TLDR
- Investment bank Morgan Stanley selected Western Digital and Seagate as premier IT hardware investments, driven by AI infrastructure and data center expansion
- WDC shares delivered exceptional 489% returns over 12 months, powered by 28% revenue growth and unprecedented 46.1% gross profit margins
- Fiscal Q2 2026 revenues reached $3.02 billion, representing 25% annual growth, with hyperscaler clients booking entire 2026 production capacity
- In February 2026, WDC divested a $3.17 billion SanDisk position, deploying funds toward reducing long-term debt obligations
- Shares have retreated approximately 16% from peak levels amid wider technology sector weakness
Western Digital has emerged as a standout performer within the hardware industry throughout the past twelve months. Shares soared approximately 489% during the March 2025 to March 2026 period, climbing from $44 per share to $259.
This remarkable appreciation stemmed from robust top-line expansion coupled with improving profitability metrics. Annual revenues expanded 28% to reach $10.73 billion, while net profit margins surged from 15% to an impressive 35.4%.
Morgan Stanley’s equity research team recently designated both Western Digital and Seagate Technology as their highest-rated names within IT hardware. The firm cited accelerating AI infrastructure investments and expanding cloud data center buildouts as the fundamental catalysts supporting both recommendations.
Western Digital Corporation, WDC
Seagate disclosed fiscal second-quarter revenues of $2.83 billion alongside earnings of $3.11 per share, surpassing Wall Street consensus on both metrics. Cantor Fitzgerald subsequently increased its valuation target on the stock following these results.
Regarding Western Digital specifically, Morgan Stanley highlighted strengthening conviction around sustained AI capital expenditure growth. The firm’s analysts also noted potential headwinds from memory chip pricing fluctuations and recent share price volatility that warrant monitoring.
AI Demand Drives Hardware Growth
Western Digital’s fiscal second quarter 2026 performance delivered $3.02 billion in revenue, marking 25% year-over-year advancement. The expansion was predominantly attributable to hyperscaler customersāmajor cloud computing providersāprocuring high-capacity hard disk drive solutions in substantial volumes.
The organization achieved a record non-GAAP gross margin of 46.1% during this reporting period. This milestone demonstrates enhanced operational leverage following Western Digital’s strategic separation of its lower-margin flash memory operations.
Western Digital also initiated a fresh $4 billion stock buyback authorization during February 2026. The company produced $599 million in free cash flow during fiscal Q1 2026 to finance this capital return initiative.
Balance Sheet Changes and Stock Pullback
During February 2026, Western Digital completed the divestiture of approximately $3.17 billion worth of SanDisk holdings. The organization allocated these proceeds toward reducing long-term debt balances, a move that prompted S&P Global Ratings to elevate Western Digital’s credit assessment to BBB-.
Both Morgan Stanley and Cantor Fitzgerald increased their price objectives for Western Digital shares following these corporate actions.
Notwithstanding these positive fundamental developments, Western Digital stock has declined roughly 16% from its 52-week peak. Market observers attribute this retracement to broader technology sector rotation and questions surrounding the timing and execution of the SanDisk stake liquidation.
Western Digital’s hard disk drive manufacturing capacity for 2026 is reportedly completely committed through contracts with hyperscaler customers.
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