SanDisk Technologies, currently valued at $4.9 billion, reported a revenue of $1,695 million for the third quarter of 2025, marking a 10% sequential decline and a slight 1% decrease year-over-year. The company posted a non-GAAP loss of $0.30 per share. Despite these setbacks, SanDisk increased its cash reserves and provided revised guidance for the upcoming quarters. According to InvestingPro analysis, the stock appears slightly undervalued based on its proprietary Fair Value model.
Key Takeaways
- SanDisk’s Q3 revenue declined both sequentially and year-over-year.
- Non-GAAP EPS showed a loss, reflecting ongoing financial challenges.
- The company is focusing on innovation with new product launches.
- Future guidance suggests a revenue increase in Q4 2025.
Company Performance
SanDisk Technologies experienced a challenging third quarter with a decrease in revenue compared to both the previous quarter and the same period last year. The company’s financial performance was impacted by a non-cash goodwill impairment charge of $1.83 billion. However, SanDisk remains committed to innovation, as evidenced by recent product launches, including new SSDs and memory cards.
Financial Highlights
- Revenue: $1,695 million, down 10% sequentially and 1% year-over-year.
- Non-GAAP EPS: Loss of $0.30 per share.
- Non-GAAP gross margin: 22.7% (25.8% excluding underutilization charges).
- Cash and cash equivalents increased from $1.3 billion to $1.5 billion.
Outlook & Guidance
With analyst price targets ranging from $32 to $80, SanDisk provided guidance for the fourth quarter of 2025, forecasting revenue between $1,750 million and $1,850 million. For comprehensive analysis and detailed insights, investors can access the full Pro Research Report available on InvestingPro, which covers what really matters about SanDisk’s business model and growth prospects. The company expects bit shipments to remain flat, while average selling prices are anticipated to increase in the mid to high single digits. Non-GAAP gross margin is projected to be between 25.5% and 27%. Looking further ahead, SanDisk forecasts a return to balanced supply and demand by fiscal 2026.
Executive Commentary
CEO David Gekler expressed optimism about the NAND industry’s growth, stating, "We estimate that the NAND industry is poised for robust long-term growth with demand expected to approach $100 billion by the end of the decade." CFO Luis Visoso added, "Our overall goal is to get 100% out of on the utilization when we can, when supply and demand is balanced."
Risks and Challenges
- Market Undersupply: The market is expected to remain undersupplied through the end of 2026, which could impact pricing and availability.
- Technology Transition: While SanDisk is leading in NAND technology innovation, the transition to new technologies involves risks and potential disruptions.
- Economic Conditions: Broader macroeconomic pressures could affect demand and pricing in the tech sector.
SanDisk’s earnings call highlighted both the challenges and opportunities facing the company as it navigates a complex industry landscape. With a focus on innovation and strategic guidance, SanDisk aims to position itself favorably for future growth.
Full transcript - SanDisk Corporation (SNDK) Q3 2025:
Conference Operator: Hi there. Good day and welcome to the SanDisk Technologies Third Quarter Fiscal twenty twenty five Earnings Conference Call. On the call today, we have David Gekler, CEO Luis Visoso, CFO and Ivan Donaldson, Investor Relations VP. All participants will be in listen only mode. By pressing the star key followed by zero.
After today’s presentation, there’ll be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over.
Please go ahead.
Unidentified Speaker, SanDisk: Thank you very much for joining us today. Before we begin, please note that today’s discussion will contain forward looking statements based on management’s current assumptions and expectations, which are subject to various risks and uncertainties. These forward looking statements include expectations for our technology and product portfolio, our business plans and performance, market trends and opportunities, and our future financial results. We assume no obligation to update these statements. Please refer to our most recent financial report on Form 10 ks and our other filings with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially from expectations.
We will also make references to non GAAP financial measures today. Reconciliations between the non GAAP and comparable GAAP financial measures are included in written materials posted in the Investor Relations section of our website.
