Why Now Could Be the Time to Buy Western Digital Stock

Amit Singh

Thu, September 17, 2026 at 4:52 PM GMT+3 4 min read

WDC +4.13%

Western Digital headquarters By JHVEPhoto

Western Digital (WDC) stock has faced significant selling pressure recently, falling about 39% over the past three months. The stock is also trading approximately 46% below its recent peak of $799.87. The steep decline reflects profit-taking and growing investor concerns about the sustainability of pricing and future demand.

Adding to the pressure, remarks from prominent AI industry leaders advocating a more cautious and measured pace for developing frontier AI systems have weighed on sentiment toward companies exposed to AI infrastructure.

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Despite the sharp decline, Western Digital is still in a solid position to deliver strong growth ahead, led by sustained demand for its storage solutions. In addition, the decline in WDC stock has made its risk-reward attractive.

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Earnings to Double and Unlikely to Slow Until FY28

Concerns about industry growth and pricing remain, but Western Digital is positioned to deliver solid earnings over the next couple of years at least. Resilient HDD demand, stronger pricing, expanding margins, and a favorable product mix supported its bottom line in fiscal 2026 (FY26), and the momentum could sustain.

Western Digital's annual revenue increased 36% to $12.9 billion in FY26, while gross margin climbed 970 basis points to 49.1%. Operating margin improved even more, expanding 1,290 basis points to 37.3%. Its strong top line and solid margins have translated into a sharp increase in earnings and cash generation. EPS more than doubled to $10.22, and free cash flow reached $3.5 billion.

The rapid expansion of AI infrastructure is creating a structural opportunity for the data storage industry. As AI models and workloads become more complex, they could materially expand long-term storage demand. In addition, the emergence of agentic AI should further increase storage demand.

Beyond data centers, opportunities across autonomous vehicles, robotics, industrial automation, and humanoid systems could create additional sources of data generation and, consequently, incremental storage requirements.

Overall, these developments point to a broader and potentially sustained expansion in storage intensity across multiple technology applications. For Western Digital, this could translate into a durable demand tailwind.

At the same time, Western Digital is positioning its product portfolio toward higher-capacity storage solutions. Higher-capacity HDDs can improve the cost efficiency and physical footprint of large-scale data center deployments, potentially making them increasingly attractive as storage requirements expand. This shift could benefit the company not only through higher unit capacities and demand but also through a more favorable product mix. Over time, greater exposure to higher-value storage products could further support gross margins and overall profitability.

Long-term customer agreements represent another potential driver of earnings visibility for Western Digital. By securing contractual commitments over extended periods, the company can build a more predictable revenue base and mitigate demand fluctuations characteristic of the data storage industry. Such agreements may also improve capacity planning and provide greater stability in cash flow generation.

These factors collectively support a favorable outlook for Western Digital's earnings trajectory. Analysts currently project fiscal 2027 EPS of approximately $19.65, implying it could double. The growth momentum is expected to extend into fiscal 2028. Consensus estimates indicate that EPS could increase by approximately 73.2% to around $34.03 in fiscal 2028.

Western Digital Stock Trades at Attractive Valuation Multiple

The recent decline in Western Digital shares has brought the valuation to a more attractive level. The company is currently valued at about 22.8 times forward earnings, suggesting the stock is undervalued relative to its earnings growth potential.

With WDC expected to deliver solid earnings growth and its stock trading cheap, WDC has more room to run.

The Bottom Line: WDC Stock is a Buy Now

Western Digital's recent share price decline reflects concerns around the sustainability of storage demand, pricing, and elevated expectations following its strong performance. However, strong demand for its storage solutions, a shift toward higher-capacity products, a growing addressable market, and a low valuation indicate significant upside in WDC stock.

Analyst sentiment toward WDC remains broadly positive, with a majority maintaining a "Strong Buy" rating. In addition, analysts' average price target of $668.39 represents about 56% upside potential from current levels.