Western Digital Corporation (WDC.US) and SanDisk (SNDK.US) reported better than expected earnings, but their stock prices plummeted after hours trading due to profit-taking triggered by high expectations and supply chain constraints.

In the context of the continuous growth in data storage demand driven by the artificial intelligence (AI) wave, Western Digital Corporation (WDC.US) reported strong performance in its latest financial report, but the stock price fell after hours, reflecting market caution towards the supply and demand pressures and valuation behind the high industry prosperity. As of the third quarter of the 2026 fiscal year, Western Digital Corporation's adjusted earnings per share were $2.72, a significant increase from $1.36 in the same period last year and significantly higher than the market's expected $2.39; revenue increased by 45% year-on-year to $3.34 billion, also exceeding analyst expectations. The company's previous performance guidance range was completely surpassed. Looking ahead, Western Digital Corporation expects fourth-quarter revenue to increase by 36% to 44% year-on-year, reaching approximately $3.65 billion, with an adjusted earnings per share midpoint of $3.25, higher than the market's general expectation of $2.75; gross margin is expected to improve to 51% to 52%. In addition, the company announced a 20% increase in quarterly dividend to $0.15 per share. CEO Irving Tan stated that almost all AI workloads, from model training, inference to intelligent enterprise AI and physical AI, will generate data that needs to be stored long-term and cost-effectively through methods such as hard drives, becoming the core DRIVE of demand growth. From an industry perspective, with the acceleration of AI infrastructure construction, there has been a comprehensive outbreak of demand for data storage and storage chips. Tech giants including Amazon.com, Inc. (AMZN.US), Microsoft Corporation (MSFT.US), Alphabet (GOOG.US, GOOGL.US), and Meta Platforms (META.US) are expected to invest over $700 billion in AI data centers this year, further driving storage demand growth. Driven by this, the storage and storage chip sector stock prices have risen significantly. Western Digital Corporation's stock price has risen by over 150% so far this year, and by about 891% in the past 12 months; Seagate Technology Holdings PLC (STX.US) has risen by about 145%, SanDisk (SNDK.US) has surged by 362%, and Micron Technology, Inc. (MU.US) has risen by about 81%. However, the AI investment frenzy has also brought new challenges. On one hand, the continued tightness of hard drive and storage chip manufacturing capacity has led to price increases due to supply shortages; on the other hand, there are concerns about high valuations and the sustainability of demand in the market. Western Digital Corporation and its competitor Seagate Technology Holdings PLC both face capacity constraints, and additional capacity is not expected to be gradually released until mid-next year, which means that inventory will remain tight and prices will remain high in the short term. Meanwhile, some AI-related stocks have recently experienced fluctuations. For example, news that OpenAI did not grow as expected previously caused a short-term pullback in AI concept stocks. Although the subsequent Seagate Technology Holdings PLC financial report boosted market sentiment, volatility remains high. Despite the impressive performance, Western Digital Corporation's stock price fell by over 7% after the financial report was released. Analysts believe that this reaction may be related to high market expectations and concerns about the sustainability of the AI capital expenditure cycle. On the same day, SanDisk reported even more impressive performance. The company's adjusted earnings per share for the third quarter reached $23.41, far exceeding the market's expected $14.62, and reversed the loss in the same period last year; revenue increased by 251% year-on-year to nearly $6 billion. Its gross margin reached 78% and is expected to increase to 80% in the next quarter, far above the industry's normal level. Data center business revenue skyrocketed by 645% year-on-year, becoming the core driver of growth. However, despite the performance significantly exceeding expectations, SanDisk's stock price fell by about 8% after hours, showing market caution towards the sustainability of high growth. Analysts point out that the storage industry is currently in a super cycle driven by AI, with clear demand growth logic, but also facing problems such as supply bottlenecks, rising costs, and high valuations. NVIDIA Corporation CEO Jensen Huang previously stated that as the demand for high-speed storage in AI servers surges, the market size of storage chips is expected to expand further, and may even become one of the largest semiconductor sub-markets.