According to a report from a financial news outlet, SanDisk (SNDK.US) released its fiscal 2027 first-quarter earnings report and held a conference call after Thursday's U.S. market close. Boosted by surging NAND flash memory demand driven by artificial intelligence infrastructure buildout and rising product prices, the company's quarterly revenue surged 378% year-over-year, with data center business revenue skyrocketing nearly 17-fold. The company expects further revenue growth next quarter and announced a 1-for-8 stock split plan.
SanDisk management highlighted positive signals for the company's future prospects during the latest earnings call: AI inference demand is pushing NAND into a structural growth cycle, with data centers continuing to serve as the growth engine. Bit demand is expected to grow approximately 40% in calendar year 2027, and the NBM long-term agreement pipeline has extended beyond 2030 with demand exceeding supply.
The company anticipates positive NAND bit demand growth next year across PCs, smartphones, and data centers. Automotive is expected to become one of the largest markets in edge business, QLC adoption is accelerating, and new technologies such as HBF are advancing. Overall, management expressed confidence in the long-term nature of AI-driven NAND demand and the company's earnings visibility, and committed to returning 100% of excess cash to shareholders.
1. Management Remarks
(1) Investor Relations Vice President Ivan Donaldson's Opening Remarks
Before the meeting began, please note that today's discussion will include forward-looking statements based on management's current assumptions and expectations, which are subject to various risks and uncertainties. These forward-looking statements include expectations regarding the company's technology and product portfolio, business plans and performance, capital allocation priorities, market trends and opportunities, and financial results. The company undertakes no obligation to update these statements. Please refer to the company's Form 10-K annual report filed with the U.S. Securities and Exchange Commission (SEC) and other documents for more information on risks and uncertainties that could cause actual results to differ materially from expectations. Additionally, today's discussion will reference non-GAAP financial measures. Reconciliations between non-GAAP and comparable GAAP financial measures are included in the written materials posted on the Investor Relations section of the company's website.
(2) CEO David V. Goeckeler's Remarks
1. Performance Highlights and Core Strengths
Thank you, Ivan. Good afternoon everyone, and thank you for joining SanDisk's fiscal 2027 first-quarter earnings call. We opened fiscal 2027 with another strong quarter, creating value for customers and shareholders and delivering results above guidance. Our strategy is working, and execution is driving strong results. Quarterly revenue was $11 billion, non-GAAP gross margin was 85.1%, and non-GAAP earnings per share was $49.51. We generated $5.7 billion in adjusted free cash flow and returned $5 billion to shareholders through stock buybacks. Our confidence in the long-term trajectory of the business is built on three enduring strengths: technology leadership, deep customer partnerships, and disciplined financial management. These strengths are strongly supported by AI-driven structural growth in NAND demand, and through our new business model — NBM partnerships — customer signals now extend beyond fiscal year 2030. Together, these advantages enable us to invest confidently in our technology roadmap, strengthen and expand customer relationships, and deliver sustained growth with durable free cash flow while returning capital to shareholders.
2. Technology Roadmap and Product Progress
It all starts with our technology leadership. BiCS 8 is the backbone of our current production portfolio and the industry benchmark for TLC and QLC in performance and density. BiCS 8 introduced our CMOS Direct Bonded Array (CBA) architecture, delivering the performance required by AI data center customers and establishing the framework for future generations. BiCS 9 combines the proven BiCS 8 memory cell array with next-generation CMOS, significantly improving interface performance while retaining the mature memory architecture. BiCS 10 advances full-node architecture on TLC and QLC, introducing a 1Tb TLC chip designed for performance-intensive workloads and a 2Tb QLC chip that delivers industry-leading density with read/write bandwidth twice that of BiCS 8. Together, these technologies will extend the BiCS 8 foundation to meet the evolving performance and capacity demands of next-generation infrastructure.
Beyond the core roadmap, High Bandwidth Flash (HBF) reached an important milestone in the first fiscal quarter, with our first HBF memory chip taped out and manufacturing now underway. As outlined at our Investor Day, HBF is a new memory architecture for inference designed to achieve HBM-class read bandwidth with greater capacity to support larger models, longer context lengths, and growing KV caches. It is designed to complement HBM by bringing NAND-class capacity closer to the processor, and we remain on track to deliver the first HBF-based product samples in the next calendar year. HBF remains a future innovation and is not included in the long-term financial model we introduced at Investor Day. As customer adoption, product demand, and manufacturing readiness become clearer, we expect to provide more perspective on the market opportunity.
