"‘Explosive earnings report’ becomes ‘selling opportunity’, SanDisk and Western Digital shares tumble after results."

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The better the financial report, the harder the drop?

On April 30 local time, US storage giants Western Digital and Sandisk released their third quarter results. Revenue, profit, and guidance all exceeded Wall Street expectations, with strong forward guidance for the next quarter.

However, the market reaction was unexpected: both stocks plunged sharply after hours, with Western Digital falling as much as 8.2% and Sandisk dropping over 6%.

This trend is less a rejection of their performance, and more a “settlement” of previous gains. Analysts pointed out that given Western Digital's about 900% rise in a year and Sandisk’s roughly 3300% surge since listing, strong performance was already fully priced in, and their guidance “lacked enough surprise,” prompting profit-taking.

How strong were the financials?

Let’s look at the numbers.

Sandisk’s third quarter revenue was $5.95 billion, a 97% year-on-year surge, far above analysts’ forecast of $4.7 billion. Adjusted EPS was $23.41, nearly 1.6 times the expected $14.54. Revenue from the data center business more than tripled year-on-year, reaching $1.47 billion in the quarter. Sandisk reported net profit of $3.62 billion, compared to a net loss of $1.93 billion a year ago—a complete turnaround in profitability.

Western Digital was equally impressive. Third quarter revenue was $3.34 billion, up 45% year-on-year, topping the expected $3.25 billion; adjusted EPS was $2.72, higher than the expected $2.39; net profit was $3.12 billion, compared to just $0.52 billion a year ago.

Western Digital CEO Irving Tan said in the earnings statement: “The demand drivers are very clear: almost every kind of AI workload—from training, inference, agent AI, to physical AI—produces data that needs to be stored persistently and efficiently on hard drives.” He also announced a 20% dividend increase to $0.15 per share.

Sandisk CEO David Goeckeler characterized this quarter as a turning point: “This quarter marks a fundamental inflection for Sandisk—our technology leadership is driving a deliberate shift towards the highest-value end markets, led by our data center business.”

Guidance still strong, but the market is ‘not satisfied enough’

After the financials were released, both companies provided guidance for the next quarter that also exceeded expectations.

Sandisk expects fourth quarter revenue of $7.75 to $8.25 billion, with the midpoint around $8 billion, well above analysts’ previous expectations of $6.49 to $6.62 billion; adjusted EPS projected at $30 to $33, also far above the expected $22.70 to $23.38.

Western Digital expects fourth quarter revenue of $3.55 to $3.75 billion, adjusted EPS of $3.10 to $3.40, both higher than analyst expectations of $3.46 billion revenue and $2.75 EPS.

With such strong guidance, why is the market still selling?

After a 900% gain, ‘good’ is no longer enough

Here is a key backdrop.

Data show that Western Digital’s stock has risen about 900% over the past year, while Sandisk, since its independent listing in February 2025 (spun off from Western Digital), has soared from its IPO price of $36 to about $1,063 after hours—a 3,300% gain.

Cerity Partners’ Michael Ashley Schulman analyzed: “The guidance from both companies failed to deliver the ‘wow factor’ needed to sustain the current surge.”

In other words, these two stocks had already priced in the expected “AI-driven storage demand boom.” When earnings confirmed those expectations, but didn't bring an extra surprise, the pressure to take profits was released.

Earlier this week, competitor Seagate issued strong forecasts, triggering a round of collective surges in storage stocks. So far this year, Sandisk is up about 350%, and Western Digital is up more than 150%. At such high levels, even “not wow enough” news may trigger selling.

There’s no doubt about AI storage demand itself

It’s worth noting that this stock drop was not due to doubts about fundamentals.

According to Reuters, Sandisk, Western Digital, and Seagate’s financials and guidance collectively confirmed that demand for storage products driven by AI data center construction remains strong. AI systems’ demand for storage is growing faster than supply, enabling companies like Sandisk to continually raise prices.

Before the financial reports, Bank of America analyst Wamsi Mohan noted that demand outstripping supply has created “a favorable pricing environment.”

Western Digital CEO Irving Tan also pointed out that the company’s gross margin reached 50.5% this quarter, a significant year-on-year improvement. Sandisk announced board approval for a $6 billion stock repurchase program.

Risk Warning and DisclaimerThe market has risks; investment needs caution. This article does not constitute personal investment advice and does not consider the particular investment objectives, financial situation, or needs of any individual user. Users should consider whether any opinions, views, or conclusions in this article suit their particular situation. Investments made accordingly are at one's own risk. ```