Western Digital (WDC): F1Q27 Review: Pricing Momentum and EB Recovery Support Positive Earnings Revision; Capex Concerns Overblown

WDC delivered meaningful upside across revenue, margins, and earnings in F1Q27, driven by a substantially stronger pricing environment, with ASP/TB growth accelerating to +28% y/y (vs. +18% in F4Q26 and +3% a year ago), while EB growth (+22%) and cost/TB reductions (-4%) tracked more in line. Importantly, the F2Q27 outlook points to a continuation of favorable pricing trends, supported by contractual price escalators, LTA renewals, favorable pricing on uncontracted volumes, and continued adoption of higher-capacity drives, alongside an anticipated acceleration in EB shipments. Management characterized F1Q27 as a "floor" and reiterated a return to the 25%+ EB growth trajectory by F3Q27, supported by the transition to 40TB ePMR drives and followed by HAMR in 1H CY27. Against a strong demand backdrop, capex is expected to track above the 4%-6% of revenue range over the next two years;