Western Digital Stock Is Up 135% This Year – Here’s Why

Shares of Western Digital (NASDAQ:WDC | WDC Price Prediction) are trading around $404 Friday afternoon, modestly higher on the session and capping one of the strongest runs in the AI infrastructure complex this year. Impressively, WDC stock is up 134% year to date (YTD).

The rally has legs across multiple timeframes. Western Digital shares have gained 9% in the past week and 35% in the past month, and over the trailing year the stock has returned 909%.

So, what’s behind the move in WDC stock? AI data center demand, a clean post-spin business model, and disciplined HDD industry economics have combined to make Western Digital one of the year’s quieter AI infrastructure winners. For broader context on the AI infrastructure trade, see our recent coverage of why AI data center spending keeps surprising to the upside.

AI Data Center Demand Powers the Rally

Western Digital’s high-capacity hard disk drives are the backbone of cold and warm storage at hyperscale cloud providers. AI training and inference workloads generate enormous volumes of data that must be stored cheaply and reliably, and HDDs remain the cost-per-terabyte leader for bulk storage at scale.

CEO Irving Tan put it directly on the latest call, noting that “as the AI value transitions from model training to inference, we expect that more data will be generated to support inference delivery, which will also require additional data storage.” Western Digital’s Cloud segment hit $2.7 billion in fiscal Q2, or 89% of total revenue, up 28% year over year.

Earnings and Margins Tell the Story

Western Digital has beaten estimates in each of its last four quarters. In fiscal Q2 reported January 29, WDC posted non-GAAP EPS of $2.13 versus the $1.93 consensus, on revenue of $3.02 billion.

The bigger story is margin expansion at Western Digital. Non-GAAP gross margin reached 46%, up 770 basis points year over year, and management guided fiscal Q3 to 47% to 48%.

Moreover, Western Digital’s free cash flow of $653 million funded $615 million in buybacks last quarter. Management noted that Western Digital returned over 100% of free cash flow to the company’s shareholders.

Sandisk Spin and a Tight Three-Player Market

Western Digital separated its NAND flash business into Sandisk (NASDAQ:SNDK) in February 2025, leaving WDC as a pure-play HDD operator with cleaner economics and a more focused capital allocation story. Sandisk shares are themselves up roughly 295% YTD, underscoring how broad the storage rerating has become.

The HDD industry is now effectively a three-player market featuring Western Digital, Seagate (NASDAQ:STX), and Toshiba, and supply discipline is tight. Tan said Western Digital is “pretty much sold out for calendar ’26,” with firm purchase orders with the top seven customers through calendar 2026 and longer-term agreements stretching into 2028.

HAMR (heat-assisted magnetic recording) extends the runway by pushing per-drive capacity higher, keeping HDDs cost-competitive against SSDs for bulk AI storage. Western Digital expects HAMR qualification in the first half of calendar 2026, with production ramp at the start of calendar 2027.

What to Watch Next

The next catalyst is close. Western Digital reports Q3 FY2026 results on April 30 after the close. Guidance calls for revenue of about $3.2 billion, roughly 40% growth at the midpoint, and EPS of $2.30, plus or minus 15 cents.

The bull case for WDC rests on continued hyperscaler capex, sold-out HDD capacity through next year, and HAMR-driven margin expansion into 2027. The bear case is harder to dismiss. Western Digital trades at a P/E ratio of 38x after a triple-digit run, the storage business is historically cyclical, SSDs nibble at certain workloads, and any normalization in hyperscaler capex could pressure pricing.

Wall Street remains constructive overall, with 21 Buy ratings versus 5 Holds and an analyst consensus target of $354.96. That target sits below the current WDC stock price, so investors considering a position may want to size moderately and watch HDD pricing commentary, hyperscaler capex outlooks, and HAMR qualification updates on next Thursday’s call. Momentum traders will likely keep Western Digital shares active into the print.