David Gekler, CEO, SanDisk: Good afternoon, and welcome to SanDisk’s third quarter earnings call. To start this call, I want to thank the SanDisk team for enabling a smooth transition to a stand alone company and for delivering a strong quarter. As discussed during our Analyst Day, our goal at SanDisk is to create value for our customers and shareholders, and in doing so, reaffirm our leadership in the NAND market. We are leveraging our strengths in innovation, scale, agility and resilience and remain disciplined in managing the business to build sustainable, profitable and long term growth. The strategy is working as intended even amid ongoing macroeconomic uncertainty.
We believe that we are well positioned to capture the significant opportunity in front of us. We estimate that the NAND industry is poised for robust long term growth with demand expected to approach $100,000,000,000 by the end of the decade. We expect growth to be driven by the exponential expansion of data, fueled in part by the deployment of artificial intelligence in cloud and edge applications as well as refresh cycles in PCs and mobile devices. In data center, we continue to see strong capital investments in the emergence of new AI driven workloads, which are fueling use cases for enterprise SSDs and expanding NAND’s addressable market. In parallel, we have made structural changes to how we operate, increasing our focus on capital discipline and making a concentrated effort to drive higher returns on invested capital.
Moving on to the third quarter results. We are pleased with our performance as we delivered revenue and EPS at the high end of our guidance ranges. For the quarter, we generated $1,700,000,000 in revenue, down 10% sequentially and down 1% year over year. Non GAAP EPS was a loss of zero three zero dollars per share, while cash and cash equivalents increased from $1,300,000,000 to $1,500,000,000 Luis will dive deeper into our third quarter results in a few minutes. The key indicator I want to call out is pricing.
For the quarter, ASPs were down high single digits, reflecting continued oversupply in the market. This was higher than our mid single digit decline expectation that we shared at our Analyst Day. To address this, we are extending our fab underutilization actions until supply and demand are balanced and we see a sustainable recovery in pricing. At the beginning of the fourth quarter, we announced and began implementing price increases for our customers. These price increases align with the expectation that we outlined during our Analyst Day, where we detailed our plan to reduce wafer production to align supply with demand and enable a sustainable level of pricing.
Let’s now move to technology and key business highlights. We continue to lead with innovation across all our markets, and nowhere is that more evident than with the successful ramp of BICS eight, our latest generation of NAND technology. We expect BICS eight to be integrated across a broad range of product lines and represent 10% of our bit shipments in the fourth quarter. Our TLC products are being qualified by customers for high performance mobile and compute applications, while our two terabit QLC die is in qualification with top cloud service providers for use in 128 terabyte and two fifty six terabyte capacity SSDs. These advancements are enabling better performance and improved energy efficiency.
In client, we see three structural drivers of PC replacement. This includes the Windows 10 end of life a post pandemic PC refresh and the emergence of AI enabled PCs. As we begin mass production of our BIX8 client SSDs, we completed qualifications with several key global PC OEMs with more expected this quarter. We are also extending our leadership in automotive innovation, highlighted by our nomination as a Ford Supplier of the Year. We shipped the industry’s first UFS 4.1 samples for autonomous driving, where performance, reliability and power efficiency are critical.
Development is underway with key partners, and early samples are being used in the next generation EV platforms in autonomous robotics. We expect to complete qualification in the coming months, paving the way for broader adoption in the next generation automotive compute platforms, including advanced driver assistance systems and robotics, beginning in the second half of calendar year 2026. In gaming, our latest SSD product has been exceptionally well received, winning multiple Editor’s Choice Awards from top PC and gaming publications globally. This quarter, we will also begin shipping our first PCIe Gen five and Gen six BIX8 enabled client SSDs delivering power efficiency and performance for AI and gaming systems. In consumer, we continue to lead the market with innovative products that define performance and reliability.
We recently introduced several products, including our latest portable SSD and a new USB dual drive, each reinforcing our leadership in high performance storage. In cards, the launch of our professional grade memory card fills a critical gap in our portfolio and strengthens our position in the ever growing content creation segment. Another key achievement for our consumer business is the launch of our next generation micro SD Express card, featuring a co branded two fifty six gigabyte card developed in partnership with Nintendo for the highly anticipated Switch two. This officially licensed product has been in development through close collaboration with Nintendo to ensure it delivers the next level speed and performance the new console requires. I am proud of the recognition our consumer products continue to receive, including the Red Dot Design Award across all consumer storage categories and the Best of Show honor for our high performance storage solution for our latest portable SSD at the NAB TV Tech twenty twenty five.
