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Sandisk Corp (SNDK)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered a clean beat with revenue $2.31B and non-GAAP EPS $1.22 versus S&P Global consensus of $2.15B and $0.89, driven by stronger pricing and mid-teens bit growth; gross margin expanded 350 bps QoQ to 29.9% non-GAAP despite $61M startup and $11M underutilization costs . Consensus values retrieved from S&P Global.*
  • Guidance shifted sharply higher: Q2 FY26 revenue $2.55–$2.65B and non-GAAP gross margin 41–43% with EPS $3.00–$3.40, signaling sustained pricing tailwinds and cost tailwinds as startup costs roll off .
  • End-market breadth: Edge up 26% QoQ to $1.39B, Consumer up 11% to $652M, and Datacenter up 26% to $269M; BiCS8 reached 15% of bits and is expected to be majority exiting FY26, underpinning mix shift to higher-margin enterprise SSDs .
  • Strategic catalysts: hyperscaler qualifications for storage-focused “Stargate” 128TB QLC enterprise SSD underway, broader hyperscale engagement (five majors), and multi-quarter supply discussions as products enter allocation—a potential re-rating driver on visibility and margin narrative .

What Went Well and What Went Wrong

What Went Well

  • Broad-based demand strength and pricing: revenue +21% QoQ to $2.31B and non-GAAP gross margin +350 bps QoQ; CFO: “Pricing strengthened during the quarter… incremental revenue drove the higher-than-expected gross margins” .
  • Datacenter momentum and qualification pipeline: “Two hyperscaler qualifications underway… third hyperscaler and top storage OEM planned for CY26… engagement with five major hyperscale customers” .
  • Technology inflection: BiCS8 accounted for 15% of bits and is targeted to reach majority of bit production exiting FY26; CEO: “Our technology is arriving at exactly the right time… the opportunity to drive meaningful earnings power is just starting” .

What Went Wrong

  • YoY compression versus a strong prior-year baseline: GAAP gross margin 29.8% vs 38.6% (-880 bps YoY) and non-GAAP operating income $245M vs $354M (-31% YoY) as costs and mix weighed vs Q1 FY25 .
  • OpEx above guidance: non-GAAP OpEx $446M vs guided $415–$430M due to higher variable compensation tied to revenue over-delivery, pressuring operating margin despite topline beat .
  • Ongoing transition costs: $61M startup and $11M underutilization charges in Q1; although tailwinds ahead, these charges dampened reported gross margins in the quarter .

Financial Results

Summary Financials vs Prior Quarters

MetricQ3 2025Q4 2025Q1 2026
Revenue ($USD Billions)$1.70 $1.901 $2.308
Gross Margin % (GAAP / Non-GAAP)22.5% / 22.7% 26.2% / 26.4% 29.8% / 29.9%
Operating Income ($USD Millions) (GAAP / Non-GAAP)$(1,881) / $2 $18 / $100 $176 / $245
Net Income ($USD Millions) (GAAP / Non-GAAP)$(1,933) / $(43) $(23) / $42 $112 / $181
Diluted EPS ($USD) (GAAP / Non-GAAP)$(13.33) / $(0.30) $(0.16) / $0.29 $0.75 / $1.22

Year-over-Year Snapshot (Q1 2026 vs Q1 2025)

MetricQ1 2025Q1 2026
Revenue ($USD Billions)$1.883 $2.308
Gross Margin % (GAAP / Non-GAAP)38.6% / 38.9% 29.8% / 29.9%
Operating Income ($USD Millions) (GAAP / Non-GAAP)$291 / $354 $176 / $245
Net Income ($USD Millions) (GAAP / Non-GAAP)$211 / $263 $112 / $181
Diluted EPS ($USD) (GAAP / Non-GAAP)$1.46 / $1.81 $0.75 / $1.22

End-Market Revenue Breakdown

End-Market ($USD Millions)Q1 2025Q4 2025Q1 2026
Datacenter$300 $213 $269
Edge (Client)$1,069 $1,103 $1,387
Consumer$514 $585 $652
Total$1,883 $1,901 $2,308

KPIs and Cash Metrics

KPIQ3 2025Q4 2025Q1 2026
Inventory Days150 135 115
Cash & Cash Equivalents ($USD Millions)$1,507 $1,481 $1,442
Gross Debt ($USD Millions)$1,927 (LT+current) $1,829 (LT) ~$1,351 CFO view / $1,331 LT + $20 current
Cash from Operations ($USD Millions)$26 $94 $488
Free Cash Flow ($USD Millions)$(18) $49 $438
Adjusted Free Cash Flow ($USD Millions)$220 $77 $448
Startup Costs ($USD Millions)$29 $42 $61
Underutilization ($USD Millions)$24 $51 $11
Net Cash Position ($USD Millions)—$(368) net debt ~$91 net cash

Performance vs S&P Global Consensus (Q1 2026)

MetricConsensusActual
Revenue ($USD Billions)$2.149*$2.308
Primary EPS (Non-GAAP, $USD)$0.891*$1.22
# of Estimates (EPS / Revenue)14* / 14*—

