Key Highlights

● WDC shares rose 6.34% to $441.64 on Monday, October 5, on Volume of 11.3 million shares, about a third above normal.

● A report said Toshiba intends to invest about ¥60 billion, or roughly $400 million, to double its hard disk drive capacity by fiscal 2027, which rattled storage stocks on Friday.

● Fiscal fourth-quarter Revenue rose 44% to $3.75 billion, with non-GAAP gross Margin of 54.4% and adjusted Earnings of $3.56 per share.

● For the first quarter of fiscal 2027, Western Digital guided to revenue of $4.1 billion, plus or minus $100 million, and adjusted earnings of $4.00 per share, plus or minus 15 cents.

Western Digital (NASDAQ:WDC) climbed the most-active list on Monday on a rebound from one of its worst days of the year. The hard drive maker's shares rose 6.34% to $441.64 on volume of 11.3 million shares, about a third above normal, for roughly $4.99 billion in dollar volume. That made it the 16th most actively traded US stock by dollar volume on the list. The bounce followed a sharp drop on Friday, October 2, when a report that Japan's Toshiba plans to double its hard drive production capacity rattled investors in the storage sector.

What's driving the volume

A report on Friday said Toshiba intends to invest about ¥60 billion, or roughly $400 million, to double its hard disk drive capacity by fiscal 2027, with the expansion centered on its factory in the Philippines and aimed at AI Data Center demand. The hard drive industry is effectively a three-player market made up of Seagate (NASDAQ:STX), Western Digital and Toshiba, so any plan to add significant Supply raises fears of lower prices. Toshiba currently holds just over 10% of capacity-based Market Share and is targeting 30% over the medium term. Western Digital fell about 10% on Friday and Seagate dropped by a similar amount.

By Monday, buyers were back. Some analysts argued the market had overreacted. Citi (NYSE:C) analyst Asiya Merchant suggested the threat may be overstated because Toshiba relies on outside suppliers for critical components such as recording media and heads, which could limit how much new capacity actually reaches the market. Nearline hard drive supply also remains tight because of strong Demand from AI data centers. Technical traders pointed to support near $415, where the stock found buyers on Friday, and to the 200-day Moving Average around $400. Seagate rose 4.49% on Monday, and the broader market was firm, with the Nasdaq Composite up 1.05% as technology shares led.

Part of the reason Friday's drop was so steep is how far the stocks had run. Western Digital was up roughly 170% this year and Seagate about 240% before the Toshiba report, which left both vulnerable to profit-taking on any hint that the tight supply backdrop might ease.

The business

Western Digital, which now presents itself as WD, is a focused hard disk drive company after separating its flash memory Business into Sandisk (NASDAQ:SNDK) in February 2025. Its main products are high-capacity nearline drives sold to cloud providers and large data center operators, who use them to store the vast amounts of data generated and used by AI applications. Hard drives remain far cheaper per terabyte than flash, which keeps them central to bulk storage even as solid-state drives handle faster workloads.

The company joined the Nasdaq-100 in December 2025, alongside Seagate, reflecting the sector's rise in Market Value during the AI boom. In FTSE Russell's June 2026 reconstitution, the stock also moved out of several value benchmarks and into growth indexes, including the Russell 1000 Growth and Russell Top 200, a sign of how much the market's view of the business has changed. Once seen as a mature, cyclical hardware maker, Western Digital is now widely treated as an AI infrastructure supplier, which brings both a higher valuation and greater sensitivity to news about AI spending.

Recent results and guidance

Western Digital's fiscal fourth-quarter report, released August 5, showed strong momentum. Revenue rose 44% from a year earlier to $3.75 billion, and non-GAAP gross margin reached 54.4%. Adjusted earnings were $3.56 per share, while GAAP earnings of $8.21 per share were well above that figure, reflecting items excluded from adjusted results. Free Cash Flow was $1.28 billion for the quarter. For the full fiscal year 2026, revenue rose 36% to $12.9 billion and non-GAAP Operating Margin expanded by 12.9 percentage points to 37.3%.

For the first quarter of fiscal 2027, the company guided to revenue of $4.1 billion, plus or minus $100 million, non-GAAP gross margin of 55% to 56%, and adjusted earnings of $4.00 per share, plus or minus 15 cents. Chief Executive Irving Tan said the company entered the new fiscal year with continued confidence in the durability of demand, and Chief Financial Officer Kris Sennesael pointed to further margin expansion and strong free cash flow. The company pays a quarterly Dividend of 15 cents per share.

Valuation

At about 18 times trailing earnings, according to market data, Western Digital looks inexpensive next to Seagate at roughly 64 times and Sandisk at about 23 times, though above Micron (NASDAQ:MU) at about 14 times. Trailing GAAP figures can be distorted by one-time items, so investors often focus on forward estimates instead.

On that basis the picture is less flattering: annualizing the company's guided adjusted earnings of $4.00 per share for the current quarter gives about $16 a year, which puts the stock at roughly 28 times that run rate. Investors are effectively betting that earnings keep climbing as AI storage demand grows. Analysts expect first-quarter earnings of $3.81 per share on revenue of $4.04 billion, compared with $1.78 and $2.82 billion a year earlier. The average analyst price target is about $650, well above the current price. Citigroup maintains a Buy rating with a $740 target, and TD Cowen recently raised its target to $540.

Bull case

● AI data centers need enormous amounts of low-cost storage, and nearline hard drive supply remains tight.

● Margins and free cash flow have expanded sharply, and guidance points to further gains.

● Toshiba's expansion may add less effective capacity than feared if component supply constrains it.

Bear case

● New supply from Toshiba could pressure pricing in a three-player market that has benefited from discipline.

● The stock has risen sharply this year, leaving it prone to sharp swings like Friday's drop.

● Hard drives are cyclical, and a pause in cloud spending would hit demand quickly.

Toshiba's expansion plans and Western Digital's next report

The next key event is Western Digital's fiscal first-quarter report, expected around October 29. Investors will look for revenue at or above the $4.1 billion guidance midpoint, comments on pricing and supply agreements with large customers, and any reaction from management to Toshiba's capacity plans. Seagate's next Quarterly Report will offer another read on industry pricing, and any further details on the timing and scale of Toshiba's expansion could move both stocks again.