Western Digital CEO says AI data beats compute as long-term bet after 55% revenue jump

The after-hours drop despite a clear beat suggests positioning, not fundamentals, is driving the moment. After the stock more than doubled this year, investors appear to be taking profits in a broad retreat from AI hardware. The 28% rise in average selling price per terabyte is the key signal for storage stocks, pointing to pricing power in hard drives that could support margins across the sector if demand holds. The growing share of orders from neoclouds is a double-edged sword: it widens the customer base but links Western Digital more closely to a group facing funding strain, so credit stress among AI infrastructure providers is now a risk to watch for storage names. Thursday’s chip rout shows how quickly sentiment toward the whole AI supply chain can change, regardless of company results.---Earlier:SK hynix drops US IPO plan for Solidigm, once eyed at up to $150 billion valuation--- Western Digital is selling more storage at much higher prices and argues data will outlast compute as the AI opportunity, but investors locked in gains instead of buying the pitch.Summary:Western Digital’s fiscal first-quarter profit rose to $1.78 billion, or $4.63 a share, from $1.15 billion a year earlier. Adjusted earnings of $4.64 a share beat expectations of $4.11.Revenue grew to $4.38 billion from $2.82 billion, ahead of the $4.14 billion forecast.The blended average selling price per terabyte rose 28%, and the company says it has demand visibility to 2030 or 2031 across its top seven customers.Second-quarter guidance is for adjusted earnings of $5.60 to $6.00 a share on revenue of $5.0 billion to $5.2 billion, above current estimates.The quarterly dividend rises 17% to 17.5 cents a share.Shares fell about 5% to 6% after hours, having already closed down 6.4% amid a broad sell-off in AI-related stocks.--- Western Digital posted stronger-than-expected fiscal first-quarter results and guided above forecasts as demand for data storage tied to AI infrastructure drove sales volumes and prices higher. Chief Executive Irving Tan used the earnings call to argue that data, not computing power, is the more lasting AI opportunity.The hard disk drive maker reported a profit of $1.78 billion, or $4.63 a share, up from $1.15 billion, or $3.07 a share, a year earlier. Adjusted earnings came in at $4.64 a share, comfortably ahead of the $4.11 expected by analysts polled by FactSet. Revenue rose about 55% to $4.38 billion from $2.82 billion, beating forecasts of $4.14 billion.Pricing was a major driver. The blended average selling price per terabyte of storage rose 28% in the quarter, reflecting strong demand that allowed the company to charge more. Tan told analysts that demand is increasingly coming from customers beyond Western Digital’s traditional base, including neoclouds and frontier AI labs. He said the company now has visibility into demand to 2030 or 2031 across its top seven customers, which has strengthened its conviction that demand for hard drive storage will last.Tan also made a broader case for the storage industry. In his view, investors focused on the computing power behind AI systems may be overlooking the data those systems produce. AI applications generate large volumes of information that must be stored and managed, he said, and storage needs will keep growing as AI adoption spreads across industries.The argument is, of course, one a storage maker has every reason to make, and investors did not reward it on the day. Shares fell about 5.6% to around $335 after hours, having already closed down 6.4% at about $354 during a broad rotation out of AI-related stocks, sparked in part by Meta Platforms’ capital spending disclosures. Even after the fall, the stock had more than doubled this year through Thursday’s close, leaving plenty of room for profit-taking.The company’s outlook points to further growth. For the fiscal second quarter, Western Digital expects adjusted earnings of $5.60 to $6.00 a share on revenue of $5.0 billion to $5.2 billion, well above analyst estimates of $4.84 a share and $4.57 billion. It also raised its quarterly dividend by 17% to 17.5 cents a share, payable on December 17 to shareholders of record on December 4.The test now is whether Tan’s longer-term view holds as AI spending comes under closer scrutiny. Growing reliance on newer customers such as neoclouds broadens demand, but it also exposes Western Digital to a part of the market where funding pressures have recently intensified. That makes the durability of those orders a key issue for investors in the quarters ahead. This article was written by Eamonn Sheridan at investinglive.com.