Western Digital Dismisses AI Slowdown Fears, Says Storage Demand Remains Strong

Western Digital Corp. expressed confidence in long-term data-storage demand despite concerns about a slowdown in artificial-intelligence investment. The company said it is discussing required storage volumes through 2031 with major cloud customers. Investors, however, focused more on rising capital spending than on the strong earnings report, sending the stock down about 3%.

Bloomberg reported on October 23 that Western Digital Chief Financial Officer Kris Sennesael said on the company’s earnings call the previous day that there had been no change in hyperscalers’ trend toward higher capital spending. Hyperscalers are cloud providers that operate large-scale data centers.

The company is discussing supply needs with customers through 2030 and 2031, he said. Even if AI growth slows somewhat, that could help ease the current supply shortage.

The results also backed the case for expanding demand. Western Digital posted fiscal 2027 first-quarter revenue of $4.381 billion, up 55% from a year earlier. Adjusted earnings per share rose 161% to $4.64. Chief Executive Officer Irving Tan said the company delivered better-than-expected results on strong customer demand and execution. He added that Western Digital would raise its quarterly dividend by 17%, reflecting confidence in the business.

The challenge is the level of spending needed to keep up with demand. First-quarter capital expenditures totaled $227 million, more than triple the $73 million recorded a year earlier. Sennesael said capital spending would average 4% to 6% of revenue over the next five years, though it would run somewhat above that range for the next two years.

Cash generation increased, but its share of revenue declined. First-quarter free cash flow more than doubled from a year earlier to $1.377 billion. Still, free cash flow as a percentage of revenue fell to 31.4% from about 34.2% in the previous quarter. Western Digital shares closed down about 3% that day.