HDD earnings are likely to confirm strength, but App Store and PC data show divergence

Overview

This report is Morgan Stanley's monthly IT hardware data tracker, covering multiple data dimensions including HDD, Apple services, Apple supply chain, smartphones, PCs, consumer electronics, and cloud/enterprise servers. The core conclusion is that HDD fundamentals continue to strengthen, and STX and WDC quarterly earnings and June-quarter guidance may come in above sell-side consensus expectations; however, because stock prices have already substantially priced in the positives, the earnings catalyst is limited. Meanwhile, App Store growth is stable but below internal forecasts, and although PC demand has improved due to stronger-than-expected first-half pull-ins, 2026 still faces the risk of a double-digit year-over-year decline.

Core views

On HDD, the report expects STX and WDC March-quarter revenue to come in near the high end of guidance, benefiting from nearline EB growth, rising $/TB, mix shift toward higher-capacity drives, and gross margin expansion. Positive industry dynamics are expected to continue in the June quarter, with STX EPS potentially reaching $4.10+ and WDC EPS potentially reaching $2.95+. On Apple services, App Store net revenue grew 6.1% year-over-year through April 19, with strong growth in China but declines in the United States and slight declines in Japan, overall slightly below forecasts. On PCs, notebook and PC shipment forecasts for 1H26 were revised up, but demand pull-forward, higher prices, supply risks, and tougher year-over-year comps in the second half mean full-year shipments may still decline 10%-11%.

Analysis framework

The report uses a multi-source high-frequency tracking framework, including Sensor Tower App Store net revenue and download data, AlphaWise search and consumer survey data, monthly sales from Taiwanese suppliers, iPhone/iPad build forecasts, CAICT and IDC China smartphone shipment data, notebook ODM builds, PC lead times, HDD TSR production and workshop information, as well as Apple retail store status and product delivery lead times. The analysis focuses on cross-validating revenue, gross margin, shipment volume, and demand cycles using operating data, supply chain data, and demand proxy indicators.

Methodology notes

• Industry Data TrackingMonthly Data Tracker

  Use monthly or weekly operating indicators to observe changes in hardware and services demand

  The report combines supply chain sales, build forecasts, app store revenue, search intensity, shipment data, and lead times to assess near-term trends in HDD, Apple, PCs, and consumer electronics.

• Alternative DataApp Store Sensor Tower Tracker

  App Store net revenue and download tracking

  Uses data from more than 110 countries and 25 app categories to estimate Apple App Store monthly and quarterly net revenue, downloads, and growth rates in major markets.

• Supply Chain AnalysisNotebook ODM Builds

  Notebook ODM build forecasts as a leading indicator for PC shipments

  The report uses notebook ODM build trends to infer PC shipment trends and assess first-half pull-ins versus second-half demand pressure.

• Demand Proxy IndicatorLead Time Tracker

  Product delivery lead times reflect the degree of supply-demand tightness

  Lead times for products such as iPhone, Mac, and PC are used to judge demand strength, supply constraints, and performance across new product cycles.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• STX

  Beneficiary of HDD earnings and pricing cycle

  Strengths

  Nearline EB growth, rising $/TB, gross margin expansion, and improved mix toward higher-capacity drives.

  Weaknesses

  The stock price is already up more than 100% year-to-date, leaving expectations high.

  Comparison

  June-quarter EPS guidance is expected at $4.10+, above consensus expectation of $3.93.

  Risks

  If June-quarter gross margin guidance, pricing durability, or HAMR qualification/ramp falls below expectations, the confirmatory thesis could weaken.

• WDC

  Beneficiary of HDD cycle improvement

  Strengths

  March-quarter revenue and gross margin are expected to be at the high end of guidance, with June-quarter gross margin potentially reaching 49%-50%.

  Weaknesses

  Buy-side expectations are already high, limiting room for short-term upside surprise.

  Comparison

  June-quarter EPS is expected at $2.95+, above consensus expectation of $2.69.

  Risks

  HDD pricing, nearline demand, or product mix improvement may fall short of expectations.

• Apple

  Tracking target for App Store, supply chain, Mac, iPhone, and retail data

  Strengths

  China App Store growth is strong, Taiwan supply chain sales are rising sharply year-over-year, and extended lead times for Mac mini/Mac Studio/MacBook Neo indicate strong demand for some products.

