ORION System Weekly Stock Recommendation: SanDisk ($SNDK) – Verdora Excellence Alliance
When many people think of SanDisk, their first impression may still be:
USB drives, memory cards, and portable hard drives.
However, viewing SNDK only as a consumer storage brand on July 17 could mean overlooking the transformation currently taking place within the company.
The key areas drawing attention are gradually shifting from consumer storage toward:
NAND Flash, enterprise SSDs, and AI data center storage.
In the AI era, most attention is focused on GPUs.
While GPUs are responsible for computing, massive amounts of model parameters, training data, and inference data ultimately require reliable storage solutions.
As AI data centers continue to expand, storage is evolving from a relatively overlooked supporting component into an increasingly important part of AI infrastructure.
This represents the core research perspective behind analyzing SNDK on July 17:
AI is creating not only greater demand for computing power, but also expanding demand for high-performance storage capabilities.
What Does SanDisk Really Sell?
At its core, SanDisk is a NAND flash memory company.
NAND technology is widely used in:
Enterprise SSDs, data centers, PCs, smartphones, automobiles, consumer electronics, and various edge devices.
Historically, one of the biggest challenges in the NAND industry has been its strong cyclical nature.
When demand is strong, manufacturers expand production.
As supply capacity continues to increase, prices begin to decline.
When prices fall, manufacturers reduce production.
After inventory levels gradually normalize, prices begin to recover again.
As a result, traditional NAND companies often experience a recurring cycle:
Strong profitability → Price declines → Lower margins → Industry production cuts → Market recovery.
SanDisk is now attempting to shift away from this traditional cycle by pursuing a different growth path.
The Key Development: A Rapid Acceleration in Data Center Business
The most important development to watch is the sudden acceleration of SanDisk’s data center business.
The FY2026 Q3 earnings report released on April 30 was particularly notable.
The company reported quarterly revenue of:
$5.95 billion.
This compared with:
$3.025 billion in the previous quarter.
That represents:
A 97% quarter-over-quarter increase.
GAAP net income reached:
$3.615 billion.
GAAP diluted EPS reached:
$23.03.
Non-GAAP EPS reached:
$23.41.
However, the most significant point was not simply that total revenue nearly doubled.
The key factor was:
Datacenter revenue increased 233% quarter over quarter.
SanDisk stated that Q3 revenue exceeded its previous guidance, largely driven by a shift in customer mix toward higher-value markets, with data centers being one of the most important contributors.
This indicates that the company’s growth drivers are changing.
Previously, the market may have viewed SanDisk primarily as:
“The company benefits when NAND prices rise.”
Now, investors may need to look one layer deeper:
“AI data centers require increasing amounts of high-performance flash storage, and SanDisk’s product portfolio is evolving toward higher-value applications.”
Margin Expansion Becomes Even More Significant
The change in profitability was even more remarkable.
In FY2026 Q3, SanDisk’s GAAP gross margin reached:
78.4%.
In the previous quarter, it was only:
50.9%.
That represents a quarterly increase of:
27.5 percentage points.
Operating income reached:
$4.111 billion,
compared with:
$1.065 billion in the previous quarter,
representing a:
286% increase.
These figures highlight the significant operating leverage that is often seen in the NAND industry.
The most challenging situation for semiconductor manufacturers occurs when product prices decline while factory expenses and research costs remain largely unchanged.
However, when pricing improves and product mix shifts toward higher-value markets such as enterprise solutions and data centers, incremental revenue can be converted into profit at a much faster pace.
Therefore, Q3 was not simply about:
Revenue doubling.
Instead, it reflected the simultaneous impact of:
Revenue growth + Product mix improvement + Pricing improvement.
This combination explains why profit growth significantly outpaced revenue growth.
AI Is Reshaping the Storage Industry
When discussing AI data centers in the past, the first thing people often thought about was:
GPU.
Then came:
HBM.
And after that:
Networking infrastructure.
However, as AI moves further into the inference stage, an increasingly important challenge is emerging:
The amount of data continues to grow.
Models need to access data.
Inference workloads require data retrieval.
Generative AI applications are also creating new data every day.
All of this data cannot remain permanently stored in expensive HBM and DRAM solutions.
Ultimately, the industry still requires large-scale, high-density, and power-efficient storage systems.
This creates new opportunities for NAND flash and enterprise SSD solutions.
The logic behind AI-driven storage demand is straightforward:
More GPUs → More AI workloads → More data → Greater storage demand.
SanDisk is positioned within this evolving industry landscape.
A Key Technology Update Emerged on July 2
A highly important technology development was announced on July 2.
SanDisk announced that:
BiCS10 1Tb TLC 3D NAND has entered customer sampling.
This represents the company’s 10th-generation 3D NAND technology.
Compared with the currently mass-produced BiCS8 platform, BiCS10 delivers:
Up to 4.8Gb/s NAND interface speed, representing a 33% improvement;
59% higher bit density;
10% lower input power consumption;
34% lower output power consumption.
The technology also reaches:
332 stacked layers.
This announcement is highly significant for the July 17 SNDK research perspective.
Because what AI data centers truly require is not simply:
“More storage.”
They require storage that is:
Faster, denser, and more power efficient.
Why Is Power Efficiency Becoming Increasingly Important?
One of the biggest challenges facing AI data centers today has become:
Power consumption.
GPUs require electricity.
Networking equipment requires electricity.
Cooling systems also require electricity.
