What Happened?

Shares of leading data storage manufacturer Western Digital (NASDAQ: WDC) jumped 13.1% in the pre-market session after the company reported strong third-quarter earnings with significant gross margin improvement, which helped to beat on adjusted operating profit and adjusted EPS. Notably, the cloud segment (54% of overall revenue) contributed the most to the top-line outperformance, accelerating 17% sequentially and 153% year on year. This was powered by what management considered "higher nearline shipments in HDD and enterprise SSD bit shipments to data center customers" and more than offsetting softness in the client and consumer segments. While guidance for next quarter's revenue and adjusted EPS slightly missed Wall Street's estimates, the market seemed to overlook this.

Is now the time to buy Western Digital? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Western Digital’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. But moves this big are rare even for Western Digital and indicate this news significantly impacted the market’s perception of the business. 

The previous big move we wrote about was 29 days ago when the stock gained 8.8% as semiconductor stocks, especially the memory chip manufacturers, surged after Micron reported impressive fourth-quarter earnings results. Micron beat across most of the key metrics we track, including revenue, operating profit, and EPS. Notably, the company recorded a whopping 93% revenue growth compared to the previous year, showing that the AI party is still ongoing. Micron attributed the outperformance to the growing demand for memory chips that power generative AI applications. 

Looking ahead, Micron provided strong sales and profitability guidance for the next quarter, which exceeded Wall Street's expectations. Overall, the result highlights the abundant growth opportunities for memory chip makers with technologies to accelerate the booming AI trend.

Western Digital is up 40.9% since the beginning of the year, but at $71.68 per share, it is still trading 10.7% below its 52-week high of $80.24 from July 2024. Investors who bought $1,000 worth of Western Digital’s shares 5 years ago would now be looking at an investment worth $1,171.

When a company has more cash than it knows what to do with, buying back its own shares can make a lot of sense–as long as the price is right. Luckily, we’ve found one, a low-priced stock that is gushing free cash flow AND buying back shares. Click here to claim your Special Free Report on a fallen angel growth story that is already recovering from a setback.