S&P raises Western Digital outlook to positive on AI

S&P Global Ratings revised its credit outlook on Western Digital to positive from stable on September 24, 2026, while affirming the data storage maker's BBB- issuer credit rating. The agency pointed to accelerating cash flow generation and sustained low leverage driven by booming artificial intelligence infrastructure demand.

S&P projects Western Digital revenue to jump approximately 44% in fiscal 2027, propelled by demand from hyperscale cloud providers for training and inference storage. Adoption of technologies like UltraSMR and progress on heat-assisted magnetic recording qualifications are expected to expand EBITDA margins by 1,000 basis points this fiscal year.

The agency expects free cash flow to reach roughly $5 billion in fiscal 2027, backed by stronger pricing power and operational leverage. S&P also anticipates Western Digital will maintain a net cash or near-net cash position even as capital expenditures rise to support manufacturing transitions.

S&P stated it could raise the credit rating if the company sustains annual free cash flow between $5 billion and $6 billion alongside gross margin expansion. Conversely, the outlook could return to stable if a sudden retrenchment in AI spending creates oversupply or weakens cash generation.