Western Digital stock (NASDAQ: WDC) fell as much as 10.8% in after-hours trading on Wednesday, after losing 5.4%, despite the company beating Wall Street estimates.
Adjusted earnings rose to $3.56 a share from $1.70 a year earlier, exceeding analysts’ forecast of $3.31. Revenue increased 44% to $3.75 billion, topping the $3.70 billion consensus.
The reaction showed that investors were no longer judging Western Digital simply on whether it could beat forecasts.
After a rally of more than 190% in 2026, the company needed a larger surprise to justify expectations embedded in its valuation.
Western Digital earnings: Quarter was strong, but expectations were spectacular
Western Digital reported record profitability as tight hard-drive supply, favourable pricing and cloud demand improved its economics.
Non-GAAP gross margin reached 54.4%, up from 41.3% a year earlier. Cash flow from operations climbed to $1.39 billion, while free cash flow reached $1.28 billion.
Those figures offered little evidence that demand for storage used by hyperscalers and artificial-intelligence workloads was weakening.
Chief executive Irving Tan said Western Digital entered fiscal 2027 with greater visibility and confidence in demand.
Hard-disk drives remain among the cheapest ways to store the vast data generated by AI training, inference and software agents.
However, the stock entered the report after an extraordinary run. Analysts described the quarter as excellent but said the decline illustrated elevated expectations facing suppliers to the AI boom.
Guidance beat forecasts, but failed the Seagate comparison
Western Digital forecast first-quarter revenue of $4 billion to $4.2 billion, compared with analysts’ estimate of $4.04 billion. Adjusted earnings were projected at $3.85 to $4.15 a share, above the $3.76 consensus.
The midpoint of both ranges exceeded expectations, but only modestly. After the stock’s surge, investors wanted guidance that would force analysts to raise forecasts sharply.
The comparison with Seagate made Western Digital’s outlook appear less impressive.
Investor’s Business Daily said its guidance looked more conservative than the forecast recently issued by its main hard-drive rival.
Morgan Stanley analyst Erik Woodring had remained bullish before the results, saying he was “pounding the table” on Western Digital and Seagate.
He argued that AI inferencing, cloud growth and limited supply could keep hard-drive demand strong for years.
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The AI-storage thesis survives, but needs fresh proof
The results did not undermine the longer-term storage story. Western Digital and Seagate dominate a concentrated hard-drive market, while hyperscalers require cost-effective capacity for expanding data sets.
The company must now prove it can keep raising prices, expanding margins and converting demand into cash without falling behind Seagate’s execution.
Wedbush analyst Matt Bryson identified the same vulnerability after Western Digital’s previous report.
He told Investor’s Business Daily that management’s forecast was “less robust” than investors had hoped, particularly because projected margin expansion lagged Seagate’s.
Wednesday’s reaction suggests that concern is recurring. Western Digital is producing strong results, but the market repeatedly demands more incremental upside.
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