Shares of Western Digital surged 5.25% to $505.19 on May 11, as investors digested the final chapter of the company's transformation from a sprawling storage conglomerate into a focused supplier of hard drives for AI data centers. The question now: has the market fully priced in a company whose factories are already sold out?
Splitting Off the Flash Business Unlocked Massive Value
SanDisk officially completed its separation from Western Digital on February 24, 2025 , with Western Digital distributing approximately 80.1% of SanDisk shares to its stockholders. The result was dramatic: WDC gained 282% in 2025, while "the combined entity before the split would never have been valued as highly as both parts are today."
Prior to the spin-off, SanDisk paid a dividend of approximately $1.5 billion to Western Digital , giving the parent company a clean balance sheet to invest in data center capacity.
89% of Revenue Now Comes From Cloud Giants — And They're Locked In
89% of the company's revenue now comes from cloud customers , up from a roughly even consumer-enterprise split before the separation. Production is sold out for calendar year 2026, and CEO Irving Tan confirmed the company holds firm purchase orders from its top seven customers.
Long-term agreements extend through 2027 with two top customers and through 2028 with one — giving revenue visibility almost unheard of in hardware. One caveat: these are capacity reservations, not take-or-pay contracts, meaning customers can renegotiate if demand slows.
Earnings Are Surging, but the Stock Isn't Cheap
Fiscal Q3 2026 revenue hit $3.34 billion — up 45.5% year over year and the fastest growth in nine years — while adjusted earnings per share rose 97% to $2.72.
The company has clocked $6.65 in EPS in its first nine months and is on track for about $9.90 for the full fiscal year. At $505, that implies roughly 51 times current-year earnings. Analysts expect earnings to cross $25 per share over the next couple of years , which would compress that ratio — if demand holds.
The Hard Drive Shortage Could Last Years — Or Break Suddenly
Western Digital estimates the AI and cloud storage market will grow at more than 25% annually through 2030.
HDD prices have already surged roughly 46% since September 2025. But the stock's parabolic run — up well over 150% in 2026 alone — assumes sustained scarcity. Any pullback in hyperscaler spending would test that thesis hard.