exabyte growth was a bit below our expectations. Perhaps the most negative indicator was management’s commentary that current pricing dynamics could slow after about three to four more quarters.

  • The CFO conceded that long-term agreements cover less volume and that pricing depends on how far out they run, and that some pricing came from spot sales of uncontracted capacity. That ties today’s margins to tight supply, the piece that reprices first when the cycle turns.
  • Exabyte growth trailed management’s 25%-plus long-term nearline target and its main rival’s pace. However, management said this was the trough and expects growth to keep rising over the next several quarters.

The bottom line: We maintain our $420 per share fair value estimate for no-moat Western Digital. We raise our fiscal 2027 adjusted earnings per share forecast to $24.20 from $20.78 on faster pricing, but less aggressive pricing assumptions starting next year offset this.

  • Shares are on the edge of 4-star territory, with recent pressure likely influenced by broader negative artificial intelligence thematic sentiment. We think worries about the cycle peaking and pricing slowing do not help either. Western Digital remains volatile and tied to the AI buildout.
  • We think consensus price targets above $600 are overdone and don’t factor in enough cyclicality. Our own $420 fair value requires pricing to remain positive through fiscal 2030.

Coming up: Two hyperscalers now finish qualifying heat-assisted magnetic recording drives in early calendar 2027, a quarter later than first promised; volume is still due in the first half.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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