Storage companies are earning more, so why are their stocks still seesawing? I think this is the part of this AI rally that’s worth thinking about.
Western Digital reported its first-quarter fiscal 2027 results on October 22: revenue of $4.38 billion, up 55% year over year; an adjusted gross margin of 58.1%, compared with 43.9% in the same quarter last year; and free cash flow of $1.38 billion. Demand has translated into profits and cash flow, giving the results solid fundamentals.
A closer look shows that the cloud business contributed 88% of revenue, while shipped capacity grew more than 20% year over year and average selling prices per unit of capacity rose about 25%. Rising volume and prices suggest that data growth driven by AI is giving storage companies greater pricing power. However, Western Digital’s main business is hard drives, so its results can’t be applied directly to all DRAM and NAND manufacturers.
Meanwhile, on October 23, SK hynix announced that it had stopped evaluating pre-IPO and IPO plans for Solidigm, while making clear that the company’s growth outlook and investment needs had not changed. This news is better understood in terms of financing arrangements and shareholder interests, rather than taken as direct evidence that AI demand is weakening.
My view is that the market will become more selective from here: After orders grow, how much will it cost to expand capacity? Will new supply push prices down? Can companies sustain their profits?
When trading, don’t equate a booming industry with rising share prices. I’ll be watching gross margins, capital expenditure, and cash flow closely. Demand determines whether a business is there; the purchase price determines whether the trade is worth it.
#市场定价美联储下周加息概率仅10%
Western Digital reported its first-quarter fiscal 2027 results on October 22: revenue of $4.38 billion, up 55% year over year; an adjusted gross margin of 58.1%, compared with 43.9% in the same quarter last year; and free cash flow of $1.38 billion. Demand has translated into profits and cash flow, giving the results solid fundamentals.
A closer look shows that the cloud business contributed 88% of revenue, while shipped capacity grew more than 20% year over year and average selling prices per unit of capacity rose about 25%. Rising volume and prices suggest that data growth driven by AI is giving storage companies greater pricing power. However, Western Digital’s main business is hard drives, so its results can’t be applied directly to all DRAM and NAND manufacturers.
Meanwhile, on October 23, SK hynix announced that it had stopped evaluating pre-IPO and IPO plans for Solidigm, while making clear that the company’s growth outlook and investment needs had not changed. This news is better understood in terms of financing arrangements and shareholder interests, rather than taken as direct evidence that AI demand is weakening.
My view is that the market will become more selective from here: After orders grow, how much will it cost to expand capacity? Will new supply push prices down? Can companies sustain their profits?
When trading, don’t equate a booming industry with rising share prices. I’ll be watching gross margins, capital expenditure, and cash flow closely. Demand determines whether a business is there; the purchase price determines whether the trade is worth it.
#市场定价美联储下周加息概率仅10%
