Industry Overview - The computer storage devices industry is expected to benefit from growth in cloud computing, IoT, auto, connected devices, virtual reality, and AI, leading to increased demand for robust data storage solutions [2] - The Zacks-defined Computer – Storage Devices industry ranks in the top 10% of the Zacks Industry Rank, with a remarkable 133.4% return over the past year and a 145.8% year-to-date return, indicating strong market performance [3] Company Analysis: Western Digital Corp. (WDC) - Western Digital reported Q2 fiscal 2026 non-GAAP earnings of $2.13 per share, exceeding the Zacks Consensus Estimate of $1.95, with a 78% year-over-year increase in earnings [7] - Quarterly revenues reached $3.02 billion, surpassing estimates by 2.24%, although down from $4.29 billion year-over-year [7] - Cloud revenues, which constitute 89% of total revenues, increased by 28% year-over-year, driven by demand for higher-capacity nearline products [8] - WDC's strong performance is attributed to robust cloud and AI-driven data center demand, with a total of 215 exabytes shipped, marking a 22% year-over-year increase [12] - The company anticipates continued momentum in Q3, projecting non-GAAP revenues of $3.2 billion, a 40% year-over-year increase, and non-GAAP EPS of $2.30 [15] Company Analysis: Seagate Technology Holdings plc (STX) - Seagate Technology reported Q2 fiscal 2026 adjusted EPS of $3.11, surpassing the Zacks Consensus Estimate of $2.83 and up from $2.03 year-over-year [19] - Quarterly revenues were $2.83 billion, exceeding estimates by 2.7%, compared to $2.33 billion in the previous year [19] - Revenues from the Data Center segment, which accounts for 79% of total revenues, rose by 28% year-over-year, driven by strong demand from global cloud customers [20] - Seagate shipped 190 exabytes of HDD storage, a 26% year-over-year increase, with 87% of shipments going to the data center market [21] - The company expects strong demand to continue, projecting Q3 revenues of $2.9 billion, a 34% year-over-year improvement, and non-GAAP EPS of $3.40 [28]

Key Takeaways SMCI expects Q2 revenues of $10-$11B, implying 83.95% growth from the year-ago quarter.SMCI is benefiting from AI rack-scale systems, liquid cooling demand, and rich partnerships.SMCI faces margin pressure, inventory and cash-cycle strain after ramping AI rack production.Super Micro Computer, Inc. (SMCI) is set to report its second-quarter fiscal 2026 results on Feb. 3, 2026, after market close.For the fiscal second quarter, the company expects revenues between $10 billion and $11 billion. The ...

Industry Overview - The Zacks Computer – Storage Devices industry is ranked in the top 9% out of approximately 250 industries, indicating a strong potential for outperformance over the next 3 to 6 months [9] - This industry has shown an impressive 87% return over the last year, suggesting robust growth and investor interest [9] Company Analysis: Western Digital - Western Digital is identified as a Zacks Rank 1 (Strong Buy) stock, indicating strong market confidence [13] - The company has benefited from improving earnings estimate revisions, with analysts raising their annual EPS estimates by 0.39% in the past 60 days, now projected at $7.66 per share, reflecting over 55% growth year-over-year [14] - Western Digital has exceeded EPS estimates in each of the past 11 quarters, showcasing a trailing four-quarter average surprise of over 9% [15][16] - The stock was the second-best performer in the S&P 500 last year, indicating strong momentum and market performance [17] - Shares have advanced roughly 15% this year, remaining above upward-sloping 50-day and 200-day moving averages, suggesting continued bullish momentum [19] Earnings Estimate Revisions - Rising earnings estimates are a critical factor impacting stock prices, with only the top 20% of stocks experiencing substantial revisions ranked as Zacks Rank 1 or 2 [12] - Western Digital has recently witnessed positive earnings revisions, which, if maintained, could support continued bullish performance throughout the year [20] Investment Strategy - Focusing on companies within leading industry groups, experiencing positive earnings estimate revisions, and showing relative strength can help narrow down stocks with the best profit potential [21]

