Western Digital Earnings: Pricing and Margins Surge as Contract Visibility Extends Into 2031

Key Morningstar Metrics for Western Digital

• : $420.00
• : ★★

• Morningstar Economic Moat Rating

  : None

• Morningstar Uncertainty Rating

  : High

What We Thought of Western Digital’s Earnings

Western Digital WDC delivered another exceptional quarter, with fiscal fourth-quarter revenue rising 44.0% year over year to $3.75 billion and non-GAAP gross margin expanding to 54.4%, both at or above the high end of guidance.

Why it matters: While results were solid, revenue was a slight miss from our expectations, thanks to lower-than-expected exabyte growth, even as pricing hikes exceeded expectations. Combined with slightly less bullish commentary than at Seagate, this is likely driving some of the after-hours selloff.

• While Seagate and Western Digital will inevitably be compared, we thought results were still good in an absolute sense. Guidance for the next quarter is solidly above expectations, and commentary for demand and visibility were both quite positive.
• For visibility, Western Digital is now negotiating long-term agreements with customers extending through calendar 2031. Like Seagate, Western Digital is seeing demand broaden beyond hyperscalers to neoclouds, frontier labs, sovereign deployments, enterprise, and physical AI applications.

The bottom line: We are raising our fair value estimate to $420 per share from $415 as we revise up our near-term EPS estimates by 25% for 2027 and 29% for 2028. We simultaneously have lowered our implied multiple on 2030 earnings to account for potential peak-cycle risks.

• Shares are down 10% after hours to roughly $465, further closing the gap with our fair value estimate. Shares are down materially from a peak of nearly $750. We currently project a five-year EPS CAGR of 51% for Western Digital, very close to our Seagate projections.
• The HDD players remain tough to value. If the current cycle extends beyond 2030 and the market gives credit for this, there is upside to our fair value and today’s prices, and vice versa if the cycle falls. Our current fair value estimate contemplates a 7% near-line pricing CAGR through 2031.