0001628280-25-050698
SEC filingSandisk posted 23% YoY revenue growth to $2.3B on 31% higher exabytes sold, offset by 9% lower ASP, driving gross margin down 9 points to 29.8% and net income down 47%.
Net revenue increased 23% YoY to $2,308 million, driven by a 31% rise in exabytes sold that more than offset a 9% decline in ASP per gigabyte. Gross profit fell $39 million and gross margin contracted 9 points to 29.8%, reflecting both the lower ASP and higher cost per gigabyte, including $10.5 million of underutilization charges absent in the prior-year quarter. Operating income declined 40% to $176 million as R&D and SG&A expenses rose on variable compensation tied to performance, an extra fiscal week, and post-separation activities. Net income dropped 47% to $112 million.
Edge revenue grew 30% to $1,387 million on 39% higher exabytes sold, while Consumer rose 27% to $652 million on 32% volume growth. Datacenter revenue declined 10% to $269 million, pressured by an 11% ASP drop despite modest volume gains. Geographic mix shifted toward Asia, which accounted for $1,515 million or 66% of total revenue.
Management expects supply-demand balance for NAND to persist through calendar 2026, supported by AI-driven storage demand. Capital expenditures are projected to rise in FY2026 as the company transitions to newer process nodes. The company believes existing liquidity, including an undrawn $1.5 billion revolving facility, is sufficient for at least the next twelve months.
As of October 3, 2025, Sandisk held $1.442 billion in cash and cash equivalents, down from $1.481 billion at June 27, 2025. Total debt stood at $1.400 billion, comprising $1.400 billion in term loan facility (net of unamortized issuance costs of $49 million, carrying value $1.351 billion) and no revolver borrowings. The current portion of long-term debt is $20 million. Shareholders' equity was $9.381 billion, up from $9.216 billion, driven by net income and stock-based compensation. Inventory decreased to $1.907 billion from $2.079 billion, with raw materials declining significantly.
Sandisk has substantial commitments related to its Flash Ventures joint ventures. The company guarantees 50% of Flash Ventures' equipment lease obligations, totaling ¥180 billion ($1.219 billion at ¥147.34/$). Additionally, Sandisk is committed to building depreciation prepayments of $259 million through fiscal 2029 and building depreciation payments of $186 million through 2035. Long-term purchase commitments with suppliers total $2.481 billion, with $98 million due in the remaining nine months of fiscal 2026, $583 million in 2027, $570 million in each of 2028-2030, and $90 million thereafter. Research and development commitments to Kioxia are $87 million for the remainder of fiscal 2026. The company also has a minimum annual purchase commitment of $550 million under a supply agreement with SDSS (20%-owned venture).
During the quarter, Sandisk repaid $500 million of its term loan facility, reducing total debt from $1.9 billion to $1.4 billion. Capital expenditures were $50 million, or 2.2% of revenue. No share buybacks or dividends were reported. The company has a $1.5 billion undrawn revolving credit facility available. Stock-based compensation was $53 million, with $424 million in unamortized compensation cost remaining.
Sandisk operates as a single reportable segment. Revenue by end market: Datacenter $269 million (11.7% of total), Edge $1.387 billion (60.1%), Consumer $652 million (28.2%). Geographically, Asia contributed $1.515 billion (65.6%), Americas $406 million (17.6%), and EMEA $387 million (16.8%). Top 10 customers accounted for 40% of revenue, with no single customer exceeding 10%.
For the three months ended October 3, 2025, Sandisk Corporation generated $488 million in operating cash flow, a dramatic improvement from a $131 million use of cash in the prior-year period. This $619 million positive swing was primarily driven by a significant net working capital benefit. Notably, inventories decreased by $172 million (versus a $149 million build in the prior year), and accounts payable to related parties increased by $86 million. These inflows more than offset a $125 million increase in accounts receivable. Operating cash flow substantially exceeded net income of $112 million, indicating high-quality earnings supported by a $36 million depreciation add-back and $53 million in stock-based compensation.
Capital expenditures (purchases of property, plant and equipment) were $50 million, down from $67 million year-over-year. While the filing does not state free cash flow, subtracting capex from operating cash flow implies a significant positive free cash flow generation for the quarter, a stark contrast to the prior-year period.
No dividends or share repurchases were reported. The company paid $15 million in taxes related to vested stock awards. The primary financing outflow was a $500 million debt repayment, resulting in net cash used in financing activities of $515 million. The company ended the period with $1.442 billion in cash and cash equivalents.
A notable prior-year item was the $96 million settlement of accrued interest on Notes due to Western Digital Corporation, which did not recur. Additionally, the current period includes a $10 million loss on a business divestiture and $27 million in equity losses from investees, which were non-cash adjustments.