HDD duopoly full of "AI infrastructure dividend"! Following Seagate, Western Digital Corporation (WDC.US) also achieved explosive growth with a net profit surge of 296%.

Western Digital Corporation, which ranks among the top three storage product leaders in the United States alongside SanDisk and Seagate, announced its quarterly performance and future outlook after the US stock market closed on Thursday. The data shows that under the explosive demand driven by global technology companies for high-capacity HDDs, this storage giant's quarterly performance and outlook all exceeded Wall Street analysts' expectations. Following the strong performance data announced by two major storage chip manufacturers, Samsung and SK Hynix, as well as Seagate, another HDD storage leader, the strong growth performance of Western Digital Corporation, which exceeded expectations across the board, further strengthens the narrative of the so-called "storage super cycle" prosperity led by major storage product giants. The construction of global large-scale AI data centers, including "Stargate," is progressing rapidly, driving strong demand for enterprise-grade high-performance HDDs and enterprise data center SSDs (eSSDs) as AI computing power requirements surge. Seagate and Western Digital Corporation's flagship enterprise storage systems are experiencing an unprecedented phase of growth, driving prices and volumes. This is why Western Digital Corporation's stock price rose by 285% for the full year 2025 and has increased by 60% since 2026. Following Seagate's announcement of its earnings, its stock price surged nearly 20% as of the close of the US stock market on Wednesday. For the second quarter of fiscal year 2026 ended January 2nd, Western Digital Corporation reported total revenue of approximately $3.02 billion, representing a significant year-over-year increase of 25%, higher than the average Wall Street analyst estimate of $2.95 billion. The company's adjusted gross margin for the quarter under the non-GAAP standard was 46.1%, higher than analysts' average expectation of 44.5%. The free cash flow was approximately $653 million, also surpassing analysts' average estimate of $637 million. In terms of other profit data, under the non-GAAP standard, the adjusted earnings per share (EPS) for the second quarter of this enterprise nearline high-capacity HDD leader were $2.13, higher than analysts' average expectation of $1.93. The adjusted net profit was approximately $807 million, a significant year-over-year increase of 92%, while adjusted operating profit reached $1.019 billion, a growth of about 72%. Under GAAP standards, Western Digital Corporation recorded an operating profit of approximately $908 million for the second quarter, a 62% year-over-year increase, and a net profit of about $1.802 billion, a significant increase of 296% based on the baseline. In terms of the outlook that the market is focused on, Western Digital Corporation management expects diluted EPS for the current quarter (Q3 of fiscal year 2026) to be between $2.15 and $2.45, far surpassing analysts' consensus estimate of about $1.99. The company expects total revenue for the quarter to be in the range of $3.1 billion to $3.3 billion, also higher than analysts' average recent estimate of about $3.0 billion. The company estimates capital expenditures for the quarter to be approximately $380 million to $390 million, reflecting a cautious approach to expanding HDD capacity under the storage super cycle. "Our business continues to grow significantly. We expect revenue to continue to grow strongly and profitability to improve as AI data center demand continues to increase and enterprise high-capacity hard drive penetration accelerates," said Chris Sennalar, CFO of Western Digital Corporation, in a performance statement. As global technology giants, including Meta, Microsoft Corporation, and Alphabet Inc. Class C, become increasingly aggressive in investing trillions of dollars in AI data centers and closely related AI infrastructure, the unprecedented surge in AI computing power demand is benefiting traditional storage hardware suppliers such as Western Digital Corporation, Seagate, and SanDisk, providing enterprise nearline HDDs and enterprise NVMe SSDs required for storing large-scale high-efficiency AI training and operation projects by Beijing Vastdata Technology. In the past year's bull market for storage stocks, the stock prices of Seagate, SanDisk, and Western Digital Corporation, the three storage product giants, have also shown strong gains, with all three companies' stock prices rising by more than 200% in 2025. SanDisk, a leader in enterprise SSD storage systems spun off from Western Digital Corporation, saw an astonishing increase of nearly 600%. These storage chip and product giants have significantly outperformed not only the US stock market but also the global stock market. The core logic behind the strong rise in stock prices of Western Digital Corporation, Seagate, and SanDisk lies in the rapid growth of storage demand driven by the unprecedented global AI computing power surge. The construction of super large-scale AI data centers, including "Stargate," has led to a explosive growth in demand for Seagate's data center nearline HDDs and Seagate's high-performance eSSDs. AI training/inference has pulled the chain of "data generation - cleaning - versioning - playback - archiving" to an exponential level, and data centers need storage solutions that can handle Exabytes in terms of both cost and scale. Nearline HDDs are still one of the most cost-effective solutions in terms of "cost per TB/per watt capacity" at this level. Therefore, when cloud providers and enterprises expand their AI infrastructure, they allocate a large budget to high-capacity nearline hard drives to manage data lakes, object storage, warm/cold tiers, and long-term retention demands. The two major HDD superpowers' cautious approach to accelerating HDD production is rooted in the concept of "supply discipline" as indicated in Western Digital Corporation's financial reports, as well as the realities of the industry's engineering. They are actively avoiding the repetition of past cycles where excessive production led to price wars and collapsing profits in the HDD industry. Western Digital Corporation's management even bluntly stated in their performance communication that they are not rushing to increase unit production capacity but are instead matching demand with product structures and technological iterations, aiming to output more Exabytes with density and structural upgrades while maintaining prices and profits with supply discipline. Therefore, the two HDD superpowers prefer to use the higher areal density route (such as Seagate's HAMR and Western Digital Corporation's ePMR/Ultra SMR/OptiNAND, among others) to turn "the same unit production capacity" into more Exabytes while keeping capital expenditures in a more controllable range. Nomura's latest assessment indicates that this current "storage chip super cycle" will last until at least the end of 2027, and they specifically stated in their report that "meaningful supply increases will not come until at least 2028." The report emphasizes that the expansion of storage chip and HDD/SSD storage component production is not a matter of simply increasing capacity, but involves upgrading semiconductor equipment and pacing plans for clean room/wafer production, the significant delay in yield and cycle time due to advanced process upgrades, and constraints on overseas chip factory construction/upgrades. In summary, Western Digital Corporation, Seagate, and SanDisk are benefiting greatly from the surge in storage demand driven by the unprecedented global AI computing power surge. The construction of super large-scale AI data centers, such as "Stargate," has led to explosive demand for Seagate's data center nearline HDDs and Seagate's high-performance eSSDs. AI training and inference are pushing the chain of "data generation - cleaning - versioning - playback - archiving" to exponential levels, and data centers require storage solutions that can handle Exabytes in terms of both cost and scale. At this level, nearline HDDs are still one of the most cost-effective solutions in terms of "cost per TB/per watt capacity." Therefore, when cloud providers and enterprises expand their AI infrastructure, they allocate a large budget to high-capacity nearline hard drives to manage data lakes, object storage, warm/cold tiers, and long-term retention demands. For this reason, the two major HDD superpowers are not rushing to accelerate HDD production but are focusing on producing more Exabytes with higher density and more controlled capital expenditures.