  Weaknesses

  Overall App Store growth is below forecasts, the U.S. App Store is declining year-over-year, and Mac's contribution to near-term earnings is limited.

  Comparison

  App Store April MTD +6.1% Y/Y, below the June-quarter forecast of +7.0%.

  Risks

  Slowing services growth, divergence in China smartphone data, and weak consumer electronics demand in the second half.

• PC Hardware Supply Chain

  Tracking target for demand cycle and shipment forecasts

  Strengths

  1H26 notebook ODM builds and PC shipment forecasts are better than previously expected.

  Weaknesses

  The improvement mainly comes from pull-forward demand, while worsening 2H demand and a high year-over-year base remain pressures.

  Comparison

  CY26 PC shipments may improve from the original forecast of -16% to -10% to -11%, but that would still be a double-digit decline.

  Risks

  Rising prices, supply shortages, post-pull-forward demand weakness, and below-seasonal growth from 3Q26 to 1Q27.

Key data

• STX March-quarter revenue expectation$2.95B-$3.00BNear the high end of guidance; EPS expectation $3.50-$3.60, above MSe $3.42.
• WDC March-quarter revenue expectation$3.25B-$3.30BNear the high end of guidance; EPS expectation $2.45-$2.50, above MSe $2.39.
• STX June-quarter EPS guidance expectation$4.10+Above MSe $4.08 and consensus expectation $3.93.
• WDC June-quarter EPS guidance expectation$2.95+Above MSe $2.87 and consensus expectation $2.69.
• App Store April MTD net revenue growthabout +6.1% Y/YThrough 2026-04-19, stable with March, but about 90bps below the June-quarter forecast.
• China App Store growth+11% Y/YAccelerated 430bps versus March.
• U.S. App Store growth-3% Y/YDecelerated 80bps versus March, but revenue per download grew 0.5% year-over-year.
• 1H26 PC shipment estimate127M units, -2% Y/YAbout 9%, or roughly 10 million units, above the current forecast.
• CY26 PC shipment trendabout -10% to -11% Y/YBetter than the prior -16% forecast, but still a clear decline.
• Apple Taiwan supply chain March sales+51% Y/YMonthly sales of Apple supply chain partners in Taiwan rose sharply year-over-year.
• Apple global retail store status520/525 open, 99%As of 2026-04-20.

Impact & implications

From an investment perspective, HDD remains the clearest positive fundamental theme, but STX/WDC share prices have already risen substantially, so near-term earnings are more about validating whether the high-margin and pricing cycle can continue rather than providing a new upside catalyst. Apple-related data are more mixed: supply chain data and Mac lead times show strong demand for some products, but App Store growth is slightly below forecasts, the U.S. market is declining, and divergence in China smartphone data suggests that services and hardware demand still need to be tracked. On PCs, improved supply chain pull-ins support first-half data, but may pull forward second-half demand, leaving full-year shipments still under pressure.

Risks

• STX/WDC share prices have already fully reflected HDD strength; if guidance only meets elevated expectations, the near-term catalyst may be limited.
• HDD pricing, $/TB growth, gross margin expansion, or HAMR qualification/mass production progress may fall short of expectations.
• App Store growth is below Morgan Stanley's forecasts, especially with year-over-year decline in the U.S. market.
• First-half PC demand may be supported by pull-forward orders, creating the risk of weaker demand in the second half.
• There are differences between CAICT and IDC China smartphone data, which may affect judgments on Apple demand in China.
• Longer Mac lead times may reflect both strong demand and supply constraints, making them hard to interpret solely as an earnings upside signal.

What to watch

• STX/WDC June-quarter gross margin guidance and management commentary on cycle duration and pricing visibility.
• Progress on HAMR qualification and capacity ramp.
• Whether App Store April and June-quarter net revenue growth returns toward the +7% forecast.
• Whether divergence in App Store growth across China, the United States, Japan, and other regions widens.
• 2Q26 notebook ODM builds, 3Q26 PC shipment seasonality, and whether there is a payback after demand pull-forward.
• Whether lead times for Mac mini, Mac Studio, and MacBook Neo continue to lengthen or return to normal.
• Directional differences between CAICT and IDC monthly China smartphone data for iPhone demand.