Sandisk Corp Q1 2026 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: C.J. Muse - Cantor Fitzgerald LP - Analyst : Yeah, thank you for taking the question. I guess, Dave, you spoke to customer engagement evolving now that we're on allocation. And you know very well how that's transpired in the HDD world moving from build to order, followed by long-term agreements. So curious, are you seeing similar trends emerge here in NAND? How does your visibility extend? And how are you allocating the bits that you can produce?

Question: C.J. Muse - Cantor Fitzgerald LP - Analyst : As a quick follow-up, how are you thinking about your bit shipment growth opportunities here in calendar '25, '26? Your days inventory down to only 107 days and BiCS8 is just kind of ramping. How are you thinking about what kind of bits you can ship this year and next?

Question: James Schneider, Ph.D. - Goldman Sachs Group Inc - Analyst : Good afternoon, thanks for taking my question. Just structurally, obviously, we're in a supply-constrained scenario, and I think a lot of customers are clearly asking for supply as you kind of talked about. So maybe you just kind of give us your view on over the next couple of years, the supply situation you expect to deliver, whether that's just through upgrades at this point? And what would make you decide to add wafer capacity over the next coming years?

Question: James Schneider, Ph.D. - Goldman Sachs Group Inc - Analyst : That's helpful, thank you. And then maybe relative to your position in enterprise SSDs. I think you gave some targets at the time of separation in terms of your ambitions in that market. Maybe give us an update on how the qualifications are going and as you look into the end of 2026 or 2027, what percentage of market share you might hope to attain and what -- how big of a part of the business that might be?

Question: Aaron Rakers - Wells Fargo Securities LLC - Analyst : Yeah, thanks for, taking the question. Apologize for the background noise here. II guess my first question is just building on the last one, David, there's been a lot of discussion around hard disk drives being supply constrained and what seems to be kind of an inflecting AI narrative around enterprise SSDs. I'm curious how you assess kind of the enterprise SSD market opportunity relative to hard disk drives. Is that -- has your thought process changed at all? Have the shortages in hard drives on a nearline perspective driven any kind of change of engagements on those opportunities?

Question: Aaron Rakers - Wells Fargo Securities LLC - Analyst : Yes, that's very helpful. And then Luis, if I can, real quick. I mean, in your prepared comments, you alluded to seasonality or just be aware of seasonality into the March quarter. Can you kind of unpack that? What should we be thinking about? Are we down sequentially in the March quarter? It seems like pricing could continue to trend higher. And how do we think about kind of feathering out the start-up costs as we move forward? Thank you.

Question: Joseph Moore - Morgan Stanley - Analyst : Great, thank you so much. I wonder if you could characterize some of this data center demand that you're seeing. Is there demand for QLC on the enterprise side? How much of it is QLC? And can you talk a little bit about how BiCS8 enables you to kind of increase your presence in that market?

Question: Joseph Moore - Morgan Stanley - Analyst : Great, thank you. And then as you describe the market, I would have to think that the fabs are all running full in NAND at this point, but you didn't mention underutilization expense. Do you think there's any incremental supply coming from the fact that people had underutilized the fabs earlier in the year? And just how does that affect your view of '26? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2025 / 9:30PM, SNDK.OQ - Q1 2026 Sandisk Corp Earnings Call

Question: Joseph Moore - Morgan Stanley - Analyst : Okay, thank you.

Question: Mark Newman - Sanford C Bernstein & Co LLC - Analyst : Hi, thanks for taking my question and Congrats on a great quarter. So just digging a bit deeper into the supply-demand dynamic. It seems like things are going great. I wondered if you could give us a little bit more clarity on the portion of your contracts that are shorter term versus longer term? Because obviously, longer-term contracts, as was discussed a little bit earlier, has a lot of positives in terms of giving you more confidence in the demand for longer term. But on the other hand, when you're talking about pricing, some of the pricing data out there is inflecting up significantly right now, but longer-term contracts may not actually inflect obviously, because they're longer-term contracts. So I just wondered if you could break out for us what portion would be shorter term, say, a quarter or less or what portion would be six quarters would be useful? And I have a follow-up on HBF as well.

Question: Mark Newman - Sanford C Bernstein & Co LLC - Analyst : Okay, great. Thanks for that. And then if you could give any more clarity on the road map for HBF, high-bandwidth flash. You discussed earlier in the prepared remarks about starting to work with some customers. Any updates on potential time line there? Thanks very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2025 / 9:30PM, SNDK.OQ - Q1 2026 Sandisk Corp Earnings Call

Question: Mark Newman - Sanford C Bernstein & Co LLC - Analyst : Great, thanks very much.

