This investor day, SanDisk's "explosive numbers" shook the market

Original Author: Li Dan

Original Source: Wallstreetcn

As AI inference demand continues to drive storage needs, SanDisk has unveiled extremely aggressive long-term financial targets.

On Thursday, the 13th, Eastern Time, SanDisk presented its long-term financial model at its 2026 Investor Day, outlining a series of financial goals for fiscal years 2028 through 2030. These include the company achieving mid-to-high double-digit revenue growth during this period. SanDisk also addressed market concerns regarding bit growth, stating that sellable bits will be adjusted based on profitability optimization needs, while committing to return 100% of remaining cash to shareholders after completing business investments.

Following the announcement, the market quickly voted with its money. SanDisk (SNDK) saw its intraday gains expand to as much as 17.6% on Thursday; the storage sector rallied in tandem. By the close, SanDisk was up nearly 14%, SK hynix and Western Digital gained over 7%, Seagate Technology rose nearly 5%, and Micron Technology advanced more than 4%.

FY2028-30 Targets: 80% Gross Margin, 75% Operating Margin

The most closely watched aspect of this investor day was undoubtedly SanDisk's long-term financial model.

The company projects that during fiscal years 2028 to 2030, revenue will maintain mid-to-high double-digit growth, matching the growth rate of bit shipments. Concurrently, on a non-GAAP basis, gross margin is expected to remain around 80%, with an operating margin of approximately 75%.

It's important to note the fiscal year timing here. SanDisk's fiscal year does not align with the calendar year; the company's fiscal year ends on the Friday closest to June 30th, typically spanning 52 weeks. Fiscal 2026, the previous fiscal year, ended on July 3, 2026. Early July 2026 already falls within fiscal 2027, so the announced FY2028-2030 range does not correspond to calendar years 2028-2030 but rather refers to a future period of three consecutive fiscal years starting around July 2027.

Under this financial model, SanDisk expects operating expenses to be approximately 5% of revenue, with no significant impact from other income and expenses. Even after accounting for taxes, capital expenditures, and working capital needed to support business growth, the company still projects an adjusted free cash flow margin of approximately 50%.

For the highly cyclical NAND storage industry, this set of targets is particularly aggressive. SanDisk is essentially conveying a clear message to the market: AI-driven storage demand growth is expected to keep the company's revenue growth and profitability well above traditional storage cycle averages for years to come.

Not Blindly Chasing "Bit Volume": SanDisk to Flexibly Adjust Sellable Output Based on Profitability

Another key signal from SanDisk this time is that the company does not intend to simply pursue bit shipment growth as its primary goal. Instead, it will proactively adjust sellable bits based on profitability.

The market had previously focused on SanDisk's FY2027 bit growth guidance: the company expects input bit growth to reach mid-to-high double digits, while sellable output bit growth may fall below that level. At the investor day, management further clarified that this does not imply a lack of capacity to expand output.

According to an interpretation of management's statements by Lynx Equity Strategies analyst KC Rajkumar, SanDisk CEO David Goeckeler explicitly stated that the long-term input bit growth target is mid-to-high double digits, but sellable bits will be flexibly adjusted based on the need to optimize profitability; in certain periods, actual output bit growth may even exceed mid-to-high double digits.

This implies that SanDisk prioritizes "how much profit can be made per bit" over simply "how many bits can be sold."

Particularly during NAND technology node transitions, the company will selectively reduce wafer output to prevent bit density improvements from new technologies from coming too fast and causing market oversupply.

Rajkumar noted that each NAND technology node transition at SanDisk historically delivers an average of approximately 54% bit growth. Therefore, if the company fully unleashed the additional capacity from technology upgrades, it could easily recreate an oversupply situation. By proactively reducing wafer output during node transitions, SanDisk can control the volume of bits entering the market, thereby better safeguarding pricing, margins, and capital efficiency.

This approach also explains why SanDisk dares to set a long-term gross margin target of around 80%: the bit density improvements from technological advancement don't necessarily have to fully translate into supply growth. The company can proactively "tap the brakes," converting a portion of the technology dividend into profitability.