If storage devices can reduce their own power consumption, the overall energy efficiency of data centers can be further improved.
Therefore, the 34% reduction in BiCS10 output power consumption should not be viewed as just a technical specification.
For data centers deploying hundreds of thousands or even millions of storage devices:
A small reduction in power usage per device can add up to a significant impact at scale.
This is also why NAND competition in the AI era will not be determined solely by who offers the largest capacity.
Future competition will also focus on:
Speed, density, power efficiency, and cost.
Another Important Shift at SanDisk May Be More Significant Than Short-Term Price Increases
The biggest challenge in the NAND industry has historically been:
Price cycles.
To address this issue, SanDisk has been promoting a new partnership model:
New Business Model, or NBM.
As of the release of the FY2026 Q3 earnings report, the company had already signed:
3 NBM agreements.
After entering FY2026 Q4, the company added:
2 more agreements.
This means that, as of the April 30 earnings disclosure, SanDisk had secured a total of 5 agreements under this model.
The importance of this approach is that SanDisk aims to create more stable demand visibility and production planning through longer-term customer partnerships and financial commitments.
In simple terms:
Previously, the market often worked like this:
Customers purchased aggressively during supply shortages, then reduced orders sharply when inventory levels increased.
Now, SanDisk is aiming to move toward a model where:
Customers secure a portion of their long-term demand in advance, allowing the company to plan capacity based on clearer demand expectations.
If this model continues to expand, the biggest impact for SanDisk may not simply be higher earnings in a single quarter.
Instead, it could be:
Reducing the extreme cyclical fluctuations that have historically affected the NAND industry.
SanDisk’s Balance Sheet Provides Greater Flexibility
After the end of Q3, SanDisk highlighted that it maintained a:
Zero-debt balance sheet.
At the same time, the company’s cash generation capability had improved significantly, and it had approved a new share repurchase program. This is particularly important for semiconductor companies.
Because NAND technology development requires continuous investment in both research and manufacturing.
If companies use all the cash generated during an industry upcycle to repay debt, the funds available for technology advancement and shareholder returns can become more limited.
At that time, SanDisk was in a more flexible position:
Improving industry profitability → Stronger cash generation → Investment in next-generation NAND technology → Potential share repurchases.
More Importantly, Next Quarter Guidance Remained Strong
On April 30, SanDisk provided FY2026 Q4 revenue guidance of:
$7.75 billion to $8.25 billion.
The company’s Non-GAAP diluted EPS guidance was:
$30 to $33.
The timing is particularly important here.
From the perspective of July 17, the market could only evaluate this guidance.
The actual Q4 results would not be released until August 5.
SanDisk had only announced on July 9 that it would hold its Q4 and FY2026 earnings conference call on August 5.
Therefore, the assessment that could be made on July 17 was:
Q3 performance was already very strong, while management’s Q4 outlook suggested that the favorable industry environment could continue.
The Three Key Changes Behind SNDK on July 17
The real significance of SNDK on July 17 was that three major developments were changing at the same time.
The first was:
The industry cycle.
NAND pricing and profitability were improving.
The second was:
Customer mix.
The company was increasingly shifting toward higher-value markets such as data centers, with Q3 data center revenue growing 233% quarter over quarter.
The third was:
Technology.
On July 2, BiCS10 entered the customer sampling phase, continuing improvements in speed, density, and power efficiency.
If only the first factor were happening, SNDK would simply be:
“A storage company benefiting from rising NAND prices.”
However, if the second and third factors continue to develop, the investment narrative could change:
SanDisk could gradually evolve from a traditional cyclical NAND company into a business with stronger AI data center growth exposure.
Of Course, SNDK on July 17 Also Faced Several Risks
The first risk was:
The NAND price cycle.
With Q3 gross margin reaching 78.4%, profitability was already at a very elevated level. At that time, it remained uncertain whether such strong margins could be sustained over the long term.
If the industry enters another period of large-scale capacity expansion, and supply growth exceeds demand growth, NAND pricing could come under pressure again.
The second risk was:
The realization of AI data center demand.
Data center revenue growth of 233% in Q3 was impressive, but strong quarterly growth does not necessarily mean the same growth rate can continue in every future quarter.
The third risk was:
New technology production risks.
As of July 2, BiCS10 had only entered the customer sampling stage. Customer sampling does not mean full-scale production, nor does it mean the technology has already generated significant revenue.
Therefore, the potential future value of BiCS10 should not be counted as profit already achieved on July 17.
Many people believe that the most valuable component in the AI era is:
Who owns the fastest chips.
However, as AI moves into large-scale adoption, another question will become increasingly important:
Where will all of this data be stored?
GPUs provide computing power.
Networks provide connectivity.
Storage provides memory.
If AI models continue to grow larger, inference workloads continue to expand, and data center infrastructure becomes increasingly massive, storage will no longer be just an overlooked component inside a computer.
It will become a fundamental part of AI infrastructure.
Therefore, focusing on SNDK on July 17 was not simply a bet on:
“NAND prices continuing to rise next quarter.”
The more important question was:
Can SanDisk use this wave of AI infrastructure expansion to transform from a company heavily dependent on storage cycles into an important storage supplier for the AI data center era?
As of July 17, 233% data center revenue growth, 97% quarter-over-quarter revenue growth in Q3, and BiCS10 entering customer sampling had already created a clearer picture of this potential transformation.
The next key question was:
Is this high growth simply a recovery driven by the storage cycle, or is AI permanently reshaping SanDisk’s business structure?