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Sandisk (SNDK) is sharply lower despite another strong quarter that reinforces the powerful tailwinds across NAND. Adjusted EPS of $39.25 was again well above expectations, while revenue surged 51% sequentially and 371.6% yr/yr to $8.97 bln, also comfortably above expectations. However, SNDK's Q1 adjusted EPS guidance of $44-46 was only in line with expectations, while revenue guidance of $10.3-10.8 bln was slightly below, likely disappointing investors positioned for another sizable upside guide.

• Datacenter: Revenue more than doubled sequentially to $2.98 bln, with Datacenter increasing from roughly 12% of SNDK's bit portfolio a year ago to 38% exiting FY26. Edge revenue rose 48% to $5.43 bln. Companywide growth was driven roughly one-third by higher bits and two-thirds by pricing, while rising storage content supports longer-term Edge demand.
• Drivers: The "Era of Inference" is making AI increasingly storage-intensive, as every interaction creates data that must be stored, retrieved, and served at low latency. This is increasing demand for NAND-based storage, including SNDK's high-capacity enterprise SSDs, with demand anchored by long-term infrastructure investments.
• Margins: Non-GAAP gross margin expanded 620 bps sequentially and 5,820 bps yr/yr to 84.6%, exceeding guidance as strong pricing continued to flow through. Q1 gross margin guidance of 83-85% implies little sequential change at the midpoint.
• NBMs: Since April, SNDK has signed five additional agreements, including three NBMs with new customers and two expansions of existing agreements. They are expected to cover more than 50% of FY27 bits and approximately two-thirds in FY28. SNDK expects margins around 80%, with pricing floors protecting profitability while variable components provide some upside from further price increases.
• Outlook: SNDK expects the NAND market to continue growing at an accelerated pace, with industry revenue exceeding $300 bln in CY26, roughly tripling yr/yr, and approaching $500 bln in CY27. Datacenter is expected to represent roughly 50% of total NAND TAM in CY26, up from approximately 30% in CY25, and continue outgrowing the broader market in CY27. Demand continues to outpace supply, with bits expected to remain on allocation beyond CY27.

Briefing.com Analyst Insight

While the guidance is weighing on SNDK shares today, this was a strong report overall that continues to reinforce NAND as a major beneficiary of rising AI data requirements. The Q1 outlook still implies approximately 15% sequential EPS growth and 18% revenue growth at the midpoint, suggesting today's weakness is more about elevated expectations than any deterioration in demand. SNDK's NBMs are also creating a more durable earnings profile, with more than four years of average visibility, margins around 80%, and pricing structures that provide downside protection while retaining some upside. Including agreements signed after quarter-end, SNDK says RPO stands at $91.1 bln, while some customers have already returned for additional supply only months after signing. Although the outlook fell short of the high bar embedded in shares, SNDK appears to be building a structurally stronger business, supported by robust demand, a rapidly expanding NAND TAM, and supply constraints expected to persist beyond CY27.