These distinctions reflect the strength of our innovation engine and the exceptional work of our engineering and industrial design teams. In data center, we continue to see capital investments in the rapid growth of AI driven workloads, which are expanding the use cases for enterprise SSDs and broadening NAND’s addressable market. Analysts estimate cloud CapEx from the major hyperscale providers grew over 50% to approximately $240,000,000,000 in calendar year 2024. And that momentum is expected to continue into 2025, reaching approximately $330,000,000,000 a 40% increase. Given this opportunity, we continue to increase our bit allocation to enterprise SSD applications, representing 12% of our bits this quarter, up from 8% in the same quarter of the prior year.
And we expect to continue to make progress as we qualify our Bix8 products with cloud customers leveraging QLC and Gen5 and Gen6 PCIe solutions. In summary, we continue to innovate to meet and exceed customer needs, reinforcing our performance and power efficiency advantage in the NAND market. At the China Flash Memory Summit, customers highlighted our leadership position, setting our best in class performance to power profile. We were honored with the Product Innovation Award, a strong validation of our system level execution and continued investment in innovation. Years of focused R and D have positioned us at the forefront of the market, and we are proud to be driving the next wave of advancement in flash memory.
With that, I’ll turn the call over to Luis to dive deeper into our financial performance and guidance. Luis?
Luis Visoso, CFO, SanDisk: Thank you, David. Let me start by providing additional details on the third quarter. Revenue was $1,695,000,000 dollars down 10% sequentially and 1% year over year and above our guidance range of $1,550,000,000 dollars to $1,650,000,000 dollars Sequentially, bit shipments were down low single digits, while ASP was down high single digits. Client revenue was $927,000,000 down 10% sequentially. Consumer was $571,000,000 down 5% quarter over quarter, and Cloud was $197,000,000 down 21% sequentially.
Lower ASPs impacted revenue across all our segments, particularly the cloud. Non GAAP gross margin for the third quarter was 22.7%, within our guidance range of 21.5% to 23%, as we continue to drive efficiency in our supply chain. During the quarter, our non GAAP gross margin included headwinds of $24,000,000 in underutilization charges and $29,000,000 in fab startup costs. Excluding these charges, our non GAAP gross margin would have been 25.8%. Operating expenses were $383,000,000 better than our guidance range of $395,000,000 to $4.00 $5,000,000 Our performance reflects meaningful progress in identifying cost saving opportunities even as we continue to invest in innovation.
Non GAAP EPS was a loss of $0.30 per share, at the high end of our guidance range of a loss between $0.45 and $0.30 per share. We closed the quarter with 145,000,000 shares outstanding. Our cash and cash equivalents increased from $1,300,000,000 to $1,500,000,000 Our third quarter GAAP financials include $44,000,000 in stock based compensation, which is included in our cost of goods sold and operating expenses, and $9,000,000 in business separation costs. This quarter, we evaluated our goodwill for potential impairment following a quantitative test in accordance with accounting standards and the engagement of valuation specialists. We concluded that the goodwill balance was impaired and recorded a noncash impairment charge of $1,830,000,000 dollars As a result, our quarter end goodwill balance was reduced to $5,000,000,000 As we look ahead for the fourth quarter, we remain committed to disciplined approach as we carefully manage both operating and capital expenditures, ensuring that our supply aligns with demand and implementing price increases to support a sustainable business model.
Our key assumption in our guidance is that the current tariffs remain unchanged throughout the quarter. At present, there are no tariffs on our products except for shipments from China to The US, which have tariffs of 27.5%. For perspective, approximately 20% of our products shipped to The United States and over 95% of that revenue is sourced from countries other than China. We’re working with our customers and closely monitoring the global supply chain environment while leveraging our agility to ensure continued stable sourcing plans. We expect revenue for the fourth quarter of ’17 ’50 million dollars to $1,850,000,000 dollars Sequentially, this assumes bid shipments to be flat and ASP to be up mid to high single digits.