Customers recognize the strength of our innovation and increasingly view SanDisk as a critical partner in achieving their growth objectives. Through our NBM, we continue to evolve customer relationships into long-term partnerships based on innovation, collaboration, and shared commitment. Our recent engagement with customers among the world's leading AI companies indicates there is further upside to demand for our technology. Our market-leading technology, product portfolio, and customer partnerships are the pillars of our strong financial position, enabling us to reinvest to maintain technology leadership and expand supply through R&D-focused capital expenditures.
3. AI-Driven NAND Demand
Each of these strengths is strongly supported by AI tailwinds. As inference workloads grow, demand for scalable memory and storage is expanding, making NAND increasingly integral to AI infrastructure. During inference, every generated token must reference its preceding context, creating a growing KV cache that serves as the model's working memory. Longer prompts, more complex reasoning, multimodal inputs, and persistent user context all significantly increase these storage requirements. HBM and DRAM support the highest performance tiers, while flash provides the capacity needed to efficiently retain broader context and avoid expensive recomputation. We view this as a long-term dynamic that is expanding NAND's role in the AI stack.
The memory hierarchy defines the role of each NAND architecture. TLC provides the lower latency, higher write performance, and higher endurance required for active datasets, checkpoints, and latency-sensitive KV cache workloads. In the AI lab comparison we presented at Investor Day, systems using SSDs achieved approximately 3x the token throughput of comparable systems relying solely on volatile memory, while consuming approximately 75% less energy. QLC further increases storage density for capacity-intensive applications such as data lakes and vector databases supporting AI search and retrieval repositories. Across these tiers, a growing persistent context layer establishes data that needs to be retained and recalled rather than regenerated. As inference costs decline, we expect adoption and usage to expand, supporting our view that by the end of this decade, KV cache will account for approximately one-third of the AI data center flash market, and the AI data center opportunity will approach the size of today's NAND industry.
4. End Market Performance
Turning to our end markets. In data centers, our product portfolio addresses the full spectrum of AI infrastructure needs, from performance-intensive enterprise SSDs to high-capacity platforms. Demand remains strong and continues to grow, and we estimate that data centers' share of industry bits has expanded from approximately 20% at the beginning of this decade to approximately half currently. This structural shift in customer mix is reshaping industry economics and is at the core of SanDisk's ongoing transformation. In the quarter, data centers again delivered strong growth and continued to outpace the overall market as we allocated more supply to meet growing demand in this end market.
Edge is a large and strategically important market for SanDisk, spanning smartphones, PCs, automotive, tablets, and an expanding range of physical AI applications. Automotive is becoming an increasingly important growth engine within our edge business and represents a meaningful long-term growth opportunity. Our deepening engagement with leading customers reinforces our confidence that automotive has the potential to become one of the largest markets in the edge business over time. Our consumer business remains a differentiated strategic asset, combining direct brand engagement with hundreds of millions of end users and broad shelf coverage through leading global channel partners. The consumer end market provides a durable foundation for our business, while its direct connection to the market informs product development and gives the company early insight into shifts in end-user demand.
Taken together, these results reinforce the durability of the model we outlined at Investor Day. We have built strong profitability and cash flow generation capabilities, and going forward our focus is on consistent execution across the entire product portfolio.
(3) CFO Luis Visoso's Remarks
Thank you, David. We are executing the strategy and plans outlined at Investor Day and delivering attractive financial results. In the first quarter, we completed two NBM transactions. Since both were completed before our fourth-quarter earnings call, we announced these partnerships at that call. We are actively engaged with existing NBM customers who are evaluating extensions of existing agreements, as well as with new customers evaluating new NBMs. These long-term partnerships provide greater visibility into demand and financial performance, supporting a more durable financial model. In determining the optimal bit percentage to allocate to NBM, we will remain patient and disciplined, and this percentage could be higher than current levels.
First-quarter revenue was $11 billion, up 23% sequentially and 378% year-over-year. This compares favorably to our guidance range of $10.3 billion to $10.8 billion. Volume growth and price increases together drove revenue growth, with approximately 60% of the growth from volume and 40% from price. Data center revenue was $4.8 billion, up 61% sequentially, exceeding the estimated market growth rate for the quarter. Our leading products and strong customer partnerships, including three U.S. hyperscalers, underpin our continued expansion in this fast-growing end market. Edge revenue was $5.8 billion, up 7% sequentially, reflecting resilience in premium and mainstream markets, partially offset by contraction in the low-end market. Within edge, we saw strong growth from automotive and IoT customers. Consumer revenue was $397 million, down 29% sequentially, as the market adjusts to higher prices. We remain committed to serving all three end markets with a diversified product portfolio to optimize our performance over time.
