Cloud Investment and AI Demand Propel Western Digital Shares

Western Digital Corporation’s stock has climbed sharply in 2025 as expanding cloud budgets and larger artificial-intelligence (AI) workloads lift demand for the company’s high-capacity hard disk drives. The storage manufacturer, traded on the NASDAQ under the ticker WDC, now sits among the 20 best-performing dividend stocks of the year after gaining more than 280 percent since January.

Near-term events in focus

Morgan Stanley analyst Erik Woodring points to a series of upcoming milestones that could influence trading in the months ahead. Western Digital plans to host its Innovation Bazaar and an Investor Day before releasing quarterly results early next year. Woodring considers those events potential catalysts, citing continued improvement in customer demand across the hard disk drive (HDD) market.

In a recent research note, Morgan Stanley raised its 12-month price target on the shares to $228 from $188, underscoring what the firm views as Western Digital’s sizable exposure to rising cloud capital expenditures. The bank also reiterated the stock as its top pick within the hardware group it covers.

Hard disk drives remain core business

Although Western Digital sells solid-state drives, its reputation rests largely on traditional HDDs that use spinning platters to store data in terabyte capacities. Those devices are widely deployed in hyperscale data centers where enterprises and cloud service providers require vast, cost-effective storage. Management has emphasized that higher-capacity models, which carry stronger margins, are attracting particular interest from customers building or expanding AI-focused infrastructure.

Recent financial performance

The company reported revenue of $2.82 billion in the most recent quarter, a 27 percent increase year over year. Executives have indicated that more profitable mix shifts—specifically the sale of larger drives into cloud and AI environments—represent a primary avenue for further margin expansion.

Analysts project revenue to advance roughly 23 percent in fiscal 2026, followed by growth of about 13 percent in 2027. While the pace is expected to moderate, the forecasts still point to ongoing expansion rather than contraction for the storage provider.

Corporate restructuring

Western Digital altered its organizational structure earlier this year. In February, the company separated its flash memory operations into a standalone entity branded Sandisk. The spin-off currently holds an estimated market capitalization of approximately $35 billion, amounting to more than half of Western Digital’s overall valuation.

Sector context

The HDD segment has held up better than several other technology hardware categories that historically experience pronounced demand cycles. According to coverage by CNBC, customer orders for large-capacity drives have not weakened, providing a supportive backdrop for suppliers serving data-center and cloud clients.

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Industry observers attribute part of that resilience to accelerating AI adoption. Training and inference workloads generate sizeable data sets, prompting cloud providers to increase investments in both compute and storage. Western Digital’s portfolio aligns with those needs, as its highest-capacity HDDs are engineered to store petabyte-scale data volumes at a lower cost per gigabyte than most solid-state alternatives.

Dividend and market recognition

The company’s strong share-price performance places it on the 2025 list of best-performing dividend equities. While income distributions are not the primary driver of recent gains, inclusion on the list underscores combined total-return momentum and dividend policy.

Outlook

Investors will monitor the Innovation Bazaar and Investor Day for updates on product roadmaps, cost-structure initiatives, and capital allocation plans. The next quarterly earnings release is scheduled for early 2026, at which point management is expected to provide further detail on market demand, pricing trends, and progress following the Sandisk spin-off.

In the view of Morgan Stanley, Western Digital’s “rare mix” of favorable end-markets, pricing leverage, and upcoming events could continue to influence sentiment. Whether the stock maintains its rapid ascent will likely hinge on the extent to which cloud spending and AI deployments persist at current levels.

Crédito da imagem: Viacheslav Bublyk / Unsplash