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    SNDK
    Earnings call· Dec 2025(Q2 FY26)

    Sandisk Corp SNDK

    Jan 29, 2026 Source

    Executive summary

    Sandisk Q2 FY26 — Strong Revenue Beat Driven by AI Demand and Pricing

    Sandisk delivered a strong Q2 FY26, significantly exceeding revenue and EPS guidance, primarily driven by accelerating AI-fueled demand in data centers and improved pricing across all segments. The company is actively pursuing multi-year agreements with customers to ensure supply certainty and better align planning cycles, aiming for structurally higher margins in the evolving NAND market. The Yokkaichi JV extension secures long-term supply, while new product innovations continue to drive portfolio strength.

    Highlights

    5

    • Revenue was $3 billion, up 31% sequentially and 61% year-over-year, significantly exceeding guidance of $2.55 billion to $2.65 billion.

    • Non-GAAP EPS was $6.20, up from $1.22 in the prior quarter, beating guidance of $3 to $3.40.

    • Non-GAAP gross margin was 51.1%, up from 29.9% in the prior quarter, exceeding guidance of 41% to 43%.

    • Data Center revenue increased 64% sequentially to $440 million, driven by accelerating enterprise SSD demand for AI workloads.

    • Generated $843 million in adjusted free cash flow, representing a 27.9% free cash flow margin.

    Concerns

    2

    • The company was unable to fulfill all customer demand this quarter due to supply constraints, indicating an undersupplied market.

    • Non-GAAP operating expenses included a nonrecurring benefit of approximately $35 million from a change in how new product introductions are managed.

    Guidance & targets

    9
    CategoryTargetConfidence
    Revenue
    $4.4 billion to $4.8 billion
    high materiality
    High
    Non-GAAP Gross Margin
    65% to 67%
    high materiality
    High
    Non-GAAP Operating Expenses
    $450 million to $470 million
    medium materiality
    High
    Non-GAAP Interest and Other Expenses
    $25 million to $30 million
    low materiality
    High
    Non-GAAP Tax Expenses
    $325 million to $375 million
    medium materiality
    High
    Non-GAAP EPS
    $12 to $14
    high materiality
    High
    Bit Growth
    mid- to high teens
    high materiality
    High
    Market Supply-Demand
    more undersupplied
    high materiality
    High
    Bit Growth
    down mid-single digits
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Company-wide
    Revenue significantly exceeded guidance of $2.55 billion to $2.65 billion due to higher pricing across segments.
    		$3,025 million61%31%—
    Edge
    Demand meaningfully exceeded supply, driven by replacement cycles and AI adoption across PCs and mobile devices.
    		$1,678 million—21%—
    Consumer
    Mix shifted toward premium products and higher value configurations, supporting storage content growth and profitability. Strong momentum through holidays driven by gaming-led initiatives.
    		$907 million50%39%—
    Data Center
    Enterprise SSD demand is accelerating as AI workloads drive meaningful increases in NAND content per deployment. Strong adoption across hyperscalers, edge, and enterprise data centers.
    		$440 million—64%—

    Operational metrics

    21
    Non-GAAP gross margin
    51.1%up from 29.9% in prior quarter
    Q2 FY26

    Exceeded guidance of 41% to 43% due to higher pricing. Excluding $24 million in start-up costs, non-GAAP gross margin would have been 51.9%.

    Non-GAAP operating expenses
    $413 millionvs guidance $450 million to $475 million
    Q2 FY26

    Reflects a nonrecurring benefit from changing how new product introductions are managed, specifically charging for qualification units (approx. $35M benefit).

    Non-GAAP operating margin
    37.5%up from 10.6% in prior quarter
    Q2 FY26

    Driven by higher revenue and lower costs.

    Non-GAAP EPS
    $6.20up from $1.22 in prior quarter
    Q2 FY26

    Exceeded guidance range of $3 to $3.40. Reflects higher-than-expected revenue and lower costs.

    Stock-based compensation (net of taxes)
    $52 million
    Q2 FY26

    Key GAAP to non-GAAP reconciliation item.

