Sandisk Corporation (SNDK) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary shows strong financial performance, with significant improvements in gross margin, operating margin, and EPS, indicating robust business health. The Q&A highlights strategic LTAs, AI-driven demand, and prudent capital allocation. Despite some management opacity, the overall sentiment is positive, driven by record revenue and optimistic guidance, suggesting a strong positive stock price movement.
Key Financial Performance
Revenue $3 billion, up 31% sequentially and 61% year-over-year. The increase was driven by higher prices across segments and strong sequential demand across all end markets.
Data Center Revenue $440 million, up 64% sequentially. Growth was driven by significant revenue growth across the data center portfolio, including the qualification of PCIe Gen5 high-performance TLC drives and BiCS8 QLC storage class products.
Edge Revenue $1,678 million, up 21% sequentially. Growth was attributed to replacement cycles and AI adoption across PCs and mobile devices, leading to richer configurations and higher storage content per device.
Consumer Revenue $907 million, up 39% quarter-over-quarter. Growth was supported by a mix shift toward premium products and higher-value configurations, as well as targeted gaming-led initiatives.
Non-GAAP Gross Margin 51.1%, up from 29.9% in the prior quarter. The improvement was due to higher pricing and expected unit cost reductions.
Non-GAAP Operating Margin 37.5%, up from 10.6% in the prior quarter. The increase was driven by higher-than-expected revenue and lower costs.
Non-GAAP EPS $6.20, up from $1.22 in the prior quarter. The increase reflects higher-than-expected revenue and lower costs.
Adjusted Free Cash Flow $843 million, representing a 27.9% free cash flow margin. This includes $1,019 million from operations, partially offset by $176 million from net cash capital spending.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Sandisk Extreme Fit USB-C flash drive: Launched as the smallest high-capacity USB-C flash drive, offering seamless and affordable storage expansion for PCs and smartphones.
Sandisk Optimus lineup: Introduced at CES 2026, rebranding WD_BLACK and WD Blue NVMe SSDs to sharpen brand architecture and reinforce performance leadership.
AI-driven data center expansion: Enterprise SSD demand is accelerating due to AI workloads, with significant revenue growth in the data center portfolio (up 64% sequentially).
Edge market growth: Demand exceeded supply as AI adoption in PCs and mobile devices drove higher storage content per device.
Consumer market shift: Shifted towards premium products and higher-value configurations, supporting storage content growth and profitability.
Strategic capacity allocation: Focused on aligning supply plans with predictable long-term demand and multiyear agreements with customers.
Operational efficiency in product mix: Partnered with key edge customers to optimize product mix within available supply, ensuring long-term returns.
NAND industry evolution: Transitioning from quarterly negotiations to multiyear agreements with customers, enabling better planning and higher returns.
Yokkaichi joint venture extension: Extended partnership with Kioxia through 2034, ensuring continued availability of product supply and mutual value creation.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Supply Chain Constraints: Demand for NAND products exceeded supply during the quarter, leading to unmet customer demand. Strategic allocation decisions were necessary, prioritizing long-term partnerships over short-term transactional demand.
Capital Expenditure Limitations: The company is maintaining its current capital spending plans despite high demand, which could limit its ability to scale production to meet future demand.
Customer Commitment Risks: The shift towards multiyear agreements with customers introduces risks if customers fail to honor long-term commitments or if market conditions change.
Market Cyclicality: Although the company believes the NAND market is becoming less cyclical, there is still inherent risk in market fluctuations impacting pricing and demand.
Economic Uncertainty: Broader economic conditions could impact customer demand and pricing, particularly in consumer and enterprise markets.
Technological Transition Challenges: The transition to BiCS8 technology requires disciplined execution and significant R&D investment, posing risks if delays or technical issues arise.
Debt Obligations: The company has agreed to pay $1,165 million for manufacturing services over the next nine years, which will impact cost of goods sold and financial flexibility.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Revenue Expectations: For the third quarter, revenue is expected to be between $4.4 billion and $4.8 billion.
Gross Margin Projections: Non-GAAP gross margin for the third quarter is forecasted to be between 65% and 67%.
Operating Expenses: Non-GAAP operating expenses for the third quarter are expected to range between $450 million and $470 million.
Earnings Per Share (EPS): Non-GAAP EPS for the third quarter is projected to be between $12 and $14, assuming 157 million fully diluted shares.
Market Trends and Demand: The NAND market is undergoing structural evolution driven by AI, with data center demand accelerating and expected to become the largest market for NAND in 2026. Demand for NAND in data centers is expected to grow meaningfully in both the near and long term, driven by AI workloads and inference.
Product Launches and Innovations: The BiCS8 QLC storage class product, codenamed Stargate, is advancing through qualification with two major hyperscalers and is expected to begin shipping for revenue within the next several quarters.
Capital Expenditures: Capital spending plans remain unchanged, supporting mid- to high-teens bit growth through the BiCS8 transition.
