Western Digital Shares Plunge Despite Beating Fiscal Q4 Revenue and Earnings
Investors sold off WDC stock on concerns over a competitive gap with Seagate and a slowdown in exabyte shipments.
Western Digital shares tumbled following its fiscal fourth-quarter report, despite the company exceeding analyst expectations for both revenue and earnings. The sharp decline underscores investor sensitivity to relative performance and technological timelines within the AI-driven storage market.
Western Digital reported fiscal Q4 revenue of $3.75 billion, a 44% increase year-over-year that beat the $3.7 billion estimate. Adjusted earnings per share (EPS) more than doubled to $3.56, surpassing the FactSet forecast of $3.31. Looking ahead, the company provided guidance for the September quarter projecting sales growth of approximately 47%, reaching $4.1 billion. Despite these figures, the stock dropped roughly 15% in premarket trades to 441.62.
The Competitive Gap
The sell-off was largely driven by a comparison to rival Seagate Technology. While Western Digital is currently ramping up ePMR drives, Seagate began shipping heat-assisted magnetic recording (HAMR) drives last year. This head start has provided Seagate with a competitive advantage in gross margins and sequential top-line growth. Western Digital does not plan to begin shipping its own HAMR drives until the first half of 2027.
Further weighing on the results was a deceleration in shipment volume. Total exabytes shipped grew 22% year-over-year to 231, a figure that fell short of Western Digital's long-term compound annual growth rate (CAGR) benchmark of 25%.
Market Implications
This reaction highlights the volatility of the AI infrastructure space, where a financial "beat" is insufficient if a primary competitor demonstrates superior technological deployment. Hard-disk drives (HDDs) remain critical for the trillion-dollar data center buildout required for AI computing, as they provide the low-cost, high-capacity storage necessary for massive datasets. However, the market is now pricing in the risk of Western Digital's transition phase as it prepares for the shift to HAMR technology.
Analyst Outlook
Despite the immediate stock slide, some Wall Street firms remain bullish on the company's long-term trajectory. Wedbush and Barclays both reiterated buy-equivalent ratings for WDC. Matt Bryson, an analyst at Wedbush, noted that while the performance delta between Western Digital and Seagate disappointed investors, the overall setup for the company remains intact.
Bryson cited confidence in the continuing current cycle and the belief that Western Digital will eventually realize improved pricing similar to that enjoyed by Seagate. Investors will likely watch for any acceleration in the HAMR timeline or further signs of pricing power in the high-capacity storage market to signal a recovery.