Question: Ruplu Bhattacharya - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Hi, thanks for taking my questions. It's Ruplu filling in for Wamsi today. I have 2, one for Dave on bit growth. Dave, you had strong mid-teens bit growth in the first quarter. Can you talk about how you're thinking about bit growth across the different markets, data center, client, consumer in the second half? And you talked about some products in allocation. Should we assume that's across the product line? And I'm assuming all of these orders are noncancelable. So any comments on the expected growth by end market in the second half and which products are in allocation? And I have a follow-up for Luis on margins.

Question: Ruplu Bhattacharya - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Okay. Okay. That's helpful. And Luis, if I can follow up on margins. It looks like you said in the first quarter, ex the start-up cost and underutilization, the gross margin would have been 33.1%. You're guiding at the midpoint of about 900 bps -- sorry, yes, a very strong 900 bps of growth in sequentially. So can you talk about what are the factors that are going into there? Should we expect another round of price increases? What is the factor -- how much is mix a factor to that? And I think you said there are no more underutilization costs and you're not talking about cost down. So are these the only 2 factors? Or is there FX or some other thing also that is impacting margins, which you've got a very strong guide. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2025 / 9:30PM, SNDK.OQ - Q1 2026 Sandisk Corp Earnings Call

Question: Ruplu Bhattacharya - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Thanks for all the details. Appreciate it. Thank you.

Question: Asiya Merchant - Citibank Cameroon SA - Analyst : Great, thanks for taking my question. Can I just clarify on the guide at the midpoint, I think it's 2.6%, and I think that's up like low double digits. I thought pricing in itself was up low double digits. So if you could just clarify that for us and you're still looking for bit growth unless I'm missing something here in my calculation. Then I have a follow-up. Thank you.

Question: Asiya Merchant - Citibank Cameroon SA - Analyst : Okay. And then just for my follow-up, a lot of questions on the data center. But just wanted to -- if I heard David correctly on the edge, the client PC and the mobile phones, just the confidence as we look into calendar '26 on the growth there. I think some of the expectations on unit growth were a little bit higher than maybe some industry is forecasting. So just if you could click on what's driving the confidence there on the edge devices, particularly PCs and mobile phones. Thank you.

Question: Asiya Merchant - Citibank Cameroon SA - Analyst : Great, thank you.

Question: Steven Fox - Fox Advisors LLC - Analyst : Hi, good afternoon. I just had one question for Dave. I guess I'm trying to figure out like how some of these long-term agreements might play out. I mean it seems like we're at a historic impasse with NAND and the demand coming from the cloud guys. So I don't know if you want to give any of this away, David, but like is there any kind of values that we should think about in these negotiations, whether it's sharing of cyclical risk, sharing of cash, CapEx, things like that? Anything you could sort of talk about? And then how does that trickle down to like customers that aren't lucky enough to be able to have longer-term supply agreements? Thanks.

Question: Steven Fox - Fox Advisors LLC - Analyst : Got it. Fair enough. Thank you very much.

Question: Krish Sankar - Cowen and Company LLC - Analyst : Yeah, hi, thanks for taking my question. I had two of them. First one, Dave or Luis, your data center revenues grew very nicely. I'm just wondering, is there a way to figure out how much of that is related to AI data center and neocloud versus traditional cloud? Is there a way to put a percentage around it? Or is it all majority AI? And then I had a follow-up.

Question: Krish Sankar - Cowen and Company LLC - Analyst : Got it. And then I think, David, you kind of talked about a 40% growth next year for data center exabytes and then even better growth in '27. I'm just curious, is that the right way to think about it, data centers is a 300-plus exabyte market this year going to mid-400 to 600 plus in '27?

Question: Nam Kim - Arete Research LLC - Analyst : Thanks for taking my question. I also have 2 questions on HBF. I know it's still early, but how do you see the long-term growth potential? And can you provide any qualitative color or early market sizing? And then second, how are you approaching this given competitors' greater TSV stacking experience from HBM? What competitive advantage do you think Sandisk can bring to HBF? Thank you.

Question: Nam Kim - Arete Research LLC - Analyst : Okay, thank you.

Question: Mark Miller - Benchmark Company LLC - Analyst : Thank you for the question and congrats on a great quarter and great outlook. Just with the strong sequential growth you've seen in data center, do you think you're picking up share there?

Question: Mark Miller - Benchmark Company LLC - Analyst : Okay, thank you.