    Legal matters related expenses
    $93 million
    Q2 FY26

    Key GAAP to non-GAAP reconciliation item.

    Cash and investments balance
    $1,539 million
    Q2 FY26

    Cash and cash equivalents at quarter end.

    Debt
    $603 million
    Q2 FY26

    Total debt at quarter end.

    Debt paid
    $150 million
    Q2 FY26

    Additional debt paid during the quarter.

    Net cash position
    $936 million
    Q2 FY26

    Calculated as cash and cash equivalents minus debt.

    Free Cash Flow Margin
    27.9%
    Q2 FY26

    Calculated from adjusted free cash flow.

    Net cash capital spending
    $176 million
    Q2 FY26

    Partially offset operating cash flow.

    Gross capital spending
    $255 million
    Q2 FY26

    Total capital spending for the quarter.

    Start-up costs
    $24 million
    Q2 FY26

    Incurred in Q2 FY26, excluded from non-GAAP gross margin calculation.

    Nonrecurring OpEx benefit
    $35 million
    Q2 FY26

    From changing how new product introductions are managed, specifically moving to charging for qualification units.

    Bit growth
    low single digitsQoQ
    Q2 FY26

    Sequential bit growth.

    Bit growth
    22%YoY
    Q2 FY26

    Year-over-year bit growth.

    Data center exabyte growth
    high 60%
    2026

    Forecasted exabyte growth for 2026, primarily driven by AI, not including any CapEx raises on this earnings cycle.

    NAND demand from key-value cache
    75-100 exabytes
    2027

    Additional demand from new configurations like NVIDIA's key-value cache, not yet included in current demand numbers.

    R&D as % of OpEx
    75%
    Q2 FY26

    Approximately 75% of operating expenses are allocated to R&D.

    Tax rate
    14%-15%
    ongoing

    Expected ongoing tax rate to model for now, following consumption of prior year losses.

    Industry KPIs

    8
    MetricValueDetails
    Capital return FCF$843 millionUSD
    Unit shipments ASP285 million unitsunits
    Gross margin drivers51.1%%
    Exabyte bit shipmentslow single digits%
    Long term supply agreements1agreement
    Component supply constraintsdemand meaningfully exceeded supply
    Capacity roadmap qualification—
    Revenue mix by end market segmentEdge: $1,678 million; Consumer: $907 million; Data Center: $440 millionUSD

    Product announcements

    2
    ProductTypeDetails
    Sandisk Extreme fitlaunch
    Sandisk Optimus lineupupdate

    Deals & partnerships

    3
    KioxiaExtension of Yokkaichi joint venture agreement.$1,165 millionthrough December 31, 2034

    Agreement to extend the Yokkaichi joint venture, aligning its expiration date with the Kitakami JV. This ensures long-term supply assurance and continued design and manufacture of NAND technology.

    CrayolaExpanded key licensing initiatives for co-branded products.

    Brought full circle commitments for Sandisk Crayola USB-C flash drives.

    FIFAExpanded key licensing initiatives for co-branded products.

    Officially licensed FIFA World Cup 2026 products.

    Capital programs

    1
    Yokkaichi Joint Venture Extensionextended

    Benefit: Continued availability of product supply; design and manufacture of highest-performing, lowest-cost NAND technology.

    Agreement with Kioxia to extend the Yokkaichi joint venture through December 31, 2034, aligning its expiration date with the Kitakami JV. Sandisk agreed to pay $1,165 million for manufacturing services from Kioxia, to be paid between calendar years 2026 and 2029. The cost will flow through cost of goods sold over the next 9 years.

    Risks & headwinds

    3
    Inability to fulfill customer demandQ2 FY26 and Q3 FY26

    Unable to fulfill demand for our customers this quarter; market expected to be more undersupplied in Q3 FY26.

    Mitigation: Strategic allocation decisions, prioritizing strategic customers with multiyear supply frameworks and shared planning commitments.

    Traditional cyclicality of NAND marketlong term

    Beyond the traditional cyclical model of our market.

