Western Digital Corporation (WDC) | Investment Case

1. Company Snapshot

1.a. Company Description

Western Digital Corporation develops, manufactures, and sells data storage devices and solutions in the United States, China, Hong Kong, Europe, the Middle East, Africa, rest of Asia, and internationally.It offers client devices, including hard disk drives (HDDs) and solid state drives (SSDs) for computing devices, such as desktop and notebook personal computers (PCs), smart video systems, gaming consoles, and set top boxes; flash-based embedded storage products for mobile phones, tablets, notebook PCs, and other portable and wearable devices, as well as automotive, Internet of Things, industrial, and connected home applications; and flash-based memory wafers.The company also provides data center devices and solutions comprising enterprise helium hard drives; enterprise SSDs consisting of flash-based SSDs and software solutions for use in enterprise servers, online transactions, data analysis, and other enterprise applications; data center solutions for data storage systems and tiered storage models; and data storage platforms.

In addition, it offers client solutions, such as external HDD storage products in mobile and desktop form; client portable SSDs; removable cards that are used in consumer devices comprising mobile phones, tablets, imaging systems, and cameras and smart video systems; universal serial bus flash drives for use in the computing and consumer markets; and wireless drive products used in-field back up of created content, as well as wireless streaming of high-definition movies, photos, music, and documents to tablets, smartphones, and PCs. The company sells its products under the G-Technology, SanDisk, and WD brands to original equipment manufacturers, distributors, dealers, resellers, and retailers.Western Digital Corporation was founded in 1970 and is headquartered in San Jose, California.

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1.b. Last Insights on WDC

Breaking News: Western Digital Corporation shares rose over 7% following a significant Power Inflow alert, a key bullish indicator. The company has seen increased institutional interest, with AE Wealth Management LLC buying 2,633 shares valued at $316,000 and Independent Advisor Alliance acquiring 3,185 shares valued at $382,000. Additionally, BI Asset Management Fondsmaeglerselskab A S increased its stake by 202.3%. Director Matthew Massengill sold 36,926 shares for $9,616,638.18. No recent earnings release was available. Analysts at various firms have not publicly released recommendations on the stock.

1.c. Company Highlights

Last Price	282.58
Change Percentage	8.61%
Open	270.2
Previous Close	260.19
Market Cap ( Millions)	95805
Volume	9913276
Year High	296.5
Year Low	28.83
M A 50	203.4
M A 200	116.2

FCF Yield	2.41%
Dividend Yield	0.12%
ROE	64.18%
Debt / Equity	63.42%
Net Debt / EBIDTA	62.04%
Price To Book	13.28
Price Earnings Ratio	25.62
Price To FCF	41.55
Price To sales	8.93
EV / EBITDA	22.8

2. Western Digital's Strong Q2 FY2026 Results Driven by AI Demand

Western Digital delivered a strong financial performance in Q2 FY2026, with revenue reaching $3 billion, up 25% year-over-year, driven by robust demand for nearline drives. Earnings per share (EPS) came in at $2.13, beating estimates of $1.93. Gross margin expanded to 46.1%, up 770 basis points year-over-year, driven by a stable pricing environment and a decline in cost per terabyte. The company's guidance for Q3 FY2026 suggests continued growth, with revenue expected to reach $3.2 billion, plus/minus $100 million, and EPS expected to be $2.30, plus/minus $0.15.

Publication Date: Feb -08

                                    📋 Highlights
                                    Revenue Growth::
                                                Q2 FY2026 revenue reached $3 billion, reflecting a 25% year-over-year increase driven by strong nearline drive demand.
EPS Outperformance::
                                                Earnings per share (EPS) hit $2.13, exceeding the high end of guidance and demonstrating profitability strength.
Gross Margin Expansion::
                                                Gross margin improved to 46.1%, a 770 basis-point increase year-over-year, with guided Q3 margin of 47-48%.
Customer Commitments::
                                                Long-term agreements with top customers through 2026-2028 ensure stability, including UltraSMR adoption boosting margins.
Free Cash Flow::
                                                Generated $653 million in free cash flow (21.6% margin) and maintained $3.2 billion in liquidity, supporting share buybacks and debt management.

                                

Operational Highlights

The company shipped over 3.5 million units of its latest generation ePMR products, offering up to 26 terabyte CMR and 32 terabyte UltraSMR capacities, demonstrating strong customer adoption. The UltraSMR mix is expected to continue increasing, driving gross margin expansion. According to Irving Tan, "UltraSMR offers a 20% capacity uplift over CMR and 10% over standard SMR, with improved gross margins."

Outlook and Valuation

Western Digital's guidance suggests continued growth, driven by increasing demand for AI-driven data storage. With a current P/E Ratio of 25.62 and EV/EBITDA of 22.8, the company's valuation multiples indicate a premium for its growth prospects. Analysts estimate next year's revenue growth at 24.1%, which may justify the current valuation. The company's strong financial performance and guidance suggest that it is on track to deliver long-term growth.

Financial Position

Western Digital's financial position remains strong, with $3.2 billion in total liquidity and a net debt position of $2.7 billion. The company's net leverage EBITDA ratio is well below 1 turn, indicating a healthy balance sheet. The company generated $653 million of free cash flow in the quarter, reflecting a free cash flow margin of 21.6%.

Technological Advancements

The company is making progress in its technological advancements, including the qualification of HAMR drives and next-generation ePMR drives. The acquisition of technology to reduce real estate in the drive and improve manufacturability and reliability is also expected to drive future growth.

