TLDR
- Morgan Stanley selected Western Digital and Seagate as leading IT hardware investments, highlighting AI infrastructure and data center expansion as primary catalysts
- Western Digital’s stock surged 489% in the past year, driven by 28% revenue growth and unprecedented 46.1% gross profit margins
- Fiscal Q2 2026 revenue reached $3.02 billion, marking a 25% year-over-year increase, with full 2026 production capacity reserved by major hyperscalers
- In February 2026, Western Digital divested a $3.17 billion ownership position in SanDisk, allocating proceeds toward reducing long-term obligations
- Shares have retreated approximately 16% from peak levels amid a wider technology sector downturn
Western Digital emerged as a standout performer in the hardware industry throughout the past twelve months. Share prices skyrocketed approximately 489% from March 2025 through March 2026, advancing from $44 per share to $259.
This remarkable appreciation stemmed from robust top-line expansion and widening profitability metrics. Overall revenues increased 28% to reach $10.73 billion, while net profit margins expanded dramatically from 15% to 35.4%.
Morgan Stanley recently designated both Western Digital and Seagate Technology as their highest-rated IT hardware investments. The financial institution cited artificial intelligence infrastructure investments and cloud computing data center buildouts as the fundamental reasoning for these selections.
Western Digital Corporation, WDC
Seagate disclosed fiscal second-quarter revenues totaling $2.83 billion alongside earnings of $3.11 per share, surpassing Wall Street projections on both metrics. In response to these results, Cantor Fitzgerald increased its valuation target for the storage provider.
Regarding Western Digital, Morgan Stanley emphasized increasing optimism surrounding AI capital expenditure as a key growth catalyst. Analysts additionally identified potential headwinds including memory chip pricing fluctuations and recent share price instability as considerations for investors.
AI Demand Drives Hardware Growth
Western Digital’s fiscal 2026 second quarter delivered revenues of $3.02 billion, representing a 25% year-over-year improvement. The expansion primarily originated from hyperscalers — dominant cloud infrastructure operators — procuring high-capacity storage drives in substantial volumes.
The organization achieved a record non-GAAP gross margin of 46.1% during this reporting period. This milestone demonstrates enhanced operational efficiency following Western Digital’s separation of its lower-margin flash memory division.
Western Digital additionally approved a fresh $4 billion stock buyback authorization in February 2026. The enterprise produced $599 million in free cash flow during Q1 FY2026 to fund this initiative.
Balance Sheet Changes and Stock Pullback
During February 2026, Western Digital liquidated an approximately $3.17 billion equity position in SanDisk. The organization deployed these funds toward reducing long-term debt obligations, a move acknowledged by S&P Global Ratings through a credit upgrade to BBB-.
Both Morgan Stanley and Cantor Fitzgerald elevated their price objectives for Western Digital subsequent to these strategic moves.
Notwithstanding the solid underlying fundamentals, Western Digital shares have declined roughly 16% from their 52-week peak. Market analysts attribute this correction to a comprehensive technology sector retracement and questions surrounding the SanDisk divestiture.
Western Digital’s hard disk drive manufacturing capacity for 2026 is reportedly completely reserved by hyperscaler clients.
