SanDisk Soars on AI-Driven Demand, Signals Strategic Shift to Long-Term Contracts
SanDisk Capitalizes on AI Boom, Reports Stellar Q2 and Charts New Strategic Course
San Jose, Calif. – SanDisk Corporation (NASDAQ: SNDK) delivered a blockbuster fiscal second quarter for 2026, shattering revenue and profit forecasts as demand for memory tied to artificial intelligence workloads continues to outstrip supply. The results underscore a dramatic turnaround for the NAND flash memory sector and signal a fundamental shift in how SanDisk intends to conduct business moving forward.
The company reported revenue of $3.025 billion, a staggering 61% increase year-over-year and 31% sequentially, far exceeding its own guidance. Non-GAAP earnings per share skyrocketed to $6.20, compared to $1.22 in the prior quarter. Profitability metrics saw a sharp rebound, with gross margin expanding to 51.1% from 29.9%, driven primarily by improved pricing power across its product segments.
Beyond the headline numbers, management emphasized a strategic pivot that could reshape its customer relationships. CEO David Goeckeler and CFO Luis Vias detailed a concerted effort to move away from short-term, transactional pricing models toward longer-term commercial agreements (LTAs) with key clients. This shift, they argued, is essential as AI infrastructure demands "supply certainty" and longer planning horizons.
"We are prioritizing strategic customers and increasingly weighting multi-year supply frameworks over short-term transactional signals," Vias stated during the earnings call. The company has already closed one such agreement, which included a customer prepayment, with several more in the pipeline.
AI as the Primary Catalyst
Executives framed the entire recovery in the NAND market through the lens of artificial intelligence. Data center build-outs for AI training and inference are consuming vast amounts of high-performance storage, making NAND "indispensable" in new architectures. SanDisk highlighted strong sequential demand across all end markets—data center, client, and mobile—but noted the data center segment is accelerating fastest.
Notably, management revealed an emerging demand driver: key-value cache architectures in AI servers. Initial analysis suggests this could add 75 to 100 exabytes of demand in 2027, potentially doubling the following year—a factor not yet included in current forecasts. SanDisk is actively working with partners like NVIDIA to understand these new configurations.
Product Roadmap and Financial Fortitude
On the product front, SanDisk completed qualifications for its PCIe Gen 5 high-performance TLC drives at a second major hyperscaler. Its next-generation BiCS8 QLC storage-class product, codenamed "Stargate," is advancing through qualification with two hyperscalers and is expected to begin revenue shipments in the coming quarters.
Financially, the company strengthened its balance sheet, ending the quarter with a net cash position of $936 million after paying down $750 million in debt. Adjusted free cash flow was a robust $843 million. SanDisk also announced a $1.165 billion agreement with partner Kioxia to extend their Yokkaichi joint venture through 2034, securing long-term manufacturing capacity.
Bullish Outlook for Q3
Looking ahead, SanDisk provided a remarkably optimistic forecast for the fiscal third quarter, anticipating the market to be "more undersupplied." It guided for revenue between $4.4 billion and $4.8 billion, with non-GAAP gross margin projected to leap to 65-67% and EPS in the range of $12 to $14.
Market Voices:
"This isn't just a cyclical uptick; it's a structural reset for SanDisk," says Anya Sharma, portfolio manager at Horizon Tech Advisors. "The shift to LTAs provides incredible visibility and pricing stability. They're not just selling chips; they're becoming a critical infrastructure partner for the AI era."
"The numbers are undeniably strong, but let's not get carried away," cautions Michael Reed, an independent semiconductor analyst. "This hyper-growth is built on severe undersupply. What happens when capacity catches up? Their LTA strategy feels like an attempt to lock in today's fat margins before the cycle potentially turns."
"Finally! I've been holding this stock through the brutal downturn," exclaims retail investor Derek Chen in an online forum. "The guidance is explosive. The AI story is real, and SanDisk is right in the thick of it. This feels like the beginning of a multi-year run."
"The prepayment from that first LTA is a masterstroke for cash flow," notes Eleanor Vance, a senior research fellow at the Center for Strategic Technologies. "It de-risks their capex and shows immense customer confidence. This operational change in managing qualification costs is a subtle but powerful efficiency gain that the market is overlooking."
The article is based on SanDisk's Q2 2026 earnings call and financial report.