AI Demand Drives WD Revenue’s Sky High with More to Come

Why It Matters

AI training, inference and physical AI are reshaping data‑storage demand, positioning HDDs as a cost‑effective backbone for cloud and enterprise workloads. WD’s strong earnings and roadmap signal a durable growth tail for the hard‑disk market amid a flash‑memory‑centric narrative.

Key Takeaways

• Revenue $3.34B, up 46% YoY
• Gross margin exceeds 50% for first time
• UltraSMR drives now in three largest customers
• Dividend increased 20% to $0.15 per share
• Projected FY2026 revenue $12.8B, +35% YoY

Pulse Analysis

The explosion of artificial‑intelligence workloads is reviving hard‑disk drives (HDDs) as a critical storage tier. AI training generates massive datasets, while inference and emerging agentic AI continuously produce new data that must be retained cost‑effectively. Compared with flash, HDDs offer a lower price‑per‑gigabyte, making them the preferred medium for exabyte‑scale archives in hyperscale cloud environments. This shift is prompting cloud providers to secure long‑term supply agreements, reinforcing the strategic importance of capacity‑focused storage solutions.

Western Digital’s latest quarter underscores how effectively it has capitalized on this trend. Revenue surged to $3.34 billion, propelled by a 9% price increase and a 10% reduction in cost per exabyte. The company’s gross margin climbed to 50.2%, its highest ever, while operating cash flow rose to $1.12 billion, supporting a 20% dividend hike. Adoption of UltraSMR technology—now in three of WD’s largest customers—demonstrates the firm’s success in delivering higher‑density, lower‑cost drives that meet AI‑driven capacity needs without sacrificing reliability.

Looking ahead, WD’s guidance of $3.65 billion for the next quarter and a full‑year target of $12.8 billion signals sustained momentum. The firm plans for 60% of shipped exabytes to be UltraSMR by FY2027 and is rolling out high‑bandwidth, dual‑pivot drives tailored for AI inference. As cloud and enterprise players continue to scale AI workloads, HDD manufacturers that can deliver ever‑greater terabytes per platter will capture a growing slice of the storage market, challenging the flash‑only narrative and reshaping the competitive landscape.