Western Digital: Don't Get Fooled By The Cycle

Louis Gerard2.36K FollowersFollow5ShareSavePlay(12min)CommentsSummaryWestern Digital delivered strong Q2 FY2026 results, with 25% Y/Y revenue growth and significant margin expansion driven by AI-fueled nearline HDD demand.WDC’s Cloud segment now comprises 89% of revenue, highlighting extreme dependence on hyperscale CapEx cycles and concentrated customer exposure.Despite robust cash flow and aggressive buybacks, valuation remains elevated for a cyclical hardware business, with shares priced for perfection and minimal margin of safety.I maintain a Sell rating on WDC due to peak-cycle risks, competitive threats from Seagate’s HAMR technology, and potential for demand normalization post-supercycle. JHVEPhoto/iStock Editorial via Getty Images Introduction Since my last analysis on Western Digital (WDC), where I gave the company a Sell rating, it has remained relatively flat, with only a slight share appreciation of 3%. In fairness, I’ll say that theThis article was written byLouis Gerard2.36K FollowersFollowAs a detail-oriented investor with a strong foundation in finance and business writing, I focus on analyzing undervalued and disliked companies or industries that have strong fundamentals and good cash flows. I have a particular interest in sectors such as Oil&Gas and consumer goods. Basically, anything that has been unloved for unjustified reasons that could offer substantial returns. Energy Transfer is one of those companies that I came across when no one wanted to touch it and now I can't resolve myself to sell it. I will always focus more on long-term value investing but I can sometimes lose myself in possible deal arbitrage such as with Microsoft/ Activision Blizzard, Spirit Airlines/Jetblue (that one still hurts), and Nippon/U.S. Steel (perfect exit at $50.19). I tend to shun businesses that I can't understand either high-tech or certain consumer goods such as fashion (give me a Levi's jeans). I don't understand why anyone would invest in cryptocurrencies as well.

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