Sandisk Earnings: The Supercycle Rages on, but Long-Term Cyclicality Risk Keeps Us on the Sidelines

Key Morningstar Metrics for Sandisk

• Fair Value Estimate
  : $1,000.00
• Morningstar Rating
  : ★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Very High

What We Thought of Sandisk’s Earnings

Sandisk SNDK reported strong upside to June-quarter guidance and a bullish September-quarter outlook. Sales rose more than 370% year over year to $9.0 billion, and guidance implies more than 350% year-over-year growth. Shares fell 5% after-hours as guidance missed lofty consensus expectations.

Why it matters: NAND pricing growth was astonishing at over 200% year over year, but it slowed sequentially. There’s more room to run in the current upcycle, which we project to peak in early 2028. Through 2027, we expect banner results, but remain concerned over longer-term cyclicality.

• Management touts long-term agreements as a defense to cyclicality, but we don’t see them as watertight, with less than 20% of “committed” revenue actually contractually guaranteed. We see these as a hedge against a potential future downturn and as an indication of just how strong demand is today.
• The key debate for investors remains when and where prices peak, and how severely prices fall thereafter. We continue to expect a glut of supply coming online from Sandisk and peers in 2028 to pressure prices, with a sharp downturn ensuing in 2029 and 2030.

The bottom line: We maintain our $1,000 fair value estimate for no-moat Sandisk, and our long-term thesis on cyclicality is unchanged. Shares continue to look overvalued to us for investors with a long-term time horizon.

Between the lines: Sandisk holds eight long-term supply agreements, totaling at least $93.9 billion in contracted revenue. This reflects exceptional demand, but only $16.5 billion of this is fully guaranteed, and we believe customers will have leverage to adapt these agreements if prices fall.