Strong financial results led to significant stock declines. On April 30, U.S. storage giants Western Digital and SanDisk Corp. reported their third-quarter earnings, with revenue, profit, and guidance all exceeding Wall Street expectations. Both companies also provided robust forecasts for the next quarter.
However, the market reaction was unexpected: both stocks fell sharply in after-hours trading, with Western Digital dropping as much as 8.2% and SanDip declining over 6%. This movement appears less a rejection of the earnings and more a "correction" following previous substantial gains. Analysts noted that, against a backdrop of Western Digital's stock rising approximately 900% over the past year and SanDisk's stock surging about 3300% since its spin-off, the strong results were already largely priced in. The guidance, while positive, "lacked sufficient surprise" to sustain momentum, triggering profit-taking.
How strong were the earnings? SanDisk Corp.'s third-quarter revenue was $5.95 billion, a massive 97% year-over-year increase, far surpassing analyst expectations of $4.7 billion. Adjusted earnings per share were $23.41, nearly 1.6 times the expected $14.54. Data center business revenue more than tripled compared to the prior year, reaching $1.47 billion for the quarter. SanDisk reported a net profit of $3.62 billion, a complete reversal from a loss of $1.93 billion in the same period a year earlier.
Western Digital's performance was similarly impressive. Third-quarter revenue reached $3.34 billion, a 45% year-over-year increase, beating analyst estimates of $3.25 billion. Adjusted earnings per share were $2.72, above the expected $2.39. Net profit was $3.12 billion, a substantial increase from $520 million a year ago.
Western Digital CEO Irving Tan stated in the earnings release: "The demand drivers are very clear: nearly every AI workload—from training and inference to agent AI and physical AI—generates data that requires persistent, efficient storage on hard drives." He also announced a 20% increase in the quarterly dividend to 15 cents per share.
SanDisk CEO David Goeckeler characterized the quarter as a turning point: "This quarter marks a fundamental inflection point for SanDisk—our technology leadership is driving our deliberate shift towards the highest-value end markets, led by our data center business."
Guidance remains strong, but the market is "not satisfied" Following the earnings reports, both companies provided next-quarter guidance that also exceeded expectations.
SanDisk expects fourth-quarter revenue between $7.75 billion and $8.25 billion, with a midpoint around $8 billion, significantly higher than the analyst consensus range of $6.49 billion to $6.62 billion. Adjusted earnings per share are forecast between $30 and $33, also well above the expected range of $22.70 to $23.38.
Western Digital anticipates fourth-quarter revenue between $3.55 billion and $3.75 billion, with adjusted earnings per share between $3.10 and $3.40. Both figures are above analyst expectations of $3.46 billion in revenue and $2.75 per share in earnings.
Why did the market sell off despite such strong guidance? After a 900% surge, "good" is no longer sufficient A key context is the stocks' prior performance. Data shows Western Digital's stock has gained approximately 900% over the past year. SanDisk's stock, since its spin-off from Western Digital in February 2025, has skyrocketed from its $36 IPO price to around $1063 in after-hours trading, a gain of roughly 3300%.
Michael Ashley Schulman, a partner at Cerity Partners, explained: "The guidance from both companies failed to deliver the 'wow factor' needed to sustain the current powerful rally." In other words, these stocks had already priced in the expectation of an "AI storage demand explosion." When the earnings confirmed these expectations but failed to deliver an upside surprise, profit-taking pressure intensified.
Earlier in the week, strong forecasts from peer Seagate Technology had triggered a collective rally in storage stocks. SanDisk's stock had already risen about 350% year-to-date before the report, while Western Digital was up over 150%. At such elevated levels, news perceived as "not spectacular enough" can become a trigger for selling.
AI storage demand itself is not in question It is important to note that the stock price decline does not stem from doubts about the underlying fundamentals. Reports indicate that the earnings and guidance from SanDisk, Western Digital, and Seagate collectively confirm that strong demand for storage products from AI data center construction continues. The growth in data storage demand from AI systems continues to outpace supply, allowing companies like SanDisk to maintain pricing power.
Prior to the earnings release, Bank of America analyst Wamsi Mohan noted that demand exceeding supply creates a "favorable pricing environment." Western Digital CEO Irving Tan specifically highlighted that the company's gross margin reached 50.5% for the quarter, a significant improvement from a year ago. SanDisk announced that its board authorized a $6 billion stock repurchase program.
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