    Mitigation: Evolving commercial relationships towards multiyear agreements with firmer commitments on supply and pricing, aiming for structurally higher average returns and better planning practices.

    Lack of long-term demand visibilitybeyond next quarter

    We just don't have visibility to the economics of it.

    Mitigation: Engaging in discussions for long-term agreements (LTAs) to gain confidence in sustained demand and justify substantial R&D and capital investments.

    What to watch in Q3 FY26

    5

    Progress on multiyear agreements (LTAs)

    next couple of quarters
    Current1 agreement signed and closed, several in queue
    TargetMore agreements signed, details on terms (prepayment, pricing)

    Why it matters

    LTAs are key to reducing cyclicality, ensuring supply certainty, and achieving higher average returns in the NAND market.

    Now we'll see💬 how quickly. I mean do we actually get to the point where we're announcing contracts. We're not quite there yet. We've got some that are coming along.

    Q&A highlights

    7

    How is Sandisk thinking about LTAs given rapidly rising prices, and what is the flexibility to add supply in the long term?

    David Goeckeler explained that LTAs are crucial for supply assurance and better planning, especially as data center demand grows. Luis Visoso added that they are being thoughtful about LTA terms (length, price, quantity, prepayment) to ensure value accretion. They reiterated supply plans for mid-to-high teens bit growth, not planning to add more supply beyond current plans.

    “So as we reach points where we believe we're getting a more fair return for our technology, and customers, quite frankly, are looking for more supply assurance.”

    asked by Mark Newman · answered by David V. Goeckeler

    2 min read6 chapters

    Detailed Narrative

    01

    NAND Industry Structural Evolution

    The NAND industry is undergoing a significant structural evolution, primarily catalyzed by artificial intelligence. This shift is leading to a foundational change in commercial relationships, moving away from traditional cyclical models towards multiyear agreements with firmer commitments on supply and pricing. This evolution is expected to reduce cyclicality, enable better planning, and result in higher average returns for the NAND market.

    02

    Accelerating Data Center Demand for AI

    Demand in the data center segment is accelerating rapidly, driven by AI workloads, particularly inference, which requires a meaningful increase in NAND content per deployment. Sandisk is seeing strong adoption across cloud hyperscalers, edge, enterprise data centers, OEMs, and system integrators. Data center revenue grew 64% sequentially, and the company expects this segment to become the largest market for NAND in 2026.

    03

    Product Innovation and Portfolio Optimization

    Sandisk's BICS8 node is ramping successfully, with PCle Gen5 high-performance TLC drives qualified at a second hyperscaler and BICS8 QLC solutions, code-named Stargate, advancing through qualification. This strong product portfolio, combined with disciplined commercial actions, allows the company to optimize its product mix towards higher-margin businesses, significantly contributing to improved financial performance.

    04

    Strategic Supply Allocation and Customer Partnerships

    With demand exceeding supply, Sandisk is strategically allocating its products to maximize value creation. The company prioritizes strategic customers who value the relationship and are willing to engage in multiyear supply frameworks and share planning commitments. This approach aims to establish sustainable business practices with high predictability of demand, returns, and capital deployment, moving away from transactional short-term demand signals.

    05

    Yokkaichi Joint Venture Extension

    Sandisk announced the extension of its Yokkaichi joint venture with Kioxia through December 31, 2034, aligning its expiration date with the Kitakami JV. This extension, building on a 25-year partnership, ensures long-term supply assurance and continued collaboration in designing and manufacturing high-performing, low-cost NAND technology. Sandisk will pay Kioxia $1.165 billion for manufacturing services between calendar years 2026 and 2029.

    06

    Future AI-Driven NAND Demand

    The company is closely monitoring emerging AI architectures, such as NVIDIA's key-value cache, which could generate significant additional NAND demand. Initial estimates suggest 75-100 additional exabytes of demand in 2027 from such configurations, potentially doubling in 2028. This substantial, new demand is not yet factored into current forecasts, underscoring NAND's increasingly critical role in AI infrastructure.

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