AI "eating memory" can't stop? Can SanDisk's financial report bring another surprise guidance?

BERNSTEIN SOCIETE GENERALE GROUP (hereinafter referred to as Bernstein) has maintained its "Outperform" rating on SanDisk in its latest report, setting a target price of $580, which implies a potential upside of 20% compared to the current closing price of approximately $481.42.

The report believes that the current NAND flash memory industry is in a strong upward cycle driven by a surge in AI demand and a slowdown in supply growth. In this context, the continuously rising average selling price provides solid support for SanDisk's performance this quarter.

Bernstein expects that SanDisk's performance in the second fiscal quarter will once again exceed market expectations, and the company's guidance for the third fiscal quarter has significant upward adjustment potential, which may become the highlight of this earnings report.

Industry Upward Cycle Boost: AI Ignites Demand, Supply Continues to Tighten

The core driving force behind this round of the NAND storage industry's upward cycle lies in structural changes on both the supply and demand sides. On the demand side, the explosion of artificial intelligence applications continues to drive data storage demand, and market expectations for storage products have been further elevated due to technological advancements such as NVIDIA's Vera Rubin platform. On the supply side, overall industry capacity expansion is limited, with new supply being scarce, leading to a persistent supply-demand gap that directly drives NAND flash prices into a clear upward channel.

Bernstein emphasizes in its 2026 industry outlook that SanDisk is a core beneficiary of this AI-driven data explosion wave. This judgment is based on the fact that even if the market has high expectations for storage manufacturers, as long as the actual performance in corporate earnings reports and future guidance continues to exceed consensus, it can effectively drive stock prices to achieve double-digit significant increases.

The performance of Micron and SanDisk in their previous earnings reports has fully confirmed this logic. On December 17, 2025, Micron announced a non-GAAP earnings per share guidance range of $8.22 to $8.62 for the second quarter of fiscal year 2026, far exceeding the market's general expectation of $5.13, and its stock price rose by 10% the next day.

Earlier, on November 6, 2025, SanDisk provided a non-GAAP earnings per share guidance of $3.0 to $3.4 for the second quarter of fiscal year 2026, also significantly higher than the market expectation of $1.99, driving its stock price to soar by 15% the next day. These cases clearly indicate that in a strong industry cycle, exceeding expectations in financial guidance is a key catalyst for driving stock prices upward.

Q2 Performance Outlook: ASP Up 14%, Performance Likely to Exceed Expectations

Bernstein expects that SanDisk's non-GAAP earnings per share for the second fiscal quarter of 2026 will reach $3.79, higher than the market's general expectation of $3.45.

The core driver for this potentially exceeding performance is the increase in average selling price (ASP). Bernstein predicts that the average selling price of SanDisk's NAND products in this quarter will achieve approximately a 14% quarter-over-quarter increase, and this upward trend may continue further Historical data indicates that the increase in average selling price (ASP) of products is a key variable driving the growth of the company's profitability. In the current context where the supply-demand dynamics of the industry have not fundamentally reversed, the continuous rise in average selling price will provide solid fundamental support for SanDisk's performance in the second quarter.

Q3 Guidance Has Huge Potential: If ASP Increases by 40%, Earnings Per Share Will Hit $9.06

Compared to the market's general focus on the second quarter performance, SanDisk's guidance for the third quarter of 2026 is considered to have greater upside potential and imaginative space.

Under Bernstein's baseline forecast scenario, SanDisk's non-GAAP earnings per share for the third quarter are expected to reach $6.52, with the core assumption being that the average selling price (ASP) of NAND products will achieve a 22% quarter-over-quarter increase. This forecast value is significantly higher than the current market expectation of $4.62.

If the industry's supply-demand tension exceeds expectations, driving a larger increase in ASP, the company's earnings elasticity will be even more astonishing. According to model calculations, if the ASP increases by 40% quarter-over-quarter in the third quarter, which is roughly consistent with Gartner's forecast of about a 43% quarterly increase, SanDisk's non-GAAP earnings per share for the quarter could soar to $9.06, further projecting its earnings per share for the fiscal year 2027 to reach a high of $67.50.

The report also highlights risks and prudence. Although sporadic data indicates that in an extremely tight market, the ASP could see a 100% quarter-over-quarter increase, Bernstein's analysis suggests that such drastic price fluctuations are unlikely to cover the entire shipment volume within a complete quarter. If this extreme increase is forcibly calculated, the theoretical quarterly earnings per share would exceed $17, but this is considered to have a low probability of realization in the short term.

Focus on Peer Earnings Reports and Beware of Downward Cycle Risks

SanDisk's market performance will largely correlate with the overall atmosphere of the semiconductor storage industry. Key signals from peers will come from Samsung Electronics; if Samsung conveys clear signals in its earnings statement regarding a solid upward trend in NAND flash prices, strong end demand (especially related to AI), or continued tight industry supply, this will serve as the most powerful third-party validation of the current industry upcycle and SanDisk's own fundamentals, potentially providing additional upward momentum for SanDisk's stock price.

At the same time, the report also warns investors to pay attention to three potential downward risks:

1. Industry Cyclical Risk: Although currently in an upcycle, the inherent cyclicality of the NAND industry means that after experiencing short-term high growth, there is a possibility of turning downward. A high performance base may put pressure on future year-over-year growth.

2. Communication Transparency Risk: The report points out that the company has deficiencies in information disclosure and investor relations communication, which may affect the confidence of some institutional investors and long-term value investors, adversely impacting the stability of the valuation system.

3. Structural Recession Risk: If the degree and duration of weak industry demand exceed the current cyclical adjustment scope, evolving into a structural recession caused by slowed technological iteration or saturation of application scenarios, it could trigger significant revaluation and downward adjustment of the company's asset value and long-term cash flow levels