Sandisk Earnings Call Signals an Early AI Storage Boom as Customers Lock In Four Years of Supply

Key Takeaways

• Sandisk has signed long-term supply agreements with eight data-center and edge customers, covering more than half of fiscal 2027 production and about two-thirds of fiscal 2028 supply.
• The agreements represent at least $93.9 billion in expected revenue at floor pricing, supported by $16.5 billion in financial guarantees.
• Customer demand continues to grow faster than Sandisk’s supply, with some of its largest buyers requesting additional capacity only months after making their original commitments.

Sandisk said the rapid expansion of artificial intelligence inference is transforming NAND flash from a cyclical component market into a strategic part of global AI infrastructure.

During its fiscal fourth-quarter earnings call, Chief Executive David Goeckeler argued that AI should no longer be viewed primarily as a computing challenge. As generative AI shifts toward agentic systems and large-scale inference, every user interaction creates data that must be stored, retrieved and delivered with minimal latency.

That process is increasing demand for high-capacity enterprise solid-state drives and NAND flash, giving storage suppliers a more central role in the design of AI systems.

“AI is fundamentally a memory-centric, storage-intensive problem,” Goeckeler said, adding that NAND has become a critical element of AI architecture.

Eight Customers Secure Multiyear Supply

The most important development from the call was Sandisk’s rapid expansion of its New Business Model, or NBM, agreements.

The NAND industry has traditionally operated through quarterly negotiations, with customers adjusting purchases as prices and market conditions changed. That approach created limited demand visibility and contributed to repeated periods of oversupply, falling prices and aggressive production cuts.

Sandisk is now replacing part of that business with multiyear supply contracts.

Since announcing five agreements during its April earnings call, the company has signed five additional deals. Three involved new customers, while two expanded previously signed arrangements after customers increased their demand forecasts.

Sandisk now has NBM agreements with eight data-center and edge-computing customers. The contracts have terms of up to five years and a weighted average duration exceeding four years.

Management expects the agreements to cover more than 50% of Sandisk’s available bits in fiscal 2027 and approximately two-thirds in fiscal 2028. According to CFO Luis Visoso, the NBM structure is quickly becoming the company’s predominant way of conducting business.

Sandisk has already received purchase orders for fiscal 2027 from contracted customers. Management also has visibility into quarterly product mix, deployment intensity and expected technology requirements, allowing the company to plan production and investment with substantially greater precision.

Contracts Carry $93.9 Billion Revenue Floor

The eight customer relationships are expected to generate at least $93.9 billion in total revenue, assuming prices remain at the minimum levels specified in the contracts. Sandisk believes actual revenue will exceed that figure because the agreements contain both fixed and variable pricing components.

The variable portion includes price floors and ceilings, allowing Sandisk to participate in some market-price increases while retaining minimum economic protection.

Remaining performance obligations stood at $59.8 billion at the end of the fiscal fourth quarter. Including two agreements completed after the reporting period, RPO would rise to $91.1 billion.

Each contract also contains financial safeguards designed to protect Sandisk if a customer fails to meet its purchase commitments. Those protections, including cash deposits and financial instruments provided largely through third-party institutions, total $16.5 billion.

Management said the guarantees are intended to align the interests of both parties rather than provide an additional source of cash. They also represent a substantial shift from the short-term purchasing discussions that historically characterized the NAND market.

Major Customers Are Already Asking for More

Goeckeler said some of Sandisk’s largest customers have returned only about three months after signing agreements to request additional supply.

Those customers now expect to need more storage over the next three to five years than they forecast just one quarter earlier. Sandisk sees the revisions as evidence that the AI infrastructure buildout remains in its early stages.

Customer demand is currently increasing faster than the company can expand production. Sandisk therefore expects its NAND output to remain allocated beyond calendar 2027.

The company plans to remain selective when considering additional NBM agreements. Potential partners must be strategically important, value Sandisk’s technology, seek multiyear supply growth and offer financial terms that support continued investment and shareholder returns.

Sandisk estimates that the global NAND market will exceed $300 billion in 2026, roughly tripling from the previous year, before approaching $500 billion in 2027. Data centers are expected to expand from approximately 30% of the NAND market in 2025 to about 50% in 2026 and continue growing faster than the overall industry the following year.

High-Bandwidth Flash Targets AI Inference Bottlenecks

Beyond conventional enterprise SSDs, Sandisk is developing High Bandwidth Flash, or HBF, for next-generation AI memory and storage architectures.

Goeckeler described AI inference as increasingly memory-bound, meaning system performance can be limited by the speed and capacity at which data is supplied to processors. HBF is intended to combine the scale and economics of NAND with substantially higher bandwidth.

The technology has progressed from an early research concept into detailed discussions with customers. Sandisk is working with hyperscalers and other infrastructure providers to understand which new architectures are most likely to gain adoption.

Management also said emerging concepts such as Nvidia’s context-memory and next-generation storage architectures could create opportunities for Sandisk. The company plans to provide additional information about HBF development and its commercialization roadmap at its August 13 investor day.

Long-Term Deals Preserve High Margins

Investors questioned whether locking in supply for several years would require Sandisk to sacrifice profitability. Visoso said the company expects gross margins on NBM business to remain around 80%, even with contractual pricing protections.

Sandisk’s fourth-quarter non-GAAP gross margin reached 84.6%, up from 78.4% in the previous quarter and 26.4% a year earlier. Quarterly revenue rose 51% sequentially and 372% year over year to $8.97 billion. (Source from: Sandisk’s official results)

Data-center revenue more than doubled sequentially to $2.98 billion, while edge revenue increased 48% to $5.43 billion. Data centers represented 38% of Sandisk’s bit shipments at the end of fiscal 2026, compared with about 12% one year earlier.

Management said the objective is not merely to maximize one quarter’s gross margin. The broader goal is to reduce the extreme boom-and-bust cycles that have historically affected NAND suppliers while creating more predictable revenue, investment returns and free cash flow.

Edge AI and Share Buybacks Add to the Strategy

Smartphones and PCs are undergoing a near-term demand adjustment, but Sandisk expects both markets to return to growth in calendar 2027. AI-enabled phones, PCs, vehicles, robots and on-device agents should increase the amount of storage required per device over time.

The company is also accelerating shareholder returns. Sandisk repurchased $4.5 billion of stock during the fourth quarter, while its board approved an additional $14 billion authorization. The remaining repurchase capacity now totals $15.5 billion.

Sandisk said it will continue prioritizing technology investment and a healthy cash balance before returning excess capital. For now, management considers share repurchases the most tax-efficient and shareholder-friendly method.

The combination of multiyear customer commitments, constrained supply and new technologies such as HBF supports Sandisk’s argument that AI is creating more than another temporary NAND cycle. The central question is whether long-term contracts can permanently reduce industry volatility while preserving the pricing and margins currently generated by the AI storage shortage.