Nomura: Sandisk revenue and gross margin beat expectations as data center business surges and consumer business declines

Where did first-quarter results beat expectations?

In the first quarter of fiscal 2027, ending in September 2026, Sandisk posted revenue of 11.031 billion dollars, up 23% quarter over quarter and above the Bloomberg market consensus of 10.695 billion dollars as of 30 October.
Non-GAAP gross margin was 85.1%, above the market consensus of 84.5%. The midpoint of the company’s earlier first-quarter gross margin guidance had implied a quarter-over-quarter decline, prompting a negative market reaction.
Nomura estimates that bit shipments rose 10%–15% quarter over quarter in the first quarter, while bit prices increased by a high-single-digit percentage. The bank sees no surprises in what these results imply for the NAND market.

First-quarter data center revenue rose 61% quarter over quarter, edge revenue increased 7%, and consumer revenue fell 29%, showing a marked divergence in growth across the businesses.
The company expects data center bit demand to rise more than twofold in 2026 and continue to grow 40% year over year in 2027. It also expects growth in PC and smartphone demand as storage capacity per device continues to increase.
Following the earnings call, Sandisk shares fell approximately 2% in after-hours trading from their closing price.

The midpoint of the company’s revenue guidance for the second quarter of fiscal 2027 is 12.4 billion dollars, up 12% quarter over quarter and above market consensus of 12.103 billion dollars. Its gross margin guidance midpoint of 85.0% is also slightly above consensus of 84.8%.
The guidance assumes that both bit shipments and bit prices will rise quarter over quarter.
Sandisk repurchased 5 billion dollars of shares in the first quarter, equivalent to approximately 90% of adjusted free cash flow, the same proportion as in the previous quarter. Nomura noted that Kioxia’s previously announced buyback plan was equivalent to approximately 97% of its first fiscal quarter core free cash flow.