SanDisk (SNDK) crushed Q4 FY26 earnings expectations, beating revenue estimates by 7% and EPS expectations by 14%, yet shares still dropped 5% following the release. According to latest reports, SanDisk posted record fourth-quarter revenue of $8.965 billion and non-GAAP EPS of $39.25, comfortably beating expectations with adjusted earnings of $39.20 per share, exceeding analysts' estimates by almost $5. The company's Data Center revenue exploded 645% year over year to $2.98 billion, more than doubling sequentially from $1.47 billion, while Edge revenue jumped 195% to $12.16 billion. However, the stock's 500% year-to-date gain has left little room for disappointment, with shares already down 18.19% over the past month signaling fragile positioning among investors.
The primary concern for investors was not just the forward outlook, but whether the companies can maintain their exceptionally high profit margins as AI-related memory demand evolves. As reported, SanDisk's adjusted gross margin reached 78.4%, aided by BiCS8 ramp and NBM contracts providing visibility, while the company expects adjusted gross margin between 83% and 85% for fiscal 2027. However, with the stock trading at 44x earnings and a $211 billion market cap, analysts warn that NAND pricing is cyclical and peak margins may not persist. The earnings report came after analysts cautioned that expectations had become increasingly difficult to meet following the stock's sharp rally this year.
Despite margin concerns, growing AI inference workloads could increase NAND flash demand, potentially benefiting SanDisk more than some competitors. As reported, the company has doubled its announced NBM agreement count to 10 in just a few months, including five additional New Business Model agreements since its April earnings call. SanDisk has now signed five additional NBM agreements, including three contracts with new customers and two expansions of existing deals. The company expects first-quarter revenue between $10.3-$10.8 billion, representing another 15% to 20% sequential increase from Q4's $8.97 billion, with management expecting the momentum to continue into fiscal 2027. With the AI trade beginning to stall, investors are reassessing their positions in AI-related stocks, with SanDisk representing a significant holding in various ETFs that could see automatic buying or selling based on fund flows.
As reported, with the AI trade beginning to stall, several market indicators suggest a potential rotation may be underway. Gold has risen more than 7% over the past few days, while bitcoin is holding above $64,000 and shrugging off the Coldcard exploit with little reaction. Crypto traders may view these indicators as a signal of changing momentum, given the prevalent narrative that investors have been rotating capital into AI with bitcoin one of the major casualties. The rotation could signal a shift back toward traditional assets like gold and cryptocurrency as AI momentum cools, with Reddit sentiment swinging from 78 to 18 in recent days reflecting retail whiplash amid the current market volatility.
