Sandisk Corporation Q2 FY2026 earnings call

AI Impact

• Artificial intelligence drives a step change in demand for data center and edge workloads, altering storage content requirements and commercial relationships.

NAND Industry Evolution

• NAND is indispensable for storage, leading to a shift towards multiyear supply agreements with customers for better planning.

End Market Execution

• Data center: Engaged in AI infrastructure expansion, with PCIe Gen Five high-performance TLC drives and BICS Eight QLC storage class product in development.
• Edge: Demand exceeded supply, with focus on mission-critical needs and product mix optimization.
• Consumer: Shift to premium products, launched Sandisk Extreme Fit USB-C flash drive, and expanded licensing initiatives with brands like Crayola and FIFA.

Strategic Partnerships

• Extended joint venture with Kyoccia through 2034 to ensure supply certainty for manufacturing services.

In the second quarter, revenue was $3 billion, up 31% sequentially. Edge revenue was $1.678 billion, up 21% sequentially, contributing ~55.9% to total revenue. Consumer revenue was $907 million, up 39% quarter over quarter, contributing ~30.2% to total revenue. Data center revenue was $440 million, up 64% sequentially, contributing ~14.7% to total revenue. Non-GAAP gross margin was 51.1% in the second quarter, up from 29.9% in the prior quarter, and non-GAAP earnings per share was $6.20.

Third Quarter 2026

• Revenue expected to be between $4.4 billion and $4.8 billion.
• Non-GAAP gross margin forecasted to be between 65-67%.
• Non-GAAP operating expenses expected to be between $450 million and $470 million.
• Non-GAAP EPS expected to be between $12 and $14.

• Market Dynamics: Uncertainty in supply-demand balance and potential delays in long-term agreement negotiations.
• Cyclicality: While structural evolution reduces cyclicality, market conditions can still impact business results.
• Execution Risks: Challenges in aligning supply plans with customer demand and potential delays in new product launches.

Q: Thoughts on long-term agreements and supply-demand balance?

A: Long-term agreements aim for supply assurance and alignment with sustained demand. Supply plans are aligned with mid to high teens bit growth, and discussions with customers are ongoing.

Q: Incremental demand for NAND related to AI?

A: Data center exabyte growth in 2026 is forecasted to be high 60%, driven by AI.

Q: Debt reduction and capital allocation?

A: Debt reduced to $600 million, priority is to invest in the business, build cash reserves, and reduce debt further.

Q: OpEx and capital allocation?

A: OpEx benefit from changed NPI management; capital allocation focuses on R&D investment and prudent cash reserves.