WDC's Strong Q4 Raises the Stakes for Its Fiscal 2027 Product Ramp

Western Digital Corporation WDC ended fiscal 2026 with a fourth-quarter earnings beat, 44% revenue growth and sharply higher margins. The results give the company a strong starting point for fiscal 2027. The next test is execution. Higher-capacity drives must ramp on schedule if WDC is to translate rising cloud and artificial intelligence storage demand into sustained revenue, margin and earnings growth.

WDC's Q4 Beat Shows Demand and Pricing Strength

Fourth-quarter revenues reached $3.75 billion, up 44% year over year and above the Zacks Consensus Estimate of $3.70 billion. Non-GAAP earnings of $3.56 per share topped the consensus mark of $3.35 and increased 109%.

Non-GAAP gross margin expanded 1,310 basis points year over year to 54.4%. A richer mix of higher-capacity drives, favorable pricing and manufacturing discipline helped lift profitability, while blended price per terabyte increased by the high teens.

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Western Digital Guides to Another Growth Step

For the first quarter of fiscal 2027, management expects revenues of $4.1 billion, plus or minus $100 million. At the midpoint, that represents about 45% year-over-year growth.

Western Digital also projects non-GAAP gross margin of 55%-56% and earnings of $4 per share, plus or minus 15 cents. The outlook implies another step up from fourth-quarter profitability if demand and pricing remain favorable.

WDC's 40TB ePMR Ramp Moves Into Volume

Western Digital began shipping next-generation energy-assisted perpendicular magnetic recording drives with capacities up to 40 terabytes in the fiscal fourth quarter. The company has entered volume production with two customers.

Management expects the platform to account for about half of nearline bits by the third quarter of fiscal 2027. Higher capacity per drive should allow WDC to deliver more exabytes without a corresponding increase in unit volumes.

Western Digital's HAMR Timeline Becomes the Next Test

The roadmap calls for 44-terabyte heat-assisted magnetic recording products in the first half of calendar 2027 and 50-terabyte products in the second half. Customer qualification and manufacturing execution therefore remain central to the fiscal 2027 setup.

UltraSMR adoption is advancing as well. Western Digital expects the technology to represent about 60% of nearline exabyte shipments as fiscal 2027 ends, making the sequencing of multiple product transitions important to capacity and cost gains.

WDC's AI Storage Demand Broadens the Opportunity

Management sees inference, agentic artificial intelligence and physical artificial intelligence as persistent storage drivers because these workloads continuously create and retain data. High-bandwidth drives are also sampling with five customers, potentially extending HDD economics into higher-throughput workloads.

The theme is broader than WDC. Seagate Technology Holdings plc STX reported fiscal fourth-quarter 2026 revenues of $3.6 billion as a mass-capacity storage provider, while Sandisk Corporation SNDK said fiscal 2026 Datacenter revenues increased 437%, illustrating demand across different storage technologies.

Growth Scores Reinforce WDC's Execution Setup

WDC's fiscal 2027 opportunity is substantial, but the product roadmap raises the execution bar. The company must sustain pricing, qualify new platforms and convert higher-capacity drives into the exabyte growth and margin expansion embedded in its outlook.

The stock currently carries a Zacks Rank #2 (Buy), along with a Growth Score of A and  Momentum Score of A. Those scores favor growth and momentum characteristics, while the Value Score of F and VGM Score of C point to a less attractive value profile and a mixed combined reading. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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