Western Digital Stock Slides Despite Record Earnings as AI Infrastructure Cost Fears Resurface

Key points

• Western Digital reported fiscal first-quarter adjusted earnings of $4.64 per share, surpassing the $4.08 analyst consensus.
• Revenue rose 55% year-over-year to $4.38 billion, exceeding the $4.14 billion estimate.
• The company forecast second-quarter revenue between $5.0 billion and $5.2 billion, with a midpoint 12% above expectations.
• Management expects capital expenditures to average 4% to 6% of revenue over the next five years, with higher ratios in the near term.
• Blended average selling price per terabyte of storage increased by 28% during the quarter.

Background

Recent market volatility has affected other technology firms with strong earnings but high capital spending. For instance, TSMC shares dropped 3.8% in October despite record profits, and Tesla adjusted its capital expenditure guidance in late 2026 due to cash flow timing concerns. These events reflect a broader investor caution regarding the sustainability of AI-driven infrastructure spending.

Why it matters

The reaction to Western Digital's results highlights investor skepticism regarding the long-term affordability of AI infrastructure expansion. While demand for storage components remains strong, concerns over capital intensity and input costs may dampen enthusiasm for high-growth tech stocks.

What to watch

Investors will monitor Western Digital's ability to maintain price increases and manage rising input costs. The company aims to reduce cost per terabyte by 10% year-over-year in the near term, which could help offset margin pressures.