Sandisk Corporation (NASDAQ: SNDK) experienced a notable decline in extended-hours trading on Wednesday, with shares indicating a drop of approximately 8% to $1,243, following the release of its preliminary fourth-quarter results. This after-hours movement compounded a 5.4% decline during the regular session, reflecting investor concerns despite the company delivering stronger-than-expected earnings.
The company's preliminary fourth-quarter revenue came in at $8.965 billion, exceeding the Reuters consensus estimate of $8.39 billion by 6.9%, while adjusted earnings per share of $39.25 surpassed the $34.45 consensus by 13.9%. However, the market's reaction suggests that expectations had been elevated, particularly given the stock's remarkable run-up of nearly 470% during 2026 prior to the earnings release.
Guidance Misses Some Estimates
Sandisk's first-quarter revenue guidance midpoint of $10.55 billion beat the Reuters consensus of $10.47 billion by 0.8%, but fell short of the MarketWatch-reported consensus of $10.80 billion by 2.3%. Similarly, the adjusted EPS guidance midpoint of $45.00 exceeded the Reuters estimate of $43.12 but came in below the MarketWatch figure of $44.72. This discrepancy likely contributed to the selloff, as investors weighed the mixed guidance against the company's lofty valuation.
Strong Sequential Growth Driven by Edge and Datacenter
On a sequential basis, the fourth quarter was robust, with revenue growing 51% to $8.965 billion and adjusted EPS reaching $39.25. Gross margin expanded by 6.2 percentage points to 84.6%. Notably, edge revenue contributed $1.77 billion sequentially, outpacing the datacenter segment's $1.51 billion increase, despite datacenter's impressive 103% growth. Consumer revenue declined by $264 million, partially offsetting these gains.
Management attributed approximately two-thirds of the sequential revenue growth to pricing, with only one-third coming from higher volumes. This pricing-centric growth raises questions about sustainability, particularly in the edge market. To mitigate these risks, Sandisk has secured long-term contracts with minimum committed revenue of $93.9 billion, representing 4.6 times fiscal 2026 sales. Half of fiscal 2027 output is already covered, and that coverage rises to two-thirds by fiscal 2028.
CEO David Goeckeler emphasized the significance of these commitments, stating, "That's light years ahead of where we were just three quarters ago." In addition, the board authorized a $14 billion increase to its share repurchase program, bringing total remaining authority to $15.5 billion, roughly 8.4% of the company's indicated equity value at $1,243.
Peer Western Digital Also Slides
The selloff extended to former parent Western Digital (NASDAQ: WDC), which fell 11.8% in premarket trading despite beating earnings estimates. This paired decline suggests that investor expectations for the storage sector may have outpaced near-term fundamentals.
Analyst Sentiment and Upcoming Catalysts
Despite the negative price reaction, analyst sentiment remains constructive, with 10 of 12 tracked analysts rating Sandisk a buy. The average price target of $2,370 implies significant upside from current levels, though most targets were set before the full results were released. The next major catalyst is the company's investor day on August 13, where investors will seek clarity on pricing floors, committed capacity, and the timing of buyback execution.
Risks remain, including NAND pricing volatility, customer timing, and contract execution. Consumer revenue declined 32% sequentially, and the repurchase plan could be suspended if conditions warrant. However, the core debate centers on whether Sandisk can maintain its pricing power across both edge and datacenter markets, which will be crucial for sustaining its current valuation.