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)Q1 2026$2.10–$2.20 Actual: $2.308 Beat vs guide
Non-GAAP EPS ($USD)Q1 2026$0.70–$0.90 Actual: $1.22 Beat vs guide
Revenue ($USD Billions)Q2 2026—$2.55–$2.65 Initiated (higher seq.)
Gross Margin % (GAAP / Non-GAAP)Q2 2026—40.8–42.8 / 41.0–43.0 Initiated (↑ seq.)
Non-GAAP OpEx ($USD Millions)Q2 2026—$450–$475 Initiated
Non-GAAP I&O Expense ($USD Millions)Q2 2026—$40–$45 Initiated
Non-GAAP Tax Expense ($USD Millions)Q2 2026—$80–$90 Initiated
Non-GAAP EPS ($USD)Q2 2026—$3.00–$3.40 Initiated
Diluted Shares (Millions)Q2 2026—~155 Initiated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2025, Q-1: Q4 2025)Current Period (Q1 2026)Trend
Pricing & Supply/DemandInitiated price increases; undersupplied market through CY26 expected Pricing strengthened; products on allocation; demand > supply beyond CY26 Strengthening pricing; deeper allocation
Enterprise SSD (Stargate)Roadmap: 60→128→256TB QLC; new clean-sheet ASIC; qualifications beginning Two hyperscaler quals underway; third and top OEM planned CY26; sequential DC growth expected through FY26 Accelerating quals; growing mix
BiCS8 ramp10% bits in FY25 exit; node ramp planned 15% of bits; majority by FY26 exit Faster ramp/mix shift
HBF (High Bandwidth Flash)Announced; timelines and SK hynix ecosystem partnership; sampling NAND die 2026, controller 2027 Active customer discussions across edge/cloud inference use cases Steady progress; TAM clarity forthcoming
Consumer/GamingNintendo Switch 2 co-branded microSD; gaming storage leadership 900k Switch 2 microSD Express units sold in Q1; refreshed portfolio poised for holidays Strong sell-through; holiday tailwind
Tariffs/MacroLimited U.S. tariff exposure; monitoring dynamics; yen cost structure nuance Staying close to tariffs; confident navigating footprint; allocation across B5/B8 Managed risk; stable ops

Management Commentary

  • CEO: “Customers are turning to Sandisk for our leading technology and products… demand is strengthening… we achieved our net cash positive milestone ahead of plan” .
  • CEO: “BiCS8… accounted for 15% of total bits shipped; expected to reach majority of bit production exiting fiscal year 2026” .
  • CFO: “Non-GAAP gross margin… 29.9%, up 350 bps QoQ… incurred $61M startup and $11M underutilization… excluding, non-GAAP gross margin would have been 33.1%” .
  • CEO on hyperscaler dynamics: “Customers are… providing visibility all the way through calendar year 2027… multi-quarter volume and price deals for certainty of supply” .
  • CFO on guidance drivers: “We expect pricing to be double digits and low-single-digit bit growth… most of the growth in revenue will be pricing-driven” .

Q&A Highlights

  • Allocation and LT supply agreements: Management prioritizing strategic customers; engaging in multi-quarter and potential multi-year volume/price commitments to secure supply visibility (especially DC) .
  • Cost trajectory: Startup costs stepping down to ~$30M in Q2 and “pretty much zero” thereafter; underutilization near zero going forward; gross margin lift primarily pricing-driven with some node cost tailwinds .
  • Datacenter market acceleration: Data center exabytes outlook raised to mid-40% in 2026; majority AI-driven growth; sequential DC sales growth expected through FY26 .
  • Product mix: Strong progress on compute TLC SSD; storage class 128TB QLC under qualification now, with broader ramps expected mid-next year; QLC mix 20%→40% by FY26 exit .
  • Edge devices: PCs flat to slightly up with mid-single-digit capacity growth; smartphones units slightly up with double-digit capacity growth, supporting exabyte growth .

Estimates Context

  • Q1 FY26 results beat consensus: Revenue $2.308B vs $2.149B*, EPS (non-GAAP) $1.22 vs $0.891*; 14 estimates for both metrics.* The beat was driven by double-digit pricing increases, mid-teens bit growth, and favorable tax rate, partially offset by higher variable OpEx . Values retrieved from S&P Global.*

  • Outlook implies upward estimate revisions: Q2 FY26 revenue $2.55–$2.65B and non-GAAP EPS $3.00–$3.40 with gross margin 41–43% suggest models will need to reflect stronger pricing tailwinds, DC mix shift, and startup-cost roll-off .

Key Takeaways for Investors

  • Pricing-led upcycle: With products on allocation and sequential price increases, margin expansion appears durable; focus on monitoring pricing vs. bit growth to sustain GM trajectory into Q2/Q3 .
  • Datacenter optionality: Hyperscaler qualifications across compute (TLC) and storage (QLC 128TB) should drive mix and margin; watch conversion of qualifications into revenue acceleration through FY26 .
  • Technology catalysts: BiCS8 ramp to majority of bits and HBF inference roadmap (die in 2026, controller in 2027) underpin medium-term differentiation—potential multiple expansion on visibility .
  • Cost tailwinds: Startup and underutilization charges are falling quickly; excluding these, Q1 non-GAAP GM already at 33.1%—validate Q2 guide as pricing and node mix further lift margins .
  • Cash generation and de-leveraging: Adjusted FCF $448M in Q1 and net cash position achieved ahead of plan—supports reinvestment and potential capital returns over time .
  • Near-term trading setup: Strong Q2 guide (EPS $3.00–$3.40) and hyperscaler pipeline are positive catalysts; watch seasonality in Q3 (consumer down post-holidays) and any tariff headlines for volatility .
  • Medium-term thesis: Shift to enterprise SSDs, BiCS8 mix, and HBF innovation position SNDK to capture AI-driven storage TAM with improving profitability and cash conversion through FY26–27 .