Sandisk Corporation Common Stock Citi’s 2026 Global TMT Conference
Review the key takeaways and the transcript of this earnings call.
- SanDisk reported that new business models (NBMs) are expected to represent 50% of bids in fiscal 27 and about two-thirds in fiscal 28, with a long-term target of 70-80% by fiscal 30.
- The company achieved around 80% gross margins even at the floor pricing levels within NBMs.
- SanDisk's data center business accounted for 38% of revenue exiting fiscal 26, with expectations to grow towards 50% as the market expands.
- The company reported $3 billion in revenue from data center business in the last quarter.
- SanDisk is investing in capacity to support mid to high teens annual NAND bit growth and increasing dollar capex accordingly.
- SanDisk generated $5 billion in free cash flow last quarter and returned $4.5 billion to shareholders via share buybacks.
- The company is funding R&D and investments in core NAND technology, new memory technologies, and HBF (High Bandwidth Flash) development.
- SanDisk sees hyperscalers as strategic customers for NBMs and has at least one edge customer engaged in NBMs.
- The company expects medium to higher-end edge devices to drive low single-digit unit growth and content growth in calendar 27.
- SanDisk highlighted competitive advantages in capex efficiency and wafer productivity driven by node transitions.
- The company is working with partners including SK Hynix, Google, and Meta on HBF standards and plans product trials in 2027.
- SanDisk's long-term market outlook assumes a NAND market growing from $50 billion to $300 billion driven primarily by AI and data center demand.
- The company expects mid to high teens sustainable NAND bit growth over a 10-15 year horizon.
- SanDisk is cautious about overbuilding capacity and focuses on balancing supply and demand to maintain attractive pricing and profitability.
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Transcript
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Tech Conference. Welcome, everyone. Asiya Merchant. I am here. I lead Citi's tech hardware and supply chain on the research side. Really excited to have Luis Thank you.
Russo here, CFO of SanDisk. I am sure this is one of the more exciting sessions here at Citi's Tech Conference. I am going to start off here with a few questions. Any safe harbor or something?
Yeah. You would have to read.
Let me just read it quickly.
All right. We'll be making forward-looking statements in today's discussion based on management's current assumptions and expectations, including with respect to our technology and product portfolio, our business plans and performance, market trends and opportunities, and our future financial results.
These forward-looking statements are subject to risks and uncertainties. We assume no obligations to update these statements. Please refer to our annual report on Form 10-K and other filings with the SEC for more information on the risks and uncertainties that could cause actual results to materially differ from expectations. We will also be making reference to non-GAAP financials and a reconciliation of GAAP to non-GAAP financials that can be found on our website.
Great. Thank you. Thank you.
All right. I'm going to kick it off here with a few questions. I'm going to leave some opportunity for investors to ask a few. Please do raise your hand so we can bring the mic to you. All right. Thank you again Thank you for being here.
It's great to be here.
Of course. I have to credit David and yourself, Luis, here for these NBMs. They've taken investors' interest quite unexpectedly. I know you guys have been talking about it.
Yeah. But when actually people did see it in your results, and now it's been two quarters, plus you had an Analyst Day as well where you talked about it.
I'm going to start it off with that because that seems to be on top of everybody's mind. Just to recap, you expect NBMs from a bit perspective to be 50% of your bits this year. You're talking about it, but two-thirds into fiscal 2028. Just where do we end up with the steady state? Are you thinking about this being like a 70%, 80% through your I think at the Analyst Day, you talked about it through fiscal 2030, sort of your long-term target overall when you laid that out.
Yeah. But in terms of NBM bits, what do you think could be the steady state going on after fiscal 2028?
Yeah, I love the question and just what we're trying to do here. You really take a step back. Just when we started, we were transacting every quarter, right? It was tough because you would start the quarter, and you did not know what our customers wanted. You got an idea of what they wanted, but not necessarily agreement on price. It was very tricky to manage and to guide our forecast. I remember one of our first board member meetings, one of our board members asked, "What's your backlog?" I was like, "What do you mean backlog? That doesn't exist in this industry." There was not kind of profitability, was really challenging. Starting this journey on building the new business models, I think was the right thing to do.
We started talking about that maybe three quarters ago, and it was an idea, and we were working on it. We had several customers engaged, and we signed our first NBM, I think was in January. We were taking small steps and really warming up and learning on how to do this, and it was a shorter one, and it was with a strategic customer, obviously. We then fast-forward to where we are today, and I think the relationship with these customers has dramatically changed. I think as you and I have talked, we have been very selective. We did not want 20 or whatever. We wanted to focus on those few customers that we thought are going to win in the market, that are very, very strategic for us, and those customers that are going to continue to take more bits as we go along the journey.
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