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

Western Digital's recent performance was driven by surging AI-fueled storage demand, record high-capacity shipments, and rising margins. The company's strong Q1 earnings, with 27% revenue growth and higher margins, fueled optimism. Analysts boosted their forecasts, citing a potential upside of 25.3%. Institutional investors, such as Coldstream Capital Management and ARS Investment Partners, increased their stakes. Western Digital's dividend hike and robust cash flow also contributed to its momentum, outpacing rival Pure Storage in value and momentum.

1.c. Company Highlights

Last Price	161
Change Percentage	3.48%
Open	154.91
Previous Close	155.59
Market Cap ( Millions)	55906
Volume	4921328
Year High	178.45
Year Low	28.83
M A 50	138.74
M A 200	79.35

FCF Yield	3.47%
Dividend Yield	0.20%
ROE	34.78%
Debt / Equity	76.56%
Net Debt / EBIDTA	83.31%
Price To Book	9.08
Price Earnings Ratio	21.72
Price To FCF	28.82
Price To sales	4.66
EV / EBITDA	18.51

2. Western Digital's Strong Q1 Earnings Driven by AI Demand

Western Digital reported a strong quarter with revenue reaching $2.8 billion, accompanied by a non-GAAP gross margin of 43.9% and non-GAAP earnings per share of $1.78, beating analyst estimates of $1.59. The company's latest ePMR products, offering capacities of up to 26 terabytes CMR and 32-terabyte UltraSMR, saw shipments grow to over 2.2 million units. The robust financial performance was underscored by the company's top 7 customers providing purchase orders extending throughout the first half of calendar year 2026, with one customer signing an agreement covering all of calendar year 2027.

Publication Date: Nov -02

                                    📋 Highlights
                                    Revenue & Margins::
                                                Q4 revenue hit $2.8B, with non-GAAP gross margin of 43.9% and EPS of $1.78.
ePMR Shipments::
                                                2.2M units shipped, offering up to 26TB CMR and 32TB UltraSMR capacities.
Customer Agreements::
                                                Purchase orders from top 7 customers extend through 2026, with 1 customer covering 2027.
Free Cash Flow::
                                                Generated $599M with a 20%+ margin, driven by improved working capital and cost reductions.
HAMR Progress::
                                                Qualification for 1 hyperscale customer moved to H1 2026, with 3 customers targeted by year-end.

                                

Revenue Growth and Customer Demand

The company is witnessing a growing demand for higher-capacity drives driven by the AI data economy. Western Digital's CFO, Kris Sennesael, mentioned that the company expects continued revenue growth driven by data center demand and improved profitability, with revenue expected to be $2.9 billion, plus/minus $100 million, and gross margin expected to be between 44% and 45% in the second quarter of fiscal 2026. The company also announced a 25% increase in dividend per share to $0.125 per share.

Technological Advancements and Product Development

Western Digital is making rapid progress in HAMR development, on track to start HAMR qualification for 1 hyperscale customer in the first half of calendar year 2026. The company's CEO, Irving Tan, discussed the progress on the 12-platter stack for UltraSMR, confirming that the qualification process for the next-generation ePMR product has been pulled forward to the first quarter of 2026. The company is working closely with customers to deliver higher capacity drives, which benefits from a total cost of ownership standpoint.

Valuation and Financial Metrics

With a P/E Ratio of 20.4 and an EV/EBITDA of 21.66, Western Digital's valuation suggests that the market has already priced in a significant level of growth. The company's ROE of 35.05% and ROIC of 30.28% indicate a strong ability to generate returns on equity and invested capital. The dividend yield stands at 0.13%, while the free cash flow yield is at 3.72%, indicating a decent return for shareholders. Analysts estimate next year's revenue growth at 23.1%, which is in line with the company's guidance.

3. NewsRoom

Pure Storage Faces Challenges Despite Strong Demand and AI Growth

Dec -03

Source: gurufocus.com

Dow Jones Today: Stocks Turn Higher as Investors Downplay Private Payrolls Decline, Report Microsoft Cutting AI Software Sales Quotas

Dec -03

Source: investopedia.com

Western Digital Corporation (WDC) Presents at UBS Global Technology and AI Conference 2025 Transcript

Dec -02

Source: seekingalpha.com

BA Flies on Strong Commentary, WDC & STX Price Target Hikes, LLY Boost

Dec -02

Source: youtube.com

History Says These 7 S&P 500 Stocks Often Rally In December

Dec -01

Source: feeds.benzinga.com

3 Stocks That Outperformed Palantir in 2025. Can They Repeat in 2026?

Nov -30

Source: 247wallst.com

Western Digital, Newmont, and 5 Star Stocks That Survived the AI Selloff and Have More to Give

Nov -28

Source:

Coldstream Capital Management Inc. Grows Stock Holdings in Western Digital Corporation $WDC

Nov -28

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: 5.2/10

Value: 8.2

Growth: 3.7

Quality: 4.8

Yield: 7.0

Momentum: 1.5

Volatility: 6.3

1-Year Total Return ->

NetApp

A-Score: 5.2/10

Value: 3.4

Growth: 5.8

Quality: 7.2

Yield: 4.0

Momentum: 4.0

Volatility: 7.0

1-Year Total Return ->

Arista Networks

A-Score: 5.0/10

Value: 0.0

Growth: 9.4

Quality: 8.5

Yield: 0.0

Momentum: 8.5

Volatility: 3.7

1-Year Total Return ->

Dell Technologies

A-Score: 4.7/10

Value: 5.3

Growth: 4.0

Quality: 4.6

Yield: 3.0

Momentum: 7.0

Volatility: 4.0

1-Year Total Return ->

Western Digital

A-Score: 4.5/10

Value: 2.3

Growth: 3.4

Quality: 7.1

Yield: 0.0

Momentum: 10.0

Volatility: 4.0

1-Year Total Return ->

Super Micro Computer

A-Score: 4.4/10

Value: 3.3

Growth: 9.9

Quality: 5.6

Yield: 0.0

Momentum: 6.5

Volatility: 1.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

12.77%

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 Q1 Earnings Driven by AI Demand

Revenue Growth and Customer Demand

Technological Advancements and Product Development

Valuation and Financial Metrics

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

161.0$

Current Price

161$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA