Sandisk expects Q2 FY2027 revenue of $12.2B-$12.6B as board approves 8-for-1 stock split

• "We began fiscal year 2027 with another strong quarter, creating value for customers and shareholders and delivering results above guidance." (Chairman & CEO David V. Goeckeler)

• "Beyond the core road map, high-bandwidth flash or HBF, reached an important milestone in the fiscal first quarter with the tape-out of our first HBF memory die with fabrication now underway" and "we remain on track to deliver samples of our first HBF-based products next calendar year." (Chairman & CEO Goeckeler)

• "We began fiscal year 2027 with another strong quarter" while highlighting AI-driven demand and a shift in industry mix: "we estimate that datacenter has expanded from approximately 20% of industry bits early in the decade to roughly half of the industry bits today." (Chairman & CEO Goeckeler)

• "Revenue for the first quarter was $11 billion, up 23% sequentially and 378% year-over-year." (Executive VP & CFO Luis Visoso)

• "Before turning to our second quarter outlook, I will announce that the Sandisk Board of Directors has approved an 8-for-1 stock split of the company's common stock." (Executive VP & CFO Visoso)

Outlook

• "For the second quarter of fiscal year 2027, we expect revenue between $12.2 billion and $12.6 billion" and "we expect non-GAAP gross margin between 84.5% and 85.5%, which includes modest like-for-like price increases." (Executive VP & CFO Visoso)

• "On a pre-split basis, we expect non-GAAP EPS between $55 and $57" and "on an 8-for-1 split adjusted basis, this equates to non-GAAP EPS between $6.88 and $7.13." (Executive VP & CFO Visoso)

• Versus the prior quarter call’s Q1 outlook, management raised the emphasis on datacenter demand intensity and NBM coverage, stating in Q&A that the portfolio is "at half the bits for this fiscal year and 2/3 for next year" and that the company expects committed bits "to continue to go a little bit higher from the 2/3." (Chairman & CEO Goeckeler; Executive VP & CFO Visoso)

Financial Results

• "Revenue for the quarter was $11 billion. Non-GAAP gross margin was 85.1% and non-GAAP earnings per share was $49.51." (Chairman & CEO Goeckeler)

• "Datacenter revenue was $4.8 billion, up 61% sequentially" and "Edge revenue was $5.8 billion, up 7% sequentially" while "Consumer revenue was $397 million, down 29% sequentially as the market adjusts to higher pricing." (Executive VP & CFO Visoso)

• "We generated $5.7 billion of adjusted free cash flow and returned $5 billion to shareholders through share repurchases" and "we closed the quarter with $5.1 billion in cash and cash equivalents and no debt." (Chairman & CEO Goeckeler; Executive VP & CFO Visoso)

• "Key GAAP to non-GAAP reconciliation includes $91 million in stock-based compensation" and "$513 million gain on equity securities, primarily attributable to our investment in Nanya." (Executive VP & CFO Visoso)

Q&A

• Benjamin Reitzes, Melius Research LLC: Asked whether more NBMs are coming despite capacity constraints and whether contracted bits have changed; Chairman & CEO Goeckeler said, "We've got a very strong pipeline of NBMs" and expects "more of them over the next several months, several quarters," while Executive VP & CFO Visoso reiterated "about 50% of our bits are under NBM for '27 and about 2/3 for '28" and expects it to go higher.

• Reitzes, Melius Research LLC: Asked about PC weakness and whether PC/edge customers may pursue NBMs; Executive VP & CFO Visoso said, "We're open for business," and Chairman & CEO Goeckeler added, "we expect the PC exabytes to grow next year" despite units being "slightly down next year, low single digits."

• Joseph Moore, Morgan Stanley: Pressed on datacenter penetration and drivers; Chairman & CEO Goeckeler tied it to "BiCS8," the QLC ramp, and more refined inference architectures, adding customers are "coming back for a second round" of NBMs.

• Mark Newman, Bernstein: Asked about pricing/volume mix and HBF/customer engagement; Executive VP & CFO Visoso said pricing should "continue to increase modestly throughout the year," while Chairman & CEO Goeckeler said HBF discussions are "robust" and will expand as Sandisk puts samples in customers’ hands.

• David Gibson, MST Financial: Asked about accelerating BiCS transitions for near-term bit growth and limits to shifting supply to datacenter; Chairman & CEO Goeckeler responded, "No" on accelerating node transitions and described allocation limits as a product-mix "fitting exercise."

• Christopher Muse, Cantor Fitzgerald: Asked how an NBM pipeline exceeding supply affects industry supply and CapEx; Chairman & CEO Goeckeler said, "the process is working" but "we're just not there yet" on changing supply, while Executive VP & CFO Visoso noted most NBM guarantees are held by third parties and "there is no legal restriction" on prepayments.

• Amit Daryanani, Evercore: Asked whether more predictable NBMs could support leverage; Chairman & CEO Goeckeler said Sandisk is "very comfortable with the strategy we have of staying debt-free" and reiterated returning "100% of the cash flow to shareholders" after investment.

Sentiment Analysis

• Analysts’ tone was slightly positive with repeated probing on sustainability and allocation: Moore called datacenter growth "surprising," and Muse questioned whether NBM visibility should change CapEx and supply assumptions.

• Management tone was positive and confident in both prepared remarks and Q&A, using phrases such as "We feel very, very good about where the pipeline is" and "100% of excess cash is going to go back to shareholders." (Chairman & CEO Goeckeler)

• Compared with the prior quarter, management repeated the durability framing around NBMs and AI inference, but the current call added a discrete shareholder-focused catalyst via the announced "8-for-1 stock split" and provided more explicit commentary that customers "have underestimated the amount of NAND they need." (Executive VP & CFO Visoso; Chairman & CEO Goeckeler)

Quarter-over-Quarter Comparison

• The prior call emphasized the initial scale and structure of NBMs, including total expected minimum NBM revenue and aggregate guarantees; the current call focused less on aggregate contract totals and more on execution pace, saying NBMs are "become the predominant way we deal with our customers" and signaling additional tranches with existing customers. (Chairman & CEO Goeckeler)

• Financially, management highlighted sequential expansion in Q1 results and guided to continued sequential growth in Q2, while also introducing an "8-for-1 stock split" as a new development not present last quarter. (Executive VP & CFO Visoso)

• Analysts’ focus remained centered on datacenter mix, pricing, NBMs, and supply discipline, with the current quarter adding more detailed questioning on TLC/QLC mix and SLC usage in inference architectures.

Risks and Concerns

• Management described near-term demand pressure in Consumer, saying "Consumer revenue was $397 million, down 29% sequentially as the market adjusts to higher pricing," while reiterating the company will "remain committed to serving all 3 end markets." (Executive VP & CFO Visoso)

• On potential credit concerns among newer AI infrastructure customers, Executive VP & CFO Visoso said, "We haven't seen any of that" and attributed NBM concentration to investment-grade counterparties.

• On supply rigidity, management flagged manufacturing lead times: "It takes 120 days or so to produce a wafer," limiting rapid reallocation near-term. (Executive VP & CFO Visoso)

Final Takeaway

Sandisk management framed Q1 FY2027 as continued execution of its AI- and datacenter-led strategy, with NBMs increasingly shaping customer commitments and visibility, while keeping supply growth discipline intact. Management guided Q2 to $12.2 billion to $12.6 billion of revenue with non-GAAP EPS of $55 to $57 (pre-split) and announced an 8-for-1 stock split, alongside reiterating its capital return posture of returning 100% of excess cash to shareholders and maintaining a debt-free balance sheet.

Read the full Earnings Call Transcript

Seeking Alpha's Disclaimer: This article was automatically generated by an AI tool based on content available on the Seeking Alpha website, and has not been curated or reviewed by humans. Due to inherent limitations in using AI-based tools, the accuracy, completeness, or timeliness of such articles cannot be guaranteed. This article is intended for informational purposes only. Seeking Alpha does not take account of your objectives or your financial situation and does not offer any personalized investment advice. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank.