TradingKey - On October 30 EST, as of press time, SanDisk (SNDK) fell 9.02% in pre-market trading to $1,210.09.
The company's latest quarterly revenue and adjusted earnings per share both exceeded market expectations, but its stock price still moved lower following the earnings release. Slower quarter-over-quarter revenue growth, declining revenue in the consumer business, and market doubts about the sustainability of high gross margins emerged as key concerns for investors.
[Source: TradingView]
Q1 Revenue Up 378% YoY, Data Center Revenue Up 61% QoQ
SanDisk reported its first-quarter fiscal 2027 financial results on October 29. For the period ended October 2, the company generated revenue of $11.031 billion, up 23% quarter-over-quarter and 378% year-over-year, exceeding market expectations of approximately $10.7 billion; non-GAAP earnings per share was $49.51, higher than market expectations of approximately $47.15. Non-GAAP gross margin was 85.1%, up 0.5 percentage points from the previous quarter.
By business segment, Data Center revenue was $4.802 billion, up 61% quarter-over-quarter; Edge revenue was $5.832 billion, up 7% quarter-over-quarter; Consumer revenue was $397 million, down 29% quarter-over-quarter and 39% year-over-year.
In terms of quarter-over-quarter growth rate, the Data Center business was the fastest-growing segment this quarter; meanwhile, the Consumer business continued to decline, with revenue falling below the levels of both the previous quarter and the same period last year.
Revenue Growth Slows as High Gross Margin Sustainability Draws Focus
Despite SanDisk's strong performance this quarter, quarter-over-quarter revenue growth slowed to 23% from 51% in the previous quarter. Meanwhile, revenue from the consumer segment continued to decline, while data center revenue's share of total revenue rose from approximately 33% in the previous quarter to about 44%, further increasing its reliance on the data center market for business growth.
In addition, the company's non-GAAP gross margin reached a high level of 85.1% this quarter. SanDisk projects a non-GAAP gross margin of 84.5% to 85.5% for the second quarter of fiscal 2027, indicating that management expects to maintain a similar level in the near term.
However, NAND average selling prices, market supply and demand, and shifts in product mix will continue to influence future gross margin performance. If memory price increases slow or shipment growth weakens, the company's revenue and profit growth could face pressure.
Q2 Guidance Tops Estimates, Announces 8-for-1 Stock Split
SanDisk expects fiscal second-quarter 2027 revenue to be $12.2 billion to $12.6 billion and non-GAAP EPS to be $55 to $57, with the guidance midpoints above market expectations of approximately $12.31 billion and $53.60, respectively. Note that the above EPS figures are on a pre-stock-split basis.
The company also announced an 8-for-1 stock split. For shareholders of record as of the close on November 9, the company plans to issue seven additional shares for every share held after the close on November 19, with split-adjusted trading expected to begin at the market open on November 20. This stock split will not change the company's total market capitalization or shareholders' ownership percentages.
Overall, SanDisk's data center business grew strongly, and its performance guidance for the next quarter also exceeded expectations. However, revenue growth, NAND price trends, and whether high gross margins can be maintained remain key focuses for investors.
Meanwhile, Intel (INTC) saw its stock price plunge 25% after earnings, and overall weakness in the semiconductor sector also put SanDisk under greater pressure from sector volatility.
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