SanDisk Shares Fall 8% as Outlook Misses Estimates Despite Record Q4 Results

The biggest highlight of this quarter still came from the data center business.

As Amazon ( AMZN ), Microsoft ( MSFT ), Meta ( META) and other large cloud providers continue to expand investments in AI infrastructure, demand for high-performance storage is growing rapidly, and SanDisk is becoming an important beneficiary of this round of AI capital expenditures.

In the fourth fiscal quarter, the company's data center business revenue reached $2.98 billion, up nearly 13-fold year-on-year, far exceeding market expectations, and management also clearly positioned data centers as the most important growth pillar for the future for the first time.

Meanwhile, the company's edge computing business revenue reached $5.43 billion, up 392% year-on-year, and remains the largest source of revenue, indicating that demand for enterprise storage, edge devices, and AI applications keeps growing strongly in tandem.

In contrast, the consumer electronics market has not yet fully recovered, with consumer business revenue at only $556 million, down 5% year-on-year, and its share of overall revenue further declining. This means that this round of earnings growth no longer relies on traditional consumer storage, but rather comes more from enterprise-class and AI-related applications.

Even more noteworthy is the improvement in profitability. Benefiting from product price increases, an improved product mix, and an increased share of high-end customers, the company's adjusted gross margin reached 84.6%, far higher than the same period last year and also significantly above market expectations, indicating that current NAND market supply and demand remain tight and the company still possesses strong pricing power.

What truly disappointed the market was not the fourth fiscal quarter, but rather management's outlook for the new fiscal quarter.

The company expects revenue for the first quarter of fiscal 2027 to be between $10.3 billion and $10.8 billion, with a midpoint of approximately $10.55 billion, which is below the market's previous expectations of about $10.8 billion to $11.2 billion; adjusted EPS is expected to be $44 to $46, basically in line with market expectations but lacking further upward revisions; the gross margin is expected to remain at 83% to 85%, which, although still at historical highs, has not continued to rise.

For SanDisk, which had previously experienced a massive rally, the market was clearly expecting to see more aggressive growth signals.

Prior to the earnings release, Wall Street had fully bet on the continuous boom in AI storage demand. Over the past month, analysts continued to raise their earnings forecasts for SanDisk's fiscal 2027, with the market widely believing that tight NAND supply and demand, the expansion of AI server demand, and new long-term customer agreements would further push up the company's profitability. Therefore, when future revenue guidance was slightly below expectations, investors quickly chose to take profits.

Despite short-term guidance falling short of expectations, management still sent out quite a few positive signals.

Since the beginning of this year, the company has continued to advance its new long-term commercial cooperation model. Following the signing of five multi-year agreements in the previous quarter, it added three new customers and expanded two existing partnerships this quarter.

Currently, the minimum contract value of the company's eight long-term agreements has reached $93.3 billion, providing high visibility for revenue over the next few years and helping to mitigate the traditional cyclicality of the storage industry.

Meanwhile, the company announced an additional $14 billion share buyback program, bringing the total authorized scale to $15.5 billion. For SanDisk, which underwent a sharp correction in July, such a massive buyback not only implies that management views the current valuation as attractive, but also reflects that the company's cash flow and balance sheet remain robust.

Wall Street remains optimistic about the company's long-term prospects, with Goldman Sachs ( GS) maintaining a "Buy" rating on SanDisk with a 12-month price target of $2,200.

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