Returning More "Earned Money" to Shareholders: 100% of Excess Cash for Buybacks or Dividends

In addition to revenue and margin targets, SanDisk also provided a very clear capital return commitment.

SanDisk Chief Financial Officer (CFO) Luis Visoso stated that after completing investments required to support business growth, the company expects to return 100% of excess cash to shareholders.

This means SanDisk's future capital allocation framework will revolve around three main pillars: first, investing in business and technology that supports growth; second, maintaining strong free cash flow generation; and finally, returning as much remaining cash as possible to shareholders.

The approximately 50% adjusted free cash flow margin implies that if the long-term financial model is realized, SanDisk's cash generation capability will be extremely robust — a key reason why the market is willing to assign it a higher valuation.

Long-Term Agreements with Eight Customers Cover Approximately Two-Thirds of FY2028 Bit Shipments

A key reason for SanDisk's strong confidence in the aforementioned long-term financial model is that the company is transforming the traditional NAND industry business model.

The company disclosed that it has signed New Business Model (NBM) agreements with 8 customers. These agreements include committed purchase volumes, binding contractual frameworks, minimum financial guarantees, and structured pricing mechanisms. They enhance the alignment between customer demand and the company's capacity planning while reducing the impact of cyclical fluctuations inherent in the traditional storage industry.

More importantly, the scale covered by these agreements is already substantial: the currently signed NBM agreements cover approximately 50% of FY2027 bit shipments and about two-thirds of FY2028 bit shipments.

SanDisk believes this model can deliver more predictable revenue, higher cash flow visibility, and more durable earnings growth.

In other words, SanDisk is not only betting on AI-driven storage demand growth but also attempting to convert a significant portion of the traditional NAND business's cyclical nature into more stable, predictable revenue and cash flows through long-term agreements.

AI Inference Creates a Larger Storage Market; Enterprise Flash TAM Expected to Reach 1.2ZB by 2030

Another major pillar supporting SanDisk's high growth over the next three years is the new demand for storage infrastructure arising from AI's expansion from training to inference.

SanDisk estimates that the flash memory market could grow from its historical revenue base of $60 billion annually to over $300 billion in 2026, approaching $500 billion in 2027.

The company stated that AI inference workloads are driving rapid growth in Token usage, and KV Cache is reshaping the memory hierarchy of data centers. As AI inference scales, AI data centers will become increasingly reliant on storage. SanDisk projects that by 2030, the Total Addressable Market (TAM) for enterprise data center flash memory will reach 1.2 Zettabytes (ZB).

On the technology front, SanDisk is advancing its two-dimensional scaling strategy based on CMOS directly Bonded Array (CBA) to enable more flexible development of customized products for different market needs while improving capital efficiency.

The company's latest BiCS9 QLC technology is the first case of this strategy. This technology combines the BiCS8 array with a BiCS10-based CMOS wafer. Meanwhile, the new BiCS10 QLC node delivers a 60% bit density improvement over BiCS8.

HBF Betting on AI Inference; Storage Sector Rallies Broadly

SanDisk is also advancing its new High-Bandwidth Flash (HBF) technology targeting AI inference. The company stated that HBF is becoming an important technical solution for addressing storage demands in the AI inference era, and the related industrial ecosystem is currently taking shape.

From the market's perspective, this means SanDisk's AI storage thesis is no longer limited to "AI data centers need more SSDs," but extends further into the AI inference architecture's own demand for higher performance, lower power consumption, and higher storage density.

This expectation quickly transmitted to the entire storage sector. SanDisk's own rally was particularly pronounced: after announcing the long-term financial targets, its share price rose nearly 18% intraday. Year-to-date, SanDisk's stock has gained over 530%.

However, SanDisk also emphasized that the aforementioned long-term financial targets are forward-looking indicators, based on a series of estimates and assumptions. Actual results may still be affected by factors such as demand, average selling prices, competition, technology iterations, supply chain dynamics, and the storage industry cycle.