Western Digital CEO on AI Storage Demand

Western Digital CEO Irving Tan joined Bloomberg Talks to discuss the company's position in the burgeoning AI storage market. Despite recent stock pressure, Tan highlighted strong Q4 fiscal 2026 results, including over 40% revenue growth and a gross margin above 54%. He emphasized that the fundamental drivers for ongoing revenue growth, margin expansion, and cash flow generation remain robust, with demand from hyperscalers and cloud providers showing no signs of slowing.

AI's Unending Data Appetite

Tan underscored the critical distinction between storage and memory technologies like NAND and DRAM in the context of AI. While memory is frequently recycled for different workloads, the data generated by AI applications continues to accumulate. This compounding data growth directly fuels the demand for storage solutions. Western Digital is addressing this by investing in technology to increase the capacity of its hard drives, rather than simply increasing the number of units produced.

"The data that's being generated continues to be stored; it isn't getting deleted," Tan explained. "The amount of data storage requirements is just compounding over time."

The full discussion can be found on Bloomberg Podcast's YouTube channel.

The company is already shipping 32 TB drives and is introducing 40 TB drives this quarter, representing a significant capacity increase without altering the physical unit size. This technological advancement is key to meeting the projected demand, which Tan anticipates will grow at a compound annual growth rate of over 25% for the next five years.

Engineering for the Future of Storage

The engineering complexity behind these high-capacity drives was also a point of discussion. Tan described hard drives as a "marvel of engineering," utilizing a significant portion of the periodic table in their construction. Each capacity increase requires substantial re-engineering of media designs and head designs. Western Digital collaborates closely with its customers throughout a rigorous qualification process to ensure the quality and reliability of its storage solutions.

Long-Term Agreements and Pricing Challenges

The conversation also touched upon the trend of long-term agreements (LTAs) for storage capacity, similar to those seen in the memory market. Western Digital has secured LTAs locked in through 2029, with customers actively seeking commitments for 2029, 2030, and 2031. These customers, with their comprehensive view of the AI infrastructure stack, recognize the need for long-term storage planning.

However, pricing these extended agreements presents a challenge. "We have LTAs in place locked in till '29," Tan stated. "Customers are coming to us to put LTAs in place to support demand for '29, '30 and '31. They have really good visibility in terms of the storage requirements that they need... but what we're working through with them is still the commercial construct of how we would price something further out in time."

Tan elaborated that while the company can commit to delivering specific exabyte volumes, the exact pricing structure for these future commitments is still under negotiation, potentially involving base prices for a percentage of volume and tiered pricing for increased capacity.

The Resurgence of HDDs in the AI Era

Addressing the notion of a "hard disk drive moment," Tan expressed enthusiasm for the technology's renewed relevance. He highlighted that hard disk drives remain a foundational component of the AI infrastructure, powering 80% of all storage in the cloud and continuing to do so for the foreseeable future.

"People thought that, you know, hard drives were a thing of the past, but it's shown to be a fundamental piece of the AI infrastructure stack," Tan remarked. "It's a very exciting time for us. It's a great challenge and I always tell my teams, it's a great responsibility that we have to deliver to the industry to enable this once-in-a-lifetime opportunity that AI is creating."