BONUS: Western Digital CEO Irving Tan Talks AI Storage Demand

Summary

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Bloomberg Tech — BONUS: Western Digital CEO Irving Tan Talks AI Storage Demand

Date: August 6, 2026
Host: Ed Ludlow (Bloomberg)
Guest: Irving Tan (CEO, Western Digital)

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Episode Overview

This bonus episode features a deep-dive interview with Irving Tan, CEO of Western Digital, exploring the surging demand for data storage in the AI era. Host Ed Ludlow and Tan discuss the company’s latest financial performance, the technological evolution of hard drives, long-term customer agreements, and what the “hard disk drive moment” means for the industry’s future in cloud and AI infrastructure.

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Key Discussion Points & Insights

1. Western Digital's Recent Performance and Market Expectations

• Strong Q4 FY26 Results:
  • Western Digital posted over 40% revenue growth and gross margins above 54%.
  • The company saw strong cash flow generation.
  • Despite positive fundamentals, market expectations for new "exit bytes" (unit capacity) were extremely high.
• Quote:

  "If you look at the results that we delivered in Q4 fiscal 26, they were very strong. We had over 40% revenue growth, gross margin was above 54%."
  — Irving Tan (00:57)

• AI and Cloud Demand:
  • Demand from hyperscalers and new physical clouds is "very robust."
  • Tan expects a sustained >25% CAGR in storage demand over the next five years.

2. Storage vs. Memory: Distinct Markets, Similar Dynamics

• Supply & Demand Concerns:
  • Demand is outpacing supply, but unlike memory (DRAM/NAND), storage is not "recycled"—stored data accumulates and isn’t deleted.
• Capacity Expansion without More Drives:
  • Western Digital focuses on boosting drive capacity per unit, not manufacturing more drives.
  • A new 40TB hard drive is launching this quarter, up from 32TB previously, offering over 30% capacity boost per unit with no increase in unit production.
• Quote:

  "We're not investing in increasing the number of drive units we are producing. We continue to invest in technology to increase the amount of hits and media that we produce because that's the big driver of capacity in a drive."
  — Irving Tan (02:24)

3. Engineering Challenges and Customer Readiness

• Technical Marvel:
  • Hard drives are “a marvel of engineering,” utilizing two-thirds of the periodic table in their construction.
  • New capacity points require complete redesigns of drive media and heads.
  • Extensive qualification processes ensure enterprise customers get quality and reliability.
• Quote:

  "We use two thirds of the periodic table in our product. So as we move from capacity point to capacity point, there's a lot of re-engineering that goes on..."
  — Irving Tan (03:40)

4. Long-Term Customer Agreements (LTAs)

• Multi-Year Customer Commitments:
  • Western Digital has agreements locked in through 2029 and is negotiating for 2030-31 due to customers’ clear infrastructure roadmaps.
  • While drive supply can be assured far into the future, pricing remains under negotiation, with potential for tiered pricing structures.
• Quote:

  "They realize it has to take a much longer term time horizon in terms of how they plan. So we are working very closely with them."
  — Irving Tan (04:37)

• Flexible Pricing Models:
  • Agreements may use base and tiered pricing based on delivered volume.
• Quote:

  "If you need 600 exabytes of storage in 2031, we will deliver that to you. How we actually price it, we're still in negotiations..."
  — Irving Tan (05:30)

5. The ‘Hard Disk Drive Moment’ in the AI Era

• Industry Renaissance:
  • Hard drives, long thought to be a “thing of the past,” are now central to cloud and AI infrastructure.
  • 80% of cloud storage still resides on hard drives, a figure expected to persist.
  • Tan frames it as a “once in a lifetime opportunity” for both his company and the industry.
• Quote:

  "People thought that, you know, hard drives were a thing of the past, but it's shown to be a fundamental piece of the infrastructure stack with 80% of all storage in the cloud... continuing to reside on hard drives..."
  — Irving Tan (06:02)

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Notable Quotes & Memorable Moments

• On Market Expectations and Performance

  "The fundamentals for ongoing revenue growth, margin expansion, [and] cash flow generation remain very strong."
  — Irving Tan (01:11)

• On Engineering Complexity

  "Hard drives are actually, as an engineer, I always viewed hard drives as a marvel of engineering."
  — Irving Tan (03:40)

• On Customer Partnerships

  "We work very closely with our customers to make sure we go through very robust qualification processes because customers are very sensitive to the quality and reliability of their data storage capability."
  — Irving Tan (04:03)

• On Industry Transformation

  "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."
  — Irving Tan (06:16)

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Timestamps for Key Segments

• 00:38 — Discussion kicks off: Market pressure and investor sentiment
• 00:57 — Q4 2026 earnings and demand growth outlined
• 02:24 — Storage vs memory explained; vertical capacity expansion strategy
• 03:40 — Engineering marvels behind new drive generations
• 04:37 — Long-term agreements and pricing strategy
• 05:30 — Customer negotiation and delivery commitment
• 06:02 — The resurgence and relevance of hard disk drives in the cloud era

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Summary Takeaways

• Western Digital is experiencing a renaissance, driven by AI and cloud storage demand.
• Revenue, margin, and cash flow performance are robust, despite market skepticism.
• The company is focused on boosting storage capacity per drive, not simply producing more units.
• Long-term contracts for exabyte-scale commitments are in demand, though pricing into the 2030s is complex and evolving.
• Hard drives remain the backbone of cloud storage and are integral to supporting AI’s exponential data appetite.

