Western Digital Sits 46% Below Its High and Has Still More Than Doubled This Year
Western Digital (WDC -5.24%) fell about 5% Monday to about $435 as of this writing, extending a slide that has taken the hard drive maker about 46% below the 52-week high of $799.87 it set on June 18.
Zoom out, though, and even after all that, the growth stock has still more than doubled in 2026. Shares ended last year at about $172, so a buyer from January is up about 150% — while a buyer from June’s peak has lost nearly half their money.
Two true numbers, pointing in opposite directions. Which one should matter to somebody weighing the stock today?
Neither, I think. The number that matters is what the business earns against what the stock costs, and that one takes some untangling.
Image source: The Motley Fool.
The business kept getting better
Whatever has happened to the stock since June, it wasn’t the company’s results. Western Digital reported its fiscal fourth quarter of 2026 (the period ended July 3) on Aug. 5, and the report was excellent.
Revenue rose 44% year over year to $3.75 billion, up 12% from the prior quarter, as data centers kept buying high-capacity hard drives for the artificial intelligence (AI) build-out. Non-GAAP (adjusted) gross margin reached 54.4%, expanding from 50.5% the quarter before and 41.3% a year earlier. And adjusted earnings per share of $3.56 more than doubled year over year, rising 31% from the prior quarter.
The outlook got better, too. Management guided for fiscal first-quarter revenue of about $4.1 billion, which works out to 42% to 49% year-over-year growth, with adjusted gross margin of 55% to 56% — another quarter of expansion, if it lands.
“As global data creation continues to accelerate, we enter fiscal year 2027 with continued confidence in the durability of demand and with increasing visibility into our business,” said CEO Irving Tan in the company’s earnings release.
So the drawdown isn’t about deteriorating results. The stock fell 16% in the two sessions after that excellent report, snapped back through mid-August, and has fallen again with the whole memory and storage group over the past week. Investors have been repricing that group as Treasury yields climbed and enthusiasm for AI-linked stocks cooled. What changed since June is the price investors will pay for these earnings, not the earnings.
A distorted bottom line
Western Digital’s price-to-earnings ratio is about 18 as of this writing, which sounds cheap for a business growing this fast.
But that ratio is built on earnings of $24.28 per share for fiscal 2026 under generally accepted accounting principles (GAAP), and those earnings include a gain of about $6.5 billion on the stake Western Digital kept in Sandisk (SNDK -6.45%) when it spun the flash memory business off in early 2025. Sandisk’s stock exploded this year, and accounting rules run that windfall through Western Digital’s income statement.
Strip out the items unrelated to operations, and the company’s own adjusted number for fiscal 2026 is $10.22 per share, up 104% year over year but less than half the GAAP figure. Measured against those adjusted earnings, the stock trades at about 42 times fiscal 2026 earnings.
The forward math, however, is friendlier. Against analysts’ consensus earnings estimates for fiscal 2027, the forward price-to-earnings ratio is about 21. The company’s own guidance points the same direction, with about $4.00 of adjusted earnings per share expected this quarter alone.
Still expensive, still earning it
So what does a buyer get at about $435? A hard drive maker growing revenue more than 40%, expanding margins every quarter, and guiding higher, at a forward price-to-earnings ratio of about 21.
Today’s Change
(-5.24%) $-24.06
Current Price
$435.38
Key Data Points
Market Cap
Day’s Range
$419.54 – $446.99
52wk Range
$76.70 – $799.87
Volume
7.8M
Avg Vol
8.6M
Gross Margin
48.83%
Dividend Yield
0.11%
That is not a bargain. Hard drives, of course, are a cyclical business, and the reason cyclical stocks often look cheapest at the top is that investors expect peak earnings to fade. Paying about 21 times forward earnings assumes this cycle is different. It assumes AI data centers keep absorbing capacity for years and that the margin expansion holds. If either assumption slips, the earnings and the ratio could fall together.
Sure, management makes a case for exactly that, with demand it calls durable and visibility it says is increasing. But a case is not a guarantee, and the guided growth only says the boom’s end may not be in sight yet.
Ultimately, the 46% drawdown is the wrong reason to buy this stock, and the 150% gain is the wrong reason to avoid it. What matters is the price against the earnings. At about 21 times forward earnings, Western Digital is still priced for the boom to continue, just no longer priced for it to be permanent. The stock arguably looks more reasonable than it did in June. I wouldn’t call it cheap.
