Sandisk Corp (SNDK)·Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 revenue was $1.70B, down 10% q/q and 1% y/y, with non-GAAP EPS at $(0.30), while GAAP EPS reflected a $(13.33) loss driven by a $1.83B goodwill impairment; management pointed to oversupply and high single-digit ASP declines as key headwinds .
• The quarter was above prior guidance on revenue and at the high end for non-GAAP EPS; segment mix showed Client down 10% q/q, Cloud down 21% q/q, and Consumer down 5% q/q .
• Q4 2025 guidance: revenue $1.75–$1.85B, non-GAAP gross margin 25.5–27.0%, non-GAAP OpEx $395–$405M, non-GAAP EPS $(0.10)–$0.15, with ASPs expected up mid- to high-single digits and bit shipments flat .
• Catalysts noted: announced price increases at the start of Q4, strong BiCS 8 ramp (target ~10% of bits in Q4), and expanding enterprise SSD qualifications (TLC for compute; QLC for high-capacity storage), supporting a return to pricing discipline and margin recovery .

What Went Well and What Went Wrong

• What Went Well

  • Revenue and EPS landed at the high end of guidance; cash and cash equivalents rose to $1.5B, reflecting operational discipline and liquidity improvement .
  • Technology execution: successful BiCS 8 ramp across product lines, with 2-terabit QLC die qualifying for 128TB/256TB enterprise SSDs; client SSDs qualified with multiple global PC OEMs .
  • Strategic pricing actions: company commenced price increases in Q4 and extended fab underutilization to rebalance supply/demand and support sustainable pricing .

• What Went Wrong

  • ASPs fell high single digits vs. expectation for mid-single-digit declines; Cloud revenue dropped 21% q/q, underscoring pricing and demand digestion in enterprise SSDs .
  • GAAP loss driven by a $1.83B non-cash goodwill impairment, compressing GAAP profitability and highlighting market-cap-based impairment triggers post separation .
  • Underutilization and fab start-up costs weighed on margins (Q3 non-GAAP GM would have been 25.8% absent $24M underutilization and $29M start-up costs); similar headwinds expected to persist in Q4 .

Financial Results

Segment Breakdown

KPIs

Actual vs. Consensus

Values marked with “*” were retrieved from S&P Global.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We have taken actions to reduce supply to match demand and commenced price increases this quarter. Our investment, supply management, and pricing strategies will remain focused on maximizing returns.” — CEO David Goeckeler .
• “Non-GAAP gross margin included headwinds of $24M in underutilization charges and $29M in fab start-up costs. Excluding these, non-GAAP GM would have been 25.8%.” — CFO Luis Visoso .
• “We expect BiCS 8 to be integrated across a broad range of product lines and represent 10% of our bit shipments in the fourth quarter.” — CEO David Goeckeler .
• “We expect revenue for the fourth quarter of $1.750–$1.850 billion…bits flat and ASP up mid- to high single digits.” — CFO Luis Visoso .

Q&A Highlights

• Supply/demand and utilization: Management targets structural capacity near 100% over time; underutilization is a tactical lever monitored weekly to balance supply/demand and pricing .
• Enterprise SSD outlook: Despite near-term pricing volatility, qualifications are broadening; enterprise SSD revenue expected to triple FY24→FY25, with QLC high-capacity roadmap (60TB→128TB→256TB) and new “Stargate” controller .
• Margin trajectory: Q4 non-GAAP GM guided up sequentially despite higher underutilization ($55–$65M) and ~$50M start-up costs; start-up costs expected to fade after a few quarters .
• Tariffs & supply chain: Limited tariff exposure due to sourcing; front-end in Japan JV, diversified back-end in Malaysia/China; no notable bottlenecks identified .
• Cost-per-bit disclosure: Company de-emphasizing explicit cost-per-bit guidance given reduced, inconsistent cost reductions at higher layer nodes; focus shifts to performance/power/density differentiation .

Estimates Context

• Q3 2025: Revenue beat consensus ($1.695B vs. $1.622B); EPS loss narrower than consensus (−$0.30 vs. −$0.387). EBITDA missed modestly (−$5M actual vs. $6M consensus)* .
• Q4 2025 (context vs. guide): Consensus revenue $1.829B* sits within the $1.75–$1.85B guide; consensus EPS $0.033* is bracketed by the −$0.10 to $0.15 range, implying sensitivity to ASP trajectory and cost headwinds .
• FY context: FY25 consensus revenue $7.28B and EPS normalized $2.67; FY26 consensus revenue $10.24B and EPS normalized $12.67, reflecting expectations for pricing recovery and BiCS 8 scaling*.
  Values marked with “*” were retrieved from S&P Global.

Key Takeaways for Investors

• Near-term recovery framework: Price increases and disciplined underutilization are aimed at stabilizing ASPs and lifting margins; Q4 guide implies sequential improvement despite continued start-up costs .
• Technology execution is a key edge: BiCS 8 ramp across TLC/QLC and new enterprise controller (Stargate) position Sandisk for share gains in AI-driven data center workloads .
• Segment mix matters: Cloud digestion and pricing volatility weighed on Q3; watch enterprise SSD qualifications and ASP trends for Q4 as primary drivers .
• Non-GAAP vs. GAAP optics: GAAP loss reflects non-cash goodwill impairment ($1.83B); investment case should focus on non-GAAP margin trajectory and cash generation (Adj. FCF $220M in Q3) .
• Macro/tariff exposure contained: Minimal direct tariff impact given diversified sourcing; supply chain viewed as efficient with multiple back-end options .
• Watch margin headwinds fade: Underutilization and start-up costs are expected to persist near term but diminish over time; margin recovery linked to pricing and BiCS 8 maturity .
• Trading lens: Near-term stock reaction likely tied to pricing momentum, Q4 ASPs up mid-to-high single digits, and execution on enterprise SSD qualifications; monitor updates on BiCS 8 mix and start-up cost tapering .

Notes on sources and prior periods:

• The Q3 2025 8‑K 2.02 press release and exhibits include full financial statements, segment data, non-GAAP reconciliations, and Q4 guidance .
• Prior two quarters’ earnings call transcripts were not available in the document set; pre-separation financials were prepared on a carve-out basis, per basis of presentation .