Core Insights - Sandisk has become a leading player in the NAND flash memory and SSD markets following its spin-off from Western Digital in February 2025, with its stock price increasing from $50 to $395, making it the top performer in the S&P 500 over the past year due to the shift in the "AI Data Cycle" [1] Business Segments - Sandisk has restructured its operations into three main segments: Datacenter (28% of Revenue), Edge (61% of Revenue), and Consumer (11% of Revenue) [3][4][5] - The Datacenter segment focuses on high-capacity, power-efficient SSDs for hyperscalers like Amazon and Microsoft, featuring products such as Stargate controller-based drives and 256TB UltraQLC SSDs for AI inference [3] - The Edge segment, which serves the PC and smartphone markets, has transitioned to the Sandisk Optimus™ brand, with the Optimus GX Pro as the flagship product for AI PCs and professional workstations [4] - The Consumer segment remains a strong revenue source through retail memory cards and portable SSDs, recently achieving over 900,000 units of co-branded Nintendo Switch 2 microSD Express cards [5] Financial Performance - Sandisk reported a strong Q1 FY'26 performance with revenue of $2.38 billion, exceeding expectations, and a gross margin increase to 29.8% [6] - Guidance for Q2 FY'26 is optimistic, projecting EPS of $3.00–$3.40 and revenue of $2.55–$2.65 billion, alongside a gross margin expansion to 41–43% [7] - Data center revenue increased by 26% quarter over quarter, driven by demand from PC refresh cycles and AI smartphone storage needs [8] Analyst Estimates - Analyst estimates for Sandisk's EPS have significantly increased, with current quarter estimates rising from $1.77 to $3.25, an 83% increase, and next quarter estimates from $1.45 to $3.63, a 120% increase [9] - For the current year, EPS estimates have jumped from $6.31 to $12.59, a 99% increase, and for the next year, estimates have risen from $10.39 to $24.04, a 130% increase [11] Market Demand and Supply Dynamics - The demand for NAND memory is expected to intensify, particularly with NVIDIA's Vera Rubin server platform requiring significant additional SSD NAND, projected to reach 34.6 million TB in 2026 and 115.2 million TB in 2027 [12][13] - The global NAND supply shortage is anticipated to worsen, creating further demand for Sandisk's products [13] Revenue Trends and Financial Outlook - Sandisk's revenue for Q1 FY26 was $2.31 billion, a 23% year-over-year increase, with guidance for Q2 FY26 suggesting further growth to $2.6 billion (+38% YoY) and a full-year outlook of $10.45 billion (+42%) [14] - Non-GAAP gross margins have improved from the low 20s in early 2024 to 29.9% in Q1 FY26, with management targeting 41%–43% for early 2026 [15] Investment Conclusion - Despite valuation concerns due to a 680% stock price increase since August, the structural demand for high-bandwidth flash in AI infrastructure supports a premium valuation, maintaining Sandisk as a "Strong Buy" [16]