Sandisk Q1 Revenue Jumps as Datacenter Demand Drives Growth

Sandisk Corporation (NASDAQ: SNDK) reported a sharp increase in fiscal first-quarter 2027 revenue and earnings as datacenter demand expanded, while its second-quarter guidance pointed to a further sequential rise in sales. Revenue for the quarter ended Oct. 2, 2026, reached $11.03 billion, up 23% from the previous quarter and 378% from a year earlier.

Approximately 60% of the sequential revenue increase came from higher volume and 40% from improved pricing. Non-GAAP gross margin rose to 85.1% from 84.6% in the preceding quarter and 29.9% a year earlier.

Non-GAAP operating income increased 25% sequentially to $8.87 billion, while non-GAAP diluted net income per share climbed 26% to $49.51. On a GAAP basis, Sandisk recorded operating income of $8.78 billion, net income of $8.10 billion and diluted earnings of $52.60 per share.

Operating cash flow was $6.36 billion, down 11% sequentially. Adjusted free cash flow rose 13% to $5.70 billion, excluding a $465 million impact from prepayments and deposits associated with the company’s New Business Model, or NBM, agreements.

Datacenter leads growth

Datacenter was the principal growth driver, with revenue increasing 61% from the previous quarter and 1,682% year over year to $4.8 billion. Sandisk said it allocated more supply to the end market during the quarter to address growing demand. Its customer relationships in the segment include three U.S. hyperscalers.

The company estimates that datacenter applications now account for roughly half of NAND industry bits, compared with about 20% early in the decade. Management expects datacenter to represent more than 55% of the market in calendar 2027, with datacenter bit demand growing about 40% year over year after more than doubling in 2026.

Sandisk attributed its long-term market confidence partly to the expanding use of NAND storage in artificial-intelligence inference. The company expects key-value cache, which stores context used by AI models, to account for about one-third of the AI datacenter flash market by the end of the decade. It also said the overall AI datacenter opportunity could approach the size of the current NAND industry.

Edge remained Sandisk’s largest end market in the quarter. Revenue rose 7% sequentially and 320% year over year to $5.8 billion, supported by premium and mainstream markets and growth among automotive and internet-of-things customers. That strength was partly offset by contraction at the lower end of the market. Management identified automotive as an increasingly important part of the Edge business and a potential long-term growth market.

Consumer revenue fell 29% sequentially and 39% year over year to $397 million as the market adjusted to higher pricing. Sandisk said the business continues to provide direct access to end-user demand through its brand and global channel presence.

Long-term contracts and technology investment

Sandisk had NBM agreements with eight datacenter and Edge customers at quarter-end. The contracts represented $93.9 billion of minimum revenue at floor pricing and $88.9 billion of remaining performance obligations, supported by $16.5 billion of cash deposits and financial instruments.

About half of the company’s fiscal 2027 bits and roughly two-thirds of its fiscal 2028 bits are committed under these agreements. The contracts have a weighted average duration of more than four years and can extend for as long as five years. Sandisk said its NBM pipeline exceeds available supply through the end of the decade, although management plans to remain selective when choosing long-term partners.

BiCS 8 remains the foundation of Sandisk’s current production portfolio. The company said BiCS 9 will combine the BiCS 8 cell array with next-generation CMOS technology, while BiCS 10 is designed to provide a 1-terabit TLC die and a 2-terabit QLC die. Sandisk also completed tape-out of its first high-bandwidth flash memory die during the quarter and said samples of its first HBF-based products remain scheduled for the next calendar year.

Cash capital expenditure totaled $202 million, or 1.8% of revenue, while gross capital expenditure was $378 million. Most fiscal 2027 capital spending is intended to support BiCS 8 technology investments.

Second-quarter outlook and capital returns

For the fiscal second quarter, Sandisk expects revenue of $12.2 billion to $12.6 billion. The company forecast a GAAP gross margin of 84.4% to 85.4% and a non-GAAP gross margin of 84.5% to 85.5%.

Non-GAAP operating expenses are expected to range from $540 million to $560 million, with non-GAAP diluted earnings projected at $55 to $57 per share based on approximately 151 million diluted shares. Sandisk did not provide a full reconciliation of its non-GAAP guidance because certain adjustments cannot be reasonably predicted.

The company spent $5 billion to repurchase about 3.2 million shares during the first quarter. Across the past two quarters, repurchases totaled $9.5 billion and covered about 6 million shares, or approximately 4% of shares outstanding. Sandisk had $10.5 billion remaining under its authorization and said its capital-allocation priorities are investing in the business, maintaining a strong balance sheet and returning excess cash to shareholders.

The board also approved an eight-for-one stock split. Additional shares are expected to be distributed Nov. 19, with split-adjusted trading scheduled to begin Nov. 20.

Sandisk’s outlook remains subject to NAND demand and pricing volatility, customer deployment timing, technology transitions, supply-chain disruptions and reliance on strategic partners, including Kioxia. The company also cited trade policies, tariffs, competition, customer concentration, foreign-exchange movements and obligations associated with its NBM agreements among the factors that could affect future results.