What drove the 233% sequential growth in enterprise SSD? What is the long-term potential for enterprise SSD as a percentage of the business?

Growth is due to a strong product portfolio (TLC, with QLC Stargate shipping next quarter), broadening qualifications, and strong market pull for high-performance enterprise SSDs. Enterprise SSD was 25% of the portfolio this quarter and is expected to keep rising, as the company can now mix into data center in ways not possible before. “It starts with the portfolio, right? I mean the portfolio is in great shape. Our TLC product -- this is almost exclusively our TLC product... And then there is a strong market pull. There's no doubt about it.”

How high can the contracted bit percentage go (e.g., above 50%)? Do you have a target margin range for these agreements?

Expects the contracted percentage to go up over the next several quarters, potentially above 50%. Management is not ready to disclose a target margin range but emphasized that NBMs target financials in line with current strong forecasts, reflecting the value of their technology and aiming to remove cyclicality. “I definitely think it can get above 50%... We're not necessarily interested in trading away that value for certainty. We're interested in getting that value and getting certainty as well.”

Thoughts on NAND supply/demand balance with limited greenfield and AI-driven growth? What cash balance is needed, and how should we think about buybacks?

The industry is always in balance; the question is at what price. Data center demand continues to accelerate (FY26 growth estimate raised to mid-70s%). Supply can increase through nodal transitions (BiCS roadmap), requiring less CapEx relative to revenue, making the franchise a strong cash generator. A $6 billion buyback was announced, and the company will continue to track cash flow. “The industry is always in balance, right? Markets always balance supply and demand... we can increase supply through nodal transitions... the amount of CapEx we need to invest, especially CapEx as a percent of revenue is continuing to go down substantially.”

SNDK

Sandisk (SNDK) Q3 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q3 FY26)· Information Technology· Apr 30, 2026

Source: earnings call transcript

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

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

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

Guidance & targets

Category	Target	Timeline	Confidence
Revenue	$7,750M to $8,250M high materiality	Q4 · FY26	High
Non-GAAP Gross Margin	79% and 81% high materiality	Q4 · FY26	High
Non-GAAP Operating Expenses	$480M and $500M medium materiality	Q4 · FY26	High
Non-GAAP Interest and Other Income	$10M and $30M low materiality	Q4 · FY26	High
Non-GAAP Tax Expenses	$775M and $875M medium materiality	Q4 · FY26	High
Non-GAAP EPS	$30 and $33 high materiality	Q4 · FY26	High
Share Buyback Program	$6B high materiality	Ongoing	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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.	$820M	strong year-over-year	down 10%	—

SNDK operating KPIs by quarter

SNDK operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Jun 2025 Q4 FY25	Sep 2025 Q1 FY26	Change vs prior quarter
Capital expenditures Back-end operations and offices	$45M This included $94 million from operations and $28 million cash received from our activities related to flash ventures, partially offset by $45 million invested in our back-end operations and offices. Source: earnings call transcript	$50M This included $488 million cash from operations and $10 million cash received from our activities related to Flash Ventures, partially offset by $50 million invested in our back-end operation and offices. Source: earnings call transcript	+11.1%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Minimum Contractual Revenue (from 3 NBMs) $42B Q3 FY26

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

Financial Guarantees (from 5 NBMs) exceed $11B Q3 FY26

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

Prepayments (from NBMs) $0.4B Q3 FY26 balance sheet

Included in Q3 balance sheet.

FY27 Bits under NBMs over 1/3 FY27

Expected to increase as additional agreements are concluded.

Product announcements

Product	Type	Timeline	Details
Next-generation portable SSD portfolio	launch	February
QLC Stargate solutions	launch	fiscal fourth quarter

Deals & partnerships

Customers (unnamed) supply partnership minimum 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.

Kioxia joint venture extension through December 2034

Extension of existing JV.

Nanya strategic investment and supply agreement approx. $1B long-term DRAM supply

Investment provides preferential treatment for access to DRAM.

Risks & headwinds

Market Cyclicality historical

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 Market ongoing

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 Market current, 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

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 read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.