$SNDK (-10.82%)
A massive beat, 61% quarter-over-quarter growth in the data center segment, and an 85% gross margin are still not enough after the extreme rally
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The key takeaway: The quarter itself was exceptionally strong. The sell-off centers on how long this cycle will last. Six analysts lowered their price targets but remain largely bullish. The key question now is how long NAND prices, margins, and earnings can remain at these extreme levels.
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Average price target based on the 8 available targets: ~$2,303
Upside potential from the current price of $1,210.16: ~90%
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Current analyst estimates:
• Susquehanna: $2,720 from $2,745 (+125%)
• Melius Research: $2,600 from $3,600 (+115%)
• Evercore ISI: $2,500 from $2,800 (+107%)
• Rosenblatt: Buy, $2,400 (unchanged) (+98%)
• Barclays: Buy, $2,300 (unchanged) (+90%)
• Goldman Sachs: Buy, $2,000 from $2,200 (+65%)
• BofA: Buy, $2,000 from $2,500 (+65%)
• Mizuho: Outperform, $1,900 from $2,050 (+57%)
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What was truly exceptional this quarter:
• Revenue of $11.0 billion, up 23% quarter-over-quarter and nearly 5 times higher than a year ago
• Adjusted EPS of $49.51, above the consensus estimate of around $47
• Data center revenue jumped 61% quarter-over-quarter to $4.8 billion
• Non-GAAP gross margin reached 85.1%
• Adjusted free cash flow of $5.7 billion
• SanDisk repurchased $5 billion in its own shares during the quarter
• Q2 EPS guidance of $55–$57 remains above expectations
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The real story is the data center: Nearly 45% of revenue now comes from the data center business. The hyperscalers’ AI investments are thus directly driving demand for enterprise SSDs. Canaccord called the segment the star of the quarter, while Goldman pointed to several eSSD wins with hyperscalers.
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Why the stock is still down 9%:
• Sequential revenue growth slowed from 51% to 23%
• Consumer revenue fell 29% quarter-over-quarter
• Q2 revenue guidance of $12.2–$12.6 billion is strong but no longer significantly above expectations
• Investors doubt that a gross margin of 85% is sustainable in the long term
• Six analysts lowered their price targets, primarily due to valuation and cyclical risks, not because of weaker current fundamentals
• The stock had previously risen by more than 500% within a year
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Supply remains tight: SanDisk’s new business model contracts already cover about 50% of FY27 bit production and roughly two-thirds of FY28. The non-binding revenue purchase obligations total just under $89 billion, providing an unusually high level of visibility for a memory company.
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The Bull Case: AI inference is making high-density NAND memory increasingly important for context caching and storage. Data center demand continues to accelerate, additional capacity remains limited, and management expects strong bit growth through FY28. Even after numerous price target cuts, analysts’ targets remain well above the current share price.
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The Real Risk: SanDisk has now become a bet on the duration of this cycle. With an 85% gross margin and extreme pricing, the current figures are already exceptional. As soon as additional supply enters the market, prices give way, or hyperscalers normalize their storage investments, profits could come back down very quickly.
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Conclusion: SanDisk did not deliver a weak quarter. On the contrary, under normal circumstances, these figures would send the stock soaring. The market simply refuses to assume that 85% margins and explosive AI growth will continue indefinitely. The debate is no longer about whether demand is strong, but rather how long this memory supercycle can remain this extreme.