Western Digital Rides AI Data Surge to Record Quarter, Forecasts Strong Growth Ahead

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January 29, 2026 — 4:30 p.m. ET

SAN JOSE, Calif. — Western Digital Corporation (NASDAQ: WDC) reported blockbuster fiscal second-quarter 2026 results, handily surpassing Wall Street expectations and providing an optimistic outlook for the coming quarter. The company's performance underscores its central role in powering the infrastructure behind the artificial intelligence revolution, particularly the burgeoning demand for data storage driven by AI inference workloads.

Revenue for the quarter reached $3 billion, a 25% increase year-over-year, with earnings per share soaring 78% to $2.13. The cloud segment, representing 89% of total revenue, was the primary engine of growth, climbing 28% as hyperscale customers scrambled to secure high-capacity hard disk drives (HDDs).

"We are in a new era where AI and cloud are dominant forces," said CEO Irving Tan during the earnings call. "The transition from AI training to widespread inference is generating unprecedented volumes of data. This isn't a transient spike; it represents a structural shift in storage demand."

Tan emphasized that AI inference—the process of running trained models in applications like chatbots, virtual assistants, and CRM tools—is becoming the "true AI workload," creating a persistent need to store the massive datasets required for these operations. Western Digital is responding by working intimately with top hyperscale clients, securing long-term agreements (LTAs) to supply reliable, high-capacity drives.

The company shipped over 3.5 million units of its latest-generation energy-assisted perpendicular magnetic recording (ePMR) drives last quarter, with capacities up to 32 terabytes using its UltraSMR technology. Notably, UltraSMR drives now constitute over 50% of its nearline HDD portfolio, a mix that boosts both storage density and profitability.

CFO Kris Sennesael highlighted robust financial health, with operating cash flow of $745 million and free cash flow of $653 million. The company returned $663 million to shareholders via dividends and share repurchases during the quarter. Looking ahead, management guided for Q3 revenue of approximately $3.2 billion and EPS of $2.30, plus or minus $0.15.

A significant portion of the call focused on technology roadmaps. Western Digital has begun qualification of its heat-assisted magnetic recording (HAMR) drives with a major hyperscaler, pulling the timeline forward into the first half of calendar 2026. The company also teased upcoming announcements at its Innovation Day on February 3rd in New York, where it will detail advancements in HAMR, ePMR, and core innovations to improve drive performance and energy efficiency.

Analysts probed the durability of the company's impressive gross margin expansion, which reached 46.1% and is guided to 47-48% next quarter. Sennesael attributed this to a stable pricing environment, a strategic upsell to higher-capacity drives, and relentless cost control, resulting in a cost-per-terabyte decline of roughly 10% year-over-year.

When questioned about the tight HDD supply environment, Tan confirmed the company is "pretty much sold out" for calendar 2026 and has established LTAs with key customers extending into 2027 and 2028. These agreements, which lock in both volume and price, reflect a "fair value exchange" and growing customer reliance on Western Digital for predictable supply in a volatile market.

Market Voices: Analyst & Investor Reactions

David Chen, Portfolio Manager at TechGrowth Capital: "This quarter validates our investment thesis. WDC isn't just selling commodity drives anymore; they're providing mission-critical, high-value storage solutions for the AI data stack. The LTAs are a game-changer, providing multi-year visibility and pricing power we haven't seen in this sector before."

Sarah Jensen, Senior Analyst at Clearwater Research: "The execution is flawless. Shifting the mix to UltraSMR ahead of schedule and pulling in the HAMR qualification demonstrates superb operational agility. Their 75% incremental gross margin flow-through is exceptional and suggests the financial model is far stronger than the market has priced in."

Marcus Thorne, Independent Investor & Tech Blogger: "Let's not get carried away. This is still a cyclical business riding a wave. All this talk of 'structural shift' is just PR spin to justify higher prices. What happens when the hyperscalers' capex cycles turn? These LTAs will look like anchors, not lifelines. And HAMR has been 'almost here' for a decade—forgive my skepticism until I see it shipping in volume and not eating into those beautiful margins."

Priya Sharma, Data Center Strategist at North Peak Advisory: "The commentary on AI inference is the key takeaway. Training gets the headlines, but inference is where the sustained, scalable data footprint is created. Western Digital's focus on the total cost of ownership for this workload directly addresses their customers' biggest pain point. Their strategic relevance has fundamentally increased."

Disclosure: The Motley Fool has positions in and recommends Western Digital.