Western Digital Corporation (WDC) | The Buildout — AI Infrastructure

——Mkt cap — · 52-wk —–— · YTD — · delayed

Updated Aug 12, 2026Q3 FY2026 reviewed

Western Digital makes high-capacity hard disk drives that store the growing data behind AI workloads.

Revenue +44% YoY

FQ4 FY26 revenue $3.75B, at or above the high end of guidance.

Gross margin 54.4%

Expanded 1,310 basis points YoY in FQ4 FY26.

LTA talks to 2031

Discussions underway for calendar 2029, 2030, and 2031.

Cloud 89% of revenue

Top three customers were 17%, 12%, and 10% of FY25 revenue.

The Buildout Takeaway

Western Digital is converting the AI data wave into long-dated contracts and a hard-drive margin profile that no longer looks like the old commodity cycle. The risk is heavy cloud concentration and the need to execute its HAMR transition against a direct competitor.

Analyst coverage

61 analysts·44 Buy16 Hold1 Sell

Median target$605 Range $400–$1,050 · 15 estimates

Management guidance

Latest quarterly guide: FQ1 FY27 revenue $4.1B ± $100M · gross margin 55%–56% · diluted EPS $4.00 ± $0.15

Important: The Buildout is a data analytics platform. Content is generated by algorithms and AI agents using public filings, earnings transcripts, and market data. This is not personalized investment advice.

Our View

The Verdict

Western Digital makes high-capacity hard disk drives that sit beneath the AI data load — not compute, not memory, but the economical mass-storage tier. It supplies the nearline systems where training, inference, agentic, and physical AI workloads accumulate data.

Market Cap	—
Revenue (TTM)	$11.8B
Revenue Growth	+9.1%
EBITDA Margin (TTM)	33.9%

Net Cash	$1.5B
Earnings Beats	7 of 7
P/E (TTM)	—
EV/EBITDA (TTM)	—

What We Like

FY2026 revenue reached $12.9B, up 36% YoY, with gross margin expanding 970 bps to 49.1%.
FQ4 FY26 gross margin hit 54.4%, and FQ1 FY27 guidance is 55%–56%.
Long-term data storage growth view raised to greater than 25% CAGR.
LTA discussions now extend to calendar 2029, 2030, and 2031.
Balance sheet ended FQ4 at $500M net cash; FY26 free cash flow was $3.5B, a 27% margin.

What We’re Watching

FQ4 exabytes grew 22% YoY, down from 34% in FQ3; management described hyperscale buying as lumpy.
HAMR execution: 44TB HAMR is in qualification with four customers and targeted for 1H CY27; management declined to quantify HAMR mix by end of CY27.
Cloud concentration: Cloud is 89% of total revenue, and top three customers were 17%, 15%, and 11% of FQ3 FY26 revenue.
No unit capacity additions: exabyte growth depends on areal density, UltraSMR, ePMR, and HAMR transitions.

Bottom Line

The thesis is strengthening: pricing per terabyte accelerated to high teens YoY, gross margin crossed 50%, the long-term demand view was raised, and visibility stretched toward 2031. The open question is whether WDC can execute the 40TB ePMR and HAMR transitions without giving back pricing or margin against Seagate.

Next upNext up is the FQ1 FY27 report, which tests the revenue and gross margin guide. After that, the 40TB ePMR >50% mix target by FQ3 FY27 and 44TB HAMR shipment in 1H CY27 test the technology roadmap.

Last Quarter — Q3 FY2026

Earnings Beat

Western Digital's FQ4 FY26 revenue reached $3.75B, up 44% YoY and at or above the high end of guidance. Gross margin came in at 54.4%, up 1,310 bps YoY. Exabytes shipped rose 22% YoY to 231, while Cloud revenue was $3.3B, 89% of total and up 43% YoY.

