Western Digital WDC) will report outcomes for its fiscal fourth quarter after the closing bell on Wednesday, August 5, giving buyers one other necessary learn on enterprise storage demand and the continuing AI infrastructure buildout.
The report additionally arrives at a pivotal time for reminiscence and storage shares after a pointy sector-wide pullback in latest weeks, leaving many buyers questioning whether or not the latest weak spot has created a pretty shopping for alternative.
That’s very true for Western Digital inventory, which stays up greater than 200% 12 months thus far and over 1,100% in the course of the previous three years, even after pulling again greater than 30% from its 52-week and all-time excessive of $799 a share.
Regardless of the latest volatility, Western Digital’s fundamentals stay compelling. AI-driven information middle investments proceed to gasoline demand for high-capacity arduous disk drives (HDDs), whereas cloud prospects are increasing storage capability to assist more and more data-intensive workloads.
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Western Digital’s This fall Expectations
Based mostly on Zacks estimates, Western Digital’s This fall gross sales are thought to have elevated 42% to $3.7 billion from $2.61 billion within the comparative quarter. Extra spectacular, This fall EPS is predicted to leap practically 102% to $3.35 versus earnings of $1.66 per share a 12 months in the past.
Rounding out FY26, Western Digital’s annual gross sales are anticipated to dip 3% to $12.88 billion following the separation of its Sandisk SNDK) flash reminiscence enterprise.
Nevertheless, full-year EPS is projected to soar 104% to $10.07 from $4.93 in FY25 as greater margins and improved profitability greater than offset the decrease income base.
A number of components may decide whether or not Western Digital exceeds This fall expectations:
- Continued energy in hyperscale cloud spending and AI infrastructure deployments.
- Wholesome demand for nearline HDDs utilized in large-scale information facilities.
- Sustained pricing self-discipline throughout the storage market.
- Secure gross margins following a number of quarters of serious enchancment.
Traders will even be intently watching administration’s commentary concerning buyer spending traits, cloud capital expenditures, and demand visibility heading into fiscal 2027.
Maybe much more necessary than the headline numbers will likely be Western Digital’s ahead outlook. With AI coaching and inference workloads requiring monumental quantities of storage capability, buyers will need reassurance that enterprise storage demand stays sturdy regardless of latest considerations surrounding semiconductor spending.
The Zacks ESP
Optimistically, the Zacks ESP (Anticipated Shock Prediction) signifies Western Digital may as soon as once more surpass earnings expectations, with the Most Correct and up to date estimate amongst Wall Avenue analysts having This fall EPS slated at $3.60 and greater than 7% above the underlying Zacks Consensus of $3.35 (Present Qtr beneath).
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Notably, Western Digital has surpassed earnings expectations for 13 consecutive quarters with a mean EPS shock of 11.55% in its final 4 quarterly experiences.
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AI Continues to Drive the Storage Cycle
Though a lot of the AI dialog facilities round GPUs from Nvidia NVDA) and superior reminiscence chips from Micron Know-how MU), large quantities of information should finally be saved, retrieved, and managed effectively.
That dynamic has created a pretty backdrop for Western Digital’s enterprise HDD enterprise, the place hyperscale cloud suppliers hold investing in more and more dense storage options to assist AI functions.
Greater-capacity drives additionally enable prospects to decrease whole possession prices, making them notably enticing as AI information facilities proceed increasing.
Whereas NAND flash pricing stays cyclical, long-term secular demand from cloud computing, enterprise storage, AI servers, and edge computing continues to offer favorable business tailwinds.
Preserving that in thoughts, it’s noteworthy that Western Digital’s Zacks Pc-Storage Units Business at present ranks within the prime 9% of greater than 240 Zacks industries. The group additionally consists of Sandisk and different notable firms comparable to Tremendous Micro Pc SMCI) and Teradata TDC).
WDC Valuation Comparability (P/E)
Even after its super run over the previous 12 months, Western Digital’s valuation stays pretty affordable relative to the broader market.
WDC trades at 29X ahead earnings, which is a noticeable premium to its Zacks Business common of 16X however is close to the benchmark S&P 500’s 21X.
For buyers searching for AI publicity at a extra reasonable valuation, Western Digital should still signify an interesting center floor between the faster-growing — however costlier — AI infrastructure shares.
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Backside Line
Western Digital enters earnings with enhancing fundamentals, favorable AI-related demand drivers, and expectations that stay achievable.
If the pc storage big delivers one other earnings beat whereas reinforcing confidence in enterprise storage spending, WDC shares may have extra room to recuperate following the latest correction amongst reminiscence and storage shares.
Supporting that bullish outlook is the continued pattern of rising EPS revisions, which has helped Western Digital inventory earn a Zacks Rank #1 (Sturdy Purchase) heading into its This fall report.
Traders on the lookout for a fairly valued AI infrastructure play could need to hold a detailed eye on Western Digital’s outcomes after Wednesday’s closing bell.
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Western Digital Company (WDC) : Free Inventory Evaluation Report
Micron Know-how, Inc. (MU) : Free Inventory Evaluation Report
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Teradata Company (TDC) : Free Inventory Evaluation Report
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This text initially printed on Zacks Funding Analysis (zacks.com).
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