What we’re preparing for customers to be cautious given the uncertain macro environment, there are positive signs including strengthening of transactional markets and encouraging customer engagements. We expect demand to strengthen throughout the year. As David mentioned, we expect client growth driven by the Windows 10 end of life, post pandemic PC refresh cycle, and emergence of AI enabled PCs and recovering the mobile market. We continue to see content growth as new features and from factors spur demand. In cloud, customers digested inventories, yet fundamentals are strong as they continue to invest in infrastructure for AI.
We expect non GAAP gross margin to be between twenty five point five percent and twenty seven percent, which includes 55,000,000 to $65,000,000 in underutilization charges and approximately $50,000,000 in fab startup costs. These costs are only partially offset by cost savings. We expect non GAAP operating expenses to be between $395 and $4.00 $5,000,000 Non GAAP interest and other income and expense to be between 45,000,000 and $50,000,000 and non GAAP taxes to be between 22,000,000 and $25,000,000 As a result, we expect non GAAP EPS to be between a loss of $0.10 per share and a profit of $0.15 per share based on 146,000,000 shares outstanding. Looking forward to fiscal twenty twenty six, we’re planning on big growth in line with the market. We expect balanced supply and demand with increases in average selling prices.
Our forecasted gross capital expenditures will be above our through cycle target model of mid teens percentage of revenue from our base eight investment. This will follow two years of capital investments well below our through cycle target. As discussed at our Investor Day, we’re beginning to move away from providing explicit guidance on cost per bit. Industry cost reductions from technology migrations are reducing, and we believe continually providing this metric is counterproductive to the value proposition of our technology, which is delivering increasing performance, power efficiency, and density. With that, let me turn the call back to David.
David Gekler, CEO, SanDisk: Thanks, Luis. Let me wrap up and then we’ll open up for questions. We are pleased with the performance this quarter and our success in establishing SanDisk as a standalone company. These results reflect the strength of our execution and the alignment of our teams around clear strategic priorities. Looking ahead, we are confident that the combination of our industry leading technology, return focused investments and improving industry fundamentals position us to deliver long term results consistent with our target through cycle financial model.
I’m proud of the team’s accomplishments and excited about the future for our customers, employees and shareholders. With that, let’s now open the call for questions.
Conference Operator: Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw from the question queue, please press then 2. Our first question comes from Joe Moore of Morgan Stanley.
Please go ahead.
Joe Moore, Analyst, Morgan Stanley: Great. Thank you and congrats on first quarter as a standalone company. You talk about the supply demand a little bit? You said that you sort of took additional supply side actions in the quarter. How much give us some sense of magnitude there?
And then just do you think that as we move into the second half that we could be fully utilized and that the market would rebalance? Or just how are you thinking about the longer term view there?
David Gekler, CEO, SanDisk: So I’ll cover a little bit of that and Luis can cover some of it. So first of all, Joe, great to hear from you. Thanks for the question. We still see an undersupplied market through the end of next year. I think we’re just going through the kind of ups and downs of a very dynamic market here.
From my perspective, we talked about this back in December. We kind of went through a mid cycle pause. I think we’re coming out of that now. We talked about this at our Analyst Day that we expected pricing to start increasing in this quarter, and that’s happening. I think, Joe, the underutilized so we do see the market getting stronger as we go throughout the year.
We see supply for this calendar year mid single digits. We see demand kind of low double digits. For next year, we see those pretty balanced in the mid to high teens, but coming off of a low supply base. So we still see kind of a long term undersupplied market. But of course, it’s going to vary quarter to quarter.
As far as our underutilization, I’ll say a little bit about that. Luis can talk about it as well. He’s very close to it. We just think it’s the prudent move given the mid cycle pause we came through, given where we’re at on margins, just given what we’re looking at. I think we’re trying to balance out the market more directly now instead of going into big ups and downs.