Market Overview - The S&P 500 has achieved a total return exceeding 17% year-to-date in 2025, marking the continuation of a bullish trend into its fourth year [1] - The year has been characterized by volatility, with the S&P 500 nearly entering a bear market early in 2025 due to tariff-related issues [2] - A subsequent V-shaped rally occurred as inflation trends improved and corporate earnings exceeded expectations, driving the S&P 500 to record highs [3] Sector Performance - The information technology and communication services sectors led the market in 2025, driven by the artificial intelligence theme [7] - However, the AI-driven rally has recently stalled, particularly in December, indicating potential challenges ahead [7] Santa Claus Rally Insights - The Santa Claus Rally period, which typically shows strong performance, has seen negative returns thus far, raising concerns for 2026 based on historical trends [8] - Negative returns during this period have historically preceded bear markets or opportunities to buy stocks at lower prices later in the year [8] Top Performing Companies - **Sandisk (SNDK)**: Achieved over 560% growth since its February 2025 debut, with projected fiscal 2026 EPS growth of over 300% to $12.59 per share, driven by strong NAND pricing and AI-related demand [12][13] - **Western Digital (WDC)**: Delivered over 290% return year-to-date, with fiscal 2026 adjusted EPS projected at $7.66, reflecting a 55% increase from the previous year [15][16] - **Micron (MU)**: Reported a nearly 49% year-over-year revenue increase to around $37 billion in fiscal 2025, with a stock surge of nearly 250% driven by high demand for high-bandwidth memory [22][24] Industry Trends - The computer storage devices industry, including Sandisk and Western Digital, ranks in the top 8% of Zacks Ranked Industries, benefiting from the explosive growth in AI-powered storage markets projected to reach $187.61 billion by 2035 [19] - Data center operators are expanding infrastructure rapidly, sustaining demand for both HDDs and NAND flash-based solutions [19]

Core Viewpoint - The Zacks Computer – Storage Devices industry has significantly outperformed the broader market, driven by explosive growth in artificial intelligence workloads requiring high-capacity storage solutions [2][5]. Industry Performance - The Zacks Computer – Storage Devices industry advanced nearly 70% year-to-date, compared to the S&P 500's 16.5% gain [2]. - Data center operators and hyperscalers are expanding infrastructure rapidly, sustaining demand for both hard disk drives (HDDs) and NAND flash-based solutions [3]. Company Highlights - Western Digital Corporation (WDC) has delivered a remarkable 260% return year-to-date, with fiscal 2026 adjusted EPS projected at $7.66, reflecting over 55% growth from the prior year [7][9]. - Revenues from the Cloud segment, which account for nearly 90% of Western Digital's revenue, grew 31% in the most recent quarter [9]. - Sandisk Corporation (SNDK), spun off from Western Digital, has risen nearly 500% since its relisting in February 2025, with fiscal 2026 EPS growth projected at over 300% [10][13]. Market Trends - The AI-powered storage market is projected to grow from $30.27 billion in 2025 to $187.61 billion by 2035, at a 20% compounded annual growth rate (CAGR) [6]. - Innovations such as UltraSMR and heat-assisted magnetic recording have enabled Western Digital to ship industry-leading 30TB+ drives tailored for AI data lakes [9]. Investment Outlook - Both Western Digital and Sandisk carry Zacks Rank 1 (Strong Buy) ratings, benefiting from favorable earnings revisions and positioned to capture a significant share of the upcoming storage spending wave [18].

Core Viewpoint - Super Micro Computer, Inc. (SMCI) is expected to report strong revenue growth for Q3 fiscal 2025, driven by rising demand for AI workloads and its leadership in liquid cooling technology [1][7][16]. Financial Performance - The company anticipates revenues between $5 billion and $6 billion, with a Zacks Consensus Estimate of $5.34 billion, reflecting a 38.6% increase from the previous year [1]. - Non-GAAP earnings per share are projected to be between 46 cents and 62 cents, with a consensus estimate of 52 cents, indicating a decline of 22.4% year-over-year [2]. Market Position and Demand Drivers - SMCI's stronghold in the Direct Liquid Cooling market, holding approximately 70% market share, is expected to stabilize its revenue [9]. - The demand for high-performance and energy-efficient servers is anticipated to rise due to the expansion of data centers and the increasing adoption of AI technologies [7][10]. - Partnerships with NVIDIA and the integration of advanced GPUs are likely to enhance the company's financial performance in the upcoming quarter [8][17]. Stock Valuation - SMCI shares have decreased by 59.1% over the past year, underperforming the industry average decline of 40.5% [11]. - The company is currently trading at a forward P/E ratio of 11.60X, which is lower than the industry average of 16.46X, indicating a potential investment opportunity [14]. Growth Prospects - The integration of Intel and AMD processors in SMCI's products is expected to drive demand in AI, high-performance computing, and data-intensive workloads [18][19]. - The company's focus on scalable AI training and inference infrastructure positions it well for sustained long-term growth [16][20].