Western Digital NASDAQ: WDC executives outlined an accelerated technology roadmap and an updated long-term financial model at a New York investor event, emphasizing that the company is increasingly centered on data center demand tied to cloud and artificial intelligence workloads. CEO Irving Tan, Chief Product Officer Ahmed Shihab, and CFO Kris Sennesael highlighted progress on customer engagement, high-capacity drive ramps, and new performance and power-efficiency initiatives, while reiterating a commitment to returning free cash flow to shareholders.
Execution focus and a “data-centric” repositioning
Tan said the company has spent the past 12 months executing against the six strategic pillars it presented at its February 2025 Investor Day, including reorganizing sales, engineering, and product management teams to better engage customers. He said those efforts have translated into long-term agreements with customers extending through calendar 2027 and one extending through 2028.
Tan also pointed to the company’s recent addition to the Nasdaq-100 (in December) and the launch of a new WD brand and logo, which he said reflects a transformation toward being “data-centric” and focused on data centers at the center of AI and cloud. He argued that storage demand is being propelled not only by AI model training, but also by inference, which generates additional data that must be stored, along with emerging AI-driven applications like autonomous vehicles and robotics.
Tan said WD expects storage exabyte demand to grow at a CAGR of “25% plus” over the next five years and asserted that HDDs will represent 80% of storage media deployed in hyperscale environments due to economics and evolving performance capabilities.
Product roadmap: capacity now, HAMR transition, and customer “no disruption” goals
Shihab framed WD’s product strategy around what he said customers consistently request: capacity at scale, reliability, cost efficiency, smooth technology transitions without software disruption, better performance, and improved power efficiency. He described AI storage as a tiered “library,” with HDDs representing about 80% of the cloud storage stack based on WD’s experience.
On capacity, Shihab highlighted rapid ramps of high-capacity drives and said the company’s HAMR drives are already “in our customers’ hands” for qualification. He said WD announced one customer qualifying HAMR drives the prior week and stated at the event that WD now has a second customer qualifying HAMR.
He emphasized that WD aims to make HAMR operationally interchangeable with existing ePMR drives so that hyperscalers can deploy HAMR and ePMR drives side-by-side in the same infrastructure without changing software or operational practices. He said WD based its HAMR design on a “trusted 11-platter ePMR platform,” using the same mechanics and firmware to keep the customer experience consistent.
Technology updates: lasers, performance, and power
Shihab said WD is pursuing a path from roughly 40–44 TB HAMR drives to 100 TB by 2029, supported by a laser technology initiative. He described a proprietary laser approach designed to address issues he associated with edge-emitting lasers—wasted light, height constraints that affect platter spacing, and manufacturing yield challenges. Shihab said WD’s laser work could increase areal density from 4 TB per platter to 10 TB per platter by 2028, and that shorter lasers could allow packing up to 14 platters into the same 3.5-inch form factor.
Beyond capacity, Shihab presented performance and efficiency initiatives intended to extend HDD usefulness for AI-era workloads:
- High-Bandwidth Drive technology: Shihab said the approach enables reading and writing from multiple tracks simultaneously, targeting up to 1.7x random read/write throughput and 2x sequential throughput, with a scalable path toward more concurrent tracks. He said customers have the technology in hand and can see results in demonstrations.
- Dual Pivot technology: Described as a dual-actuator approach intended to double sequential I/O while maintaining power and total cost of ownership (TCO) needs. Shihab said the design is meant to fit existing customer chassis and be manufactured on the same lines. He said Dual Pivot would be introduced around the 60 TB mark, with customer hands-on timing in late 2027 and 2028.
- Power-optimized drives: Shihab said WD can reduce drive power consumption by about 20% by spinning drives slower, while trading only 5%–10% of sequential I/O. He also said this approach could deliver about 10% more capacity, and that the company expects qualification of this drive concept in 2027.
Shihab also argued that while QLC flash can offer high headline performance, real-world object-store deployments are constrained by network and interface bottlenecks such as SATA bandwidth, and he said HDDs avoid wear-out concerns that can complicate flash use under constant data movement.
Updated financial model and capital returns
Sennesael said WD is “structurally different” from years past, stating that about 90% of revenue is now tied to data center build-outs, cloud, and AI. He argued that this shift reduces the seasonality and cyclicality historically associated with the business, positioning WD as a secular growth company aligned with long-term data center expansion.
On recent performance, Sennesael presented a scorecard indicating expected fiscal 2026 results based on two quarters of actuals, one quarter at the midpoint of guidance, and consensus estimates for the fourth quarter. He said revenue is expected to roughly double over two years from $6 billion (fiscal 2024) to more than $12 billion (fiscal 2026), and he described gross margin expansion from “high 20s” (fiscal 2024) to “high 30s” (fiscal 2025) and expected “mid- to high 40s” in fiscal 2026, with operating margins expected in the “mid-30s.”
He also cited free cash flow margins above 20% over the last three quarters, an improvement in cash conversion cycle from more than 100 days to roughly 40 days, and capital expenditure intensity of roughly 4%–6% of revenue (below the low end in recent quarters). Sennesael said WD returned 100% of free cash flow over the last two quarters through dividends and buybacks, consistent with prior commitments.
Looking forward, Sennesael updated assumptions from the February 2025 Investor Day. He said WD now expects nearline exabyte growth in the “mid-20s” CAGR over the next three to five years and stated that the company no longer expects price declines. Instead, he described a “stable pricing environment,” which he defined as ASP per terabyte being “flattish to slightly up” in low single digits beyond 2026, following expected mid- to high-single-digit year-over-year increases in ASP per terabyte during calendar 2026.
He presented long-term targets over the next three to five years of:
- Revenue CAGR: greater than 20%
- Gross margin: greater than 50%
- Operating margin: greater than 40%
- Free cash flow margin: greater than 30%
- Earnings per share: greater than $20
On capital allocation, Sennesael said priorities remain investing in the business, reducing debt, and returning cash to shareholders. He noted net debt declined from about $5.1 billion pre-separation to about $2.7 billion, and highlighted that WD holds 7.5 million SanDisk shares, which he said were worth roughly $5 billion at the time of the discussion. He said the company intends to monetize those shares around the one-year anniversary of the separation, including exploring alternatives for portions of debt that do not qualify for a debt-for-equity exchange. He added that, assuming successful execution, WD could move from net debt to a net positive cash position.
He also said WD’s board approved a new $4 billion share repurchase authorization, in addition to the prior $2 billion authorization (with $1.5 billion already used to repurchase 14 million shares). Executives reiterated a commitment to continue dividends and return free cash flow to shareholders.
About Western Digital NASDAQ: WDC
Western Digital Corporation is a global data storage company that designs, manufactures and sells a broad range of storage devices and systems for personal, enterprise and cloud applications. Headquartered in San Jose, California, the company develops hard disk drives (HDDs), solid-state drives (SSDs), NAND flash components and finished storage products used in PCs, external storage, servers, network-attached storage (NAS) and embedded systems.
Its product portfolio spans consumer and commercial markets, including internal and external HDDs and SSDs, removable flash memory products and storage platforms for data center and enterprise environments.
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