AI's "memory appetite" shows no sign of stopping—can SanDisk's earnings report bring another surprising guidance?

AI's "memory appetite" shows no sign of stopping—can SanDisk's earnings report bring another surprising guidance?

BERNSTEIN SOCIETE GENERALE GROUP (hereinafter referred to as Bernstein) in its latest report has maintained its “outperform” rating on SanDisk, and set a target price of $580, which represents a potential upside of 20% compared to the current closing price of around $481.42.

The report believes that the current NAND flash industry is in a strong upward cycle driven by surging AI demand and slowing supply growth. Against this backdrop, the steadily rising average selling price has provided solid support for SanDisk’s performance this quarter.

Bernstein expects that SanDisk's results for the second fiscal quarter will again exceed market expectations, and the company’s guidance for the third fiscal quarter has significant potential for upward revision, which may become the biggest highlight of this earnings report.

Industry Upcycle: AI Ignites Demand, Supply Remains Tight

The core driving force of the current NAND storage industry upcycle lies in structural changes on both supply and demand sides. On the demand side, the explosive growth of artificial intelligence applications continues to drive data storage demand, and market expectations for storage products have further increased due to technological advancements such as Nvidia’s Vera Rubin platform. On the supply side, industry-wide capacity expansion is limited, with scarce new supply, leading to a persistent supply-demand gap and directly pushing NAND flash prices into a clear upward channel.

In its 2026 industry outlook, Bernstein explicitly highlights that SanDisk is a key beneficiary of this wave of AI-driven data explosion. This judgment is based on the fact that even though the market already has high expectations for storage manufacturers, as long as the actual results and guidance in corporate earnings continue to exceed consensus, stock prices can still be driven to achieve impressive double-digit growth.

The financial results released earlier by Micron and SanDisk have fully verified this logic. On December 17, 2025, Micron released guidance for non-GAAP earnings per share for Q2 fiscal year 2026 to be in the range of $8.22–$8.62, far above the market’s general expectation of $5.13, and its stock price jumped 10% the next day.

Prior to that on November 6, 2025, SanDisk’s non-GAAP earnings per share guidance for Q2 fiscal year 2026 was $3.0–$3.4, also well above the market’s expectation of $1.99, pushing its share price up 15% the following day. These cases clearly show that in a strong industry cycle, upbeat financial guidance is a key catalyst for driving stock price upward.

Q2 Earnings Preview: ASP Up 14%, Performance Likely to Beat Expectations

Bernstein projects that SanDisk’s non-GAAP earnings per share for Q2 FY2026 will reach $3.79, higher than the market’s consensus of $3.45.

The key factor for the potential earnings beat this quarter is the rise in average selling price (ASP). Bernstein forecasts that SanDisk’s NAND product ASP for the quarter will see a quarter-on-quarter increase of about 14%, and this upward trend may continue.

Historical data shows that improvement in ASP is a critical variable driving growth in company profitability. So long as the industry’s supply-demand balance has not fundamentally reversed, the continued rise of ASP will provide a solid fundamental base for SanDisk’s Q2 performance.

Q3 Guidance Has Huge Potential: If ASP Increases 40%, EPS May Hit $9.06

Compared to the widely watched Q2 results, SanDisk’s performance guidance for Q3 FY2026 is considered to have even greater upside potential and imagination.

In Bernstein’s base case, SanDisk’s non-GAAP EPS for Q3 could reach $6.52, based on a quarter-on-quarter ASP rise of 22% for NAND products. This projection already significantly exceeds the market’s consensus of $4.62.

If supply-demand tightness exceeds expectations and pushes ASP to a larger increase, corporate profit leverage will be even more stunning. According to model calculations, if Q3 ASP increases 40% quarter-on-quarter (a level nearly matching Gartner’s forecast of about 43% increase), then SanDisk’s non-GAAP EPS for the quarter could jump to $9.06, with its FY2027 EPS further extrapolated to hit $67.50.

The report also points out risks and prudence. Although sporadic data shows in extremely tight markets, ASP may double within a quarter, Bernstein believes that such drastic price changes are difficult to apply to all shipment volumes over a full quarter. If one forcibly calculates with this extreme increase, the theoretical quarterly EPS would exceed $17, but the probability of achieving this in the short term is low.

Keep an Eye on Industry Peers’ Earnings; Beware of Downcycle Risks

SanDisk’s earnings performance will, to a large degree, be linked to the overall sentiment in the semiconductor memory industry. Key peer signals will come from Samsung Electronics; if Samsung’s earnings statement conveys that NAND flash pricing remains strong, end demand (especially related to AI) is robust, and industry supply stays tight, these will serve as powerful third-party validation for the current industry upcycle and SanDisk’s fundamentals, potentially providing extra upside momentum for SanDisk stock.

Meanwhile, the report also warns investors to watch out for three major downside risks:

  1. Industry cycle risk: Although currently in an upcycle, the inherent cyclical nature of the NAND industry means that after a period of high growth, there is a possibility for a downtrend. A high performance base may pressure future year-on-year growth.
  2. Communication transparency risk: The report points out that the company is lacking in information disclosure and investor relations communication, which could impact the confidence of some institutional and long-term value investors, and be detrimental to valuation stability.
  3. Structural recession risk: If industry demand’s weakness in extent and duration exceeds cyclical adjustment and develops into a structural recession caused by slowing tech iteration or application saturation, substantial reassessment and reduction of company asset values and long-term cash flows may ensue.

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