Western Digital earnings forecast doubles as AI demand drives stock rally
Shares have surged more than 200 per cent year-to-date as hyperscalers expand storage infrastructure for artificial intelligence workloads.
Western Digital shares have surged more than 200 per cent year-to-date and approximately 945 per cent over the past 52 weeks, driven by robust artificial intelligence demand and constrained supply in the memory market. The rally reflects a structural shift in data infrastructure, with hyperscale cloud providers and data centres rapidly expanding storage capacity to manage exploding data volumes. The company is capitalising on this trend through high-capacity nearline hard disk drives, which are critical for enterprise data storage and AI workloads.
In its fiscal third quarter, Western Digital’s adjusted earnings per share nearly doubled year-on-year, rising 97 per cent to $2.72. This sharp increase reflects strong demand trends, improving pricing conditions, and disciplined cost execution. Analysts project that earnings per share will reach $9.57 in fiscal 2026, representing an 111 per cent increase from the prior year. Growth is expected to remain solid beyond that period, with forecasts indicating a further 75 per cent rise in fiscal 2027 to $16.71.
The company has secured purchase commitments from its top seven customers through 2026, providing significant revenue visibility. Additionally, three of its five largest customers have signed longer-term agreements extending into 2027 and 2028. These commitments allow Western Digital to plan production capacity more efficiently and support sustained long-term growth as demand strengthens and supply remains constrained.
Western Digital is scaling advanced technologies to enable higher storage density and stronger margins, including ePMR drives and Heat-Assisted Magnetic Recording-based drives. Increasing adoption of UltraSMR technology is also expected to enhance profitability by improving storage efficiency. Management has highlighted a favourable pricing environment, particularly for higher-capacity products, which is helping to lift gross margins alongside stronger operating leverage and lower interest expenses.
Wall Street maintains a “Strong Buy” consensus on the stock, with the highest analyst price target set at $660. The stock currently trades at a forward price-to-earnings ratio of 50.6 times. While this valuation may appear elevated, analysts suggest that the premium multiple is warranted by the company’s earnings growth potential and improving fundamentals.
This analysis is based on reporting originally published on Barchart.com by Amit Singh.
