AI Data Storage Demand Drives Western Digital, Sandisk Profit Surges

What happened

Western Digital reported adjusted third-quarter earnings of $2.72 per share, double the prior year's $1.36 and significantly above Wall Street's $2.39 forecast. Revenue jumped 45% year-over-year to $3.34 billion, surpassing the $3.25 billion estimate. Sandisk delivered even stronger results with adjusted earnings of $23.41 per share versus expectations of $14.62, while revenue soared 251% to $5.95 billion, well ahead of the $4.72 billion consensus. Both companies issued fourth-quarter guidance above analyst projections, with Western Digital expecting revenue of approximately $3.65 billion and Sandisk forecasting sales between $7.8 billion and $8.3 billion.

Why the stock moved

Despite crushing earnings expectations, both stocks declined in after-hours trading—Western Digital fell over 6% and Sandisk dropped 4%. The pullback appears to be a sell-the-news reaction following extraordinary year-to-date rallies, with Western Digital up 152% and Sandisk up 362%. Investors may have been taking profits after the massive run-up, or potentially hoping for even stronger numbers. The decline came even as management highlighted strong demand drivers, with Western Digital CEO Irving Tan noting that virtually every AI workload—from training to inference—creates data requiring persistent, cost-efficient storage on hard disk drives.

Bigger picture

The data storage sector is experiencing a significant boom driven by AI infrastructure buildout. Four tech giants—Amazon, Alphabet, Microsoft, and Meta—have committed to spending over $700 billion on AI data centers this year, creating massive demand for memory chips and storage components. This surge has lifted the entire sector, with competitors Seagate up 145% and Micron up 81% year-to-date. Sandisk CEO David Goeckeler described the quarter as a fundamental inflection point, highlighting a shift toward multiyear customer engagements with firm financial commitments. However, tight supply remains a challenge, with Sandisk noting that new production lines won't come online until mid-next year, likely keeping inventories constrained and prices elevated.

What investors watch

Watch for updates on manufacturing capacity expansion, particularly Sandisk's timeline for bringing new production lines online in mid-2026. Monitor whether the tight supply-demand balance continues to support elevated pricing for memory and storage products. Keep an eye on spending patterns from major cloud providers, as their AI infrastructure investments directly impact storage demand. Additionally, observe whether the new multiyear customer engagement model Sandisk mentioned translates into more predictable revenue streams. The sustainability of gross margins will also be key—Western Digital's 50.5% gross margin in the quarter marked a significant improvement from the prior year.

This article was generated by Quantli AI using publicly available news sources.