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For listeners and tech sector stakeholders alike, this episode makes clear: the future of AI-driven infrastructure rests on innovation not just in computing, but in the humble—and continually advancing—hard disk drive.

Transcript

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getting back to the AI hard disk drive story. I think it's great to have you back on the show. You know, like investors still believe in that story. I hard disk drive, your stock is under some pressure. Just reflect on like the moment that you tried to outline in this, in this earnings print.

[Irving (Hard Drive Industry Executive)]

Yeah, well, first of all, thank you very much for having me back. If you look at the results that we delivered in Q4 fiscal 26, they were very strong. We had over 40% revenue growth, gross margin was above 54%. Very strong cash flow generation as well. If anything, probably the expectations were very high in terms of the increased amount of exit bikes that we could supply into the market. But if you take a step back, really, the fundamentals for ongoing revenue growth margin expansion, cash flow generation remain very strong. On the demand side, demand from hyperscalers, new clouds physical remains very robust and we continue to see over 25% CAGR demand from a demand perspective over the next five years. Similarly, on the supply side, we have a very robust roadmap that we have put in place that will be able to meet this demand. And so it's pretty much a function of just quarterly transitions that we're going through.

[Interviewer]

I think what you're touching on there is, you know, storage is distinct in many ways from what's happening in memory. In some ways highly analogous. Right. There is a pricing story there, there is a demand outpacing supply story. And your industry facing the balancing act of expanding output manufacturing capacity on a, on a permanent basis or not. How are you managing all of that?

[Irving (Hard Drive Industry Executive)]

Yeah, so first of all, thank you for highlighting that. It's a clear distinction between memory, which is like NAN and DRAM versus storage because memory and like compute is being recycled all the time for different workloads. But the data that's being generated continues to be stored. It isn't getting deleted. So the amount of data storage requirements is just compounding over time, which puts a lot of more demand on our products on an ongoing basis. And how we're trying to solve for that is really to technology. We're not investing in increasing the number of drive units we are producing. We continue to invest in technology to increase the amount of hits and media that we produce because that's the big driver of capacity in a drive. So we are currently shipping a 32 terabyte hard drive as our top of the line drive. But starting this quarter we'll be shipping a 40 terabyte drive. So that's an ability to drive over 30% capacity to customers without adding any unit capacity.

[Interviewer]

Could you go into into how that works? You know, bring a 40 terabyte drive to market, the engineering complexity of it and how much do the customers have to sort of re architect their infrastructure to accommodate for that new generation of of hdd?

[Irving (Hard Drive Industry Executive)]

Yeah, well, hard drives are actually as an engineer, I always do hard drives as a marvel of engineering. We use two thirds of the periodic table in our product. So as we move from capacity point to capacity point, there's a lot of re engineering that goes on into the of our media designs, the recipe of our head design. So it's quite an engineering feat. Obviously we have great teams that have years of experience doing that. At the same time, we work very closely with our customers to make sure we go through very robust qualification processes because customers are very sensitive to the quality and reliability of their data storage capability.

[Interviewer]

The other sort of highly analogous factor that is in front of you is long term agreements. With the memory market, we see long term agreements coming in as well. So you have these in place like 2029, 2030, 2031. How do you know how to price an agreement today going that far into the future?

[Irving (Hard Drive Industry Executive)]

It's a really good question. We do have LTA is in place locked in till 29. We have customer demand. Customers are coming US to put LTA's in place to support demand for 29, 30 and 31. They have really good visibility in terms of the storage requirements they need because they're looking at the entire infrastructure stack, everything from GPUs to CPUs to HBMs to NAND. Yes, to storage. And they realize it has to take a much longer term time horizon in terms of how they plan. So we are working very closely with them. We're definitely locking in the sort of exabyte supply that they need. But what we're working through with them is still the commercial construct of how we would price something further out into.

[Interviewer]

Right. So let me look at it another way. Somebody comes to you and says, Irving, I'm a big customer and I want to lock you in until 2031. Why might you Say no.

[Irving (Hard Drive Industry Executive)]

Well, what we are saying is if you need 600 exabytes of storage in 2031, we will deliver that to you. How we actually price it. We're still in negotiations with them where we might have a base price for a percentage of that volume and then a tip stop tier pricing structure as we increase the capacity we deliver to them.

[Interviewer]

I don't mean to trivialize this in any way, but you know, like it's the hard disk drive moment, you know, make hard disk drive great again. What's, what's that been like for you to put the technology at the forefront of discussion at the moment?

[Irving (Hard Drive Industry Executive)]

Well, it's really exciting. I mean, people thought that, you know, hard drives were a thing of the past, but it's shown to be a fundamental piece of the infrastructure stack with 80% of all storage in the cloud and ISE continuing to reside on hard drives both today and going forward. So 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.

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