Skip to content
    SNDK
    Earnings call· Mar 2026(Q3 FY26)

    Sandisk Q3 FY26 earnings call SNDK

    Apr 30, 2026 Source

    Executive summary

    Sandisk Q3 FY26 — Strong Performance Driven by New Business Models and Data Center Growth

    Sandisk delivered a strong quarter, driven by robust data center demand and the successful implementation of new multiyear supply partnerships. These agreements, backed by substantial financial guarantees, aim to fundamentally reshape the business by improving predictability, securing long-term demand, and sustaining higher margins. The company is also initiating a $6 billion share buyback program, reflecting confidence in its financial strength and future cash flow generation.

    Highlights

    5

    • Revenue for Q3 FY26 was $5,950 million, up 97% sequentially and 251% year-over-year, exceeding guidance of $4,400M-$4,800M.

    • Non-GAAP gross margin reached 78.4%, significantly up from 51.1% in the prior quarter and above guidance of 65%-67%.

    • Non-GAAP EPS was $23.41, up from $6.20 sequentially, exceeding guidance of $12-$14.

    • Signed 5 multiyear supply partnerships (New Business Models) with over $11 billion in financial guarantees and over $42 billion in minimum contractual revenue from the first 3 agreements.

    • Data center revenue grew 233% sequentially to $1,467 million, becoming the fastest-growing end market.

    Concerns

    1

    • Bit shipments were flat year-over-year and down high teens sequentially, as inventory was built for Q4 demand and NBMs.

    Guidance & targets

    7
    CategoryTargetConfidence
    Revenue
    $7,750M to $8,250M
    high materiality
    High
    Non-GAAP Gross Margin
    79% and 81%
    high materiality
    High
    Non-GAAP Operating Expenses
    $480M and $500M
    medium materiality
    High
    Non-GAAP Interest and Other Income
    $10M and $30M
    low materiality
    High
    Non-GAAP Tax Expenses
    $775M and $875M
    medium materiality
    High
    Non-GAAP EPS
    $30 and $33
    high materiality
    High
    Share Buyback Program
    $6B
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Data Center
    Fastest-growing end market, driven by AI infrastructure demand. Primarily TLC-based enterprise SSDs, QLC Stargate solutions expected to ship for revenue in Q4.
    25% of portfolio this quarter
    		$1,467M—233% sequential—
    Edge
    Continued shift towards premium devices across both PC and smartphone markets, driving higher storage requirements and greater demand for high-performance solutions. Mix continues to shift to high-value configurations.
    		$3,663M—118% sequential—
    Consumer
    Strong year-over-year revenue growth across all key storage categories and regions, despite evolving consumer industry dynamics. Performance supported by strong brand recognition and channel presence, focusing on financially attractive demand.
    		$820Mstrong year-over-yeardown 10%—

    Operational metrics

    13
    Bit Shipments
    flatYoY
    Q3 FY26

    Down high teens sequentially as inventory was built for Q4 Stargate demand and NBMs.

    Bit Shipments Growth
    18%
    FY26 YTD

    In line with mid- to high-teens growth model.

    Non-GAAP Operating Expenses
    $448M7.5% of revenue vs 13.7% prior quarter
    Q3 FY26

    Generated additional leverage, favorable to guidance range of $450M-$470M.

    Non-GAAP Operating Margin
    70.9%up from 37.5% prior quarter
    Q3 FY26
    Net Cash Capital Spending
    $83M
    Q3 FY26

    Partially offset cash flow from operations.

    Gross Capital Expenditures
    $240M
    Q3 FY26
    Cash and Cash Equivalents
    $3,735M
    Q3 FY26 end
    Stock-Based Compensation (net of taxes)
    $20M
    Q3 FY26

    Key GAAP to non-GAAP reconciliation item.

    Write-off of Unamortized Issuance Fees
    $46M
    Q3 FY26

    Related to repayment of remaining $650M TLB balance.

    Fully Diluted Shares (forecast)
    158M
    Q4 FY26

    Used for non-GAAP EPS forecast.

    Capital Allocation Priority
    net cash position achieved
    Q3 FY26

    Achieved by paying off remaining TLB balance.

    JV with Kioxia Extension
    extended
    through December 2034

    Solidified supply chain.

    Investment in Nanya
    $1B
    last month

    To secure long-term DRAM supply.

    Industry KPIs

    9
    MetricValueDetails
    Capital return FCF$6BUSD
    Unit shipments ASP—
    Gross margin drivers78.4% (non-GAAP)%
    Long term supply agreements5 signedagreements
    Component supply constraints—
    Installed base refresh runway—
    Capacity roadmap qualification—
    Ai server orders revenue backlog—
    Revenue mix by end market segment—

    Orderbook & backlog

    4
    Minimum Contractual Revenue (from 3 NBMs)$42BQ3 FY26

    From 3 contracts signed during the quarter, will be updated as more agreements are concluded.