Metric	Q3 FY2026	Q2 FY2026	Q3 FY2025	YoY
Revenue	$3.3B	$3.0B	$2.3B	+45.5%
Gross margin	50.2%	45.7%	39.8%	+1040bps
EBITDA	$1.3B	$1.1B	$870M	+47.8%
EPS	$8.52	$4.90	$1.46	+482.4%
Exabytes shipped	231 exabytes	222 exabytes	n/a	+22% YoY

During the quarter, the blended average year-over-year price increase per terabyte improved from high single digits last quarter to high teens this quarter, reflecting the impact of our predictable and sustainable pricing strategy as we deliver greater value to our customers.— Kris Sennesael, CFO, August 5, 2026

Management tone: Management shifted from a strong-quarter, improving-visibility tone in FQ3 to a structural, thesis-driven tone in FQ4. Pricing language strengthened from high single digits to high teens YoY, the long-term growth view was raised, and visibility was extended to 2029–2031 discussions.

Management Guidance

For FQ1 FY27, management guided revenue of $4.1B ± $100M, gross margin of 55% to 56%, diluted EPS of $4.00 ± $0.15, opex of $390M to $400M, and a 17% tax rate. Long-term exabyte growth was raised to greater than 25% CAGR, and cost per terabyte is expected to decline roughly 10% per year.

Business Trajectory

Trajectory

Trailing data through Q3 FY26 shows revenue rising from $2.8B in Q1 to $3.0B in Q2 and $3.3B in Q3, with gross margin expanding to 50.2%. FQ4 revenue then reached $3.75B, up 44% YoY, while gross margin hit 54.4%. The mix shifted toward price and product mix: FQ4 exabytes grew 22% YoY after FQ3 grew 34%, while price per terabyte moved to high teens YoY.

Revenue & Margin Trajectory

Gross margin as reported.

Share Price — 12 Months

52-week range $76–$712.

Share Price — 12 Months

52-week range $76–$712.

The Numbers

The Model

The model projects FY+1 revenue of $17,300M and EBITDA of $7,629M, a 44.1% EBITDA margin, then FY+2 revenue of $21,250M and EBITDA of $9,988M, a 47.0% margin. The near-term anchor is Cloud pricing and the 40TB ePMR ramp; the FY+2 step assumes HAMR and UltraSMR add more capacity per drive.

Revenue & EBITDA Projections

Solid bars are reported actuals; outlined bars are model projections — not company guidance.

Metric	FY2025	Next FY (E)	Following FY (E)
Revenue	$11.4B	$17.3B	$21.2B
YoY Growth	—	+51.8%	+22.8%
EBITDA	$3.1B	$7.6B	$10.0B
EBITDA Margin	27.1%	44.1%	47.0%

Projections are the median of 5 independent model runs. The model’s revenue sits 9.7% below analyst consensus.

What Could Go Right — and Wrong

What good looks like

LTA discussions for calendar 2029–2031 convert into signed exabyte-based contracts.
40TB ePMR reaches >50% of nearline bits by FQ3 FY27, and UltraSMR approaches 60% of nearline exabyte shipments by exit FY27.
44TB HAMR ships in 1H CY27, followed by 50TB products in 2H CY27.
High-bandwidth drives move from sampling with five customers to deployed design wins.
Core cloud video-driven demand adds a durable non-AI leg to hyperscale storage growth.

What could go wrong

HAMR qualification or yield slips, delaying 44TB shipment beyond 1H CY27.
A major hyperscaler pauses orders or shifts share; Cloud is 89% of revenue and top three customers were 17%, 15%, and 11% of FQ3 revenue.
Exabyte growth stays below the >25% CAGR claim; FQ4 already decelerated to 22% YoY from 34% in FQ3.
A competitive pricing cycle resumes once HAMR and areal-density gains loosen supply, reversing price per terabyte.
Sole/single-source supply disruption or a slip in areal density and UltraSMR transitions caps exabyte output.

What’s Next

Looking Ahead

The next 12 months hinge on the 40TB ePMR volume ramp, first 44TB HAMR shipments in 1H CY27, and UltraSMR adoption toward roughly 60% of nearline exabytes by exit FY27. LTA discussions for 2029–2031 and the FQ1 FY27 gross margin guide of 55%–56% test whether the pricing and margin structure holds.

Catalysts

FQ1 FY27FQ1 FY27 results — Tests $4.1B revenue and 55–56% gross margin guidance.
1H CY2744TB HAMR shipment — First volume HAMR; tests yield, reliability, and ramp.
FQ3 FY2740TB ePMR mix target — Tests >50% of nearline bits on the 40TB platform.
Exit FY27UltraSMR adoption target — Tests ~60% of nearline exabyte shipments via UltraSMR.
2H CY2750TB product launch — Next capacity step beyond 44TB HAMR.
Ongoing2029–2031 LTA conversion — Tests whether discussions become signed multi-year contracts.

