Western Digital Sees Continued AI Storage Demand as Higher CAPEX Draws Investor Scrutiny
DataNews Editorial Team
Western Digital says hyperscalers, emerging cloud providers and advanced AI labs continue to support demand for AI-oriented storage, with no signs of a pullback in hyperscaler capital spending. The company has more than doubled year-on-year CAPEX to expand high-capacity HDD production, while investors have raised concerns over the payback from broader AI data-center infrastructure spending.
- Western Digital says hyperscaler AI-related CAPEX shows no sign of weakening.
- The company more than doubled year-on-year CAPEX in the latest quarter to expand high-capacity HDD production.
- Western Digital expects CAPEX of about 4% to 6% of revenue over the next five years, with relatively higher spending in the next two years.
- Investor concern is focused on cash-flow pressure and the investment payback of AI data-center infrastructure.
- Long-range customer discussions for 2030–2031 signal planning activity, not confirmed future revenue or deployed demand.
Western Digital said demand for AI-oriented storage remains resilient across hyperscalers, newer cloud providers and advanced AI labs, even as investor attention turns to the financial burden of expanding supply-chain capacity.
On its first-quarter earnings call on October 22, Chief Financial Officer Kris Sennesael said hyperscaler customers continued to increase capital expenditure and were discussing supply-and-demand conditions with the company for 2030 and 2031. Those discussions are forward-looking and do not establish realised demand or revenue for that period.
Western Digital has more than doubled CAPEX year on year in its latest reporting quarter, directing the investment towards expanded production of high-capacity HDDs. The company expects CAPEX to run at approximately 4% to 6% of revenue over the next five years, with spending in the next two years slightly above the midpoint of that range.
The higher investment level has sharpened concerns about cash generation. Bloomberg Industry Research estimated that the CAPEX expansion reduced Western Digital’s free-cash-flow margin by roughly three percentage points. Vital Knowledge also questioned the durability of current data-center spending and the conversion of a large order backlog into revenue.
Western Digital forecast adjusted second-quarter earnings per share of up to $6, compared with an analyst consensus of $4.80. Despite results above expectations and a higher profit outlook, the company’s shares fell by about 3% on Friday, reflecting investor concern over CAPEX intensity and the returns available from AI data-center infrastructure investment.
For data-center operators and infrastructure suppliers, the update could indicate continuing tightness in high-capacity storage supply as vendors add manufacturing capacity. However, the market reaction suggests that future procurement cycles may face closer scrutiny over the demonstrable economics of large-scale AI infrastructure deployment.
The update points to continued demand for high-capacity storage in AI data-center clusters and a supplier response through added manufacturing investment. It also highlights a stricter market test for the returns on AI-infrastructure CAPEX: equipment demand may depend not only on technical requirements, but on hyperscalers’ and AI companies’ ability to demonstrate investment payback.
- — / October 24, 2026 · ChineseSource →
This article was prepared by the DataNews editorial team based on the sources listed above.