Sandisk 4QFY26: The Earnings That Stay

The old catalyst was another pricing surprise. The new thesis is that a contracted earnings base deserves a higher multiple even as peak estimates begin to flatten.

“We want to increase the visibility and the durability of the franchise. We want to get this kind of boom and bust out of it.”

David Goeckeler gave that answer when Cantor’s CJ Muse asked why Sandisk’s next-quarter gross-margin guide was not higher even though NAND pricing was still rising. The wording matters. A chief executive whose company had just reported an 84.6% gross margin described the mid-80s as a fair return, then immediately changed the subject from price to duration. Management is no longer trying only to extract the highest possible margin from the shortage. It is trying to make an extraordinary margin last.

The quarter was certainly extraordinary. Revenue reached $8.97 billion, gross margin was 84.6%, adjusted EPS was $39.25, and adjusted free cash flow was $5.04 billion. Datacenter revenue doubled sequentially, while Datacenter’s share of bits rose from 12% a year ago to 38%. Sandisk guided the next quarter to $10.3–10.8 billion of revenue, an 83–85% gross margin, and $44–46 of adjusted EPS. Yet the most important disclosure was not in the income statement. It was that Sandisk now has $93.9 billion of minimum contracted revenue at floor prices.

The question is no longer how high earnings can go. It is how much of them stay.

The Thesis Has Moved

I have written three pieces on Sandisk. The first argued that AI created a missing storage layer between HBM and hard drives. The second connected that layer to context memory and KV cache inside new AI systems. The third accepted that the demand thesis had been proved and shifted the debate to contracts: could Sandisk turn temporary scarcity into a higher earnings floor?

I ended that article by asking whether the gross-margin floor was 55%, 45%, or 30%. At the time, New Business Models covered just over one-third of FY2027 bits. I said coverage needed to cross 50%, Datacenter needed to become a larger part of the business, and the contracts needed enough financial protection to matter when pricing eventually weakened.

FY4Q crossed those thresholds. More than half of FY2027 bits are committed, roughly two-thirds of FY2028 bits are spoken for, QLC Stargate is shipping for revenue, and customers that signed only one quarter ago are already asking for more supply over the next three to five years. The contract mechanism is no longer a thesis. It is becoming the business.

That changes my view. I no longer think Sandisk should be analysed mainly as a memory producer enjoying the strongest cycle in its history. It is building a contracted core inside that cyclical business, and the size of that core is now large enough to change normalised earnings.