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    SNDK
    Earnings call· Sep 2025(Q1 FY26)

    Sandisk Corp SNDK

    Nov 6, 2025 Source

    Executive summary

    Sandisk Q1 FY26 — Strong Revenue Growth and Margin Expansion Driven by AI Demand

    Sandisk delivered a robust first quarter, driven by strengthening demand for NAND products, particularly in the AI-fueled data center segment. The company achieved significant revenue growth and margin expansion, reaching a net cash position ahead of schedule. Management is strategically allocating supply amidst demand outpacing production, focusing on long-term customer partnerships and the ramp of its BiCS8 technology.

    Highlights

    5

    • Revenue of $2.3 billion, up 21% sequentially and 23% year-over-year, exceeding guidance of $2.1 billion to $2.2 billion.

    • Non-GAAP EPS of $1.22, significantly above guidance of $0.70 to $0.90.

    • Adjusted free cash flow of $448 million, representing a 19.4% free cash flow margin.

    • Achieved a net cash position of $91 million approximately 6 months faster than targeted.

    • Data center business revenue up 26% sequentially, with strong demand for AI-driven SSDs.

    Concerns

    1

    • Non-GAAP operating expenses of $446 million were higher than guidance of $415 million to $430 million, primarily due to higher variable compensation.

    Guidance & targets

    11
    CategoryTargetConfidence
    Revenue
    $2,550 million - $2,650 million
    high materiality
    High
    Non-GAAP Gross Margin
    41% - 43%
    high materiality
    High
    Non-GAAP Operating Expenses
    $450 million - $475 million
    medium materiality
    High
    Non-GAAP Interest and Other Expense
    $40 million - $45 million
    low materiality
    High
    Non-GAAP Tax Expenses
    $80 million - $90 million
    low materiality
    High
    Non-GAAP EPS
    $3.00 - $3.40
    high materiality
    High
    Fully Diluted Shares
    155 million
    low materiality
    High
    Free Cash Flow
    Positive
    medium materiality
    High
    FY26 CapEx Plans
    Unchanged
    medium materiality
    High
    NAND Demand vs Supply
    Demand to exceed supply
    high materiality
    High
    BiCS8 Production
    Majority of bit production
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Edge
    Revenue up sequentially, benefiting from PC refresh cycle and increasing NAND content in mobile devices.
    		$1,387 million—26%—
    Consumer
    Revenue up sequentially, driven by refreshed portfolio and strong partnerships, including gaming sector expansion.
    Nintendo Switch 2 microSD Express Card units sold: 900,000+
    		$652 million—11%—
    Data Center
    Revenue up sequentially, gaining momentum from global hyperscaler, neocloud, and OEM customers seeking deeper partnerships for storage-focused SSDs (Stargate).
    Hyperscaler qualifications underway: 2Planned hyperscaler/OEM qualifications CY26: 2Major hyperscale customers with active engagements: 5
    		$269 million—26%—

    Operational metrics

    34
    Non-GAAP gross margin
    29.9%up 350 bps QoQ
    Q1 FY26

    Exceeded guidance of 28.5% to 29.5% due to incremental revenue.

    Non-GAAP gross margin (excluding start-up costs and underutilization)
    33.1%
    Q1 FY26

    Adjusted for specific costs incurred in the quarter.

    Non-GAAP operating expenses
    $446 millionhigher than guidance
    Q1 FY26

    Above guidance of $415 million to $430 million, mainly due to higher variable compensation from revenue over-delivery.

    Non-GAAP operating margin
    10.6%up 530 bps QoQ
    Q1 FY26

    Reflects improved profitability.

    Non-GAAP EPS
    $1.22up from $0.29 prior quarter
    Q1 FY26

    Exceeded guidance of $0.70 to $0.90 due to higher revenue, gross margins, and favorable tax rate.

    Stock-based compensation (net of taxes)
    $47 million
    Q1 FY26

    Key GAAP to non-GAAP reconciliation item.

    Separation charges
    $9 million
    Q1 FY26

    Key GAAP to non-GAAP reconciliation item.

    Onetime costs related to SSDs transaction and separation from Western Digital
    $17 million
    Q1 FY26

    Key GAAP to non-GAAP reconciliation item.

    Cash and cash equivalents balance
    $1,442 million
    Q1 FY26

    Balance at quarter end.

