Bernstein: SanDisk data center revenue rises 61% sequentially as higher volume and prices lift quarterly results

What drove the earnings beat?

SanDisk reported first-quarter fiscal 2027 revenue of $11.03 billion, exceeding Bernstein’s forecast by 4.5% and market consensus by 3.1%. Earnings per share were $49.51, exceeding the respective estimates by 5.1% and 6.8%.
Revenue rose 23% sequentially, with bit shipments up approximately 13% and average selling prices up approximately 9%; both volume and prices contributed to growth.
Data centers were the main source of the upside: revenue from the business was $4.8 billion, up 61% sequentially and 34% above market consensus.

Quarterly gross margin was 85.1%, up 0.5 percentage points sequentially; operating profit reached $8.87 billion, approximately 4% above market consensus.
Adjusted free cash flow, however, was $5.696 billion, below Bernstein’s forecast and market consensus by 8.2% and 13.3%, respectively. Cash flow performance was weaker than profit performance.

The company’s guidance for the second quarter of fiscal 2027 calls for revenue of $12.2 billion to $12.6 billion, gross margin of 84.5% to 85.5%, and earnings per share of $55 to $57. At the midpoints, revenue and earnings per share would rise approximately 12% and 13% sequentially, respectively, while gross margin would be roughly flat.
Management expects data centers to remain the main growth engine, with data center bit demand rising approximately 40% year over year in calendar 2027. The company also said its demand pipeline for NBM products exceeds available supply through the end of the decade.
For HBF, the first memory chip has completed design and entered manufacturing. The company plans to advance controller integration and send samples to customers in calendar 2027.

SanDisk repurchased approximately 3.2 million shares in the first fiscal quarter for $5 billion. Over the past two quarters, it repurchased a total of $9.5 billion, representing approximately 4% of shares outstanding, with $10.5 billion remaining under its existing authorization.
Bernstein believes the earnings beat, AI-driven data center growth and buybacks have strengthened investment confidence. It maintained its outperform rating and $3000 price target. The target represents 11 times its fiscal 2028 earnings-per-share forecast.
The firm also cautioned that near-term earnings expectations are already high and that the company faces the risk of a NAND cycle downturn. If NAND weakness extends beyond the current cycle and becomes structural, the valuation of the company’s assets could come under further pressure.