Western Digital Stock Is Up Over 470% This Year. Can the AI Storage Boom Continue?

Key Stats for WDC Stock

• Past week performance: +6.1%
• 52-week range: $78 to $800
• Valuation model target price: $684
• Implied upside: 48.0% over 2.8 years

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A Record Quarter That Still Triggered a Pullback

Western Digital (WDC) shares gained 6.1% this week, a modest move given how dramatic the quarter actually was. Fiscal Q4 revenue jumped 44% year over year to $3.75 billion, and non-GAAP earnings per share more than doubled to $3.56. Both beat the high end of guidance, yet the stock initially fell because expectations had climbed even faster than results.

Artificial intelligence demand for high-capacity hard drives drove the beat. Cloud revenue, now 89% of total sales, grew 43% to $3.3 billion as hyperscale data centers kept buying nearline drives for exploding volumes of AI-generated data. Gross margin expanded 1,320 basis points to 54.4%, so pricing power, not just volume, is fueling the upside.

For fiscal 2027, management guided first quarter revenue to roughly $4.1 billion and non-GAAP earnings per share to $4.00. That would mark 125% year-over-year earnings growth. Separately, on August 26, Western Digital said it will exchange about $191 million of convertible notes for cash and 4.65 million new shares, a deal expected to close near September 2 that adds mild dilution while trimming debt.

CEO Irving Tan summed up demand simply: “data creation isn’t slowing.” He called it accelerating instead. Because AI is shifting from training toward inference and now physical AI, Western Digital has several separate waves of demand rather than one single cycle to depend on.

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Is WDC Stock Still Cheap After a 475% Run?

Under valuation model assumptions realized through 6/30/29, the stock is modeled using:

• Revenue Growth (CAGR): 35.2%
• Operating Margins: 37.3%
• Exit P/E Multiple: 17.6x

Based on these inputs, the model estimates a target price of $684, implying a 48.0% total return from the current share price and an annualized return of 14.8% over the next 2.8 years.

A stock up over 470% in a year rarely still looks cheap. Yet Western Digital’s forward multiple tells a different story than its chart. At 17.6x forward earnings, the exit multiple sits well below the broader AI infrastructure group, even though 35.2% guided revenue growth rivals chipmakers trading at much richer multiples.

This reads as a revenue acceleration story more than a valuation reset. Roughly 80% of hyperscale data still lives on hard drives rather than flash memory, and management expects exabyte demand to keep growing above 25% annually as AI workloads shift from training toward continuous inference.

Pricing cyclicality remains the main risk, since hard drive prices have swung wildly in past cycles. But against Seagate, its closest peer, Western Digital’s margin expansion looks earlier stage. That gap is exactly what gives the valuation model room for further upside if execution holds.

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Western Digital Versus the Storage Field

Seagate Technology (STX) is Western Digital’s most direct rival in mass capacity storage, and both are riding the same AI supercycle from different starting points. The company posted fiscal 2026 revenue growth of 34%, almost matching Western Digital’s 35.7% one-year growth, while its non-GAAP operating margin reached 44.6% in the June quarter, ahead of Western Digital’s 37.6%. Seagate now trades near 28x forward earnings, above Western Digital’s 17.6x modeled exit multiple, reflecting confidence in its HAMR technology transition.

That margin gap shows where Western Digital still has room to close the distance. Both companies are locking in multi-year customer agreements, with Seagate citing deals stretching toward 2030 and Western Digital discussing contracts through 2029 to 2031. Whichever company cuts cost per terabyte fastest tends to win the next round of hyperscaler budgets.

Because pricing moves together across the duopoly, investors often treat Seagate’s results as a preview for Western Digital. Seagate’s multiple premium suggests the market currently favors its margin trajectory, but if Western Digital’s 40TB drive ramp lands on schedule, that valuation gap could shrink.

Measure whether Western Digital’s 40TB drive ramp can accelerate exabyte shipments and support further upside from current levels >>>

What’s Driving WDC Stock Going Forward?

The shift from AI training toward inference is broadening demand beyond the first wave of hyperscaler buildouts. Training created the first mountain of data, but inference and agentic AI generate data continuously, so storage demand keeps compounding instead of plateauing.

Physical AI is becoming a real, measurable driver. Management said one autonomous vehicle customer’s 2027 exabyte demand increased multiple times over, since training self-driving systems requires massive synthetic datasets that need somewhere to live.

The technology roadmap gives Western Digital a path to lower costs without adding physical capacity. New 40TB drives began shipping in the fourth quarter, and 44TB HAMR-based products follow in early calendar 2027, both aimed at cutting cost per terabyte roughly 10% a year.

The convertible notes exchange closing near September 2 slightly raises share count, but it also trims debt ahead of a multi-year investment cycle. If long term hyperscaler agreements keep extending toward 2030, Western Digital enters fiscal 2027 with more visibility than usual.

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Should You Invest in Western Digital?

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Disclaimer:

Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!