3. NewsRoom

Top Wall Street analysts like these stocks for long-term growth potential

Feb -08

Source: cnbc.com

Matthew Massengill Sells 36,926 Shares of Western Digital (NASDAQ:WDC) Stock

Feb -08

Source: defenseworld.net

The AI Memory Crunch Is Creating Winners and Losers. Here Are the Stocks to Buy

Feb -08

Source: fool.com

AE Wealth Management LLC Takes $316,000 Position in Western Digital Corporation $WDC

Feb -07

Source: defenseworld.net

BI Asset Management Fondsmaeglerselskab A S Acquires 39,479 Shares of Western Digital Corporation $WDC

Feb -07

Source: defenseworld.net

Western Digital Shares Rise Over 7% Following Key Trading Signal

Feb -06

Source: benzinga.com

4 Top-Ranked Highly Efficient Stocks to Strengthen Portfolios in 2026

Feb -06

Source: zacks.com

Allianz Asset Management GmbH Sells 472,363 Shares of Western Digital Corporation $WDC

Feb -06

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (13.94%)

6. Segments

Hard Disk Drives

Expected Growth: 10%

Western Digital's 10% growth in Hard Disk Drives is driven by increasing demand for data storage in cloud computing, artificial intelligence, and 5G networks. Additionally, the rise of gaming and video content creation fuels demand for high-capacity storage solutions. Furthermore, the company's strategic acquisitions and investments in SSD technology also contribute to its growth.

Flash-based

Expected Growth: 18%

Western Digital's Flash-based segment growth is driven by increasing demand for high-capacity storage in data centers, adoption of cloud computing, and rising use of IoT devices. Additionally, the company's strategic acquisitions, such as SanDisk, have expanded its product portfolio and strengthened its position in the flash storage market.

7. Detailed Products

Hard Disk Drives (HDD)

Non-volatile storage devices that store data on magnetic disks

Solid-State Drives (SSD)

Flash-based storage devices that provide high-speed data access

Flash Storage

High-capacity, low-latency storage solutions for data centers and cloud infrastructure

Data Center Systems

Customizable, scalable storage solutions for data centers and cloud infrastructure

Client SSDs

High-performance storage solutions for laptops, desktops, and mobile devices

External Storage

Portable, high-capacity storage solutions for data backup and transfer

G-Technology External Storage

High-performance, portable storage solutions for creative professionals

SanDisk Memory Cards

High-capacity, high-speed memory cards for cameras, drones, and other devices

8. Western Digital Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Western Digital Corporation faces moderate threat from substitutes, as customers have limited alternatives for data storage solutions. However, the rise of cloud storage and solid-state drives poses a moderate threat to the company's traditional hard drive business.

Bargaining Power Of Customers

Western Digital Corporation has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's products are often customized to meet specific customer needs, making it difficult for customers to switch to alternative suppliers.

Bargaining Power Of Suppliers

Western Digital Corporation relies on a few key suppliers for components such as memory chips and printed circuit boards. While the company has some bargaining power due to its large scale, suppliers may still exert some pressure on prices and delivery terms.

Threat Of New Entrants

The data storage industry has high barriers to entry, including significant capital requirements and technological expertise. Additionally, Western Digital Corporation's established brand and customer relationships make it difficult for new entrants to gain traction.

Intensity Of Rivalry

The data storage industry is highly competitive, with several established players competing for market share. Western Digital Corporation faces intense rivalry from companies such as Seagate Technology and Toshiba, which can lead to pricing pressure and increased marketing expenses.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	39.46%
Debt Cost	3.95%
Equity Weight	60.54%
Equity Cost	11.50%
WACC	8.52%
Leverage	65.18%

11. Quality Control: Western Digital Corporation passed 2 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

A-Score: 5.6/10

Value: 9.0

Growth: 4.1

Quality: 4.8

Yield: 8.0

Momentum: 1.5

Volatility: 6.3

1-Year Total Return ->

NetApp

A-Score: 5.5/10

Value: 3.4

Growth: 5.7

Quality: 7.4

Yield: 5.0

Momentum: 4.5

Volatility: 7.0

1-Year Total Return ->

Arista Networks

A-Score: 5.0/10

Value: 0.6

Growth: 9.4

Quality: 8.3

Yield: 0.0

Momentum: 8.0

Volatility: 3.7

1-Year Total Return ->

Dell Technologies

A-Score: 4.6/10

Value: 6.6

Growth: 4.0

Quality: 4.6

Yield: 4.0

Momentum: 5.0

Volatility: 3.7

1-Year Total Return ->

Western Digital

A-Score: 4.3/10

Value: 1.8

Growth: 3.4

Quality: 7.3

Yield: 0.0

Momentum: 10.0

Volatility: 3.3

1-Year Total Return ->

Super Micro Computer

A-Score: 3.9/10

Value: 3.6

Growth: 9.8

Quality: 5.0

Yield: 0.0

Momentum: 3.5

Volatility: 1.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

18.39%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

8.52%

Western Digital Corporation - US9581021055

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on WDC

1.c. Company Highlights

Lower Growth

Strong Momentum

Higher Yield

Earnings Beats

Revenues Beats

Cheaper

Average Quality

Fairly Valued

Stable Momentum

Average Growth

Average Yield

Medium Volatility

Weak Momentum

Revenues Miss

2. Western Digital's Strong Q2 FY2026 Results Driven by AI Demand

Operational Highlights

Outlook and Valuation

Financial Position

Technological Advancements

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (13.94%)

6. Segments

Hard Disk Drives

Expected Growth: 10%

Flash-based

Expected Growth: 18%

7. Detailed Products

Hard Disk Drives (HDD)

Solid-State Drives (SSD)

Flash Storage

Data Center Systems

Client SSDs

External Storage

G-Technology External Storage

SanDisk Memory Cards

8. Western Digital Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Western Digital Corporation passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

282.58$

Current Price

282.58$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA