SanDisk’s Blowout Earnings Meet a Cold Reality: NAND Price Growth Is Slowing
TREE NEWS reports: SanDisk delivered a quarter that beat expectations on nearly every line—revenue, earnings per share, gross margin, and guidance—yet its stock plunged as much as 8% in premarket trading Friday. The culprit was not SanDisk’s own results but its Japanese fabrication partner, Kioxia, which issued a profit outlook that fell far short of consensus and warned that the AI-driven NAND flash price surge is beginning to cool.
SanDisk reported revenue of $11.03 billion, ahead of the $10.74 billion consensus, with a gross margin of 85.1% and non-GAAP EPS of $49.51, topping the $46.73 expected. Management also announced a $5 billion buyback increase and an 8-for-1 stock split. The stock barely budged after hours—until Kioxia’s guidance hit the tape.
The Second Derivative Matters
Kioxia projected operating profit of ¥2 trillion ($127 billion) for the current quarter, well below the ¥2.35 trillion consensus. That implies essentially flat sequential growth, a sharp deceleration from the 57% jump in the September quarter. NAND average selling prices rose about 25% in the three months through September, down from a 70% increase in the prior quarter. In the storage industry, the only number that matters is the second derivative—how fast prices are rising, not whether they are rising.
For a stock priced on the assumption that the curve would only steepen, that deceleration was enough to trigger a selloff. SanDisk fell to as low as $1,197.57 premarket, down 16% from Wednesday’s high of $1,419. Micron Technology also moved lower. The pain spread: JPMorgan’s market intelligence team noted that the DRAM storage ETF dropped 5.6% premarket, and the broader semiconductor sector came under pressure as concerns about AI monetization resurfaced.
Customers Are Pushing Back
There are signs that end customers are balking at higher prices. Kioxia executives have reportedly warned against excessive price hikes to avoid alienating customers. Intel said Friday it expects PC shipments to fall about 12% this year and another 10% in 2027, citing constrained memory supply; the company blamed memory prices for a “surprisingly severe PC correction” and its shares plunged 25% premarket.
SanDisk’s own guidance also contained a subtle warning. Its next-quarter revenue midpoint of $12.4 billion and EPS of $55 to $57 exceeded consensus of $12.08 billion and $52.94, but fell well short of Goldman Sachs’ estimates of $13.55 billion and $59.71—numbers that roughly represent the buy-side’s whispered expectations. Long-term agreements cover only about 50% of SanDisk’s planned bit capacity for fiscal 2027 and 65% for fiscal 2028, meaning half of next year’s output will float at contract market prices—and Kioxia just showed which way those prices are heading.
Market Implications
- Semiconductors: The selloff is a valuation reset for memory names priced on accelerating price growth. Expect volatility to persist as investors reassess the durability of the AI-driven storage boom.
- PC and hardware makers: Slowing NAND price increases are a double-edged sword—good for input costs, but Intel’s warning shows demand destruction is already underway.
- Broader market: The episode feeds into growing unease about AI capital expenditure and monetization timelines, a theme that has pressured megacap tech.
- Crypto and risk assets: A semiconductor-led risk-off move could weigh on high-beta assets, though the direct read-through is limited.
Key Takeaways for Investors
The storage cycle has not necessarily peaked, but the rate of change has. Kioxia’s guidance suggests price growth is normalizing, and the market is punishing any sign that the AI storage narrative is losing momentum. Bulls argue that 25% quarterly price growth is still exceptionally strong, data-center demand is structural, and Kioxia may be deliberately conservative. Bears counter that memory is cyclical, spot prices peaked in March, and capacity additions from Kioxia, Micron, and Chinese entrants are coming. For investors, the lesson is clear: in cyclical industries, the second derivative can matter more than the level—and expectations, once set at euphoric levels, are fragile.
