Western Digital Corporation (WDC): A Bull Case Theory

We came across a bullish thesis on Western Digital Corporation on The Simple Side’s Substack. In this article, we will summarize the bulls’ thesis on WDC. Western Digital Corporation’s share was trading at $214.00 as of January 13th. WDC’s trailing and forward P/E were 29.88 and 28.09 respectively according to Yahoo Finance.

Western Digital Corporation develops, manufactures, and sells data storage devices and solutions based on hard disk drive (HDD) technology in the United States, Asia, Europe, the Middle East, and Africa. The company offers internal HDDs, data center drives, data center platforms, external drives, portable drives, NAS for home and office, and accessories.

Western Digital Corp (WDC) presents a compelling investment case driven by disciplined execution, market leadership, and strategic focus on high-capacity nearline HDDs. In Q1FY26, the company reported $2.82 billion in revenue, a 27% year-over-year increase, with non-GAAP EPS of $1.78, a 30.4% operating margin, and $599 million in free cash flow.

Guidance for Q2FY26 anticipates sequential revenue growth to ~$2.9 billion with mid-40s margins, while a $0.125 dividend increase and $553 million in buybacks demonstrate strong cash conversion and confidence in the demand environment. Following the February 2025 separation of its Flash business, Western Digital now focuses exclusively on HDD operations, aligning cost structure with cloud-driven storage demand and providing clearer visibility into profitability and capital allocation.

The company’s diversified exposure across Cloud, Client, and Consumer markets, with cloud leading revenue and margin gains, supports resilient growth. Technological leadership is underscored by accelerated ePMR and HAMR qualifications, which improve yield, density, and gross-margin potential toward the high-40s.

Management maintains disciplined capex at 4%–6% of revenue, avoiding new unit capacity while sustaining pricing power. Multi-year orders from hyperscale customers and a robust backlog provide visibility into revenue and margins through CY27, supporting structural growth in a previously cyclical industry.

Valuation analyses using DCF, SOTP, and peer multiples indicate fair value in the high-$100s, with upside toward $250 if margin and technology milestones are met, while downside near $90 is mitigated by strong cash generation. WDC’s combination of operational discipline, technological innovation, and visible cash flows positions it as an attractive investment with asymmetrical upside potential.

Previously, we covered a bullish thesis on Seagate Technology Holdings plc (STX) by fortitudelkw in January 2025, which highlighted STX’s leadership in high-capacity HDDs and strong positioning in the AI-driven cloud storage market. The company’s stock price has appreciated by approximately 194.36% since our coverage. This is because the thesis played out as AI and cloud demand surged. The Simple Side shares a similar perspective but emphasizes Western Digital’s disciplined execution, Flash separation, and multi-year order visibility supporting structural growth and margin expansion.

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Disclosure: None.