Sandisk (NASDAQ:SNDK) reported fiscal third-quarter 2026 results that management said reflected “another strong quarter with excellent performance across all key metrics,” while highlighting what executives described as a major shift toward multi-year customer supply partnerships designed to reduce cyclicality and increase earnings visibility.
Multi-year supply partnerships take shape
Chief Executive Officer David Goeckeler said the company has “successfully advanced” discussions around multi-year supply partnerships—referred to as new business models (NBMs)—with five agreements signed to date. He said the arrangements are intended to lock in committed supply for customers and committed financials for SanDisk, with customer obligations “backed by firm financial guarantees.”
Visoso said the three agreements signed during the quarter provide “minimum contractual revenue of approximately $42 billion,” which he characterized as a remaining performance obligations (RPO) metric that the company plans to provide going forward. He also said the five signed agreements include financial guarantees exceeding $11 billion, including prepayments and other instruments managed by third-party financial institutions. Visoso said $0.4 billion of prepayments were included on the company’s Q3 balance sheet.
On the call, management said the five NBMs account for “over a third” of the company’s bits in fiscal year 2027, with Goeckeler telling analysts he expects that percentage to rise and that it “definitely” could exceed 50% over time, though he emphasized the company is still early in the process and agreements are tailored by customer.
Data center momentum and AI-related demand drivers
Goeckeler pointed to data center as an example of the company’s strategy, noting revenue grew 233% sequentially. He attributed momentum to a combination of product readiness, qualifications expanding across accounts, and what he called “strong market pull” for high-performance enterprise SSDs supporting AI-related infrastructure.
Management discussed several AI-related drivers for NAND demand, including model scaling, higher token generation, longer and more complex model runs, and increasing context requirements. Goeckeler said inference optimizations such as KV cache and workloads like retrieval-augmented generation (RAG) are increasing the amount of data requiring low-latency flash. He described NAND as “the only economically viable solution” to deliver the capacity, performance, and efficiency needed for real-time inference at scale, and said SanDisk’s differentiation is “strongest” now, anchored by BiCS8 and a portfolio spanning TLC and QLC.
In the question-and-answer session, Goeckeler said enterprise SSD growth in the quarter was “almost exclusively” tied to TLC products, with QLC “Stargate” expected to begin shipping for revenue in the fiscal fourth quarter. He described Stargate as having been under qualification with major players for “well over a year,” but did not quantify the expected revenue contribution. On product mix, Goeckeler said that across the overall portfolio it is “roughly two-thirds TLC, one-third QLC,” while data center is currently predominantly TLC for the company.
Goeckeler also commented on industry supply, saying the NAND market “always” balances supply and demand, and argued SanDisk can drive mid-to-high teens bit growth primarily through nodal transitions on its BiCS roadmap, with relatively lower capital intensity as a percentage of revenue.
Third-quarter results far above guidance
Visoso reported fiscal third-quarter revenue of $5.95 billion, up 97% sequentially and up 251% year-over-year, exceeding the company’s guidance range of $4.4 billion to $4.8 billion. He attributed the outperformance to “both a mix shift towards higher value customers and higher pricing.”
By end market, Visoso said:
- Data center revenue grew 233% sequentially to $1.467 billion.
- Edge revenue grew 118% sequentially to $3.663 billion.
- Consumer revenue was $820 million, down 10% sequentially, which he said was in line with historical seasonality.
On shipments, Visoso said BiCS8 shipments were flat year-over-year and down “high teens” sequentially as the company built inventory primarily to support expected BiCS8 QLC demand tied to the Stargate ramp and to prepare for recently signed NBMs. He added that BiCS shipments increased 18% fiscal year-to-date, consistent with the company’s mid- to high-teens growth model.
Profitability also exceeded the company’s outlook. Visoso reported non-GAAP gross margin of 78.4%, up from 51.1% in the prior quarter and above the company’s 65% to 67% guidance. He said the improvement was driven by higher-value mix and the pricing environment. Non-GAAP operating expenses were $448 million, or 7.5% of revenue, compared with 13.7% of revenue in the prior quarter, and below guidance of $450 million to $470 million.
As a result, Visoso reported non-GAAP operating margin of 70.9%, up from 37.5% in the prior quarter. Non-GAAP earnings per share were $23.41, up from $6.20 in the prior quarter and above the company’s $12 to $14 guidance range.
Visoso cited key GAAP-to-non-GAAP reconciliation items including $20 million in stock-based compensation net of taxes and $46 million related to the write-off of unamortized issuance fees tied to repayment of the remaining $650 million balance in the company’s TOB.
Cash generation, capital allocation, and buyback authorization
SanDisk ended the quarter with $3.735 billion in cash and cash equivalents, Visoso said. The company generated $2.955 billion in adjusted free cash flow during the quarter, representing a 49.7% margin. Cash flow from operations was $3.038 billion, partially offset by $83 million in net cash capital spending. Gross capital expenditures were $240 million, or 4% of revenue.
Visoso said the company’s capital allocation priorities, outlined previously, were to invest in the business, achieve a net cash position, and then return cash to shareholders. He said the company extended its joint venture with Kioxia Corporation through December 2034 and invested about $1 billion in Nanya Technology to secure long-term DRAM supply. He also said SanDisk repaid the remaining balance of its TOB, contributing to what management described as a strong net cash position.
Following those steps, Visoso announced that the board authorized a $6 billion share repurchase program, effective immediately with no expiration date.
Fourth-quarter outlook
For the fiscal fourth quarter, Visoso guided for revenue of $7.75 billion to $8.25 billion, driven by bit growth and higher pricing. The company forecast non-GAAP gross margin of 79% to 81% and non-GAAP operating expenses of $480 million to $500 million as it continues to invest in innovation and R&D.
SanDisk also guided for non-GAAP interest and other income of $10 million to $30 million, non-GAAP tax expense of $775 million to $875 million, and non-GAAP EPS of $30 to $33, assuming 158 million fully diluted shares.
In response to analyst questions about pricing cadence, Goeckeler said the company does not guide pricing and described the market as “extremely dynamic,” adding that it “pays to be a bit conservative” early in the quarter. Visoso added that within the NBMs, pricing tends to be more fixed in the near term and becomes more variable further out, allowing both SanDisk and customers to share in potential price upside or downside depending on market conditions.
Closing the call, Goeckeler said the company believes its margins are sustainable and emphasized that the combination of signed NBMs, data center acceleration, and capital return plans represent a “fundamental reshaping” of the business toward more predictable demand, pricing protection, and “more consistent, durable returns.”
About Sandisk (NASDAQ:SNDK)
SanDisk Corporation offers flash storage solutions. The Company designs, develops and manufactures data storage solutions in a range of form factors using flash memory, controller, firmware and software technologies. The Company operates through flash memory storage products segment. Its solutions include a range of solid state drives (SSD), embedded products, removable cards, universal serial bus (USB), drives, wireless media drives, digital media players, and wafers and components. It offers SSDs for client computing applications, which encompass desktop computers, notebook computers, tablets and other computing devices.
