Western Digital (WDC) stock has rallied significantly, rising over 71% year-to-date (YTD). Moreover, WDC shares have climbed more than 560% over the past 52 weeks, driven by increasing demand for memory and storage solutions, particularly its high-capacity nearline drives.
Western Digital is strategically positioned in the data infrastructure ecosystem, focusing on the production of high-capacity hard disk drives to meet the storage requirements of artificial intelligence (AI) workloads. As AI adoption accelerates, cloud service providers and hyperscale data centers are expanding their storage capabilities to manage rapidly growing datasets. This structural demand trend remains a key growth driver for Western Digital.
In parallel, WDC is benefiting from favorable supply-side dynamics in the memory market. Global supply constraints have tightened product availability, contributing to a more supportive pricing environment for manufacturers. The combination of constrained supply and sustained demand is expected to support revenue growth and margin expansion.
While WDC stock has rallied significantly, here are two key factors suggesting Western Digital may have further upside in 2026 and beyond.
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WDC stock still has meaningful upside potential, supported by accelerating earnings growth and favorable industry dynamics. Strengthening demand and tight supply conditions in the memory and storage market are improving pricing and profitability, creating a constructive backdrop for WDC.
Recent results highlight this momentum. In the last reported quarter, revenue increased 25% year-over-year (YoY) to $3 billion, driven primarily by robust demand for high-capacity nearline storage solutions. Adjusted earnings per share (EPS) rose 78% to $2.13, reflecting both higher volumes and improved margins. Shipment growth remained strong, including more than 3.5 million units of the company’s latest-generation ePMR drives.
Cloud customers remain the dominant revenue driver, contributing to the majority of its total sales, or $2.7 billion, up 28% from the prior year. This concentration reflects sustained hyperscale demand for higher-capacity storage infrastructure. The client segment also showed strength, generating $176 million in revenue, up 26% YoY, while consumer revenue declined slightly to $168 million.
Demand visibility further strengthens WDC’s investment appeal. Western Digital has secured purchase commitments from its top seven customers through 2026, alongside longer-term agreements with three of its five largest customers extending into 2027 and 2028. These arrangements provide revenue stability and support effective capacity planning.
Margin expansion remains a key catalyst. Adjusted gross margin increased by 770 basis points YoY and 220 basis points sequentially in the most recent quarter. This improvement reflects a favorable shift in the product mix toward higher-capacity drives, combined with disciplined cost control across manufacturing and supply chain operations.
Looking ahead, management projects continued momentum in the business. For the upcoming quarter, revenue is expected to reach approximately $3.2 billion, representing around 40% YoY growth. Gross margin is forecasted in the range of 47% to 48%, compared to 40.1% a year earlier, while EPS is projected at $2.30, up over 69% YoY.
With a supportive demand and pricing environment, ongoing customer migration to higher-capacity solutions, and continued cost optimization, Western Digital is well-positioned to deliver solid margins and earnings, which will support its share price.
Western Digital’s growth outlook supports the case for further valuation expansion, even after the stock’s recent rally. While WDC stock currently trades at a forward price-to-earnings (P/E) ratio of 37.3, this multiple appears reasonable relative to its projected earnings trajectory.
Western Digital is expected to deliver substantial earnings growth in the coming years. Consensus estimates indicate that WDC’s EPS could increase by 87.2% in fiscal 2026, followed by an additional 67.8% growth in 2027. Such a strong acceleration in profitability provides a solid base for sustained upside momentum in WDC stock.
Western Digital’s stock will likely be driven by structural demand tailwinds, a favorable supply environment, and a reasonable valuation.
Analysts maintain a consensus “Strong Buy” on WDC stock. Moreover, the Street’s highest price target of $440 implies about 49% upside from its recent close of $294.79.
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On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
