Western Digital (NASDAQ: WDC) stock increased by over 5% in Tuesday’s trading and is up by nearly 40% over the past month. What factors are propelling the stock upwards?
Authorization of Share Buyback Program
Western Digital announced a new $2 billion share buyback program, demonstrating solid confidence in its long-term prospects. Effective immediately, the program permits share buybacks through open market purchases, private transactions, or under a Rule 10b5-1 plan. This initiative follows the recent introduction of a quarterly dividend and reinforces the company’s shareholder-oriented capital allocation approach—emphasizing reinvestment, debt reduction, and capital returns as detailed during Investor Day.
Strong Q3 Earnings
Western Digital (WDC) reported its first complete quarter as an HDD-focused company in Q3 FY25, (June year), achieving $2.3 billion in revenue—marking a 31% year-over-year growth even with a 5% quarterly decrease. Non-GAAP EPS increased by 15% to $1.36, and gross margin rose to 40.1%, an increase of 1.7 points from the previous quarter and 10 points compared to the previous year. The Cloud division accounted for 87% of total revenue, yielding $2.0 billion, an increase of 38% year-over-year, driven by rising data demands from hyperscale cloud providers and AI adoption.
Positive Guidance
Looking forward to the fiscal fourth quarter ending June 27, 2025, Western Digital provided a positive forecast, estimating revenue of $2.45 billion ± $150 million and non-GAAP EPS of $1.45 ± $0.20—both exceeding analyst predictions. The company anticipates to maintain robust gross margins between 40.0% and 41.0%, with non-GAAP operating expenses tightly managed in the range of $330 million to $340 million. As AI adoption fuels significant data growth, demand for high-capacity, cost-effective storage continues to grow. Western Digital’s commitment to durable, large-capacity HDDs positions it favorably to benefit from this trend.
WDC Stock’s Volatility
The rise in WDC stock over the last 4-year period has been anything but steady, with annual returns showcasing significantly greater volatility than the S&P 500. Stock returns clocked in at 18% in 2021, -52% in 2022, 66% in 2023, and 14% in 2024.
The Trefis High Quality (HQ) Portfolio, comprising 30 stocks, is considerably less volatile. Additionally, it has comfortably surpassed the S&P 500 over the past 4-year period. Why is this the case? As a collective, HQ Portfolio stocks have yielded better returns with lower risk compared to the benchmark index; resulting in a smoother experience, as illustrated by HQ Portfolio performance metrics.
We assess WDC stock to be around $49 per share, which aligns closely with the current market value. Refer to our analysis on Western Digital’s Valuation: Is WDC Stock Expensive Or Cheap? for further insights regarding Western Digital’s valuation and its comparison with competitors.
Read the full article here
