Western Digital's business has shifted decisively toward cloud infrastructure, with roughly 90% of revenue now derived from cloud customers, according to CFO Kris Sennesael speaking at Citi's Global TMT Conference on September 9, 2026.
The transition away from consumer and PC-client demand has reshaped the company's cyclical profile, Sennesael said. "You can basically forget everything about hard disk drives and WD until I joined in May 2025," he told attendees. "The business was mostly consumer and PC client, where you have a lot of cyclicality. Fast-forward to today, 90% of our business is with the cloud. It's more a secular growth business."
Exabyte demand — a measure of total storage throughput — grew at a compound annual rate exceeding 25% over a five-year horizon, Sennesael said. Recent quarterly growth came in at 22% to 23%, while fiscal year 2026 delivered about 25% growth, including one quarter with 34% year-over-year expansion.
Profitability metrics strengthened sharply. Gross margins climbed to the mid-50s, operating margins reached the mid-40s, and incremental margins exceeded 70%. Free cash flow margins hit a target of plus 30%, a level the company has sustained across several quarters.
Pricing recovered meaningfully. The price per terabyte rose 18% to 19% year-over-year in the latest quarter, accelerating from 9% two quarters prior. Over the long term, Western Digital expects cost per terabyte to decline approximately 10% annually, driven by areal density gains.
The company completed its transition to 32-terabyte ePMR products over four to five quarters and has begun small-quantity shipping of 40-terabyte and up to 44-terabyte ePMR drives, which are currently ramping. First-generation HAMR drives, also targeting capacities up to 44 terabytes, qualified with four large hyperscale customers and are expected to begin shipping in the first half of calendar year 2027, with production ramp extending through the balance of the year. Future roadmaps target 50-plus, 70-plus, and eventually 100-plus terabyte capacities, moving toward 10 terabytes per platter.
Sennesael emphasized that hard disk drives remain essential to AI infrastructure despite representing only 4% to 5% of hyperscaler capital spending. "Let's be clear, there is no AI without HDDs," he said. "Without HDDs, there is no data centers, there is no AI." Hyperscalers' total capital expenditure is approaching $1 trillion, with that portion allocated to HDDs providing durable demand.
There was no sign of demand digestion. "Every time we go and talk to our customers," Sennesael said, "they come back with a stronger demand signal." Build-to-order lead times remain at 52 weeks.
Western Digital shares have returned 406% over the past year and trade at a market capitalization of $173.69 billion, with revenue growth of 35.7% over the trailing twelve months.
Long-term visibility agreements requested by customers extend through 2030 and 2031, Sennesael said, underscoring the extended demand visibility driving the current cycle.
