Sandisk (NasdaqGS:SNDK) Q2 2026 Earnings call January 29, 2026 04:30 PM ET Company ParticipantsBlayne Curtis - Managing DirectorCJ Muse - Senior Managing DirectorDavid Goeckeler - Chairman and CEOIvan Donaldson - Head of Investor RelationsJoe Moore - Managing DirectorKarl Ackerman - Managing Director of Equity Research, Semiconductors, and IT HardwareLuis Visoso - EVP and CFOMatthew Pan - Equity Research Assistant VPVijay Rakesh - Managing DirectorConference Call ParticipantsAsiya Merchant - Director and Eq ...

Financial Data and Key Metrics Changes - Revenue for the second quarter was $3,025 million, up 31% quarter-over-quarter and 61% year-over-year, exceeding guidance of $2,550-$2,650 million [16] - Non-GAAP gross margin for the second quarter was 51.1%, up from 29.9% in the prior quarter, and above guidance of 41%-43% [16] - Non-GAAP EPS for the second quarter was $6.20, up from $1.22 in the prior quarter, exceeding guidance of $3.00-$3.40 [17] Business Line Data and Key Metrics Changes - Data center revenue was $440 million, up 64% sequentially, reflecting strong demand driven by AI workloads [16][8] - Edge revenue was $1,678 million, up 21% sequentially, with demand exceeding supply due to AI adoption [16][9] - Consumer revenue was $907 million, up 39% quarter-over-quarter, with a shift towards premium products [16][10] Market Data and Key Metrics Changes - The NAND market is undergoing structural evolution driven by AI, with data center expected to become the largest market for NAND in 2026 [12][21] - Higher demand for NAND in data centers is impacting other markets, leading to overall growth across segments [13] - The company anticipates continued strong demand well above supply beyond calendar year 2026 [11] Company Strategy and Development Direction - The company is transitioning to multi-year agreements with customers to ensure supply certainty and better align planning cycles with demand [5][6] - Focus on disciplined execution through the BiCS8 transition, supporting average long-term bit growth in the mid to high teens [11] - Continued investment in R&D and capital expenditures to support advanced semiconductor technologies [11][19] Management's Comments on Operating Environment and Future Outlook - Management noted that the NAND industry is becoming more durable and structurally attractive with higher average returns [6] - The company expects margins to reset at a structurally higher level, delivering fair returns on innovation and investment [22] - Management expressed optimism about the evolving business practices in the data center market, which is becoming increasingly strategic [70] Other Important Information - The company closed the quarter with $1,539 million in cash and cash equivalents and $603 million in debt, with a net cash position of $936 million [18] - An agreement was reached with Kioxia to extend the Yokkaichi joint venture through December 31, 2034, ensuring continued product supply [19] - For the third quarter, the company expects revenue between $4.4-$4.8 billion and non-GAAP gross margin between 65% and 67% [20] Q&A Session All Questions and Answers Question: How are you thinking about long-term agreements? - Management acknowledged the pros and cons of long-term agreements, emphasizing the need for confidence in demand and pricing stability [24][30] Question: Any plans to add supply given the current undersupply situation? - Management indicated that supply plans are in place, and they are focused on meeting customer demand while ensuring profitability [25][35] Question: Can you quantify incremental demand for NAND related to AI infrastructure? - Management noted that data center exabyte growth is forecasted to be high 60s for 2026, driven largely by AI [47] Question: How should we think about capital return plans, particularly around share repurchases? - Management stated that the priority is to continue investing in the business and reducing debt, with capital return plans to be evaluated at the right time [48] Question: Can you provide an update on the product roadmap to meet new performance requirements? - Management highlighted ongoing innovation in high-performance products and the introduction of new technologies to meet AI demands [87]

Summary of SanDisk Conference Call Company Overview - **Company**: SanDisk (NasdaqGS:SNDK) - **Industry**: NAND Flash Memory Key Points and Arguments Market Dynamics - The NAND market is experiencing tight supply conditions, with pricing increasing due to both demand and strategic under-shipping to maximize margins [13][14][16] - SanDisk is managing supply for a mid-teens growth rate, moving away from the previous expectation of 30% market growth [16][17] - The company anticipates the market will remain undersupplied through the end of 2026, with a focus on efficient supply-demand matching [16][17] Strategic Supply Management - SanDisk's strategy involves being prescriptive in managing supply to avoid oversupply situations that previously led to market downturns [15][16] - The company is investing billions annually to grow the market, with a long-term view of returns from new fabs [22][24] - There is a need for longer-term commitments from customers to align with SanDisk's investment horizon [24][25] Demand and Pricing - Demand in the data center market is increasing, contributing to a situation where unconstrained demand exceeds expected supply [33][34] - The company is optimistic about maintaining strong business performance despite potential price increases affecting consumer demand [32][36] Technological Advancements - SanDisk is focused on developing high-performance products, including the BiCS8 UltraQLC, which is expected to enhance their competitive position in the market [42][43] - The company is also exploring High Bandwidth Flash technology, aimed at optimizing NAND for specific use cases like AI inference [47][50] Financial Performance and Future Outlook - SanDisk reported a gross margin of 29.9%, with a target of 35% through the cycle, indicating room for improvement in profitability [36] - The company is generating significant free cash flow and is considering options for returning cash to investors in the future [53] Market Position and Competition - SanDisk acknowledges competition in the NAND market but believes its strategy and technological advancements will allow it to maintain a strong position [19][31] - The company is actively engaging with large customers for potential long-term agreements, indicating a shift towards more stable demand commitments [26][28] China Market Considerations - SanDisk sees opportunities in China but recognizes the strong presence of local suppliers, which may limit its market share [30][31] Additional Important Insights - The company emphasizes the importance of capital efficiency in its operations, focusing on maximizing output while minimizing capital expenditure [44][46] - SanDisk's collaboration with SK Hynix on High Bandwidth Flash indicates a strategic partnership aimed at addressing emerging market needs [51][52]