Memory chip maker SanDisk (SNDK) reported third-quarter revenue that more than tripled from a year ago, fueled by surging demand for its memory in artificial intelligence data centers. The company also announced a $6 billion share buyback and long-term contracts worth at least $42 billion, signaling a strategic move to reduce the historical volatility of the memory market.
"The bane of this industry has been the boom-bust cycle," CEO David Goeckeler told Reuters. "We want to get out of that. We want consistent, predictable economics."
For the quarter ended April 3, SanDisk's revenue jumped to $5.95 billion, easily beating the LSEG consensus estimate of $4.70 billion. Adjusted profits were $23.41 per share, a significant turnaround from a 30-cent loss in the same quarter last year and far ahead of the $14.50 per share analyst estimate. The company’s NAND flash memory is critical for AI systems that process large datasets.
The strong results and forward guidance suggest the current memory upcycle, driven by the capital-intensive AI infrastructure buildout, could be more durable than previous cycles. SanDisk's stock has already climbed more than 360% this year, and the new long-term agreements provide a new layer of revenue visibility that could further support its valuation.
The core of SanDisk's blowout quarter is the insatiable demand from AI data centers. Unlike in previous years, where NAND was less central, it is now vital for AI workloads involving large language models and codebases. This has directly translated to SanDisk's top and bottom lines.
The company is forecasting current-quarter sales between $7.75 billion and $8.25 billion, with adjusted profits of $30 to $33 per share. Both figures are substantially higher than Wall Street's prior estimates of $6.49 billion in revenue and $22.70 in EPS, indicating that management sees the AI-driven momentum continuing.
To counter the industry's notorious price swings, Goeckeler announced five long-term supply agreements. Three of these contracts, signed in the third quarter, are worth a combined $42 billion. Goeckeler noted that these agreements include financial commitments that prevent customers from walking away if market conditions change, a flaw in past attempts at long-term deals.
This move is viewed positively by analysts. "The stock remains a key AI beneficiary despite its sharp run," said Amit Daryanani of Evercore ISI, who initiated coverage with an Outperform rating and a $1,200 price target. He highlighted the rise of long-term contracts with cloud players as a key factor in improving pricing visibility and reducing volatility. Similarly, Bank of America's Wamsi Mohan raised his price target to $1,080, citing the "secular opportunity as AI inference makes NAND more indispensable."
Despite the strong report, SanDisk shares fell 6% in after-hours trading, a move that could be attributed to profit-taking after the stock's massive run-up this year. The announced $6 billion buyback may help provide a floor for the stock. The company's performance and strategic shifts will be closely watched by competitors like Samsung and partners such as Kioxia.
This article is for informational purposes only and does not constitute investment advice.
