WDC's quarter was excellent: revenue up 55% with 58.1% margins, as long-term cloud contracts (88% of revenue) shift to higher-margin 20-30 terabyte disks and supply constraints lift prices. Demand and margins are guided through 2027-2028, and the stock, down about 50% from its June peak, may not need to retest it.

what we learned from Western Digital's earnings in our technology spotlight segment So, what do you think of what we heard from " Western Digital"? Well, this is a great window into the evolution of artificial intelligence architecture, Nicole.

It was clearly an excellent quarter. We expected nothing less. 4.38 billion, an increase of 55 % year-on-year.

Earnings per share exceeded expectations. Total profit margins amounted to 58.1%. So, all the numbers look really good. Strong growth, profitability, and solid direction.

However, we still see a challenge in stocks, don't we ? It has risen since the beginning of the year, but has fallen considerably, by about 50% from its peak on June 18. So, it's an interesting market while we monitor some ongoing repricing processes.

We may not need to return to the summer peak levels of around $800 for Western Digital stock. Growth, profitability, and an overall excellent quarter may be enough. Is this enough?

Look, Western Digital is doing a great job of moving its customers. They have existing contracts, these long- term agreements that set the prices, right? For many years with their major clients.

I should add that the cloud accounts for 88% of their revenue, and of that, 73 % of their total revenue is distributed among 10 customers. So , think about this customer focus.

Isn't that so? All of these are bound by long-term agreements. Some of these agreements will reach the renewal stage, and they are moving customers to much higher capacities and products with higher profit margins as well, such as 20-30 terabyte disks.

So, I think they are doing a great job . They are talking about increasing capacity and improving their overall profit margins as well. So, all the numbers look good for the company.

I mean, the demand for storage already exists. Everyone wants to store data, and the higher price component is also a factor. I mean, it seems like a lot of things are going right for this company, don't you think ?

I brought you something today, Nicole. I said, "This is a Western Digital Passport disc that I bought in 2019 for about $100." The same 4TB hard drive is now being sold used for $200, and new for about $229.

So, the consumer sector represents only about 5% of Western Digital's revenue, but the takeaway is that we are all facing this price increase right now due to supply constraints.

The company does a better job of extracting profit margins because their manufacturing costs are lower. Therefore, I believe that what Wall Street is looking for is the difference between the cost of producing one terabyte and the cost of selling it, and that is what determines the overall profit margins .

For comparison , Western Digital shipped 248 exabytes, a 22% increase over the previous year. So this is one of the numbers we are monitoring. I'm only thinking about the competition in general.

For example, when you talked about Western Digital and said how important the cloud story is to the company's revenue, but with only a few customers, maybe 10, if they don't renew their contracts or go elsewhere.

I mean, that could lead to the company's collapse. Not for Western Digital, but generally if you're putting all your eggs in one basket right now .

Well, Western Digital has given us some insight into the demand. They said they expect demand and profit margins to continue through 2027 and 2028, and even indicated that demand will continue into 2030 and 2031.

We don't know what prices and margins will look like at that time , but this tells us that the building of AI infrastructure will continue.