US Storage Giant Western Digital Reports 55% Revenue Growth, Guidance Signals Accelerating AI-Driven Demand
Western Digital posted strong quarterly results with cloud revenue accounting for 88%, and expects HAMR technology qualifications to complete in early 2027.
US data storage giant Western Digital disclosed robust performance for its first quarter of fiscal 2027 during an earnings call on October 22, 2026. The company reported revenue of $4.4 billion, up 55% year over year; non-GAAP EPS of $4.64, up 161%; and free cash flow of $1.4 billion. This performance exceeded management's own expectations, driven primarily by sustained demand for high-capacity nearline hard drives.
Cloud business emerged as the core engine of growth, contributing $3.9 billion in revenue, or 88% of total sales, rising 54% year over year. CFO Kris Sennesael noted that average selling price per terabyte increased by 28%, and the product mix shifted toward higher-capacity nearline drives, driving gross margin expansion to 58.1%. CEO Irving Tan stated that storage demand is broadening beyond traditional cloud and hyperscale customers to enterprise users, NeoCloud providers, and AI frontier labs, with customers extending their infrastructure planning horizons into the next decade.
Regarding technology transitions, Western Digital announced that its latest ePMR platform, supporting capacities up to 40 terabytes, has begun volume production. It is expected to account for 30% of nearline shipments in the second quarter and 50% in the third quarter. Meanwhile, first-generation Heat-Assisted Magnetic Recording (HAMR) drives remain on schedule, with qualifications expected to be completed with two hyperscale customers in the first quarter of calendar 2027, ahead of volume shipments in the first half of that year. Second-generation HAMR drive qualifications are planned for the second half of calendar 2027.
The company's guidance for the next quarter indicates accelerating growth: revenue for the second quarter of fiscal 2027 is forecast at approximately $5.1 billion, representing 69% year-over-year growth at the midpoint. Gross margin is expected to rise to 60%-61%, and non-GAAP diluted EPS is projected at $5.80. Additionally, the board approved a 17% increase in the quarterly dividend to $0.175 per share, and the company returned $1.1 billion to shareholders through repurchases and dividends in the first quarter. Despite facing near-term input cost increases for DRAM and NAND, management believes long-term cost-per-terabyte reduction will continue through value engineering and increased areal density.