TLDR
- Investment bank Morgan Stanley identified Seagate and Western Digital as leading IT hardware investments, highlighting AI and data center expansion
- WDC shares delivered 489% returns in one year, powered by 28% revenue growth and industry-leading 46.1% gross profit margins
- Fiscal Q2 2026 sales reached $3.02 billion, marking 25% annual growth, while hyperscalers secured all 2026 manufacturing capacity
- Company divested $3.17 billion SanDisk position in February 2026, allocating funds toward reducing long-term obligations
- Shares have declined approximately 16% from peak levels amid wider technology sector downturn
Western Digital emerged as a standout performer in the hardware space throughout the previous twelve months. Share prices skyrocketed approximately 489% from March 2025 through March 2026, advancing from $44 per share to $259.
This remarkable appreciation stemmed from robust top-line expansion and widening profitability. Consolidated revenues increased 28% to reach $10.73 billion, while net profit margin expanded dramatically from 15% to 35.4%.
Morgan Stanley’s latest analysis positioned Western Digital alongside Seagate Technology at the top of its IT hardware recommendations. The financial institution cited artificial intelligence infrastructure investments and cloud data center buildouts as fundamental catalysts supporting both selections.
Western Digital Corporation, WDC
Seagate delivered fiscal Q2 results featuring $2.83 billion in revenue and $3.11 earnings per share, surpassing Wall Street expectations on both metrics. These numbers prompted Cantor Fitzgerald to increase its valuation target for the storage company.
Regarding Western Digital specifically, Morgan Stanley emphasized increasing conviction around AI-related capital expenditure as a core growth driver. The firm’s analysts also identified memory chip pricing dynamics and recent share price fluctuation as elements requiring investor attention.
AI Demand Drives Hardware Growth
Western Digital’s fiscal 2026 second quarter generated $3.02 billion in revenue, representing 25% year-over-year expansion. The majority of this growth originated from hyperscalers—major cloud service providers—purchasing high-density hard disk drive systems in substantial volumes.
The storage manufacturer posted a record-breaking non-GAAP gross margin of 46.1% during the period. This achievement demonstrates enhanced operational efficiency following the company’s separation from its lower-margin flash memory operations.
Western Digital additionally approved a fresh $4 billion stock buyback authorization in February 2026. The organization produced $599 million in operating cash flow during fiscal Q1 2026 to fund this initiative.
Balance Sheet Changes and Stock Pullback
During February 2026, Western Digital completed the divestiture of approximately $3.17 billion in SanDisk equity. Management deployed these funds toward retiring long-term debt obligations, a move that prompted S&P Global Ratings to elevate Western Digital’s credit assessment to BBB-.
Both Morgan Stanley and Cantor Fitzgerald subsequently raised their price objectives for Western Digital shares in response to these strategic actions.
Notwithstanding solid underlying business performance, Western Digital stock has retreated roughly 16% from its 52-week peak. Market observers attribute this decline to broader technology sector weakness and questions surrounding the timing and structure of the SanDisk stake liquidation.
Western Digital’s complete 2026 hard disk drive manufacturing capacity has reportedly been reserved by hyperscaler clients.