    Financial Guarantees (from 5 NBMs)exceed $11BQ3 FY26

    Includes prepayments and other financial instruments managed by third-party financial institutions.

    Prepayments (from NBMs)$0.4BQ3 FY26 balance sheet

    Included in Q3 balance sheet.

    FY27 Bits under NBMsover 1/3FY27

    Expected to increase as additional agreements are concluded.

    Product announcements

    2
    ProductTypeDetails
    Next-generation portable SSD portfoliolaunch
    QLC Stargate solutionslaunch

    Deals & partnerships

    3
    Customers (unnamed)supply partnershipminimum contractual revenue of approx. $42B (from 3 contracts); financial guarantees exceed $11B (from 5 contracts)up to 5 years (longest contract)

    5 agreements signed so far, with 3 signed in Q3 and 2 in Q4. These agreements account for over 1/3 of FY27 bits. Include quarterly commitments with a combination of fixed and variable pricing. Secured with financial guarantees, including $0.4B in prepayments on Q3 balance sheet.

    Kioxiajoint venture extensionthrough December 2034

    Extension of existing JV.

    Nanyastrategic investment and supply agreementapprox. $1Blong-term DRAM supply

    Investment provides preferential treatment for access to DRAM.

    Risks & headwinds

    3
    Market Cyclicalityhistorical

    Corrosive to CapEx investment and customer product availability

    Mitigation: New Business Models (NBMs) with financial guarantees and multiyear commitments aim to remove cyclicality and provide consistent consumption.

    Forecasting Difficulty in Dynamic Marketongoing

    Market moving very, very rapidly, pieces change literally day by day

    Mitigation: Staying very close to customers, understanding their infrastructure build-out and demand signals, which drives NBMs.

    Unit Decline in Edge Marketcurrent, expected to bounce back in '27

    Some contraction in the market just because of unit decline

    Mitigation: Engaging with Edge customers for NBMs to secure demand, focusing on content per device increase.

    Q&A highlights

    6

    Is Q4 EPS guidance conservative due to NBMs? How fixed is pricing for FY27 bits under NBMs?

    Management stated the market is dynamic and guidance is conservative. NBMs have tailored fixed and variable pricing; shorter-term pricing is mostly fixed, longer-term has more variable components to capture upside/downside. Agreements target financials in line with Q4 guidance.

    “The shorter time you are in within the contract, the more fixed it is, the longer out you go out, there would be more components of variable. So you could assume that most of the pricing that we're seeing in the very short term is mostly fixed.”

    asked by Mark Newman · answered by Luis Visoso

    2 min read5 chapters

    Detailed Narrative

    01

    New Business Models (NBMs) Progress

    Sandisk has successfully advanced its New Business Models initiative, signing 5 multiyear supply partnerships to date. These agreements are designed to provide demand certainty for Sandisk and supply assurance for customers, backed by firm financial guarantees exceeding $11 billion. The first three contracts alone provide minimum contractual revenue of approximately $42 billion, with the longest contract extending to 5 years. These NBMs are expected to reshape the historical cyclicality of the business.

    02

    Data Center Market Acceleration

    The data center segment is experiencing extraordinary growth, with revenue up 233% sequentially. This growth is driven by the increasing importance of NAND flash in AI infrastructure, particularly for inference optimizations like KV cache and RAG workloads, which require high-performance, low-latency flash. Sandisk's TLC-based enterprise SSD portfolio is currently powering this demand, with QLC Stargate solutions expected to contribute revenue in Q4 FY26, further broadening the AI-focused product offering.

    03

    Strategic Portfolio Shift

    Sandisk is deliberately architecting its product portfolio to meet evolving customer needs, shifting towards higher-value opportunities and away from legacy models. This includes a focus on premium devices in Edge markets (PC and smartphone) and strong brand recognition in Consumer, supported by new product launches like the next-generation portable SSD portfolio. The company aims to optimize its end market mix for long-term economics and maximize value creation across all three end markets.

    04

    Financial Strength and Capital Allocation

    The company achieved a net cash position by paying off its remaining TLB balance. This financial strength, combined with strong free cash flow generation ($2,955 million in Q3), has enabled the Board to authorize a $6 billion share buyback program. Sandisk also solidified its supply chain through an extended JV with Kioxia (through Dec 2034) and a $1 billion investment in Nanya to secure long-term DRAM supply, reinforcing operational foundation.

    05

    Sustainable Margins and Reduced Cyclicality

    Management believes the new business models and strategic shifts will lead to sustainable gross margins, free cash flow generation, and earnings power. The goal is to reshape the historical cyclicality of the business, improving visibility and securing pricing and margins that reflect the value of Sandisk's technology and investments. This approach is expected to deliver higher, more consistent, and durable returns for shareholders, moving the business to a very different spot.

    AI-generated summary of the company’s earnings call. Not investment advice.