Investing.com -- Western Digital Corporation (NASDAQ: WDC) reported fiscal third quarter results that exceeded Wall Street expectations, yet shares declined 6% after hours. WDC shares closed 5.27% higher Thursday, and were up over 60% over the past month amid heightened investor optimism.

With data storage stocks rallying recently on enthusiasm around AI-driven demand and tighter supply conditions, the bar heading into earnings had risen significantly.

The data storage company posted adjusted earnings per share of $2.72, beating the analyst consensus of $2.36 by $0.36. Revenue reached $3.34 billion, up 45% YoY and above the $3.23 billion estimate. The strong performance was driven by robust demand across all end markets, particularly in AI workloads requiring persistent data storage on hard disk drives.

"WD started calendar year 2026 with great execution, driving strong sequential and YoY revenue growth in all our end markets, while expanding gross and operating margins," said Irving Tan, CEO of WD. "The demand drivers are clear: Virtually every AI workload, from training, inference, agentic AI to physical AI, creates data that is stored persistently and cost-efficiently on HDDs."

For the fourth quarter, Western Digital issued guidance of $3.10-$3.40 per share on revenue of $3.55-$3.75 billion. The midpoint of $3.25 per share significantly exceeds the consensus estimate of $2.75, while the revenue midpoint of $3.65 billion tops the $3.47 billion consensus. The company issued fourth quarter adjusted gross margin guidance of 51%-52%.

The company reported adjusted gross margin of 50.5% for the third quarter, up from 40.1% in the prior year period. Operating cash flow reached $1.12 billion with free cash flow of $978 million. Western Digital also announced a 20% increase in its quarterly dividend to $0.15 per share.