SKN | Bank of America Resets Western Digital Target as AI Storage Demand Drives Confidence

Key Takeaways

• Bank of America raised its price target on Western Digital to $257, citing tightening HDD supply and AI-driven demand.

• Gross margin expansion and resilient pricing are reinforcing confidence ahead of Q2 FY2026 earnings.

• Long-term visibility is improving as hyperscalers favor high-capacity, cost-efficient nearline storage.

Western Digital Corporation traded higher after Bank of America reset its price target on the data storage provider ahead of its fiscal second-quarter 2026 earnings. The stock, one of the strongest performers in the hardware and storage segment, has surged sharply over the past year, reflecting renewed investor interest in hard disk drive exposure tied to AI-driven data growth.

The updated target signals growing confidence that Western Digital’s earnings power is entering a more durable phase.

AI-Driven Demand Reshapes the HDD Narrative

Western Digital has emerged as a major beneficiary of the surge in AI workloads, which are driving exponential growth in data generation. Hyperscalers and cloud providers continue to favor nearline HDDs for cost-efficient, high-capacity storage, supporting sustained demand even as other hardware segments face cyclical pressure.

Bank of America highlighted that demand continues to outpace supply, underpinning stable pricing and reinforcing the company’s margin outlook.

Margins and Volumes Support Upgraded Estimates

The bank now expects Western Digital’s gross margin to reach 45%–46% in the coming quarter, reflecting improving mix and disciplined supply conditions. It also forecasts shipments exceeding 200 exabytes per quarter in calendar 2026, a key indicator of scale and operating leverage.

For full-year 2026, Bank of America raised its revenue estimate to $11.9 billion and EPS to $7.87, up from prior forecasts, citing improved visibility and sustained margin upside.

Earnings Season and Innovation Day in Focus

Bank of America expects Western Digital to deliver results toward the top end of management guidance, projecting Q2 revenue and EPS above consensus. Attention will then shift to the company’s Innovation Day in early February, where updates on product development and technology roadmap could further shape investor expectations.

The timing is notable, with Western Digital reporting shortly after its closest peer, Seagate Technology, allowing markets to assess broader trends across the HDD industry.

Peer Read-Through Reinforces Sector Optimism

Alongside Western Digital, Bank of America also raised its target on Seagate, reinforcing a constructive view on the storage hardware segment. Tight supply, resilient pricing, and AI-linked demand are increasingly viewed as structural rather than cyclical drivers, supporting higher valuation multiples across the space.

Forward-Looking Outlook

Bank of America’s reset underscores a shift in how investors are viewing Western Digital: less as a cyclical hardware name and more as a strategic enabler of AI infrastructure. With earnings momentum building and long-term demand visibility improving, confidence in sustained revenue growth and margin expansion is strengthening.

For a confidential discussion on positioning around AI infrastructure beneficiaries and storage hardware exposure, contact our senior advisory team.