Western Digital Stock Rises After Earnings Beat. Profits Are Growing.

The data-storage company reported better-than-expected quarterly earnings. (Getty Images for WIRED)

Key Points

• Western Digital reports fiscal first-quarter earnings of $1.78 a share and revenue of $2.82 billion, exceeding estimates.
• Gross margin expands to 43.9% from 37.3% a year earlier, driven by increased demand for data hardware.
• The company’s stock rises Friday, adding to gains of 207% this year.

Shares of Western Digital rose Friday after the data-storage company reported better-than-expected quarterly earnings and new orders from hyperscaler customers.

The company posted earnings of $1.78 a share for its fiscal first quarter, beating both its own guidance and analysts’ estimates of $1.59. Revenue totaled $2.82 billion, up 27% from a year ago and ahead of Wall Street’s call for $2.73 billion. Gross margin widened to 43.9% from 37.3% last year.

Western Digital stock was up 3.1% to $142.35 on Friday. Shares had soared 207% this year as of Thursday’s close.

The company has benefited from a spike in demand for hard disk drives, or HDDs, driven by cloud computing and artificial intelligence. That demand, which has boosted both revenue and profit, doesn’t appear to be going away any time soon.

Western Digital’s top seven customers have all made purchase orders through at least the first half of next year. One of its largest hyperscaler clients has signed an agreement through calendar 2027, CEO Irving Tan said on a conference call.

“Looking ahead, we’re excited about the opportunities AI continues to unlock for our business even as we navigate macroeconomic uncertainties,” Tan said.

Western Digital’s second-quarter guidance was better than Wall Street expectations. The company expects revenue to total $2.9 billion, plus or minus $100 million, versus analysts’ forecasts of $2.83 billion. The company’s gross margin is expected to expand again to between 44% and 45%.

“Another impressive beat and guidance underscores the strong demand for HDDs,” wrote Evercore analysts Amit Daryanani and Irvin Liu in a research note. The shift to higher-capacity drives should support continued margin growth, they added. Evercore reiterated an Outperform rating and a price target of $190 on Western Digital stock.

Mark Miller of Benchmark Equity Research also chalked up the results to robust capital spending on AI and data centers among technology companies. With no signs of that investment abating, Benchmark expects more strong quarters ahead. It maintained a Buy rating on the shares and is in the process of raising its target price.

Shares of competitor Seagate Technology Holdings dropped 7.5% on Friday, though it wasn’t clear why. The stock gave back some of its gains from earlier in the week, when the company posted similarly stellar earnings.

Write to Nate Wolf at nate.wolf@barrons.com