Is Western Digital Corporation (WDC) A Good Stock To Buy Now?

Is WDC a good stock to buy? We came across a bullish thesis on Western Digital Corporation on Studio Innovation’s Substack by Studio. In this article, we will summarize the bulls’ thesis on WDC. Western Digital Corporation's share was trading at $530.60 as of May 27 th . WDC’s trailing and forward P/E were 31.75 and 27.86 respectively according to Yahoo Finance. Copyright: believeinme33 / 123RF Stock Photo Western Digital Corporation develops, manufactures, and sells data storage devices and solutions based on hard disk drive (HDD) technology in the United States and internationally. WDC delivered a strong Q3FY26 performance, reinforcing its position as a leading beneficiary of structurally rising data storage demand driven by AI and cloud infrastructure. The company reported revenue of $3.34B, up 45% YoY and ahead of estimates, with cloud contributing 89% of total revenue, underscoring the depth of hyperscaler demand. Read More: 15 AI Stocks That Are Quietly Making Investors Rich Read More: Undervalued AI Stock Poised For Massive Gains: 10000% Upside Potential EPS surged 97% YoY to $2.72, while gross margins expanded meaningfully to 50.5%, reflecting improved mix, pricing discipline, and operational leverage. Operating margin reached 38.6%, supported by continued execution strength across end markets. Cash generation remained robust, with $1.12B in operating cash flow and $978M in free cash flow, highlighting the durability of earnings quality. Forward momentum remains strong, with Q4FY26 guidance calling for $3.6B in revenue, up 36%–44% YoY, and EPS of $3.25, implying more than 100% YoY growth at the midpoint. Gross margins are expected to further expand to 51%–52%, signaling continued profitability improvement. Western Digital also returned capital aggressively, increasing its quarterly dividend by 20% to $0.15 per share, reflecting confidence in sustained cash flow generation and balance sheet strength following the Sandisk spin-off. Strategically, the company is increasingly positioned as a core AI infrastructure enabler, with management emphasizing that virtually all AI workloads—from training to inference, agentic AI, and physical AI—generate persistent data that is optimally stored on high-capacity HDDs. Industry-wide storage demand is expected to grow at over 25% CAGR, supported by accelerating inference workloads, which are projected to dominate AI compute activity. Western Digital’s technology roadmap further strengthens this outlook, with 40TB drives entering production in H2 CY26 and a path toward 100TB+ capacities over time, alongside expanding adoption of Ultra SMR technology across key hyperscaler customers. With strong execution, expanding margins, AI-driven demand tailwinds, and rapidly improving free cash flow, Western Digital’s sharp multi-quarter momentum and YTD 145% and 1-year 910% stock performance highlight a powerful re-rating narrative still in early stages. Previously, we covered a bullish thesis on Seagate Technology Holdings plc (STX) by fortitudelkw in January 2025, which highlighted AI-driven cloud storage demand and HAMR-led capacity expansion. STX’s stock price has appreciated by approximately 704.82% since our coverage. Studio Innovation shares a similar view but emphasizes Western Digital’s stronger execution momentum, margin expansion, and accelerating AI infrastructure-driven re-rating potential. Western Digital Corporation is not on our list of the 40 Most Popular Stocks Among Hedge Funds . As per our database, 83 hedge fund portfolios held WDC at the end of the first quarter which was 79 in the previous quarter. While we acknowledge the risk and potential of WDC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WDC and that has 10,000% upside potential, check out our report about this cheapest AI stock .