What Could Go Wrong With Western Digital Stock?
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Western Digital (WDC) is expanding faster on price than on volume, leaving its price per terabyte as the number a holder should watch. During fiscal Q1 2027, its average price per terabyte rose 28% from a year earlier, outpacing a 22% increase in shipped storage. Revenue grew 55% to $4.4 billion, and management said revenue came from both factors. So what is letting Western Digital charge that much more?
Why Can Western Digital Charge More Per Terabyte?
During the October 22, 2026 call, management said storage supply is tight. The company sees demand growing at more than 25% a year, and Western Digital has secured better spot prices from nearline customers operating without long-term agreements. Management also credited a shift toward higher capacity drives.
Pricing gains accelerated from high-teens growth a quarter earlier. Management said these increases materialized across nearline drives, as well as the client and consumer businesses. Cloud customers generated 88% of revenue, with management crediting demand for its high-capacity nearline drives. The higher prices thus reach nearly everything Western Digital sells.
Western Digital’s Margins Are At A Multi-Year High
Western Digital posted a 40.7% operating margin over the twelve months ended October 2, 2026. That marks the highest of its 40 fiscal quarter ends dating back to fiscal 2017. At the bottom of that range, during the twelve months ended September 29, 2023, the company recorded an operating loss, with a margin of minus 21.3%.
Price accounts for a large part of that climb. Management said the company’s gross margin reflects higher capacity drives, tighter execution and a favorable pricing environment, and that on its own adjusted measure, Western Digital retained more than 80% of each added dollar of sales over the past year as gross profit. A fall in prices would likely come out of profit just as directly.
Western Digital stock fell 33.1% between August 5 and November 3, 2026, compared with a 1.7% drop for the S&P 500. Even after that decline, the stock trades at 8.8 times sales, compared with 3.2 for the S&P 500, so the price likely assumes margins will remain close to today’s level.
Can Western Digital Keep Its Prices Rising?
Management expects prices to keep rising for the next few quarters. It said demand shows no sign of fading, the gap between supply and demand will not close in the near term, and the company sees room for further price increases over the next three or four quarters. Rather than expanding the number of drive units it can build, Western Digital is directing capital toward heads, media and factory automation, management said. It expects fiscal Q2 2027 revenue of $5.1 billion, plus or minus $100 million.
The uncertainty lies further out. Management said the further ahead it looks, the less of its business is covered by long-term agreements. An even smaller fraction is covered by the pricing terms of those agreements. Rival capacity expansions came up more than once on the call, and management said that some competitors may add units to maintain their share.
That makes the worry real but not immediate. Western Digital’s margins currently sit at the top of their own range, aided in part by price, and less of that price is set by contract the further out the timeline runs. If rivals add more units, a holder has more reason to worry. Western Digital is expected to report its fiscal second quarter in January 2027, and the year-over-year change in its average price per terabyte is the number to watch.
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