Western Digital surges 16% to record close as AI storage demand fuels rally

Western Digital Corp. shares jumped 16% on Monday, their best single-day gain since January, closing at a record high as investors piled into the hard-disk drive maker on surging AI infrastructure demand.

"The AI data economy is fundamentally a storage story, not just a computing one," Vijay Rakesh, an analyst at Mizuho, said. "We see a structural supply-demand imbalance persisting well into 2028."

The rally extended a year-long surge that has lifted Western Digital 795% over the past 12 months and roughly 190% year to date in 2026. The stock, which traded as low as $28.83 in April 2025, has climbed more than 1,500% from that trough, making it one of the two best-performing stocks in the S&P 500 alongside its own spinoff, SanDisk Corp.

Western Digital reported fiscal third-quarter revenue of $3.34 billion in late April, up 45% from a year earlier and $110 million above the analyst consensus of $3.23 billion. Non-GAAP earnings per share of $2.72 beat the Street estimate of $2.34 by 16%. Non-GAAP gross margin crossed the 50% threshold for the first time, reaching 50.5%, up 1,040 basis points year over year. Operating income more than doubled to $1.3 billion, representing a 38.6% margin.

The company's cloud segment delivered 222 exabytes to customers, up 34% year over year, including more than 4.1 million drives of its latest-generation energy-assisted perpendicular magnetic recording technology with capacity points up to 32 terabytes. Free cash flow reached $978 million on operating cash flow of $1.12 billion.

For the fiscal fourth quarter, management guided revenue of $3.65 billion, plus or minus $100 million, implying 40% year-over-year growth at the midpoint. Non-GAAP gross margins are expected to reach 51% to 52%, with non-GAAP EPS of $3.25, plus or minus $0.15. The company also raised its quarterly dividend by 20% to $0.15 per share.

Mizuho raised its price target on Western Digital to $685 from $550, implying 35% upside from current levels, while maintaining an "Outperform" rating. The firm cited accelerating demand from AI infrastructure buildouts, including surging Google TPU, Meta MTIA, and OpenAI ASIC ramps, as directly positive for storage attach rates. Mizuho estimates total NAND demand will grow 18% year over year in both 2026 and 2027, with no significant new supply coming online until 2028.

Wall Street's consensus remains firmly bullish. Western Digital carries a "Strong Buy" rating across 25 analyst ratings, comprising 21 "Strong Buy," one "Moderate Buy," and three "Hold," with a mean price target of $531.95.

The company's heat-assisted magnetic recording technology is now in customer qualification with four customers, with 44-terabyte HAMR and 40-terabyte EPMR drives in the pipeline and a product roadmap extending beyond 100 terabytes. Chief Executive Officer Irving Tan said the company remains "confident in our ability to deliver sustainable revenue growth, expand gross and operating margins, and create long-term value."

The guidance raise signals management expects AI-driven storage demand to accelerate further. Investors will watch the fiscal fourth-quarter earnings report for updated segment margins and HAMR qualification progress.

This article is for informational purposes only and does not constitute investment advice.