Sandisk Q1 Earnings Call Highlights

Key Points

• Sandisk reported exceptional fiscal Q1 2027 results, with revenue of $11 billion, up 23% sequentially and 378% year over year. Non-GAAP gross margin was 85.1%, adjusted free cash flow reached $5.7 billion, and the company repurchased $5 billion of stock.
• Data-center demand is driving growth: revenue rose 61% sequentially to $4.8 billion as AI workloads increased NAND usage for inference, KV caches, data staging, and data lakes. Sandisk expects data-center demand to remain the industry’s primary growth engine in 2027.
• Sandisk forecast fiscal Q2 revenue of $12.2 billion to $12.6 billion and expects continued benefits from long-term customer agreements, with roughly half of fiscal 2027 bits already covered. The company also approved an eight-for-one stock split and plans to begin split-adjusted trading on Nov. 20.

Sandisk NASDAQ: SNDK reported fiscal first-quarter 2027 results above its guidance, citing continued demand from AI infrastructure customers, expanding data-center sales and growth in its long-term customer partnership model.

Revenue totaled $11 billion, up 23% sequentially and 378% from the prior-year period. Non-GAAP gross margin reached 85.1%, while non-GAAP earnings per share were $49.51. The company generated $5.7 billion in adjusted free cash flow and repurchased $5 billion of stock during the quarter.

Chairman and Chief Executive Officer David Goeckeler said the results reflected the company’s technology roadmap, customer relationships and financial discipline. “Our strategy is working, and our execution is delivering strong results,” he said.

Data center drives growth

Data-center revenue was $4.8 billion, rising 61% sequentially, as Sandisk allocated more supply to the segment. CFO Luis Visoso said the company’s products and partnerships with three U.S. hyperscalers supported its expansion in the market.

Goeckeler said data-center demand has been supported by increasing NAND use across AI inference systems, including applications involving key-value, or KV, caches, data staging and data lakes. Sandisk estimates that data center now represents roughly half of industry NAND bits, compared with approximately 20% early in the decade.

The company expects AI data-center flash demand to expand as inference workloads require greater storage capacity for longer prompts, more complex reasoning, multimodal inputs and persistent user context. Sandisk expects KV cache to represent approximately one-third of the AI data-center flash market by the end of the decade.

Goeckeler said the company is seeing wider use of both TLC and QLC NAND in AI architectures. In addition, customers are exploring use of NAND configured in SLC mode for applications requiring greater endurance. He characterized those discussions as early-stage but said the trend could expand NAND’s addressable market rather than cannibalize other flash products.

Sandisk said its TLC-to-QLC mix remains about 70% to 30% for the current fiscal year. The company’s QLC data-center product has completed customer qualifications and is ramping, according to Goeckeler.

Edge and consumer results

Edge revenue was $5.8 billion, up 7% sequentially. The company cited resilience in premium and mainstream markets, partly offset by contraction at the lower end of the market. Automotive and Internet-of-Things customers posted strong growth within the segment.

Consumer revenue was $397 million, down 29% sequentially as the market adjusted to higher pricing. Goeckeler said Sandisk continues to view consumer operations as a strategic asset because of its direct brand relationship with users and broad channel presence.

Management said PC and smartphone unit volumes remain under pressure, particularly at the low end of the market, but expects NAND exabyte demand to grow in each major end market next year as storage content per device rises. Goeckeler said the company expects PCs, smartphones and data center to all show positive NAND demand growth in calendar 2027 despite modest declines in unit volumes in some categories.

Long-term agreements and technology roadmap

During the quarter, Sandisk closed two new business model partnerships, or NBMs, which are longer-term customer arrangements intended to provide demand and financial visibility. Management said about 50% of its bits are under NBM arrangements for fiscal 2027 and about two-thirds are committed for fiscal 2028, with the proportion expected to rise further.

Visoso said 95% of the company’s NBM agreements are with investment-grade companies that collectively generate about $130 billion in operating cash flow. The company said its NBM pipeline exceeds its available supply through the end of the decade.

Goeckeler said Sandisk is balancing requests from existing customers seeking additional supply with opportunities to add new partners. He added that the company has no plans to alter its previously discussed mid- to high-teens bit-growth plan, noting that wafer-fab transitions and equipment planning require substantial lead time.

On technology, Sandisk highlighted its BiCS8 NAND platform, along with planned BiCS9 and BiCS10 products. BiCS9 pairs the BiCS8 cell array with next-generation CMOS technology to raise interface performance, while BiCS10 is expected to include a 1-terabit TLC die and a 2-terabit QLC die.

The company also said it taped out its first High Bandwidth Flash, or HBF, memory die during the quarter and has begun fabrication. Sandisk expects to sample its first HBF-based products next calendar year. Goeckeler said the technology is intended to complement high-bandwidth memory by bringing NAND-class capacity closer to processors for inference workloads. HBF is not included in the company’s long-term financial model, management said.

Margins, cash flow and outlook

Non-GAAP operating expenses were $513 million, or 4.7% of revenue, and non-GAAP operating margin was 80.4%, up from 79.2% in the preceding quarter. Cash flow from operations was $6.4 billion, while gross capital expenditures were $378 million, or 3.4% of revenue.

Sandisk expects gross capital spending to increase during the rest of fiscal 2027 and reach a mid-single-digit percentage of revenue for the year. The company ended the quarter with $5.1 billion in cash and cash equivalents and no debt.

Sandisk repurchased approximately 3.2 million shares for $5 billion in the first quarter. Over the past two quarters, it repurchased 6 million shares, representing roughly 4% of shares outstanding. Management reiterated its plan to return 100% of excess cash to shareholders while remaining debt-free and investing in its technology roadmap.

For fiscal second quarter 2027, Sandisk forecast revenue of $12.2 billion to $12.6 billion and non-GAAP gross margin of 84.5% to 85.5%. The company projected pre-split non-GAAP earnings per share of $55 to $57, or $6.88 to $7.13 on an eight-for-one split-adjusted basis.

The board approved the eight-for-one stock split, with additional shares expected to be distributed Nov. 19 and split-adjusted trading expected to begin Nov. 20. Management said it expects calendar 2027 data-center demand to remain the industry’s primary growth engine, with data center representing more than 55% of the market and bit demand rising about 40% year over year.

About Sandisk (NASDAQ:SNDK)

SanDisk Corporation offers flash storage solutions. The Company designs, develops and manufactures data storage solutions in a range of form factors using flash memory, controller, firmware and software technologies. The Company operates through flash memory storage products segment. Its solutions include a range of solid state drives (SSD), embedded products, removable cards, universal serial bus (USB), drives, wireless media drives, digital media players, and wafers and components. It offers SSDs for client computing applications, which encompass desktop computers, notebook computers, tablets and other computing devices.

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