0001628280-26-004407
SEC filingSandisk delivered 61% YoY revenue growth and 1,900 bps gross margin expansion driven by favorable NAND pricing and strong AI-led demand, resulting in net income of $803M.
Sandisk Corporation reported exceptional financial results for the second quarter of fiscal year 2026, with net revenue of $3.025 billion, a 61% increase from $1.876 billion in the prior-year period. This top-line growth was propelled by a favorable pricing environment and robust demand for NAND flash storage, particularly for AI workloads. Average selling prices (ASP) per gigabyte increased 36%, while exabytes sold grew 22%. Net income soared 672% to $803 million, or 26.6% of revenue, compared to $104 million, or 5.4% of revenue, a year ago.
Gross margin expanded dramatically by 1,900 basis points to 50.9%, driven by the increase in ASP outpacing cost per gigabyte movements. Operating income reached $1.065 billion, representing a 35.2% operating margin, up from 10.3% in the prior year. The improvement was broad-based, with operating expenses growing at a much slower rate (16%) than revenue. Total interest and other expense, net, increased to $128 million from $22 million, primarily due to the settlement of non-operating legal matters, increased interest expense from the new Term Loan Facility, and an investment impairment, partially offset by higher interest income. The effective tax rate decreased significantly to 14% from 40%, benefiting from jurisdictional earnings mix and a $10 million tax benefit related to the One Big Beautiful Bill Act.
All three end markets delivered strong double-digit revenue growth. The Datacenter segment, serving cloud and enterprise customers, grew 76% year-over-year to $440 million, fueled by a 90% surge in exabytes sold as AI infrastructure demand accelerated, though this was partially offset by an 8% decline in ASP per gigabyte. The Edge segment, which includes OEM and channel customers for PCs, mobile, and automotive, was the largest contributor at $1.678 billion, up 63%. This performance was led by a 55% increase in ASP per gigabyte and a 10% increase in volume. The Consumer segment grew 52% to $907 million, driven by a 30% ASP increase and a 17% volume increase. Geographically, revenue growth was led by the Asia region, particularly from Edge customers.
Management provided a positive outlook, stating that demand for NAND continues to outpace supply and that this imbalance is expected to persist through calendar year 2026 and beyond. The rapid growth of AI infrastructure is cited as a key driver for high-performance storage. The company plans to continue managing supply to match market demand and invest in high-value opportunities. However, management also noted uncertainty regarding U.S. trade policy and potential tariff increases, which could increase costs and negatively impact margins and demand if enacted. For fiscal year 2026, the company anticipates increased capital investments to transition to newer technology nodes.
As of January 2, 2026, Sandisk held $1.5B in cash and cash equivalents, with total debt of $603M (net of $47M unamortized issuance costs) on a $650M term loan facility. The company has a $1.5B undrawn revolving credit facility maturing in 2030. Shareholders' equity stood at $10.2B, driven by a reduction in accumulated deficit from $(1.8B) to $(0.9B) due to net income. Inventory decreased to $2.0B from $2.1B, reflecting improved demand.
Sandisk has significant commitments related to its Flash Ventures joint ventures with Kioxia. The maximum estimable loss exposure is $3.1B, comprising $453M notes receivable, $224M equity investments, $1.1B operating lease guarantees, and $1.4B inventory and prepayments. Additionally, the company has $2.5B in minimum long-term purchase commitments with suppliers, with $60M due in the remainder of FY2026, $1.2B in 2027-2028, and $1.2B beyond 2028. Building depreciation prepayments of $387M are committed through 2029, and R&D commitments of $44M for the remainder of 2026.
During the six months ended January 2, 2026, Sandisk repaid $1.3B of debt, primarily using proceeds from operations. Capital expenditures were $89M (1.7% of sales). No share buybacks or dividends were reported. The company has a $1.5B undrawn revolver available for general corporate purposes.
Sandisk operates as a single reportable segment. For the three months ended January 2, 2026, revenue by end market was: Datacenter $440M (15%), Edge $1,678M (55%), Consumer $907M (30%). Geographically, Asia contributed $2.1B (68%), Americas $0.5B (17%), and EMEA $0.4B (15%). No single customer exceeded 10% of revenue.
CFO of $1,507M far exceeded net income of $915M, aided by $205M working-capital inflow and $111M stock-based compensation. Capex intensity remained moderate at $89M. No dividends or buybacks occurred. Key anomalies include $1,250M debt repayment and various Western Digital separation-related transfers. FCF comfortably covered any capital returns (none present). Prior period showed negative CFO of $36M with higher capex of $115M.