Is WDC a good stock to buy? We came across a bullish thesis on Western Digital Corporation on Studio Innovation’s Substack by Studio. In this article, we will summarize the bulls’ thesis on WDC. Western Digital Corporation’s share was trading at $530.60 as of May 27th. WDC’s trailing and forward P/E were 31.75 and 27.86 respectively according to Yahoo Finance.
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Western Digital Corporation develops, manufactures, and sells data storage devices and solutions based on hard disk drive (HDD) technology in the United States and internationally. WDC delivered a strong Q3FY26 performance, reinforcing its position as a leading beneficiary of structurally rising data storage demand driven by AI and cloud infrastructure. The company reported revenue of $3.34B, up 45% YoY and ahead of estimates, with cloud contributing 89% of total revenue, underscoring the depth of hyperscaler demand.
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EPS surged 97% YoY to $2.72, while gross margins expanded meaningfully to 50.5%, reflecting improved mix, pricing discipline, and operational leverage. Operating margin reached 38.6%, supported by continued execution strength across end markets. Cash generation remained robust, with $1.12B in operating cash flow and $978M in free cash flow, highlighting the durability of earnings quality.
Forward momentum remains strong, with Q4FY26 guidance calling for $3.6B in revenue, up 36%–44% YoY, and EPS of $3.25, implying more than 100% YoY growth at the midpoint. Gross margins are expected to further expand to 51%–52%, signaling continued profitability improvement. Western Digital also returned capital aggressively, increasing its quarterly dividend by 20% to $0.15 per share, reflecting confidence in sustained cash flow generation and balance sheet strength following the Sandisk spin-off.
Strategically, the company is increasingly positioned as a core AI infrastructure enabler, with management emphasizing that virtually all AI workloads—from training to inference, agentic AI, and physical AI—generate persistent data that is optimally stored on high-capacity HDDs. Industry-wide storage demand is expected to grow at over 25% CAGR, supported by accelerating inference workloads, which are projected to dominate AI compute activity.
Western Digital’s technology roadmap further strengthens this outlook, with 40TB drives entering production in H2 CY26 and a path toward 100TB+ capacities over time, alongside expanding adoption of Ultra SMR technology across key hyperscaler customers. With strong execution, expanding margins, AI-driven demand tailwinds, and rapidly improving free cash flow, Western Digital’s sharp multi-quarter momentum and YTD 145% and 1-year 910% stock performance highlight a powerful re-rating narrative still in early stages.
