Bernstein: SanDisk beats expectations as volumes and prices rise, with buybacks supporting higher EPS forecasts

What drove the first-quarter beat?

SanDisk’s revenue in the first quarter of fiscal 2027 was 11.031 billion dollars, up 23% sequentially and 3.1% above market consensus; earnings per share were 49.51 dollars, 6.8% above consensus. Revenue growth was driven by a sequential increase of approximately 13% in bit shipments and a 9% rise in the average selling price.
Data centers were the main source of the upside: the business generated 4.8 billion dollars in revenue, up 61% sequentially and 34% above market consensus. The company guided for second-quarter revenue of 12.2 billion to 12.6 billion dollars and earnings per share of 55 to 57 dollars; at the midpoints, these represent sequential growth of approximately 12% and 13%, respectively.
Cash flow did not similarly beat expectations: adjusted free cash flow for the first quarter was 5.696 billion dollars, 13.3% below market consensus.

Management expects data center bit demand to grow approximately 40% year over year in calendar 2027; NBM customer demand commitments exceed available supply through 2030. Some existing customers have placed additional orders, and new batches can be negotiated at prevailing market prices rather than existing contract prices.
New high-performance NAND may also consume more wafer capacity. SLC solutions for agentic inference could replace some more expensive DRAM in applications where they meet performance and endurance requirements; however, customer discussions remain at the architecture stage, with no meaningful sales yet. SLC mode entails approximately 3 to 4 times the bit-capacity penalty relative to TLC or QLC, so even modest adoption could absorb more capacity.
The design of the first HBF memory chip is complete and it has entered manufacturing, with controller integration and customer sampling targeted for calendar 2027. Bernstein’s base case estimates a 6.5-fold bit-capacity penalty for HBF relative to conventional NAND; as the product scales, this could further tighten industry supply.

Higher prices for components such as DRAM, together with a greater mix of enterprise SSDs, which contain a higher proportion of non-NAND components, led to unit bit costs performing slightly worse than Bernstein expected. The firm expects blended unit bit costs to remain roughly flat in fiscal 2027.
Buybacks reduce the share count, helping offset cost pressures. In the first quarter, the company repurchased approximately 3.2 million shares for 5 billion dollars; over the past two quarters it repurchased 9.5 billion dollars in total, equivalent to approximately 4% of shares outstanding. The remaining buyback authorization is 10.5 billion dollars.
Bernstein raised its EPS forecasts for fiscal 2028 and 2029 by approximately 7% and 8%, respectively, mainly because of the lower share count. At the same time, it cut its revenue forecasts for each of the two years by 1.3% and its net profit forecasts by 0.8% and 1.0%, respectively; it also cut its fiscal 2027 EPS forecast by 2%.

Management said the annual decline in underlying NAND costs has slowed from a historical 15% to 7%–8% because manufacturing is more complex, equipment is more expensive and production cycles are longer. Bernstein believes slower cost declines could constrain supply growth, supporting more durable pricing power and margins.
Bernstein reiterated its outperform rating and 3000 dollar price target, equivalent to approximately 10 times its fiscal 2028 EPS forecast. The firm also noted that near-term earnings expectations are high and that a downturn in the NAND cycle poses a risk to the price target.