Numbers

Financials

Annual Summary

Metric	FY2024	FY2025	TTM	YoY
Revenue	$9.5B	$11.4B	$11.8B	+19.5%
Gross Margin	24.1%	38.1%	45.4%	+1,405bps
EBITDA	$291M	$3.1B	$25.7B	+959.5%
EBITDA Margin	3.1%	27.1%	33.9%	+2,400bps
Net Income	−$806M	$1.9B	$6.5B	+331.8%
Free Cash Flow	−$781M	$1.3B	$10.6B	—
Net Cash	—	—	—	—

Key Ratios (Trailing)

Valuation

P/E TTM—
EV/EBITDA TTM—
EV/Revenue TTM—
Price/FCF TTM—

Profitability

Gross Margin (TTM)45.4%
EBITDA Margin (TTM)33.9%
Net Margin (TTM)55.1%
ROIC35.1%
FCF Conversion72.9%
SBC / Revenue1.7%

Reference

The Company

Western Digital is a pure-play HDD company after completing the Flash separation on February 21, 2025. It makes high-capacity nearline drives, ePMR drives up to 32TB, 40TB ePMR now entering volume production, 44TB HAMR in qualification, and UltraSMR software-defined capacity. These products supply the economical mass-storage layer hyperscalers use for AI and cloud data.

Manufacturing spans the U.S., China, Malaysia, Philippines, and Thailand, with the largest manufacturing-related sites in Thailand and Penang, Malaysia. WDC deliberately avoids adding unit HDD capacity, investing instead in heads, media, and automation; capex was $108M in FQ4 FY26.

Business Segments

Cloud

89% of FQ4 FY26 revenue

High-capacity enterprise HDDs and data storage platforms for public/private cloud and enterprise customers.

Growth driver: Hyperscaler AI and core cloud storage demand.

Client

6% of FQ4 FY26 revenue

High-performance HDDs for desktop/notebook OEM and channel customers.

Growth driver: Exabyte growth and higher average selling prices.

Consumer

5% of FQ4 FY26 revenue

External HDD storage products sold via retail and channel.

Growth driver: Higher HDD pricing pulled by flash-based alternatives.

Competitive Landscape

The 10-K names WDC's HDD competitors as Seagate Technology Holdings plc and Toshiba Electronic Devices & Storage Corporation. The material's competitive discussion centers on Seagate, the direct HDD competitor with the most prominent public read-through. An analyst on WDC's FQ4 call challenged WDC's sequential growth and gross margin guide against that main competitor.

Seagate Technology Holdings plc
Direct HDD competitor; an analyst compared WDC's sequential growth and gross margin guide unfavorably to Seagate's.
Toshiba Electronic Devices & Storage Corporation
Named in the 10-K as an HDD competitor; not otherwise discussed in the source material.

Competitor names are from the WDC 10-K; the detailed comparison comes from the FQ4 FY26 call and companion supply-chain read-through.

Supply Chain

WDC sits between a limited disclosed supplier base and a concentrated hyperscale/cloud customer set. No specific hyperscale customer names were disclosed on the earnings calls.

Sole Source

Limited qualified suppliers (10-K)

Technologies, firmware, preamps, controllers, DRAM, components, equipment, materials; some sole/single-source.

Supplier

Inferred HDD equipment and component suppliers

Specific names are inferred from the Wiring file and not confirmed by WDC disclosure.

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Most economical hyperscale mass-storage layer

WDC

Pure-play HDD manufacturer; no unit capacity additions; growth from areal density, ePMR, UltraSMR, and HAMR.

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Hyperscale and cloud customers

Cloud 89% of FQ4 FY26 revenue

Top three customers were 17%, 15%, and 11% of FQ3 FY26 revenue.

Neoclouds, frontier AI labs, sovereign programs

Management reports increasing demand; an unnamed autonomous-vehicle company cited.

Tier 2 CSPs and Asia-based hyperscalers

Targets for broader UltraSMR JBOD adoption.