Sandisk (NASDAQ:SNDK) reported a strong fiscal second quarter for 2026, highlighting surging demand tied to artificial intelligence workloads, tightening supply conditions in NAND, and a sharp improvement in profitability. Management also emphasized a strategic shift toward longer-term commercial agreements with customers as the company seeks to move away from what it described as a historically transactional, quarter-to-quarter pricing model.
Quarter results beat guidance as pricing strengthened
For the fiscal second quarter, Sandisk reported revenue of $3.025 billion, up 31% sequentially and 61% year-over-year, exceeding its prior guidance range of $2.55 billion to $2.65 billion. Management attributed the outperformance primarily to higher pricing across segments, noting that market conditions improved meaningfully during the quarter.
Non-GAAP gross margin expanded to 51.1% from 29.9% in the prior quarter, ahead of guidance of 41% to 43%. Sandisk said higher pricing drove the gross margin upside, while unit cost reductions were “as expected.” The company also noted $24 million in startup costs during the quarter; excluding that item, non-GAAP gross margin would have been 51.9%.
Non-GAAP operating expenses were $413 million, below the company’s $450 million to $475 million guidance, which management said was driven by a non-recurring benefit from changing how it manages new product introductions. On the call, executives quantified the one-time OpEx benefit at about $35 million and explained the operational change as a shift toward charging customers for qualification units, moving associated costs from period expense into inventory as those units are sold.
Demand exceeds supply as AI drives a “structural evolution”
CEO David Goeckeler and CFO Luis Vias framed the current NAND environment as being catalyzed by AI, particularly in the data center. Management argued that NAND is becoming more “indispensable” and that supply certainty and longer planning horizons are increasingly important as customers scale AI infrastructure.
Sandisk said demand remains above supply and that it is making allocation decisions based on value creation. Vias said the company is prioritizing “strategic customers” and is increasingly weighting multi-year supply frameworks and share planning commitments over short-term transactional signals.
Management reiterated that it is not changing its capital spending plans and continues to target mid- to high-teens bit growth through its BiCS8 transition. Executives said any material increase in capital deployment would require high confidence that demand at attractive pricing levels is durable over several years and supported by commitments.
End-market performance led by data center growth
Sandisk reported strong sequential demand across its three end markets, while emphasizing it intends to continue serving each market as diversification “maximizes value creation.”
- Edge: Revenue of $1.678 billion, up 21% sequentially. Management said edge demand “meaningfully exceeded supply,” driven by AI adoption-related replacement cycles and richer configurations in PCs and mobile devices.
- Consumer: Revenue of $907 million, up 39% sequentially. Management said mix shifted toward premium products and higher-value configurations. The company highlighted the launch of the “SanDisk Extreme Fit,” described as its smallest high-capacity USB-C flash drive, and discussed licensing initiatives with brands including Crayola and FIFA, as well as a gaming-focused “Don’t Delete Your Games” campaign.
- Data center: Revenue of $440 million, up 64% sequentially. Sandisk said enterprise SSD demand is accelerating as AI workloads scale, with inference increasing NAND content per deployment.
In data center, management said it completed qualification of PCIe Gen 5 high-performance TLC drives at a second hyperscaler and expects additional hyperscaler qualifications over coming quarters, with BiCS8 TLC solutions “soon thereafter.” The company also said its BiCS8 QLC storage class product (code name “Stargate”) is advancing through qualification with two major hyperscalers and is expected to begin shipping for revenue in the next several quarters.
During Q&A, management said enterprise SSDs remain tilted toward TLC today, with QLC expected to increase as Stargate begins shipping. When asked about enterprise SSD exposure in the model, the company did not provide a revenue percentage but stated that enterprise SSD growth has accelerated and is expected to continue.
Long-term agreements, supply visibility, and new AI architectures
Executives spent significant time discussing efforts to evolve customer relationships from quarterly price negotiations toward multi-year agreements with firmer commitments on supply and pricing. Management said customers across end markets and geographies are reaching out, and Sandisk is evaluating key terms such as agreement length, pricing, quantities, the portion of business committed under LTAs, and whether prepayments are included.
On the call, management said it has signed and closed one agreement, which included a prepayment component, and that several more are “in the queue,” though it did not disclose terms.
Sandisk also discussed the potential impact of changing AI infrastructure designs. In response to a question about key-value cache, management said none of that demand is included in current demand numbers, but initial analysis suggests it could add roughly 75 to 100 exabytes of demand in 2027, with that potentially doubling the following year. Management described this as another example of NAND being “front and center” in AI architecture and said it is working with NVIDIA and customers to understand configurations.
Balance sheet, JV extension, and Q3 outlook
Sandisk ended the quarter with $1.539 billion in cash and cash equivalents and $603 million in debt, after paying down an additional $750 million during the quarter. The company reported a net cash position of $936 million.
Adjusted free cash flow was $843 million, representing a 27.9% margin. Cash from operations was $1.019 billion, partially offset by $176 million in net cash capital spending. Gross capital spending totaled $255 million, or 8.4% of revenue.
The company also announced an agreement with Kioxia to extend the Yokkaichi joint venture through December 31, 2034, aligning its expiration with the Kitakami JV. As part of the extension, Sandisk agreed to pay $1.165 billion for manufacturing services to be provided by Kioxia, to be paid between calendar years 2026 and 2029. Management said the cost will flow through cost of goods sold over the next nine years.
Looking to fiscal third quarter, Sandisk guided for revenue of $4.4 billion to $4.8 billion and said it expects the market to be “more undersupplied” than in the second quarter. The company forecast non-GAAP gross margin of 65% to 67% and non-GAAP EPS of $12 to $14, assuming 157 million fully diluted shares. Management expects bits to be down mid-single digits sequentially, citing lower-than-historical seasonality as data center strength accelerates.
About Sandisk (NASDAQ:SNDK)
SanDisk Corporation offers flash storage solutions. The Company designs, develops and manufactures data storage solutions in a range of form factors using flash memory, controller, firmware and software technologies. The Company operates through flash memory storage products segment. Its solutions include a range of solid state drives (SSD), embedded products, removable cards, universal serial bus (USB), drives, wireless media drives, digital media players, and wafers and components. It offers SSDs for client computing applications, which encompass desktop computers, notebook computers, tablets and other computing devices.