First-quarter non-GAAP gross margin was 85.1%, up from 84.6% in the prior quarter, driven by volume and pricing increases. This compares favorably to our guidance range of 83% to 85%. Non-GAAP operating expenses were $513 million, representing 4.7% of revenue. Non-GAAP operating margin was 80.4%, compared to 79.2% in the prior quarter. Non-GAAP earnings per share was $49.51, up from $39.25 in the prior quarter and $1.22 in the same period last year. This compares favorably to our guidance range of $44 to $46. At quarter end, diluted shares outstanding were 154 million. Key GAAP to non-GAAP reconciliations include $91 million in stock-based compensation, representing 0.8% of revenue, and $513 million in equity securities gains, primarily attributable to our investment in Nanya Technology.
During the quarter, we repurchased approximately 3.2 million shares of common stock for $5 billion. Over the past two quarters, we have repurchased a total of 6 million shares, representing approximately 4% of our total shares outstanding. Our buybacks reflect our confidence in the long-term value of the business and our disciplined approach to capital allocation. We continue to invest appropriately in the business while returning 100% of excess cash to shareholders. Moving to free cash flow. Operating cash flow was $6.4 billion. Total capital expenditures were $378 million, representing 3.4% of revenue. We expect total capital expenditures to increase over the remainder of the fiscal year, reaching a mid-single-digit percentage of revenue for fiscal 2027. In the quarter, we generated $5.7 billion in adjusted free cash flow, representing approximately 52% margin. At quarter end, we had $5.1 billion in cash and cash equivalents and no debt.
Turning to guidance. Our confidence in the long-term health of the market is reinforced by structural growth in AI infrastructure and NAND's expanding role in inference workloads. Before turning to the second-quarter outlook, I'd like to announce that SanDisk's board of directors has approved a 1-for-8 stock split of the company's common stock. Additional shares are expected to be distributed on November 19, and split-adjusted trading is expected to begin on November 20. For fiscal 2027 second quarter, we expect revenue between $12.2 billion and $12.6 billion. We expect non-GAAP gross margin between 84.5% and 85.5%, including modest sequential price increases. On a pre-split basis, we expect non-GAAP earnings per share between $55 and $57, assuming 151 million fully diluted shares. Adjusted for the 1-for-8 split, this equates to non-GAAP earnings per share between $6.88 and $7.13, assuming approximately 1.208 billion fully diluted shares. As context, we expect a strong market in calendar year 2027. Data centers are expected to again be the growth engine, representing more than 55% of the market, with bit demand growing approximately 40% year-over-year, driven by increased AI-driven capital expenditures. This follows a doubling of growth in 2026. Our NBM pipeline demand will exceed our supply capability through the end of the decade.
(4) CEO David V. Goeckeler's Closing Remarks
Thank you, Luis. We continue to execute the strategy outlined at Investor Day, which reinforces our confidence in SanDisk's long-term trajectory. Our technology leadership, deep customer partnerships, and disciplined financial management, supported by AI-driven structural growth in NAND demand, position us to serve customers, achieve sustained growth with durable free cash flow, and return capital to shareholders. Over the past year, we have transformed the earnings and cash flow generation capability of the business and laid a solid foundation for durable performance. We remain focused on disciplined execution, continued value creation, and achieving our long-term financial objectives.
2. Q&A Session
1. NBM Pipeline and PC Market
Melius Research analyst Benjamin Reitzes asked: Will the pace of NBM signings accelerate? Will the percentage of bits locked under contracts change in coming years? Will there be more NBM demand from the PC market?
CEO David V. Goeckeler answered: The NBM pipeline is very strong. Approximately 50% of the company's bits for this fiscal year are already locked through NBM, approximately two-thirds for next fiscal year, and the percentage is expected to continue rising. The company will remain patient and selective with the next batch of customers. At the same time, the company is balancing customers returning for more supply with bringing in new customers. Customers generally report that they underestimated the amount of NAND needed to run their infrastructure, and several customers are seeking a second round of partnership. CFO Luis Visoso added: Currently 95% of NBM customers are investment-grade companies, and these companies together generate approximately $130 billion in operating cash flow. The company is pleased with its partner selection.
CEO David V. Goeckeler added on the PC market: The company's internal model shows that NAND bit demand for PCs, smartphones, and data centers will all achieve positive growth next year, primarily driven by increasing content per device and premiumization trends. Although the current two calendar quarters represent the "toughest period" of year-over-year unit declines, improvement is expected from current levels.
2. Data Center Growth Drivers
Morgan Stanley analyst Joseph Moore asked: Data center business grew nearly 20-fold year-over-year and 61% sequentially. Is the growth mainly from BiCS8 or from the market itself? What is the long-term target for data center bit share?