And especially with the macro uncertainty risk, we thought it was the right move last quarter. I think that turned out to be a good call. But it is something we look at every week, right? And we can a very dynamic decision. And we’ll stay very close to it, look at all the data points we have and we’ll make the best decision for our shareholders of how to use the fab.
Luis, you want to add to that?
Luis Visoso, CFO, SanDisk: Yes. Maybe a few things to add, Joe, is as David said, we’re very optimistic on demand overall. We’re seeing some unit growth, particularly on our client business. And particularly the growth is coming from more content per unit, as we look at this year and particularly as we forecast 2026. So, we’re very optimistic there.
As we’ve all seen spending in by the cloud providers is high as they continue to increase capacity and we benefit some of that as well. On the supply side and on the utilization, I think the most important point is what David said, we’re tracking these weekly, monthly and what we want to do is make sure that we set up our structural capacity to the right level. So as we transition from Big five to Big eight, we’re making sure we set up the right capacity so that we can be as close as possible to 100%. But it’s important that we balance supply and demand. We have enough inventories to continue to serve the market and we’ll keep on tracking this very carefully.
Joe Moore, Analyst, Morgan Stanley: Great. Thank you. And for my follow-up, think enterprise SSD sort of had a little bit of a digestion window in March. It seems like it’s getting better to me, and I just wanted to see how you guys are seeing those trends. And are you guys still confident in your ramp kind of getting to the levels of market share that you’ve described in that space over time?
David Gekler, CEO, SanDisk: Yes. Joe, I think the demand has been pretty consistent. There’s been a lot of volatility in pricing, quite frankly, in that part of the market. Probably that’s the most volatile part of the market on pricing. But we see continued good demand.
We’re very, very optimistic about the road map. I think we’ve established ourselves well in that market. If I look FY 2024 to where we expect to end FY 2025, I see a tripling of that business from a revenue perspective, which lays a good foundation for us with qualifications and relationships with the right players. And then as we talked about at our Analyst Day, we’re moving into a period where we’re going to have a new controller, we’re going to have a new product in the storage side of that business. We have BIX8 coming, which is a great node for performance and power efficiency.
So we think we’ve established the business well over the last couple of years. We’ve got qualifications in the right places. It’s performing as expected. And then we feel like we’re moving into a part of the portfolio where we’re going to get stronger over the next couple of years quarter by quarter as we move forward. So I’m very happy and optimistic about that part of the business.
Great. Thank you. Thanks.
Conference Operator: Our next question comes from PJ Muse of Evercore. Please go ahead.
PJ Muse, Analyst, Evercore: Thank you for taking the question and may I say congrats again on your first quarter out. Guess maybe if could Yes, you’re welcome. If we could drill down into gross margins, you talked about kind of taking utilization lower, yet you’re still guiding up $3.55 bps sequentially. So could you help us kind of understand what the headwind is specifically into Q2 and how we should think about that headwind kind of unwinding through the calendar year?
Luis Visoso, CFO, SanDisk: Yes. We feel good about the progress we’re making on gross margin overall, C. J. I think the headwinds are the two that we called out in our prepared remarks. One is this under utilization, right, of $55,000,000 to $65,000,000 which really is the continuation of the decision we took earlier as we continue to play that out.
So that’s a big one. I also called out the $50,000,000 fab startup costs. We think that startup costs will be with us for a few more quarters and then they should go away. So that’s kind of one time cost that we have there, which will continue to impact those. But we benefit from the higher ASP, which is helping our gross margin overall.
PJ Muse, Analyst, Evercore: Perfect. And then maybe a focus on enterprise SSD and CapEx. And so you talked about investing in big state at the same time, we’re seeing a concerted effort by some players in the industry pushing to 200 layer plus QLC and moving to Molly to really support kind of the AI enterprise SSD. So I guess, where are you in kind of that transition? And how do you go about bringing on kind of optimized capacity for the enterprise yet at the same time limiting bit growth?
It seems to be in our form right now where we are in the cycle for NAND.