    Gross debt
    $1,351 million
    Q1 FY26

    Balance at quarter end.

    Net cash position
    $91 millionachieved 6 months faster than target
    Q1 FY26

    Achieved ahead of schedule due to strong cash focus and robust market.

    Inventory days
    115down from 135
    Q1 FY26

    Reduced as demand exceeded supply.

    Free cash flow margin
    19.4%
    Q1 FY26

    Represents the margin on adjusted free cash flow.

    Cash received from Flash Ventures activities
    $10 million
    Q1 FY26

    Component of free cash flow.

    Gross capital expenditures
    $387 million
    Q1 FY26

    Total CapEx, including funding sources.

    CapEx as % of revenue
    16.8%
    Q1 FY26

    Ratio of gross capital expenditures to revenue.

    Bits shipped
    mid-teenssequentially
    Q1 FY26

    Sequential growth in bits shipped.

    Pricing
    mid-single digitssequentially
    Q1 FY26

    Sequential increase in pricing.

    PC unit shipments growth
    low single digits
    CY25 and CY26

    Expected growth in PC unit shipments.

    PC capacity per device growth
    mid-single-digit
    CY25 and CY26

    Expected growth in NAND capacity per PC device.

    Smartphone unit growth
    modest
    CY25 and CY26

    Expected growth in premium smartphone unit shipments.

    Smartphone capacity per device growth
    high single digits
    CY25 and CY26

    Expected growth in NAND capacity per smartphone device.

    BiCS8 % of total bits shipped
    15%
    Q1 FY26

    Represents the contribution of BiCS8 technology to total bit production.

    Nintendo Switch 2 microSD Express Card units sold
    900,000+
    Q1 FY26

    Successful adoption of co-branded product.

    Data center exabyte demand growth
    mid-40%upped from mid-20%
    CY26

    Revised upward estimate for exabyte demand growth in the data center market.

    Supply growth
    8%
    CY25

    Estimated supply growth for the calendar year.

    Supply growth
    17%
    CY26

    Estimated supply growth for the calendar year.

    Demand growth (constrained)
    14%
    CY26

    Estimated constrained demand growth for the calendar year, limited by supply.

    Demand growth (unconstrained)
    mid-20sup from 20%
    CY26

    Estimated unconstrained demand growth for the calendar year, indicating strong underlying demand.

    QLC % of business
    20% to 40%
    FY26

    Expected increase in QLC product contribution to the business.

    Fab utilization
    100%
    Q1 FY26

    Fabs are running at full capacity.

    Start-up costs
    $30 milliondown from $61 million
    Q2 FY26

    Expected start-up costs for Q2 FY26, trending towards zero thereafter.

    Start-up costs
    0
    Q3 FY26 and beyond

    Expected start-up costs to be eliminated from Q3 FY26 onwards.

    Data center exabyte demand
    high 300s
    CY26

    Projected exabyte demand for the data center market in CY26.

    Industry KPIs

    9
    MetricValueDetails
    Capital return FCF$448 millionUSD
    Unit shipments ASPmid-teens%
    Gross margin drivers29.9%%
    Services peripheral attach900,000+units
    Long term supply agreementscustomers seeking
    Component supply constraintsdemand to outpace supply
    Installed base refresh runwaylow single digits%
    Capacity roadmap qualification128T drives
    Revenue mix by end market segmentData Center: $269M; Edge: $1,387M; Consumer: $652MUSD

    Orderbook & backlog

    2
    NAND productson allocationQ1 FY26

    Products are currently on allocation across all end markets due to demand exceeding supply.

    Long-term commitmentscustomers seekingQ1 FY26

    Customers are proactively seeking multi-quarter and multi-year commitments for supply, especially for data center products, providing visibility through CY27.

    Product announcements

    5
    ProductTypeDetails
    Stargate SSD product linemilestone
    BiCS8 technologymilestone
    Nintendo Switch 2 microSD Express Cardmilestone
    Sandisk microSD for ROG Xbox Allylaunch
    High-Bandwidth Flash (HBF) technologyroadmap

    Deals & partnerships

    3
    SK hynixTechnical advisory board and ecosystem partnership

    Partnership to advance High-Bandwidth Flash (HBF) technology for AI inference applications.