Customer Commitments: The company is prioritizing customers with multiyear supply frameworks and shared planning commitments to improve business predictability and ensure supply certainty.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
The selected topic was not discussed during the call.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:How is the company thinking about long-term agreements (LTAs) and their impact on supply-demand balance?
A:The company is focusing on LTAs to ensure supply assurance for customers, especially in the data center market. They are being thoughtful about the length of agreements, pricing, quantities, and prepayment components. The goal is to align long-term growth rates with sustained demand at attractive financials. They have signed one LTA with a prepayment component and are in discussions for more.
Q:What is the company's perspective on supply-demand balance and plans for adding supply?
A:The company has clear supply plans with mid- to high-teens bit growth on a sustained basis. They are not planning to increase supply beyond these plans and are focusing on understanding long-term demand to allocate supply effectively. They emphasize the need for better visibility into demand to make informed decisions.
Q:What is the company's view on the impact of AI infrastructure build-out on NAND demand?
A:The company sees significant demand growth driven by AI infrastructure, estimating 75-100 additional exabytes in 2027, doubling the following year. They believe NAND is central to AI architecture and are working closely with customers to understand configurations and future demand.
Q:How is the enterprise SSD opportunity evolving, and what is the mix between TLC and QLC?
A:The enterprise SSD market is predominantly TLC, with QLC expected to grow as the company launches its Stargate product. The company is seeing strong growth in enterprise SSDs, with 64% sequential growth last quarter and further growth expected as new products are introduced.
Q:What is the company's outlook on incremental NAND demand related to AI and data center growth?
A:The company forecasts high-60s exabyte growth in the data center market for 2026, driven by AI. This is a significant increase from previous forecasts and reflects the growing importance of NAND in AI infrastructure.
Q:What are the company's capital allocation priorities and plans for debt reduction?
A:The company prioritizes investing in the business, building prudent cash reserves, and reducing debt. They have reduced debt from $2 billion to $600 million and plan to continue this trend while maintaining sufficient cash reserves for operational needs.
Q:What is the company's perspective on the urgency of addressing NAND shortages and customer commitments?
A:The company believes there is urgency in addressing NAND shortages, especially as data center demand grows. They note that the market is transitioning from a transactional model to one focused on long-term planning, driven by the strategic importance of NAND in AI architecture.
Q:What is the company's approach to managing OpEx and tax rates?
A:The company is focused on funding R&D, which constitutes 75% of OpEx, while also seeking efficiencies. They expect OpEx to remain stable at current levels. The tax rate is expected to hover around 14-15% as prior year losses are consumed.
Q:What is the company's view on the consumer market and its impact on demand?
A:The company sees strong performance in the consumer market, with over 50% year-over-year growth. They believe the market dynamics, including unit and content growth, remain robust despite some base effects from prior years.
Q:What is the company's perspective on through-cycle gross margins?
A:The company aims to achieve gross margins that justify high CapEx and R&D investments. They have seen significant improvement, with gross margins reaching 51% last quarter and guiding to 66% this quarter, indicating progress toward sustainable profitability.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the mix breakout impacting ASP trends, stating they would provide more information in the next quarter. Additionally, they did not disclose the terms of the signed LTA or provide a detailed breakdown of enterprise SSD revenue as a percentage of total revenue.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI adoption
AI ecosystem
AI evolution
AI scale
AI workload
BiCS TLC
Bids digit
CES
Crayola
FIFA
Sandisk
USB flash
Yokkaichi
action
bid
breakthrough
capital deployment
capital spending
center margin
commitment term
configuration storage
customer demand
demand profitability
enabler
extension
flash drive
horizon commitment
hyperscalers quarter
investment world
manufacturing
need product
planning
practice
predictability
qualification hyperscalers
storage content
supply framework
term return
SNDK Transcript
Sandisk Corporation (SNDK) Q2 2026 Earnings Call Transcript
Positive1-30
The earnings call summary shows strong financial performance, with significant improvements in gross margin, operating margin, and EPS, indicating robust business health. The Q&A highlights strategic LTAs, AI-driven demand, and prudent capital allocation. Despite some management opacity, the overall sentiment is positive, driven by record revenue and optimistic guidance, suggesting a strong positive stock price movement.
Sandisk Corporation (SNDK) Presents at Barclays 23rd Annual Global Technology Conference Transcript
Neutral12-10
Sandisk Corporation (SNDK) Presents at UBS Global Technology and AI Conference 2025 Transcript
Neutral12-2
Sandisk Corporation (SNDK) Q1 2026 Earnings Call Transcript
Positive11-6
The earnings call reveals optimistic guidance with strong growth expectations in enterprise SSDs and data centers, driven by AI demand and BiCS8 technology. Despite caution on seasonality, gross margins are improving due to pricing and cost reductions. Management's strategic customer engagements for long-term agreements and potential market share gains in data centers also signal positive sentiment. However, some details remain vague, slightly tempering enthusiasm. Overall, the positive outlook on growth and strategic initiatives outweighs uncertainties, suggesting a positive stock price movement.
SNDK Slides
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