David Gekler, CEO, SanDisk: Yes. I mean, I think we manage that very closely. So it depends on the enterprise SSD. I think you’re mainly talking about the storage, high capacity, 60 terabyte going to 128, going to two fifty six over the next year. Those are QLC BiCS-eight.
I mean, that’s all part of the ramp of what we’ll do this coming year. We’ll this quarter will be like 10% BiCS-eight and FY 2026 will be 40 to 50% BiCS-eight. So that’s that ramp happening. So I guess to say how do we go about that, we go about that very carefully to make sure that we don’t do just what you said, which is oversupply the market with bits as we go to higher layer count and more density per wafer, as we go through that transition. We also structurally remove some capacity from the system as we go on the number of wafer starts to make sure we keep that in balance.
PJ Muse, Analyst, Evercore: Thanks so much.
David Gekler, CEO, SanDisk: Thanks, CJ.
Conference Operator: Our next question comes from Aaron Rakers of Wells Fargo. Please go ahead.
Aaron Rakers, Analyst, Wells Fargo: Yes. Thanks for taking the question. Also my congrats on the first quarter out of the gate. Kind of sticking with the gross margin, maybe taking a little bit of a different way is that it looks like if I adjust for some of these underutilization and start up cost charges that your cost on a per bit basis was maybe more or less flattish sequentially this last quarter. And it looks like based on the guidance again with those charges considered, it looks like you’re assuming maybe the cost improves, Your cost structure declines maybe in the low to mid single digit on a bit basis this next quarter.
I guess my question is, how do we think about as big base matures, the cost down that you expect to see as we move out into the second half of the year and into 2026?
David Gekler, CEO, SanDisk: Yes. I think we talked about this, Aaron. So first of all, thanks the congratulations. We feel good about it. Our first quarter out, it’s been a great two or three months here.
Post separation, it’s gone quick. So we talked about this in the script. We’re going to start and we talked about at our Analyst Day, we’re going to start talking less about cost downs. And I’ll give you some context on that because I think it’s important. First of all, I think the whole structure of the industry of driving cost down, it’s an important concept, mainly around expanding the TAM.
I think in storage in general, having managed two different storage franchises, you drive the cost down, you expand the TAM. However, we talked about it. TAM is going to $100,000,000,000 I think expanding the TAM is not really our issue as a company. It’s like making sure we have the right profitability to drive all the capital investment required to support this demand. So we’re more focused on the technology differentiation we have.
We feel very good about the R and D we performance, power, density, all these things we need in an AI world. Customers are really pushing us for more dense, higher op IOPs based enterprise SSD that requires an enormous amount of R and D investment. And so that’s really where we want to put the focus. And then I’ll also say the cost downs are my observation over the last five years. They’re just more they’re more I don’t want say unpredictable, they’re less consistent is the right way to say it.
Some quarter used to be you’d get pretty consistent cost downs as you move nodes and you drove yields higher. It just seems like over the last couple of years, they’ve been more a lot of quarters up and down. So it’s hard to like just put a number out there for them. They’re also getting harder to get, quite frankly, as we get to these larger layer nodes, larger layer count nodes, you get more bits than you do cost downs, right, just the way it works. So that’s really the third part is I think for a long time, kind of the approach the industry was drive a new node, get more cost downs.
And I think the last downturn showed that, that was like bringing a gasoline can to a fire because you get way more bits than you get cost down. When you add that all up, we just want to focus on different parts of the business and kind of not talk so much about that. All that said, we will get some obviously, we’ll get some cost downs out of BIGS eight, right? And we’re just not going to forecast them on a quarter by quarter basis. But the way you’re thinking about it is a reasonable way to think about it.
I have no longer answer than you were looking for, but I appreciate you bearing with me. Thanks, Aaron.
Aaron Rakers, Analyst, Wells Fargo: All good. Thanks.
Conference Operator: Our next question comes from Karl Ackerman of BNP Paribas. Please go ahead.
