Western Digital's Sold-Out Hard Drives Meet a Street That Can't Agree on the Price
Published on 10/26/2026 at 13:11 | Editorial boerse-global.de
Western Digital has spent the past week proving it can grow. What it has not done is settle the rather more awkward question of what that growth is worth. The storage maker's latest quarterly report landed on Thursday, and by Friday the analyst community had responded with a split verdict — one camp hauling its target sharply higher, another trimming it, and both keeping the buy ratings intact.
That divergence, rather than any single number, is the real story coming out of the print.
A Sold-Out Order Book and a Five-Year Forecast
Start with the demand side, where the picture is unusually clear. Chief executive Irving Tan told CNBC that appetite for AI storage will expand roughly 25% a year over the next five years — an aggressive call, and one that undercuts any thesis of an imminent slump in orders. Media reports point the same way: Western Digital's hard-drive capacity is close to fully sold out through the end of 2026, with orders from its seven largest customers for the year already booked.
Tan's diagnosis of the market's jitters is worth dwelling on. He pinned the nervousness on concerns over returns on AI investment, the financial health of neocloud operators, and the direction of interest rates — not on weakening demand. The distinction matters. A full order book and a financially sturdy customer base are two different things, and only one of them is currently in evidence.
The Numbers Behind the Confidence
The reported results give the bulls something firmer to stand on. Revenue for the first quarter of fiscal 2027 came in at $4.381 billion, up 55% year over year. Adjusted earnings per share reached $4.64. Both figures cleared expectations, which means management can point to delivered results rather than leaning solely on long-range market forecasts.
Should investors sell immediately? Or is it worth buying Western Digital?
Guidance for the second quarter of fiscal 2027 points to revenue of $5.0 billion to $5.2 billion — a step up from the quarter just reported. More telling is the profitability outlook: adjusted EPS is projected at $5.60 to $6.00, against an analyst consensus of $4.80. That is a wide gap, not a matter of a few cents, though it remains a forecast rather than a banked gain.
Gross margin is expected to climb to 60–61% in the current quarter from 58.1%. Management also anticipates a free-cash-flow margin above 30% for the foreseeable future. That cash-flow pledge is arguably the most consequential part of the whole outlook: it promises not just rising revenue but genuine financial room to maneuver — and it hands investors a demanding yardstick against which coming quarters will be measured.
Two Houses, Two Directions, One Rating
The analyst reactions capture the tension neatly. Baird raised its price target on Friday to $900 from $630 while maintaining an outperform rating — a clear upgrade of expectations. TD Cowen went the other way, cutting its target to $430 from $540 but sticking with its buy call. Rosenblatt trimmed its target to $650 from $800, also keeping a buy. Others revised in both directions.
Reading that batch as a unified vote of confidence misses the point. A lower target is not a rejection of the company, and a dramatic hike does not make the higher price a certainty. Price targets are expectations; business results are facts, and the two should not be conflated.
What Actually Gets Measured
For investors, a sensible order of operations emerges: business performance first, delivery against guidance second, valuation last. Western Digital has reported vigorous growth and promised more of the same. That the same set of numbers produced opposing target changes is no contradiction — it simply shows how widely expectations can diverge around an identical trajectory.
The operational case against a blanket crisis narrative looks solid. Demand is contracted, earnings beat, and the margin outlook is expanding. None of that amounts to an all-clear. The company still has to demonstrate that the promised cash generation holds up, and that its customers can run their infrastructure economically enough to keep the orders coming.
The next big AI forecast is not the argument that will settle this. Reliable execution against the guidance already on the table is.
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