Wall Street Punishes Sandisk's Outlook: What Investors Are Missing

Wall Street Punishes Sandisk's Outlook: What Investors Are Missing

Geoffrey Seiler, The Motley Fool

Sun, August 9, 2026 at 9:36 PM GMT+3 5 min read

• SNDK -3.68%
• NVDA +2.27%

Sandisk (NASDAQ: SNDK) has been one of the hottest stocks in the market over the past year, up over 2,820%, but the stock continued its recent retreat following its fiscal Q4 earnings report and is now off around 47% from its June highs.

The memory chip maker continued to see surging revenue and substantial gross margin expansion in its fiscal Q4 that ended July 3. However, fiscal Q1 revenue guidance that fell just below analyst expectations helped sink the stock, as investors continue to look for signs that the memory cycle may turn.

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Trading near-term gains for more sustainable growth

Sandisk has benefited from soaring NAND (flash) memory prices, as the market remains supply-constrained. This is largely due to the big three memory makers reducing NAND production and shifting their focus toward DRAM (dynamic random access memory) following a crash in the NAND market after the pandemic pulled forward demand for electronics.

However, NAND demand soon shot up as AI data centers suddenly began using enormous, high-performance solid-state drives (SSDs) composed of flash memory to store training data. Meanwhile, NAND capacity has been slow to increase, as the big three memory makers pour most of their resources into high-bandwidth memory (HBM), which gets packaged with graphics processing units (GPUs) and other AI chips, to reduce latency and improve power efficiency.

Given how cyclical the flash market has historically been, Sandisk has decided to give up some near-term gains in favor of long-term visibility and durability by signing long-term contracts. That is why the midpoint of its Q1 revenue guidance, between $10.3 billion and $10.8 billion ($10.55 billion midpoint), came up just short of the $10.62 billion consensus. Fiscal Q1 gross margins are expected to fall sequentially but remain robust between 83% and 85%, and the midpoint of its projected EPS of between $43 and $46 ($45 midpoint) was above the $44.21 consensus.

The company has added three new long-term deals since its fiscal Q3 earnings report, bringing the total to eight deals with data center and edge customers (devices like smartphones and laptops). It said the contracts include $93.9 billion in revenue at floor pricing and $16.5 billion in financial guarantees.

It expects to grow production at a mid-to-high-teens rate going forward and said that, with four years of visibility, supply and demand will catch up. It expects continued downward pressure in the consumer market this year, with smartphone and PC units down and growth returning next year. Meanwhile, it sees agentic AI and KV-cache as major opportunities.

As for the results themselves, Sandisk's revenue soared 372% year over year to $9 billion. Data center revenue went from $213 million a year ago to $3 billion, and more than doubled quarter over quarter. Its Edge segment saw revenue skyrocket 392% to $5.4 billion, while the consumer segment, which includes products like flash drives, saw revenue fall 5% to $556 million.

Revenue growth has largely been driven by higher NAND prices, which have also significantly bolstered the company's gross margins. For the quarter, gross margins climbed from 26.2% last year and 78.4% in fiscal Q3 to 84.6%. The company's adjusted earnings per share (EPS) surged from $0.29 a year ago to $39.25. That easily surpassed the adjusted EPS range of $30 to $33 it had previously forecast.

Is the stock a buy on the dip?

The biggest knock on Sandisk has been the cyclical nature of its business, so I don't view the company giving up a little near-term revenue and gross margin to lock in longer-term five-year deals to give it more sustained growth and visibility as a bad thing. The company is still making money hand over fist, and it should continue to do so over the next several years.

Meanwhile, Sandisk still has the potential to drive outsize growth through technological advancements like high-bandwidth flash. Developed with SK Hynix, this could become a big technology in the inference market.

Following the pullback, the stock trades at a forward price-to-earnings (P/E) ratio of 5.6 times fiscal 2027 analyst estimates. If the company is going to be printing money for at least the next four or five years, this looks like an attractive entry point for this AI stock.

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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Wall Street Punishes Sandisk's Outlook: What Investors Are Missing was originally published by The Motley Fool