Financial Report Preview | After a 47% drop in July, we are facing a major financial report test! Can SanDisk (SNDK.US) use AI requirements to prove a “mistaken kill”?

The Zhitong Finance App learned that memory chip giant SanDisk (SNDK.US) will release the fourth quarter and full year results for the 2026 fiscal year after the market on Wednesday (August 5) EST. The market is paying close attention to whether the previous growth in NAND flash memory sales, profit margins, and profits driven by strong demand for artificial intelligence infrastructure will continue.

The release of this financial report coincides with SanDisk's stock price experiencing sharp fluctuations. Although the company benefited from rising demand for data center storage and limited NAND supply, in July, as investors concentrated on reducing their holdings of some of the strongest performing memory chip stocks this year, SanDisk's stock price fell sharply.

Performance guidelines point to another quarter of rapid growth, and last quarter's results set a high base

SanDisk officially expects revenue for the fourth fiscal quarter to be between $7.75 billion and $8.25 billion. Based on the median value of $8 billion in the range, the month-on-month increase was about 34%, a sharp increase of more than 320% compared to US$1.9 billion in the same period in fiscal year 2025.

The company predicts non-GAAP diluted earnings per share for the fourth fiscal quarter of $30 to $33, compared to just $0.29 per share after adjustments for the same period last year. Meanwhile, non-GAAP gross margin is expected to be between 79% and 81%.

Some market forecasts are even higher than the company's official guidelines. According to statistics from third-party profit data platforms, analysts currently expect average revenue of about US$8.42 billion, with adjusted earnings per share of approximately US$34.67. This means that investors may expect SanDisk's final performance not only to meet the standards, but also to exceed the upper limit of the guideline.

However, such high market expectations also mean that even if the company hands over a steady “report card,” stock prices may still face downward pressure if they give a conservative outlook for the new fiscal year.

SanDisk's third-fiscal quarter performance was impressive: revenue reached US$5.95 billion, up 97% month-on-month, up 251% year over year; adjusted earnings per share rose to US$23.41; and GAAP net profit reached US$3.62 billion.

Gross margin expanded to 78.4% during the quarter, compared to 50.9% in the previous quarter and only 22.5% in the same period last year. The significant improvement in gross margin was mainly due to rising NAND prices and the company's product structure leaning towards high value-added customers and markets.

By business, data center revenue reached 1.47 billion US dollars in the third fiscal quarter, surging 233% month-on-month and surging 645% year over year; edge business revenue surged 295% year over year to 3.66 billion US dollars; consumer business revenue rose 44% year over year to 820 million US dollars, but fell 10% month-on-month.

In terms of cash flow, operating cash flow for the quarter was US$3.04 billion, cash held at the end of the period was US$3.74 billion, and the company paid off all long-term debts at the end of the quarter.

NAND pricing and long-term contracts became key variables. Market expectations were high after the sharp drop in July

AI workloads demand high speed and durable storage, which strongly supports sales of enterprise-grade solid-state drives and high-end NAND products. SanDisk has fully benefited from this, while limited industry production capacity has further strengthened pricing capabilities and profit margin levels.

Investors will pay close attention to whether data center revenue continued to expand rapidly in the fourth fiscal quarter; whether higher average sales prices continued to support extraordinary gross profit margins. Additionally, management comments on cloud service provider procurement trends, enterprise-grade SSD shipments, and the progress of next-generation BiCS technology will help determine the sustainability of the current growth momentum.

Long-term customer agreements are another major highlight. By the end of the third fiscal quarter, SanDisk had signed three long-term agreements under the new business model, and two more were added in the fourth fiscal quarter. These multi-year arrangements include stronger financial commitments to improve revenue predictability while reducing the cycle fluctuations inherent in the storage industry. Therefore, management's statements about FY2027 contract coverage, manufacturing capacity, and partnership with Kioxia (Kioxia) are probably as important as “book numbers” for quarterly results.

SanDisk shares closed at $1214.83 on July 31, down about 5.2% on the same day. Throughout July, the stock had a cumulative decline of about 47%, the worst monthly performance since returning to the publicly traded market as an independent company in February 2025. Previously, the stock experienced an unusually strong upward cycle.

July's concentrated sell-off shows that investors have become wary of overvalued and crowded AI-themed deals. However, the correction in stock prices also eased valuation pressure before financial reports to a certain extent.

If this performance exceeds expectations in revenue, surpasses 81% in gross margin, and the outlook for the 2027 fiscal year is optimistic, SanDisk's stock price is expected to usher in a restorative rebound. Conversely, if NAND pricing weakens, data center orders slow down, or management statements tend to be conservative, the recent decline may continue even if the year-on-year increase is still significant.