CEO David V. Goeckeler answered: The growth is the result of multiple factors working together. The BiCS 8 node and CBA architecture provide excellent interface speed. The company has the right product portfolio — TLC products have been on the market for several years, and QLC products began contributing revenue a few quarters ago and are ramping. AI inference architectures are becoming increasingly refined, and customers are using NAND more granularly, using TLC and QLC separately for different functions such as KV cache, scratchpad, and fast data lakes. Some customers are even beginning to use QLC for KV cache, while SLC is also being introduced into architecture discussions, primarily focused on the endurance needed for agent workloads, exploring the possibility of replacing DRAM with NAND. Once these architectures are converted, they will be highly sticky. The company is working to align its product portfolio with the market bit structure and expects continued progress in calendar year 2027, with the portfolio mix significantly improving by the end of fiscal year 2026.
3. Pricing and HBF Progress
Bernstein analyst Mark Newman asked: What is the contribution ratio of price versus volume in the second-quarter guidance? What is the progress of HBF customer communications? What are your views on new NAND technology tiers such as Storage-Next and CMX?
CFO Luis Visoso answered on pricing: In first-quarter revenue growth, approximately 60% came from volume and 40% from price. For the second quarter, both are expected to contribute to growth, with prices rising modestly, and prices are expected to continue rising modestly throughout the year.
CEO David V. Goeckeler answered on HBF and new technologies: Communication with potential customers continues and is active, and the company will continue to provide updates after placing product samples in customers' hands. AI inference architectures are continuously being optimized around economics, which is driving NAND into more parts of the architecture. The company is both advancing density improvements from TLC to QLC and exploring providing higher endurance through SLC mode in specific areas to replace costly DRAM. The company views these explorations as healthy, with the key being to stay close to customers investing capital to expand infrastructure and provide the right technology, timing, intensity, and cost based on their use case requirements.
4. BiCS Transition and Supply Allocation
MST Financial analyst David Gibson asked: Will the company accelerate the transition from BiCS 8 to 9 and 10 to meet customer demand? Are there constraints on allocating more bits to data centers?
CEO David V. Goeckeler answered: The company maintains its previously announced bit growth plan (mid-to-high double-digit percentage) and does not intend to accelerate node transitions, as node conversions require significant planning and equipment procurement. There are some constraints on allocating more bits to data centers. When wafers are produced, the mix of TLC, QLC, and chips is fixed and requires continuous matching. CFO Luis Visoso added: In the short term (approximately 120-day wafer production cycle), there is minimal room for adjustment, but over the long term there is more flexibility.
5. NBM Pipeline and Capital Expenditures
Cantor Fitzgerald analyst Christopher Muse asked: What specifically does it mean that the NBM pipeline exceeds supply? Will this affect capital expenditure plans? Can deposits in NBM contracts be used for buybacks?
CEO David V. Goeckeler answered: The NBM model is working well, and the pipeline has extended to 2030 and beyond. Customers are willing to provide demand signals and financial commitments, which will give the company the ability to adjust supply and demand in the future, though negotiations and commitments still need to be completed. The company is pleased with the progress and will continue to provide updates.
CFO Luis Visoso answered on deposits: Most of the financial guarantees in NBM contracts are held by third-party financial institutions and are not on the company's balance sheet. Only prepayments are on the balance sheet, and the amounts are very small. In theory, prepayments could be used for buybacks, with no legal restrictions.
6. Enterprise SSD Content and Market Share
BNP Paribas analyst Karl Ackerman asked: What is the trend for enterprise SSD content per server in 2027? Is there an update to the enterprise SSD market share target?
CEO David V. Goeckeler answered on content: In inference and agent orchestration applications, the company observes approximately 60 to 90 GB of NAND demand per CPU. NAND is being introduced into various parts of inference architectures through TLC, QLC, and high-endurance SLC. The company will continue to track and analyze the elasticity relationship between server TAM and NAND TAM.
CEO David V. Goeckeler answered on share: The company does not set specific market share targets to avoid distorting the product portfolio. Data center business grew 17-fold year-over-year and is expected to continue increasing its share in 2027. The equilibrium point will depend on market conditions and NBMs signed on a quarter-by-quarter basis.
7. BiCS Nodes and SLC Impact
Mizuho analyst Vijay Rakesh asked: Can the BiCS 8/9/10 transition help meet the 40% bit demand growth for data centers in 2027? How will SLC usage affect NAND market supply next year?
CEO David V. Goeckeler answered on BiCS: BiCS 9 is an important part of the data center strategy, enabling faster interface speeds on the same memory cells. TLC products are performing well, QLC is ramping, BiCS 9 will gradually ramp, and BiCS 10 is still some time away.
