To The Moon

Sandisk Earnings: Pricing Uptrend Continues; Data Center Core Engine Next Year

SanDisk delivered a standout quarter, and what really kept the bull case intact was that the next-quarter guidance came in strong again, which helps justify why the stock has multiplied recently.

Core Financial Indicators

Q1 FY26 was a clear beat versus guidance. Revenue came in at $2.308 billion, up 21% quarter on quarter. Operating income was $245 million, up 145% quarter on quarter. Non-GAAP EPS was $1.22. Operating cash flow was $488 million.

On the volume-price mix, bit shipments grew by the mid-teens, unit prices rose by the mid single digits, and the mix effect together pushed gross margin up sequentially to 29.9%.

Q2 FY26 guidance keeps highlighting the pricing momentum. Management guided revenue to grow another 12% sequentially, but guided gross margin to jump by about 10 percentage points quarter on quarter. The company explicitly said that the Q2 revenue uplift will be driven mainly by “double-digit price increases,” while bit growth will only be in the low single digits. That is a very clean signal that the current leg of the recovery is more price led, less shipment led.

By end market, the mix was also constructive. Data center revenue was $269 million, up 26% q/q, helped by stronger demand for enterprise and cloud SSDs, and the company is progressing through qualifications and new platform introductions with several hyperscalers. Edge revenue was $1.387 billion, also up 26% q/q, supported by the PC refresh cycle and rising storage content per smartphone. Consumer revenue was $652 million, up 11% q/q, on better sell-through in channels such as gaming and camera cards.

Key Points

Core Growth Engine-DC Segment

Data center still accounts for only about 10% of total revenue today, which is much smaller than edge and consumer, but management sees it as the core growth engine next year. The company said in effect that AI and richer media models are accelerating data creation, and that NAND is at an interesting transition point. They expect calendar 2026 to be the first time the data center market becomes the largest end market for NAND from an industry perspective, overtaking mobile.

On products, SanDisk said its enterprise “Stargate” 128T (QLC) drive is currently under qualification at two hyperscale customers, with a third hyperscaler plus a large storage OEM planned for 2026, which in total means deep engagements with five very large customers.

Supply Side

Longer term, the sustainability of high profitability will still be decided by supply. The memory market is notoriously cyclical. With NAND simpler to ramp than DRAM, its price volatility is greater.

Morgan Stanley's current read is that NAND supply growth in 2026 will not be very aggressive.

The most positive datapoint is that equipment makers are reporting limited investment in 1H26. A second positive datapoint is that SK hynix, Micron and Samsung are still prioritizing DRAM capex because of HBM demand and because NAND bit growth has been lower.

The mixed datapoints are that node migrations will be the key variable for supply growth, since today most of the industry is shipping 1YY–2XX layer TLC. Samsung's move to 238-layer TLC adds about 35% bit density versus 176-layer, and switching to QLC adds another roughly 30%.

Near Term, Valuation Looks Full

Morgan Stanley removed SanDisk from its Top Pick list on November 3rd because the short-term risk-reward has become more balanced as the stock has moved up. But they still see upside in the base case over time, and they said the bull case will need more proof points. They remain fundamentally constructive because industry pricing appears to be up 10–15% or more in both Q4 and Q1, which means we could see several quarters of upward estimate revisions. That should support a higher share price. But because the stock has already rerated on the early part of that story, the margin of safety on the short-term trade is smaller.

Summary

Overall, this is a quarter that validated the stock's recent strength, because it showed price is coming through, gross margin is responding, and the guide says Q2 will be even more price led. But it also raised the bar for the next few quarters, because the market is now watching whether NAND price increases can stay in place long enough, and whether AI-related enterprise storage demand actually shows up at the scale the company is talking about.

@TigerStars  @CaptainTiger  @TigerWire  @Daily_Discussion  @Tiger_chat  @Tiger_comments  @MillionaireTiger