SanDisk's Earnings Boom Faces Reality Check as NAND Price Growth Decelerates

The memory chip business just hit a wall—not the kind that stops growth dead, but the kind that slows it down enough to break the math that investors have been using to value the stocks that rode the boom.

Sandisk's fourth quarter, which ended in early July, was extraordinary by almost any measure. Revenue hit $8.97 billion, up 51% from the previous quarter and nearly four times higher than the same period a year before. Gross margins swelled to 84.6%, a stunning reversal from 26.2% just twelve months earlier. The company earned $70.88 per share on an adjusted basis for the full fiscal year 2026, after posting a loss the year before. For the full year, revenue climbed 175% year over year to $20.25 billion, with datacenter revenue up 437%.

But here's what matters: management was explicit about where those gains came from. Two-thirds of the sequential revenue jump came from higher prices for NAND flash memory chips themselves. The other third came from selling more units. That distinction—price versus volume—is about to reshape how Wall Street thinks about this company.

The price surge was real and staggering. Research firm TrendForce had projected NAND flash contract prices would climb 70% to 75% in the spring quarter that Sandisk just reported. The company's datacenter revenue more than doubled from the prior quarter to roughly $3 billion as artificial intelligence buyers kept paying whatever the market demanded. But consumer revenue told a different story. Buyers of personal computers and smartphones, who have the option to delay purchases or walk away entirely, cut their orders. Consumer revenue fell 32% sequentially to $556 million.

That consumer pullback is the signal TrendForce is reading as a turning point. In its July survey, the firm projected NAND contract prices would rise only 10% to 15% in the current quarter—a dramatic deceleration from the 70% to 75% it had forecast for the quarter Sandisk just completed. The slowdown isn't coming from new manufacturing capacity flooding the market. Supply relief isn't expected until the second half of 2027. Instead, it's coming from demand hitting a ceiling. Buyers in price-sensitive markets have reached the limit of what they will pay, even as AI demand keeps overall supply constrained.

Sandisk's own guidance makes the slowdown visible in real time. The company projected first-quarter revenue of $10.3 billion to $10.8 billion. At the midpoint, that's 18% sequential growth—down sharply from the 51% the company just delivered. The company expects adjusted gross margins of 83% to 85%, essentially flat with the prior quarter, and adjusted earnings per share of $44 to $46, up from $39.25. Those numbers still look strong. But they're built on a fundamentally different price trajectory than the one that powered the last quarter.

The stock trades near $1,600, about 32% below the June high of $2,354. At that price, it carries a forward price-to-earnings ratio of roughly 7.5—a multiple that only looks cheap if the earnings projections hold. And those projections require extraordinary margins to persist deep into fiscal 2027 while contract-price growth shrinks toward 10%. Sandisk does have a cushion that memory chip companies lacked in past cycles. The company has signed long-term supply agreements with eight customers covering about half the bits it expects to ship in fiscal 2027, with those contracts guaranteeing a minimum of $93.9 billion in revenue over their life. Those contracts could blunt the downside if market pricing eventually rolls over.

But the uncontracted half of Sandisk's business still floats on whatever the market will pay. And that market price is no longer rising at 70%. It's rising at 10% to 15%, if TrendForce's forecast holds. The boom isn't ending. It's just moving to a part of the curve where the math that built these earnings estimates no longer applies.