    NintendoCo-branded microSD Express Card for Switch 2

    Strong partnership with solid adoption of co-branded product.

    ROG Xbox AllyNew Sandisk microSD for handheld gaming

    Expanding presence in the handheld gaming sector.

    Capital programs

    1
    BiCS8 transitionunderway

    Capital investments are being made to enable the BiCS8 transition, which is expected to be the most significant node by the end of the fiscal year.

    Risks & headwinds

    1
    Seasonality in consumer businessQ3 FY26

    Historically, bits are down 12%-14% sequentially in Q3

    Mitigation: Mix shift towards stronger data center business may partially offset, but caution advised for modeling.

    What to watch in Q2 FY26

    5

    BiCS8 production ramp

    exiting FY26
    Current15% of total bits shipped
    TargetMajority of bit production

    Why it matters

    BiCS8 is key to capacity, performance, and energy efficiency, driving data center growth and overall profitability.

    BiCS8, which delivers industry-leading capacity, I/O performance and energy efficiency, accounted for 15% of total bits shipped and is expected to reach majority of bit production exiting fiscal year '26.

    Q&A highlights

    6

    How are customer engagements evolving with supply allocation, particularly regarding long-term agreements and visibility? How are bits being allocated?

    Customers are seeking multi-quarter deals for supply certainty and providing visibility through CY27 for long-term planning. Allocation prioritizes strategic customers with growth potential, shifting towards data center. This is a welcome development for long-term CapEx decisions.

    “I would say there's kind of 2 phases of how we're hearing from customers and what they're reaching out about. There's a phase where we're striking deals that are multi-quarters, let's say, through the first half of next calendar year that are volume and price kind of deals where customers are looking for certainty of supply.”

    asked by Christopher Muse · answered by David V. Goeckeler

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q1 Performance and Market Dynamics

    Sandisk reported a strong first quarter for fiscal year 2026, with revenue significantly exceeding guidance and non-GAAP EPS more than doubling from the prior quarter. This performance was driven by strengthening demand for NAND products across all end markets, with demand outpacing supply. The company expects this dynamic to continue through calendar year 2026 and potentially beyond, leading to strategic allocation decisions.

    02

    AI Tailwinds and Data Center Momentum

    The company is experiencing a strong tailwind from investments in data centers and AI infrastructure, which are projected to surpass $1 trillion by 2030. This is driving demand for high-capacity, power-efficient SSDs, particularly those enabled by Sandisk's BiCS8 technology. The data center business saw a 26% sequential revenue increase, with qualifications underway for its Stargate SSD product line with hyperscalers and a major storage OEM.

    03

    BiCS8 Technology and Product Portfolio

    BiCS8 technology, which offers industry-leading capacity, I/O performance, and energy efficiency, constituted 15% of total bits shipped in Q1 FY26 and is expected to become the majority of bit production by the end of the fiscal year. This technology is crucial for growing the data center business and strengthening positions in edge and consumer markets. The company is also developing High-Bandwidth Flash (HBF) technology for AI inference applications, actively engaging potential customers.

    04

    Edge and Consumer Market Performance

    The edge business is benefiting from a PC refresh cycle and modest unit growth in premium smartphones, both supported by increasing NAND content per device. Consumer revenue also grew 11% sequentially, driven by a refreshed portfolio and strong partnerships, including the successful Nintendo Switch 2 microSD Express Card which sold over 900,000 units. The company is expanding its presence in handheld gaming with new products like the Sandisk microSD for ROG Xbox Ally.

    05

    Capital Allocation and Financial Strength

    Sandisk achieved a net cash position of $91 million, approximately six months ahead of its Investor Day target, driven by strong cash generation. The company repaid an additional $500 million of its TLB and reduced inventory days from 135 to 115. Capital allocation priorities remain consistent: investing in the business, particularly for the BiCS8 transition, and returning cash to shareholders. Gross capital expenditures totaled $387 million, representing 16.8% of revenue.

    06

    Customer Engagement and Long-Term Agreements

    Customers are proactively seeking long-term commitments for supply, with some discussions extending through calendar year 2027. This marks a shift from traditional quarter-by-quarter engagements, especially from large hyperscale customers. Sandisk is prioritizing strategic customers and those with growth potential in its allocation decisions, aiming to align its long-term CapEx decisions with these emerging demand trends.

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