WDC Stock Surges 10.1% on Q4 Beat - AI Storage Demand Drives Growth

The Catalyst

WDC just delivered a masterclass in how to capitalize on the AI revolution, surging 10.1% to $78.68 after posting Q4 results that absolutely crushed expectations across every metric. The storage giant reported non-GAAP earnings of $1.66 per share, smashing the consensus estimate by 12.2%, while revenue of $2.61 billion surged 30% year-over-year and beat expectations by $160 million.

But here’s the real story - Western Digital shipped 190 exabytes of storage to customers, up 32% year-over-year, driven by explosive demand for AI and cloud computing infrastructure. The company’s high-capacity drives are becoming the backbone of the AI revolution, with shipments of 26TB CMR and 32TB UltraSMR drives more than doubling from the previous quarter to top 1.7 million units.

Why This Matters

This earnings report validates Western Digital’s positioning at the epicenter of two massive secular trends: artificial intelligence and cloud computing expansion. The 30% revenue growth to $2.61 billion demonstrates that demand for massive, cost-effective storage solutions is accelerating, not just growing.

The gross margin expansion to 41.3% (up 610 basis points year-over-year) shows this isn’t just a volume story - it’s a value story. When storage companies can drive both top-line growth and margin expansion simultaneously, it signals they’re riding genuine technological inflection points rather than just cyclical recoveries.

For fiscal 2025, revenues skyrocketed 51% year-over-year to $9.5 billion. That level of growth from a mature technology company is remarkable and reflects the fundamental shift toward AI-driven infrastructure investment. The cloud end market, representing 90% of revenues, climbed 36% year-over-year to $2.6 billion.

The $2 billion share buyback authorization with strong cash flow generation ($675 million free cash flow, up 139%) demonstrates management’s confidence in the sustainability of this AI-driven demand cycle.

Technical Setup

WDC’s technical breakout today represents a clean break above resistance that had been containing the stock for weeks. The move from $71.43 to $78.68 represents not just an earnings reaction, but a fundamental re-rating of the company’s growth prospects.

Key observations from the daily chart:

• Strong gap up and sustained momentum breaking through the $72-74 resistance zone
• Clean breakout with high-volume confirmation (220% above average)
• Volume explosion to 22.5 million shares showing massive institutional participation
• Strong finish near session highs at $78.68, minimal profit-taking despite solid gains

Is WDC Stock a Buy After This AI Storage Surge?

The combination of AI infrastructure demand, margin expansion, and technical breakout creates a compelling setup. Storage is the foundation of AI computing, and WDC appears positioned as a critical enabler of this technological revolution.

Today’s Price Action

The price action today showed steady institutional accumulation throughout the session, with the stock gapping up from $71.43 and maintaining momentum through multiple resistance levels. This wasn’t just algorithmic buying - it was sustained recognition of the earnings quality.

Intraday Highlights

• 9:30 AM: Strong gap up to $74.25, immediate buying interest with sustained momentum
• 10:00 AM: Steady climb through $76, storage demand story gaining traction
• 11:00 AM: Push through $77 resistance, AI infrastructure theme resonating
• 2:00 PM: Afternoon strength toward $78, institutional accumulation continuing
• 3:30 PM: Power hour maintaining gains near session highs
• 4:00 PM: Close at $78.68, up 10.1% with conviction buying throughout

Volume Analysis

The volume surge to 22.5 million shares (220% above average) represents significant institutional recognition of Western Digital’s positioning in the AI infrastructure build-out. This level of activity suggests major funds are repositioning for the storage demand cycle.

The sustained volume throughout the session indicates real conviction behind the move rather than just earnings momentum. When storage companies deliver this combination of growth acceleration and margin expansion, institutions typically build long-term positions.

Earnings and AI Storage Breakdown

These results showcase a company perfectly positioned for the AI infrastructure boom:

Q4 2025 Results:

• Non-GAAP EPS: $1.66 (vs $1.48 expected) - 12.2% beat
• Revenue: $2.61B (vs $2.45B expected, up 30% YoY)
• Gross margin: 41.3% (up 610 bps YoY)
• Operating income: $732M (up 147% YoY)
• Free cash flow: $675M (up 139%)

AI and Cloud Storage Metrics:

• Total storage shipped: 190 exabytes (up 32% YoY)
• High-capacity drive shipments: 1.7M units (more than doubled QoQ)
• Cloud revenues: $2.6B (up 36% YoY, 90% of total)
• 26TB CMR and 32TB UltraSMR ramp: “One of fastest in history”

Full Year Fiscal 2025:

• Revenue: $9.5B (up 51% YoY)
• Share buyback authorization: $2B

AI Storage Revolution

Western Digital’s success stems from recognizing that AI and generative computing require massive, cost-effective storage backbones that traditional HDDs still provide most efficiently. While flash storage gets attention, the bulk storage needs of AI training and inference still rely heavily on high-capacity hard drives.

The 32% increase in exabyte shipments demonstrates that data generation is accelerating faster than many anticipated. AI model training, inference workloads, and data retention requirements are creating unprecedented demand for storage infrastructure.

The shift toward higher-capacity drives (26TB and 32TB) shows customers optimizing for density and cost-efficiency rather than just performance - exactly WDC’s competitive strength.

What Price Target for WDC Stock?

Based on the AI storage demand trajectory and today’s technical breakout, we’re targeting $85 as the initial objective. This represents roughly an 8% move from current levels and would put WDC at reasonable multiples given the AI infrastructure growth profile.

The $80-82 zone serves as the next resistance area to watch. A clean break above this level could accelerate the move toward our $85 target.

When to Take Profits on WDC?

This looks more like the early innings of an AI infrastructure build-out than a cyclical storage recovery. The secular demand for massive data storage should sustain momentum beyond one quarter. Consider partial profit-taking at $85, but maintain exposure to the AI storage theme.

Where to Place Stop Loss for WDC?

The previous resistance zone around $72-74 now serves as support. A break back below $72 would suggest today’s move was overdone and merit a position reassessment.

WDC Storage Forecast - AI Infrastructure Play

The convergence of AI computing, cloud expansion, and data generation creates multiple tailwinds for storage demand. WDC’s focus on high-capacity, cost-effective solutions positions it uniquely for this infrastructure cycle.

The Bottom Line

WDC delivered results that validate its positioning as a critical enabler of AI infrastructure, combining 30% revenue growth with significant margin expansion. The 190 exabytes of storage shipped represents the scale of data infrastructure being built to support AI computing.

The technical breakout confirms what the fundamentals suggest - Western Digital has entered a new growth phase driven by artificial intelligence and cloud computing expansion. When you combine AI infrastructure demand, margin expansion, and the fastest high-capacity drive ramp in company history backed by massive institutional volume, the setup becomes compelling for continued upside.

At $78.68, WDC trades at levels that reflect optimism about AI storage demand, but the 51% full-year revenue growth and strong execution suggest this optimism is well-founded. The storage industry is experiencing a fundamental shift toward AI-driven infrastructure, and WDC appears positioned to benefit significantly from this technological evolution.