Western Digital beat fiscal first-quarter forecasts and guided higher, but shares fell after hours as investors took profits during an AI-stock sell-off.
Even with a clear earnings beat, the stock moved lower in extended trading, a sign that investor positioning rather than the underlying results is steering the action. Having more than doubled this year, the shares now look like a candidate for profit-taking as money pulls back from AI hardware broadly. For storage names, the 28% jump in blended average selling price per terabyte stands out as the most important indicator, suggesting hard-drive pricing power that could lift margins across the industry should demand continue. A bigger portion of orders now comes from neoclouds, which cuts both ways: it broadens the customer mix but ties Western Digital to a set of companies under funding pressure, making credit stress among AI infrastructure providers a new risk for storage stocks. Thursday's sell-off in chip shares was a reminder that sentiment across the AI supply chain can turn fast, no matter how a company performs.
Earlier:
Western Digital's pitch is that it is shipping more storage at sharply higher prices and that data will prove a longer-lived AI opportunity than computing power. Investors, however, chose to cash in rather than embrace the story.
Summary:
The company's fiscal first-quarter numbers came in ahead of expectations, and its guidance also topped forecasts, with AI-infrastructure demand for data storage pushing both shipment volumes and prices higher. On the earnings call, Chief Executive Irving Tan made the case that data, rather than computing power, is the more durable AI opportunity.
For the maker of hard disk drives, net income came to $1.78 billion, or $4.63 per share, against $1.15 billion, or $3.07 per share, in the same period a year ago. Adjusted profit of $4.64 a share easily exceeded the $4.11 that FactSet-surveyed analysts had expected. Revenue climbed roughly 55% to $4.38 billion from $2.82 billion, also above the $4.14 billion expected.
Pricing did much of the heavy lifting. For every terabyte sold, the blended average selling price climbed 28% during the quarter, a sign of demand strong enough to support higher prices. Tan said on the analyst call that a growing share of demand is arriving from outside Western Digital's usual customer base, among them neoclouds and frontier AI labs. Demand visibility now extends to 2030 or 2031 across the company's top seven customers, he added, reinforcing its belief that hard-drive storage demand has staying power.
Tan went further, sketching a broader argument for the storage sector. Investors preoccupied with the computing power behind AI could be missing the data those systems generate, he believes. The large volumes of information generated by AI applications all need to be stored and managed, he said, and the need for storage should keep growing as AI spreads through more industries.
Naturally, a storage company would be expected to make that argument, but investors did not reward it that day. The stock declined roughly 5.6% to about $335 after hours, after ending the regular session down 6.4% near $354 as investors rotated away from AI names, partly triggered by Meta Platforms' capital spending disclosures. Even following that slide, the stock remained more than twice its level at the start of the year through Thursday's close, leaving ample room for profit-taking.
Its guidance also signals more growth ahead. For the fiscal second quarter, the company projects adjusted earnings between $5.60 and $6.00 a share, with revenue of $5.0 billion to $5.2 billion, comfortably above the $4.84 per-share and $4.57 billion that analysts had forecast. The quarterly dividend is being lifted 17% to 17.5 cents a share, with payment set for December 17 for holders on record as of December 4.
What remains to be seen is whether Tan's long-range outlook survives the closer examination now being applied to AI spending. A heavier dependence on newer buyers such as neoclouds widens the demand pool, yet it also ties Western Digital to a segment where financing strains have grown recently. How durable those orders prove is therefore likely to be an important question for investors over the coming quarters.
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