Western Digital Sees AI-Driven HDD Demand Outpacing Supply Through 2027

Western Digital Sees AI-Driven HDD Demand Outpacing Supply Through 2027

AI and cloud demand are outpacing HDD supply: Western Digital says roughly 90% of its business is now tied to cloud customers, with exabyte demand expected to grow more than 25% annually over the next five years. The company expects supply constraints to persist through 2027. Capacity and performance upgrades are advancing: Western Digital is ramping 32TB ePMR drives and developing products up to 40TB, 44TB HAMR and beyond 50TB. First-generation HAMR drives are expected to ship in the first half of 2027, while high-bandwidth HDDs are being developed to improve performance for AI workloads. Strong pricing and contracted visibility support profitability: Price per terabyte rose about 18% to 19% year over year in the latest quarter, while long-term agreements cover much of 2027 and portions of 2028 and 2029. The company reported gross margins in the mid-50% range and plans to direct excess cash flow primarily toward share buybacks and dividends.

Western Digital NASDAQ: WDC CFO Kris Sennesael said the hard-disk-drive market has become more structurally tied to cloud and artificial-intelligence infrastructure spending, arguing that the company has greater demand visibility than in prior industry cycles. Speaking at Citi’s Global TMT Conference, Sennesael said the company’s business has shifted sharply from consumer and PC markets, which historically were more dependent on economic conditions and unit cycles. He said roughly 90% of Western Digital’s business is now tied to cloud customers, where demand is being driven by expanding data storage requirements.

Sennesael said Western Digital does not currently see an AI infrastructure “digestion” period. Instead, he said customer conversations have produced stronger demand signals and longer-term visibility. The company expects exabyte demand to grow at a compound annual rate of more than 25% over the next five years, though he noted that growth will not necessarily be uniform every year. “My revenue is not gated by the demand,” Sennesael said. “My revenue is gated by the amount I can supply.”

He said the company is currently supply constrained and expects technology transitions to enable higher exabyte shipments over time. Western Digital has been ramping its 32-terabyte ePMR products and is preparing a series of further transitions, including ePMR drives of up to 40 TB, first-generation HAMR drives of up to 44 TB and subsequent products exceeding 50 TB. Sennesael said the company has already shipped a limited amount of its next-generation ePMR product and expects its volume to increase over coming quarters. The company’s first HAMR products are in qualification with four large hyperscale customers, he said.

Western Digital expects to begin shipping first-generation HAMR drives in the first half of calendar 2027, with an initial amount in the first quarter and a broader ramp through the remainder of the year, according to Sennesael. He said customers have provided favorable feedback on the product’s areal density, reliability and quality, while adding that hyperscalers maintain rigorous qualification processes for new storage products. The company is also developing high-bandwidth HDDs aimed at improving read-and-write performance. Sennesael said engineering samples are being shipped to five customers and that the product has been well received. Western Digital is targeting a twofold performance improvement initially, with fourfold an...