Latest data shows that SanDisk's latest quarterly profit exceeded the previous quarter's revenue, and its full-year profit for fiscal year 2026 even exceeded its revenue for fiscal year 2025; this is the speed at which NAND flash memory prices are rising in a market dominated by three suppliers, with persistent supply shortages and continuously rising demand driven by artificial intelligence.

This quarter's profit

In th fourth quarter of fiscal year 2026, ending July 3, the company reported record revenue of $8.97 billion, far exceeding the previous expectation of $8.25 billion, representing a year-over-year increase of 372% and a quarter-over-quarter increase of 51%. Under Generally Accepted Accounting Principles (GAAP), net income reached $6.9 billion, higher than the previous quarter's $5.6 billion revenue, and reversing a $23 million loss in the same period last year. Full-year revenue for fiscal year 2026 is projected at $20.25 billion, a year-over-year increase of 175%, with net income of $11.4 billion, higher than the $7.36 billion revenue in fiscal year 2025, and completely reversing the $1.6 billion loss in fiscal year 2025. NAND flash memory joint venture partner Kioxia reported latest quarterly revenue of $11 billion, but a profit of $5.3 billion.

Chairman and CEO David Göckler stated on the earnings call: "We delivered record revenue, gross margin, and earnings per share, all exceeding the upper limit of our previous guidance, and repurchased $4.5 billion worth of company stock. We are encouraged by this progress and believe that the company's long-term profitability, cash flow, and resilience will continue to emerge."

Chief Financial Officer Louis Vyssoso, discussing revenue growth, stated: "Approximately one-third of the growth came from incremental increases, and two-thirds came from price adjustments."

The company stated: "Fiscal year 2026 is a fundamental turning point in SanDisk's history, a year in which we reshaped our business model, shifted towards the highest-value end markets, and established data centers as a major growth pillar."

Data center NAND/SSD sales are becoming a significant growth driver. SanDisk stated, "The data center is our fastest-growing end market and a core pillar of our long-term growth." It also noted, "The data center business's share of our total business has grown from 12% in Q4 FY2025 to 38% in Q4 FY2026." SanDisk anticipates that "the data center business's share of the total market will grow from approximately 30% in 2025 to approximately 50% in 2026, and will continue to maintain its market leadership in 2027."

Edge computing

The company isn't overly optimistic about its largest market—edge computing (smartphones, PCs, tablets, and embedded hard drives). It stated that while the edge computing market isn't growing rapidly, it remains a large and strategically important end-user market. PCs and smartphones are undergoing a period of adjustment as demand shifts towards AI devices and high-end configurations, driving growth in storage capacity. The edge computing market is expected to experience faster growth by 2027.

The smaller consumer market "remains a significant differentiator within the industry, allowing us to establish unique connections with end-users and channel partners."

Göckler stated that the most important driver in their market is the "inference era." Artificial intelligence is inherently a memory-centric, storage-intensive problem, and it is reshaping the demand landscape for NAND flash memory. He noted, "This demand stems from the long-term strategic investments in infrastructure by the world's largest technology companies, who are increasingly partnering with suppliers capable of scaling, establishing partnerships, and securing performance and reliability for years to come."

SanDisk has signed long-term agreements (LTAs) with eight customers in the data center and edge computing markets, known as its "New Business Model" (NBM), with terms of four to five years designed to guarantee supply and predictable pricing. These customers include several of the world's largest hyperscale data center operators. The NBM agreements represent a minimum contract revenue (at the lowest price) of $93.9 billion and provide $16.5 billion in financial guarantees. These guarantees are designed to protect SanDisk from customer failures to fulfill their procurement obligations under the agreements. Half of the NAND flash memory bits produced by SanDisk in fiscal year 2027 have already been delivered under NBM agreements, and approximately two-thirds will be delivered in fiscal year 2028.

Vesso stated that the gross margin for these transactions is approximately 80%, "with some room for further growth. We can also profit from this as prices continue to rise."

The NAND flash memory market is projected to exceed $300 billion by 2026, a threefold increase year-over-year, and reach $500 billion by 2027. The company believes that the NAND flash memory market will accelerate its growth, driven by strong AI inference. The company stated, "Customer demand is growing faster than our supply, and we expect flash memory to remain in a quota state beyond 2027."

SanDisk relentlessly emphasizes the sustainability of demand, stating, "Demand stems from the strategic long-term investments in infrastructure by the world's largest technology companies, who are increasingly partnering with suppliers capable of scaling and securing supply, thus guaranteeing performance and reliability years in advance. Our New Business Model (NBM) gives customers confidence in long-term supply and allows us clearer demand forecasts and more stable cash flow."

The company plans to increase its NAND flash memory bit supply to 15% to 10%, achieving this through NAND technology node upgrades rather than increasing wafer fab capacity. Visoso stated, "Our capital expenditures will increase year-over-year, primarily due to increased capacity for BiCS8 and BiCS10. However, full-year investment as a percentage of revenue will decrease to approximately 6%."

Revenue expectations for the next quarter are $10.55 +/- $250, representing a midpoint increase of 357%.

Source: Compiled from blocksandfiles

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