Sandisk Corporation delivered a standout third quarter, propelled by surging demand for AI-driven storage solutions. The memory-chip maker posted revenue of $5.95 billion for the period ended April 3, a 97% sequential increase and a 251% year-over-year leap. GAAP net income reached $3.62 billion, or $23.03 per diluted share, while adjusted earnings per share came in at $23.41. The results comfortably topped Wall Street expectations, highlighting the company's successful pivot toward data-center applications.
AI Storage Deals and Buyback
In a move that underscores its strategic shift, Sandisk announced a $6 billion share buyback program, funded by operating cash flow, with no set expiration date. The board-authorized repurchase plan signals confidence in the company's financial health and future prospects. Additionally, Sandisk revealed five new multiyear customer agreements that collectively guarantee over $11 billion in financial commitments, with prepayments of $400 million already on the balance sheet. These contracts now account for roughly one-third of Sandisk's bit supply for fiscal 2027.
Revenue and Outlook
Data-center revenue soared 233% sequentially to $1.47 billion, driven by the need for faster storage to handle complex AI workloads, from large-scale text processing to model training data. For the fourth quarter, Sandisk forecasts revenue between $7.75 billion and $8.25 billion, with adjusted earnings per share targeted at $30 to $33. Both figures significantly exceed LSEG estimates compiled by Reuters, which projected $6.49 billion in revenue and $22.70 per share. This guidance reflects a fundamental shift in the memory market, moving away from traditional boom-bust cycles toward more predictable, contract-based economics.
Market Reaction and Context
Despite the strong results, Sandisk shares initially dropped more than 6% in late trading before stabilizing near $1,096.44. The stock has since traded in a range between $1,022.60 and $1,152.57. The decline may reflect high expectations built into the stock price after a significant run-up on AI momentum. Sandisk's flash memory and enterprise SSD focus distinguishes it from peers like Western Digital and Seagate, which also reported robust demand for storage hardware but rely more on hard drives.
Strategic Pivot and Supply Chain
CEO David Goeckeler described the quarter as a "fundamental inflection point," emphasizing the company's move toward "the highest-value end markets, led by Datacenter." CFO Luis Visoso noted that three of the five new agreements were signed during the quarter, locking in at least $42 billion in contractual revenue. These contracts, lasting one to five years, include price floors, price ceilings, and penalties for non-compliance. Sandisk's separation from Western Digital in February 2025 and its extended partnership with Kioxia through 2034, with $1.165 billion in manufacturing commitments, further solidify its supply chain position.
Risks and Outlook
While the new business model aims to reduce volatility, challenges remain. If AI demand wanes or customers resist contract terms, the model's effectiveness will be tested. Goeckeler acknowledged that earlier long-term memory contracts have unraveled during downturns. Nonetheless, Sandisk's strong Q3 performance and strategic initiatives position it well to capitalize on the AI-driven storage boom.
