Is it Too Late to Buy WDC Stock After 305% Explosive Rally in a Year?

Core Insights - Western Digital Corporation's (WDC) shares have surged 305.2% over the past year, significantly outperforming the Zacks Computer-Storage Devices industry growth of 134.3% and the S&P 500's growth of 15.7% [1][8] - The primary driver of this growth is the increasing demand for data storage driven by AI and cloud workloads [1][8] Company Performance - WDC has outperformed its main competitor, Seagate Technology Holdings plc (STX), which rose 301.3%, and Pure Storage (PSTG), which increased by 12.6% during the same period [2] - The company reported $3.02 billion in revenue for the fiscal second quarter, marking a 25% year-over-year increase, primarily due to strong data center demand [11] - WDC's non-GAAP gross margin improved to 46.1%, up 770 basis points year over year, attributed to a transition to higher-capacity drives and effective cost management [11] Strategic Developments - At its Innovation Day 2026, WDC emphasized the reinvention of hard drives as essential for AI infrastructure, introducing a new financial model and branding [5] - The company is pursuing a dual-path strategy with its HDD technologies, focusing on both ePMR and HAMR to meet growing storage demands [6] - WDC plans to introduce a 40TB UltraSMR ePMR HDD in the second half of 2026 and a 100TB HAMR HDD by 2029, showcasing its commitment to innovation [6][10] Capital Return and Financial Health - WDC has returned $1.4 billion to shareholders through buybacks and dividends since launching its capital return program in 2025 [12][13] - The company declared a quarterly dividend of 12.5 cents per share and returned over 100% of free cash flow to shareholders in the fiscal second quarter [12] - As of January 2, 2026, WDC had cash and cash equivalents of $2 billion and long-term debt of $4.7 billion, indicating a need for careful financial management [14] Market Outlook - The Zacks Consensus Estimate for WDC's earnings for fiscal 2026 has been revised up by 17.4% to $8.96, while the estimate for fiscal 2027 has increased by 54.3% to $15.19 [17] - The ongoing demand for AI-generated data is expected to drive significant growth in storage needs, positioning WDC favorably for the future [19]