SanDisk (SNDK) FY2026 Q4 Earnings Highlights: Revenue of $8.97 Billion Up 372% YoY, Non-GAAP EPS of $39.25, Strong Datacenter Growth, Q1 Guidance Soft vs. Expectations

Core View

SanDisk reported fiscal fourth-quarter 2026 (ended July 3, 2026) revenue of $8.97 billion, up 51% sequentially and 372% year-over-year, significantly exceeding the prior guidance range of $7.75–$8.25 billion and market expectations. Approximately one-third of sequential revenue growth came from higher volumes and two-thirds from higher pricing. Non-GAAP diluted EPS reached $39.25, with non-GAAP gross margin expanding to 84.6%. Full-year FY2026 revenue was $20.25 billion, up 175% year-over-year; GAAP net income was $11.43 billion (diluted EPS of $73.76), and non-GAAP diluted EPS was $70.88. Datacenter emerged as the key growth pillar, rising 437% for the full year. The company expanded its share repurchase authorization to a remaining total of $15.5 billion. However, Q1 FY2027 revenue guidance of $10.30–$10.80 billion came in below some analyst expectations (around $11.16 billion), pressuring shares in after-hours trading.

1. Overall Revenue and Profit Performance

• Q4 revenue: $8.965–$8.97 billion, +51% QoQ, +372% YoY.
• GAAP net income: $6.903 billion (diluted EPS of $43.97); Non-GAAP diluted EPS: $39.25 (vs. $23.41 prior quarter and ~$0.29 year-ago).
• Non-GAAP gross margin: 84.6% (vs. 78.4% prior quarter and 26.4% year-ago), up 6.2 percentage points sequentially.
• Non-GAAP operating income: approximately $7.104 billion, with operating margin of ~79.2%.
• Adjusted free cash flow: approximately $5.035 billion in Q4.
• Full-year FY2026 revenue: $20.25 billion (+175% YoY); GAAP net income: $11.43 billion (diluted EPS of $73.76); Non-GAAP diluted EPS: $70.88.
• Revenue outperformance was primarily driven by a mix shift toward higher-value customers (notably datacenter growth) and improved product pricing.

2. Datacenter Business Performance

• Q4 revenue: $2.977 billion, +103% QoQ, and a sharp increase from ~$213 million year-ago.
• Full-year datacenter revenue: $5.153 billion, +437% YoY.
• Datacenter bits contribution rose from ~12% in Q4 FY2025 to 38% in Q4 FY2026, establishing it as a key growth pillar.
• Key drivers included strong AI inference demand, ramp of enterprise SSDs (especially compute-focused TLC and QLC Stargate platforms), and deeper engagement with hyperscale and AI infrastructure customers.
• Following the announcement of five New Business Model (NBM) agreements on the April earnings call, the company signed five additional agreements (including three with new customers and two expansions of prior deals), enhancing long-term visibility.

3. Other Business Segment Performance

• Edge (including smartphones, PCs, and related devices): Q4 revenue $5.432 billion, +48% QoQ, +392% YoY; full-year $12.160 billion, +195% YoY. Remains the largest revenue contributor.
• Consumer: Q4 revenue $556 million, –32% QoQ, –5% YoY; full-year $2.935 billion, +29% YoY. Relatively soft demand, impacted by pricing adjustments and end-market conditions.
• The company remains committed to serving all three end markets while optimizing the portfolio for long-term value creation.

4. Capital Returns and Business Model Plans

• Board approved an additional $14 billion share repurchase authorization, bringing total remaining authorization to $15.5 billion. Approximately $4.5 billion of stock was repurchased in Q4.
• New Business Model (NBM) agreements continue to advance, providing multi-year visibility (some exceeding four years). Minimum expected total revenue under signed NBMs (at floor pricing) is approximately $93.9 billion, with actual revenue expected to exceed this level; remaining performance obligations (RPO) are substantial.
• Technology progress: BiCS8 accounts for the majority of bit production, with BiCS10 advancing, reinforcing leadership in TLC/QLC NAND.
• Capital expenditures will support technology upgrades, with full-year capital intensity expected to decline.

5. Next-Quarter Guidance (Q1 FY2027)

• Revenue expected in the range of $10.30–$10.80 billion (midpoint ~$10.55 billion). Analysts had expected around $11.16 billion or higher.
• Non-GAAP diluted EPS expected in the range of $44.00–$46.00 (analysts ~$45.58).
• Non-GAAP gross margin guided at approximately 83%–85%; operating expenses ~$520–$540 million.
• Guidance reflects steady but relatively moderate sequential growth under NBM locked-in pricing, viewed by some market participants as conservative.

6. Market Backdrop and Investor Concerns

• Core drivers: Robust AI and datacenter storage demand. The NAND market is expected to exceed $300 billion in calendar 2026 and approach $500 billion in 2027, with supply remaining tight. SanDisk’s NBM agreements lock in long-term orders with floor-price protection, improving cash-flow visibility and cycle resilience.
• Investor concerns: Q1 revenue guidance below some expectations led to notable after-hours share price declines (reports indicated drops of over 5%–7% or more); ongoing softness in the consumer segment; potential bit growth slightly below the mid-to-high teens target due to higher inventory days and component costs to support NBMs.
• Positive factors include elevated profit margins, strong free cash flow, large-scale buybacks, and the rapid rise in datacenter mix, supporting long-term value. CEO David Goeckeler stated that the company closed the year with a leading technology portfolio, established datacenter as a key growth pillar, and deepened customer partnerships, enabling sustained growth in free cash flow.

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Disclaimer This content is for reference only and does not constitute any investment advice. All data is based on publicly available earnings releases and news reports; actual results should be verified against the company’s official filings.