Western Digital Corporation WDC recorded impressive revenue growth in the fourth quarter of fiscal 2026, supported by strong demand for high-capacity storage solutions and favorable pricing trends. Revenues surged 44% year over year to $3.75 billion, driven by rising exabyte shipments and growing cloud storage requirements. The strong performance raises questions about whether the company can sustain this growth momentum throughout fiscal 2027.
Cloud remained Western Digital’s primary growth engine, contributing $3.3 billion, or 89% of total revenues, in the fiscal fourth quarter. Cloud revenues increased 43% year over year, reflecting robust demand for high-capacity nearline hard disk drives (HDDs). Client and Consumer revenues rose 61% and 38%, respectively, benefiting from improved pricing conditions. Total exabyte shipments increased 22% year over year to 231 exabytes, highlighting continued demand for storage capacity.
AI adoption and expanding cloud infrastructure are expected to remain significant growth catalysts. Increasing deployment of AI inference, agentic AI and physical AI applications is generating substantial data storage requirements. Western Digital anticipates exabyte demand growth exceeding 25%, supported by its expanding product portfolio and strong hyperscale customer relationships.
The company’s technology roadmap further strengthens its growth prospects. Western Digital has begun shipping 40-terabyte ePMR drives and expects these products to account for more than half of nearline exabyte shipments by the third quarter of fiscal 2027. It also plans to introduce 44-terabyte HAMR drives in the first half of calendar 2027, supporting higher storage capacity and improved cost efficiency.
Management expects first-quarter fiscal 2027 revenues of $4.1 billion, plus or minus $100 million, indicating approximately 45% year-over-year growth at the midpoint. Favorable pricing and long-term customer agreements provide additional revenue visibility.
However, sustaining such elevated growth throughout fiscal 2027 may prove challenging amid quarterly fluctuations in shipment mix, contract pricing and product transitions. Management has also provided guidance only for the first quarter rather than the full fiscal year.
Nevertheless, strong cloud demand, AI-driven storage expansion and higher-capacity product adoption position Western Digital favorably for continued revenue growth, even if the 44% pace moderates.
Taking a Look at WDC’s Competitors
Seagate Technology Holdings plc STX is banking on strong data center demand, HAMR adoption and pricing discipline. Management expects cloud spending and AI-led storage demand to remain healthy. Demand visibility remains strong, with most nearline capacity allocated through 2028 and customer commitments extending into 2029. Seagate's HAMR-based Mozaic roadmap, disciplined pricing and manufacturing efficiencies are expected to drive revenue growth, margin expansion and cash generation in fiscal 2027. Management anticipates fiscal first-quarter revenues of $4.1 billion (+/- $100 million). At the midpoint, this indicates a 56% year-over-year improvement.
NetApp NTAP is benefiting from growing demand for AI-ready storage, all-flash solutions, Public Cloud and Keystone. Its unified platform and acquisitions support data modernization and AI adoption. For fiscal 2027, NetApp raised its revenue guidance to $7.98-$8.23 billion, with the midpoint implying 17% growth. Adjusted earnings are projected at $9.73-$10.03 per share, representing 22% year-over-year growth at the midpoint. For the second quarter, revenues are expected at $2.03-$2.18 billion and earnings at $2.54-$2.64 per share. However, higher component costs and an unfavorable product mix are expected to pressure gross margins despite pricing actions.
WDC Price Performance, Valuation and Estimates
In the past month, WDC’s shares are down 7% compared with the Zacks Computer- Storage Devices industry’s decline of 2%.
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In terms of forward price/earnings, WDC’s shares are trading at 16.73X, higher than the industry’s 9.63X.
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The Zacks Consensus Estimate for WDC’s earnings for fiscal 2027 has been unchanged over the past 60 days.
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Currently, Western Digital has Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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