Western Digital Posts 55% Revenue Jump and Strong Q2 Outlook but Shares Slide on Capex Fears

Western Digital reported fiscal first-quarter 2027 revenue of $4.38 billion, up 55% year over year, with non-GAAP earnings per share of $4.64 beating the analyst consensus of $4.11. Cloud revenue reached $3.9 billion, representing 88% of total sales, while exabytes shipped rose 22% year over year and 8% sequentially to 248 exabytes. The company lifted its dividend following the results and its HAMR hard-disk-drive technology continued to ramp.

Despite the beat and an upbeat second-quarter outlook, Western Digital shares fell more than 6% in after-hours trading Thursday and extended losses into Friday's session. The company guided Q2 revenue to $5.1 billion, plus or minus $100 million, implying year-over-year growth of 66% to 72%, well above Wall Street expectations. CEO Irving Tan, speaking on CNBC, said AI demand for storage remains durable and continues to grow, and an industry analyst projected that 80% of data center information will eventually be stored on hard disk drives.

Wall Street's mixed reaction centered on concerns about rising capital expenditure, the potential for increased HDD industry supply, and questions about the long-term sustainability of AI-driven demand. Morgan Stanley raised its price target on Western Digital citing demand strength, while UBS, TD Cowen, and Cantor Fitzgerald all cut their price targets, each pointing to capex concerns or lower multiples. Evercore ISI reiterated its rating, citing pricing strength. Memory and storage stocks broadly, including Micron and SanDisk, partially recovered later in Friday's session after initially selling off alongside Western Digital.