Western Digital (WDC): F1Q27 Earnings – Fighting Misconceptions After A Strong Quarter

Morgan Stanley reiterates Overweight on Western Digital (WDC.O) and raises its price target to $668 from $643, based on 14x FY28 EPS of $47.73, implying roughly 102% upside from the $354.19 share price. F1Q27 (September quarter) revenue rose 55.5% Y/Y to $4.381bn with non-GAAP EPS of $4.64, a pricing-driven beat; price per exabyte growth accelerated from +18% Y/Y in the June quarter to +28% Y/Y, gross margin reached 58.1% (up ~370bps Q/Q) on ~80% incremental margins. December quarter EPS guidance of $5.80 is 13% above the analyst's $5.25 forecast and well above Street's $4.84, and with a four-quarter average beat of 14% versus guidance midpoints, EPS could exceed $6. Management highlighted stronger demand than 3-6 months ago, visibility from its top 7 customers out to 2030-2031, a broadening customer base including neoclouds and frontier labs, and no change to industry fundamentals. Rising capex supports head, platter and substrate capacity rather than unit growth, a point the market m