CEO David V. Goeckeler answered on SLC: Some customers have already signaled SLC demand. There is a clear 3:1 to 4:1 conversion ratio between SLC and TLC/QLC, which will affect overall market supply. However, it is too early to provide specific forecasts, and the company will continue to provide updates in the coming quarters.
8. Seasonality and Buyback Authorization
Goldman Sachs analyst James Schneider asked: What is the seasonal trend for the third fiscal quarter (March quarter)? Will the buyback authorization be updated quarterly?
CFO Luis Visoso answered on seasonality: Historically, the third fiscal quarter is typically the weakest quarter sequentially. Last quarter, bits declined 19% sequentially. The company is not providing third-quarter guidance but suggests modeling conservatively for sequential growth from the second to third fiscal quarter.
CEO David V. Goeckeler answered on buybacks: The company's strategy is clear — 100% of excess cash will be returned to shareholders. The company meets with the board quarterly, and buyback execution is not expected to be hindered. Approximately 4% of shares outstanding have been repurchased over the past two quarters, and the program will continue to be executed appropriately.
9. TLC/QLC Ratio and Mobile Market
TD Cowen analyst Krish Sankar (asked by Steven) asked: What is the current demand ratio of TLC to QLC among cloud service provider customers and how will it change long-term? Can mobile bits grow next year despite declining unit numbers in the mobile market?
CEO David V. Goeckeler answered on TLC/QLC: Currently the TLC to QLC ratio is approximately 70:30, and this level is expected to be maintained for the remainder of the fiscal year. There is more discussion among customers about accelerating QLC adoption across different use cases. The QLC product (Stargate) is fully qualified, customers are ramping, and market reception is positive.
CEO David V. Goeckeler answered on the mobile market: The low-end market is under pressure, leading to declining unit numbers, but content per device is increasing. Next year, bits (EB) in this market are expected to grow despite slightly declining unit numbers. The company will manage its product portfolio with agility and flexibility to optimize short-, medium-, and long-term financial results.
10. AI Customers and Accounts Receivable
Bank of America analyst Wamsi Mohan asked: Does "leading AI companies" refer to AI labs or neocloud providers? Are credit issues at neocloud providers affecting the company? What is the reason for the increase in accounts receivable?
CFO Luis Visoso answered on AI customers: The company sells to all customers, including hyperscalers and model manufacturers. No impact from neocloud credit issues has been observed. On the contrary, customer demand is very strong, and the largest customers are essentially all investment-grade companies. Customer demand has strengthened compared to a quarter ago.
CFO Luis Visoso answered on accounts receivable: The increase in accounts receivable is primarily due to changes in customer mix, with a slight impact on linearity, but mainly attributable to customer composition.
11. Capital Structure and HBF Milestones
Evercore analyst Amit Daryanani asked: Does the shift to an NBM-driven business model change capital structure considerations? Is the company willing to use leverage to accelerate capital returns? What are the key milestones for HBF from sampling to revenue contribution?
CEO David V. Goeckeler answered on capital structure: The company is committed to executing its financial model through 2030 and is satisfied with its strategy of maintaining a debt-free, strong balance sheet. The company will continue to invest in internal innovation (such as HBF and 3D matrix storage) and will return 100% of excess cash flow to shareholders. This strategy is not expected to change in the near term.
CEO David V. Goeckeler answered on HBF: The next step is to tape out the base chip (controller), combine it with the memory chip, and deliver it to customers. Customers will actually test how the product performs in their infrastructure, which will help answer questions about market opportunity, TAM, and architectural positioning. The company will expand use case discussions with customers once it has actual products.
12. SLC and TLC/QLC Relationship
Susquehanna analyst Mehdi Hosseini asked: Will SLC demand adversely affect TLC or QLC adoption? Can the joint venture fab increase SLC capacity to meet short-term demand?
CEO David V. Goeckeler answered on SLC positioning: SLC is not cannibalizing TLC or QLC but rather expanding TAM into areas requiring different technical attributes. The company can run wafer output in SLC mode, and the product is highly flexible. SLC's main appeal is that its cost is 20 to 40 times lower than DRAM, and if it can provide sufficient endurance and performance, it has the potential to replace DRAM in some scenarios.
CEO David V. Goeckeler answered on supply flexibility: The company does not believe it needs to specifically add SLC capacity, as existing memory cells can flexibly switch between SLC, MLC, TLC, and other modes, utilizing existing wafer supply to serve the market. It is still in the customer exploration phase, but SLC usage will impact the market because "a small amount of SLC is equivalent to a large amount of QLC."
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