Karl Ackerman, Analyst, BNP Paribas: Yes. Thank you. I was hoping you could address the outlook for NAND bit shipments in the June. And if you still anticipate NAND bit volume to grow low double digits this calendar year. As you address that question, perhaps you can discuss the level of order visibility that you have across your various
Luis Visoso, CFO, SanDisk: end markets. Yes. So for the June, what we guided was flattish bps, right. Now if we look further out, when we were together at Analyst Day, we said we expected growth to be high single digits in the July through December semester, your back end of twenty twenty five. And frankly, is nothing that we see that leads us to change that view.
We continue to feel optimistic about the growth in the business, particularly in the industry and we talked about some of that those drivers earlier in the call. We talked about client, we talked about PC, we talked about mobile, we talked about cloud. So, continue to feel good about the long term growth in the industry. But for the June specifically, it’s what we guided. Now we guided bids to be flattish and ASP to be going up.
David Gekler, CEO, SanDisk: Visibility across the markets? Visibility so far
Luis Visoso, CFO, SanDisk: is, I mean, we talk to customers all the time, right? What we see across the market is good. There are pieces in all the transactional markets and you guys have access to a lot of that data. We’re seeing prices moving up. We see the business moving.
We’re making good progress across client and cloud. So we feel good about where things are so far as we start in the quarter and that leads us to have confidence in the guide we’re giving you.
Karl Ackerman, Analyst, BNP Paribas: Very helpful. I’ll see the floor. Thank you.
David Gekler, CEO, SanDisk: Thanks, Karl.
Conference Operator: Our next question comes from Vijay Rakesh of Mizuho. Please go ahead.
Vijay Rakesh, Analyst, Mizuho: Yeah. Hi. Thanks, David. Just a quick question on the e cloud side. I saw it’s going almost almost % year on year, I guess.
But can you talk to how many enterprise hyperscale customers you have? How you’re approaching that market? What are the milestones that you expect to hit?
David Gekler, CEO, SanDisk: Yes. We have multiple hyperscale customers, and we’re really starting to expand out the channel business, especially the kind of qualification we talked about with NVIDIA a a couple of quarters ago, that’s now starting to really blossom with a lot of customers, a more broader set. So we feel good that we’re playing at the biggest players. And then the deeper into the ecosystem, as AI pulls a lot of business in that part of the portfolio. Got it.
Vijay Rakesh, Analyst, Mizuho: And I think when you look at the SSD segment, a lot of it is still shipping on TLC, but you’re starting to see QLC SSD pickup. Can you talk to how that ramp is going? Where the stand is going on that road map in terms of qualification of ramping up shipments on QLC? Thanks.
David Gekler, CEO, SanDisk: We talked about that a little bit at our Analyst Day and it’s still very consistent with that. We have the compute focus TLC based very high performance PCIe Gen five interface SSD that has been doing quite well at hyperscalers and throughout a broader set of customers. I think the number of qualifications there keeps increasing. And then we’ve got a larger QLC based storage based enterprise XSD, 60 terabyte going to 128 and then eventually two fifty six as we move through fiscal year twenty twenty six. That qualifications are going well there, but what we’re really excited about is we have a new architecture coming out in the next couple of quarters that we call Stargate, new ASIC, clean sheet design and then with Bixate QLC and we just think that’s going to be a dynamite project.
It’s we’ll have it in customers’ hands here soon and we expect that to go very well. So we’re very optimistic about the portfolio, the progress we’ve made and what’s coming from a roadmap perspective. All right. Thank you. Thank you.
Conference Operator: Our next question comes from Steven Fox of Fox Research. Please go ahead.
Karl Ackerman, Analyst, BNP Paribas: Hi, good afternoon. Had two questions if I First of all, was curious about how we think about underutilization charges beyond this quarter, how quickly they sort of dissipate? And then just thinking about the full supply chain, you’ve mentioned that there’s not a lot of direct exposure to tariffs at this point and even like it seems it sounds like demand is holding up pretty well too. But is there any other bottlenecks that you’re worried about with your customers where they’re moving around supply chains or anything else that could either help you versus competition or maybe become a sort of a push out going forward? Thank you.
