SanDisk Earnings Preview: AI Storage Drives Performance Surge, Valuations and Risks Rise

Demand for high-performance storage in AI infrastructure is expanding rapidly. In the first quarter of 2026, enterprise SSD contract prices rose by 33% to 38% quarter-on-quarter. The proliferation of AI applications in North America and the launch of Nvidia's new architecture have led to a severe supply-demand gap in the enterprise SSD market. Capacity bottlenecks are expected to keep NAND bit shipment growth at around 20%, while AI servers now account for more than 45% of total NAND shipments.

This trend has driven a rapid ramp-up in SanDisk's data center business, with Q2 data center revenue reaching $440 million, up 64% quarter-on-quarter, accounting for approximately 15% of total sales—up from just 1% a year ago. Management believes this share will continue to rise as more hyperscale customers complete certifications.

Supply-side logic is also providing support, as global NAND manufacturers shift capacity toward high-margin products. With new capacity not expected to be released until after 2027, effective supply elasticity remains limited in the short term, and NAND contract prices are expected to stay at elevated levels. In early 2026, SanDisk extended its joint venture agreement for the Yokkaichi plant in Japan by five years to 2034, committing to a consideration of approximately $1.165 billion paid in installments to ensure supply stability.

SanDisk spun off independently from Western Digital ( WDC) in February 2025. SanDisk's stock price has surged over 2,900% in the past year, briefly crossing $1,010 during intraday trading on April 27 to hit a new all-time high. The spin-off liberated SanDisk from the constraints of its traditional HDD business, allowing it to focus on NAND flash and data center SSDs, perfectly capturing the current explosion in AI storage demand.

Based on 2026 earnings estimates, SanDisk currently trades at a forward P/E of approximately 30x, roughly in line with the industry average. However, at 9x consensus forward earnings, its valuation is not only below the 10x–13x range seen in previous upcycles but also just half that of the Philadelphia Semiconductor Index on a forward P/E basis, compared to a historical mean of 0.8x to 1.0x. This indicates that the market remains relatively cautious regarding the sustainability of its earnings.

[Source: TradingKey]

TradingKey data shows a consensus 'Buy' rating among 21 analysts, with an average price target of $848.28.

BofA Securities analyst Wamsi Mohan raised the price target to $1,080 while maintaining a 'Buy' rating, noting that NAND suppliers are controlling the pace of capacity expansion in a rational and cautious manner, and that AI inference is expected to remain a major driver of medium-term demand.

Bernstein analyst Mark Newman issued a price target of $1,250 and an optimistic valuation of $3,000 under a 'blue-sky scenario,' implying an upside of more than 250%.

Newman expects Q3 earnings per share (EPS) to reach $14.18, which is near the upper end of the company's guidance range, while Q4 EPS is expected to climb further to $25.30. He believes that NAND prices 'only reached a material inflection point six to seven months ago' and that the market has 'severely underestimated the profitability and sustainability of this cycle.'

However, there is widespread market concern that if the growth rate of downstream demand for artificial intelligence slows down, or if capacity release exceeds expectations, NAND prices may undergo a correction, which would impact SanDisk's earnings elasticity accordingly.

Meanwhile, in the data center business, the proportion of hyperscale customers is increasing, reducing SanDisk's bargaining power. Competitors such as Samsung, SK Hynix, and Micron ( MU) are also expanding capacity, which will further squeeze SanDisk's pricing space. If the adoption of AI inference applications fails to meet expectations, enterprise SSD orders could be overestimated.

It also needs to be considered that SanDisk still needs to strengthen its brand and customer relationships after its spin-off into an independent entity, as the company remains highly dependent on its Japanese joint venture plant with Kioxia, resulting in extremely high capacity concentration. Although the joint venture agreement has been extended to 2034, earthquakes, geopolitical volatility, or disagreements between partners could all disrupt the supply chain.

Furthermore, the Federal Reserve is expected to keep interest rates unchanged on April 29, with Powell making his final appearance as Chair; his policy stance will sway market sentiment. The deadlock in U.S.-Iran negotiations continues, and any escalation in Middle East tensions would disrupt the global semiconductor supply chain.

In the short term, SanDisk's data center business is growing rapidly and SSDs are in short supply, making a Q3 earnings beat likely. However, the stock price has already priced in significant optimism; if guidance does not further exceed expectations, there is a high risk of a correction. In the medium term, the sustainability of the NAND price hike cycle depends on AI inference demand and the pace of capacity release. SanDisk has a clear AI narrative and strong fundamentals, leaving room for long-term potential; however, given the substantial previous gains, investors should balance optimism against potential pullback risks and closely monitor gross margin performance in the Q3 report, guidance on price hike sustainability, and progress on long-term supply agreements with core customers.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.