Shares of Sandisk declined 8% in after-hours trading Wednesday to $1,243 per share, following the release of its latest financial results. This came as investors engaged in profit-taking while also growing cautious on the company’s revenue guidance going forward despite robust Q4 earnings.
According to an analysis by Yuanta Securities (Thailand), Sandisk reported record earnings for 4QFY26, with revenue of $8.97 billion, up 372% year-over-year and 3.8% above consensus. Gross margin stood at 84.6%, while operating income reached $7.10 billion. Net income was $6.16 billion, and adjusted EPS came in at $39.25—all exceeding market forecasts and company guidance.
The primary growth driver was the Data Center segment, which saw revenue surge to $2.98 billion, a thirteenfold increase year-on-year and up 103% quarter-on-quarter. The Edge segment also experienced robust growth, up 48% to $5.43 billion, helping offset a 32% decline in the Consumer segment, which declined to $560 million.
Approximately two-thirds of the growth was attributed to higher pricing, with the remainder driven by an increase in Bits, indicating that Sandisk is benefiting from strong pricing power, an improved product mix, and unexpectedly strong demand for AI storage solutions.
The Data Center business has become the main growth engine, driven by the adoption of AI inference workloads that require greater storage capacity. Unlike the previous cycle, where Data Center growth was primarily fueled by TLC Enterprise SSDs for compute applications, this quarter saw the introduction of the QLC Stargate product, which targets AI Data Lake applications demanding high capacity.
Management noted that AI inference is both “memory-centric” and “storage-intensive” as larger model sizes, longer context lengths, KV cache usage, and agentic AI are all contributing to increased demand for rapid data storage and retrieval. However, the outlook for smartphones and PCs has moderated, with management revising their previous expectation for flat to slightly rising unit sales in 2027 to now anticipate merely stable performance, following a mid-teen percentage contraction after 2026.
The NBM (New Business Model) segment has seen rapid expansion, with the number of contract customers rising from five in the previous quarter to eight currently, now covering over 50% of FY27 Bits and about two-thirds of FY28 Bits, with an average contract duration of over four years.
The guaranteed minimum revenue from these contracts has increased from $42 billion across the initial three agreements to $93.9 billion, with RPO rising to $91.1 billion when accounting for deals signed post-quarter. Financial guarantees have also climbed from over $11 billion to $16.5 billion. Notably, some customers have already asked to increase their contracted volumes, signaling that actual demand exceeds initial contractual commitments.
Sandisk has locked in high gross margins without sacrificing long-term upside or accelerating oversupply. The company clarified that these NBM contracts yield gross margins of about 80%, using both fixed and variable pricing structures with floor and ceiling levels. This approach secures demand and allows Sandisk to partially benefit if market prices rise.
Management emphasized a strategic approach to “remove boom and bust cycles” rather than maximize single-quarter margins. On the supply side, Sandisk is increasing Bit output by shifting to newer BiCS8 and BiCS10 technologies instead of rapidly expanding wafer capacity, thus supporting sustainable growth and limiting the risk of a supply glut.
Guidance for the first quarter of FY27 was softer than expected, with projected revenue of $10.55 billion and adjusted EPS of $45.00, both below market consensus. Although gross margin guidance exceeds expectations, it marks a slight decline from the previous quarter. Whereas earlier the company had targeted mid-to-high teens supply growth, it now expects FY27 Sellable Bit Growth to be just mid-teens, with higher inventory levels held to fulfill long-term NBM contracts and only modest price increases, limiting near-term revenue upside.
Product mix, component costs, and prudent assumptions are expected to press on gross margins, though the upper end of guidance remains robust at 85%, still above last quarter’s actual 84.6%, signaling no structural weakness. Management reiterated that the NBM model is not depressing margins, as demand continues to grow faster than supply, and NAND will remain allocated through at least 2027.
Nevertheless, Yuanta remains positive on the memory sector, viewing SanDisk’s cautious guidance as an execution risk rather than a signal of weakening demand. The constraint appears to be in Sellable Bits and delivery timing, not order volume, a scenario echoed by peers such as SK Hynix and Kioxia.
The sector thesis remains intact and may be shifting from a phase led by strong price growth to one driven by higher sales volumes. Prices and margins remain supported by a tight market, long-term contracts, and an improving product mix, particularly with a shift toward QLC products for Data Center and potential future HBF offerings.
Despite concerns that increased supply will eventually pressure prices and end the current upcycle, Yuanta sees a structural difference in this cycle. Memory and NAND now constitute critical infrastructure for AI data centers. Whereas producers previously had to invest without clear demand forecasts, customers are now willing to commit to multi-year volumes, more closely aligning supplier output with customer needs from the outset.
This shift means products are being co-developed and planned in partnership with customers. The brokerage therefore believes the sector offers continued growth potential as sales volumes pick up, while prices and margins remain buoyed by long-term agreements and a move to higher-value products.