Luis Visoso, CFO, SanDisk: Yes. So, would say first of all on the utilization, overall strategy is we don’t we would rather operate at 100% capacity, right? So, we believe that this is a tactical thing we need to do and I think it’s the right thing to do at the right time. But over time, we need to get out of that, right. We want to have our structural capacity should be set up for the market that we’re supporting and that’s how we want to operate.
So, we’ll be tracking this as David said earlier and we’ll be adjusting over time. But our overall goal is to get 100% out of on the utilization when we can, when supply and demand is balanced. On your second question, we are good on tariffs, right, as we said, right. Only 20% of our products are shipped to The U. S.
And 95% of those products do not have any tariffs because they are source of countries outside of China. We don’t see a lot of other bottlenecks in our supply chain. So, the supply chain is run efficiently. We have as you know front end comes 100% out of Japan from our JV And we have several options on the back end, particularly Malaysia. And we do have a JV in China, which sources some of the countries as well.
But we feel that the supply chain is operating efficiently and sourcing and supporting our products around the world. Great. That’s very helpful. Thank you.
David Gekler, CEO, SanDisk: Thanks, Steven.
Conference Operator: Our next question comes from Nam Kim of Arete Research. Please go ahead.
Nam Kim, Analyst, Arete Research: Hi, thank you. Thank you for taking my question. One more question on NAND pricing. Compared to a few months ago before tariff impact, the overall sentiment on price outlook seems becoming more conservative. But you mentioned that you assume mid high single ASP built into your guidance this quarter.
Is this mainly driven by transactional market or across the board? If you give me any color on OEM market, that would be great. And then if I can add one more question, since your fabs are all located in Japan, now I just wonder how Japanese yen exchange rate against dollar impact your cost structure? Is there any framework to share with us for our modeling purpose? Thank you.
PJ Muse, Analyst, Evercore: Yes. Do you want to go ahead?
David Gekler, CEO, SanDisk: No, I’ll pick up. So just a little bit on pricing. I we have a lot of visibility as a company, right? We have a big consumer franchise. We have a good sized channel business.
We sell to all the PC OEMs. We sell to all the hyperscalers and all the phone vendors. I think the turn in the market is across the board. We just see we’ve had conviction on this for a while. I think we were early in saying that we thought in the June, we were going to see price increases.
That’s what we put out in our Analyst Day. And we took actions to help drive that. But really, it was looking across this entire kaleidoscope of information we have and talking to customers and understanding all the technology roadmaps that gave us the conviction in that. And of course, there’s been a lot of macro issues, tariffs or whatever it happens to be that’s been things for the market to digest along the way. But when you still look at it, as I said, I think in the first question, we still see an undersupplied market through the end of calendar year 2026.
And that’s kind of because that’s how far out we forecast at this point. We feel like we have enough data on. And so we’ve had a lot of conviction that we’re moving into a better market. And then what we went through in the last couple of quarters was just a mid cycle correction. And I think that’s playing out.
So anyway, I that helps on the pricing side. And on the yen, I’ll let Luis take that.
Luis Visoso, CFO, SanDisk: Yes. I mean, overall, our front end is clearly exposed to the yen and we’re somewhere on whatever 1.44 yen per dollar today. Now something to be very careful here as you do your models is, there are two types of costs, right? There are costs which are yen denominated, which I would say it’s labor and a few other things. And there are other costs which are non yen denominated even if they are coming from Japan.
Think about equipment and CapEx and some of our materials which we’re importing from other countries or they are part of the global economy and therefore they are dollar based or they could be euro based. So, not necessarily all our cost that comes out of Japan is exposed to the yen in the same way. So, we obviously track this very carefully and we make sure that we are prepared to that. So, we understand that piece. Does that make sense?
Nam Kim, Analyst, Arete Research: Yes. Thank you very much.
David Gekler, CEO, SanDisk: Yes. Thank you.
Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to David Goetzler for any closing remarks.
David Gekler, CEO, SanDisk: All right. Thanks for joining us on our first conference call as Sandoz, our first earnings call. We appreciate your participation and all the great questions, and we look forward to talking to you throughout the quarter. Take care. Thank you.
Conference Operator: This conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
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