Core Viewpoint - SanDisk has established that AI is reshaping the storage industry, with management stating that NAND is becoming a "key component of AI infrastructure" [2][10]. Group 1: Market Dynamics - Data center revenue for SanDisk surged by 64% quarter-over-quarter, indicating a significant shift in demand driven by AI [7][40]. - The company expects that by 2026, data centers will become the largest market for NAND, surpassing mobile devices for the first time [5][6]. - The demand for NAND capacity is expected to grow nearly 70% by 2026, a substantial increase from previous estimates of 20% and 40% [7]. Group 2: AI's Impact on NAND - AI is driving a structural change in the storage market, with NAND now viewed as essential for meeting global storage needs [10][38]. - The expansion of AI workloads is significantly increasing the demand for storage capacity in data centers and edge computing [10][38]. - SanDisk's high-performance TLC drives are contributing to revenue growth, with new products like the "Stargate" BiCS8 QLC storage expected to generate income in upcoming quarters [8][10]. Group 3: Supply and Capital Expenditure Strategy - Despite strong short-term pricing, SanDisk is committed to its existing capital expenditure plans and is cautious about blindly expanding production [13][14]. - The company is currently in a "severe allocation environment," unable to meet all customer demand, yet it remains disciplined in its supply strategy [14][39]. - SanDisk has extended its joint venture with Kioxia until 2034, ensuring a stable supply base for the next decade [15][16]. Group 4: Financial Performance and Guidance - SanDisk's Q3 gross margin guidance is projected to reach 67%, reflecting strong pricing power in a supply-constrained environment [19]. - The company reported a non-GAAP EPS of $6.20 for Q2, with expectations for Q3 EPS to rise to between $12 and $14 [19][43]. - Revenue for Q2 was $3.025 billion, a 31% increase quarter-over-quarter, driven by strong demand across all end markets [40][41]. Group 5: Traditional Market Challenges - Despite the growth in AI, traditional consumer electronics markets, such as PCs and smartphones, are facing unit sales declines [22][23]. - The CEO acknowledged that while unit sales may drop, increased single-device capacity could partially offset this impact [23]. Group 6: Strategic Initiatives - SanDisk is focusing on long-term agreements with customers to ensure supply certainty and predictable returns, moving away from traditional quarterly negotiations [10][39]. - The company is also prioritizing high-end products and configurations to support storage capacity and profitability [35].

Core Viewpoint - The company is experiencing significant growth driven by AI infrastructure expansion, particularly in the data center segment, with a notable increase in enterprise SSD demand due to AI workloads [6][13][20]. Group 1: Financial Performance - The company reported revenue of $3 billion for the second quarter, a 31% increase quarter-over-quarter and a 61% increase year-over-year [15]. - Non-GAAP earnings per share (EPS) for the quarter were $6.20, exceeding guidance of $3 to $3.40 [16]. - The non-GAAP gross margin was 51.1%, significantly higher than the previous quarter's 29.9% and above the guidance of 41% to 43% [15][16]. Group 2: Market Dynamics - The NAND market is undergoing a structural evolution driven by AI, with increasing demand for storage in data centers as data temperatures rise and workloads expand [13][20]. - The company is prioritizing long-term agreements with strategic customers to ensure supply certainty and better align with market demand [7][14]. - The data center segment is expected to see significant growth in both the short and long term, with enterprise SSD demand accelerating [8][20]. Group 3: Product Development and Innovation - The company is advancing next-generation product innovations and certifications, with key customer projects progressing as planned [8]. - The BiCS8 TLC solution is driving significant revenue growth in the data center product portfolio, which saw a 64% increase quarter-over-quarter [9]. - The company launched the Sandisk Extreme Fit, a breakthrough USB-C flash drive, enhancing its consumer product offerings [10][11]. Group 4: Strategic Partnerships and Investments - The company extended its joint venture agreement with Kioxia until December 2034, ensuring a stable supply of NAND technology [17]. - The company is focused on maintaining a cautious capital expenditure plan while supporting mid-to-high single-digit bit growth through the BiCS8 transition [14][17]. - The company is committed to investing in R&D and capital expenditures to support the development of advanced semiconductor technologies [16][70].

Core Viewpoint - The demand for storage driven by AI is not a temporary trend but a structural transformation in the industry, with data centers expected to become the largest market for NAND by 2026 [2][4]. Group 1: Company Performance - SanDisk reported a revenue of $3 billion for the quarter, a 31% increase quarter-over-quarter, and a non-GAAP EPS of $6.20, significantly higher than the previous quarter's $1.22 [29][30]. - Data center revenue surged by 64% quarter-over-quarter, indicating strong demand driven by AI infrastructure [3][29]. - The company’s non-GAAP gross margin reached 51.1%, up from 29.9% in the previous quarter, with expectations for Q3 gross margins to be between 65% and 67% [11][29]. Group 2: Market Dynamics - The CEO highlighted that AI is reshaping the NAND industry, making NAND a critical component for AI infrastructure, which is leading to a fundamental change in supplier-customer relationships [4][27]. - The company is experiencing a significant increase in demand for NAND capacity due to the expansion of AI workloads in data centers and edge computing [4][22]. - SanDisk is maintaining a cautious approach to capital expenditure despite strong short-term pricing, emphasizing the need for confidence in long-term demand before increasing production capacity [5][28]. Group 3: Strategic Initiatives - SanDisk announced an extension of its joint venture with Kioxia until 2034, securing a stable supply base for the next decade [8][31]. - The company is focusing on long-term agreements with customers to ensure supply certainty and better align with their long-term demand [7][21]. - SanDisk is prioritizing high-performance TLC drives and the upcoming Stargate QLC storage products to drive revenue growth in the data center segment [3][22]. Group 4: Industry Outlook - The company expects the data center market to see a near 70% growth in exabytes by 2026, reflecting a significant upward revision from previous estimates [6][29]. - Traditional consumer electronics markets, such as PCs and smartphones, are facing unit sales declines, which may impact overall growth despite AI-driven demand [12][13]. - The CFO indicated that the structural changes in the NAND market are expected to reduce cyclicality and create higher average long-term profit margins [27].

Fiscal Second Quarter 2026 Financial Results Quarter ended January 2, 2026 Forward-Looking Statements This presentation contains forward-looking statements within the meaning of U.S. federal securities laws, including, but not limited to, statements regarding expectations for: Sandisk Corporation's (the "Company's") business outlook and operational and financial performance for the fiscal third quarter of 2026 and beyond; the Company's market positioning; the alignment of the Company's technology and produc ...