Sandisk's revenue jumps 378% to $11 billion and beats on every line but cash; shares still fall 5.3%

The floor's first test: a beat on every line but cash

Sandisk▼−9.10% — Sandisk, down 9.10 percent today Corp., the Milpitas, California flash-memory maker spun out of Western Digital▼−4.14% — Western Digital, down 4.14 percent today in February 2025 ¹, has taken the first earnings test of its contract book. For the three months to October 2, revenue was $11.03 billion, up 378% year on year; adjusted earnings of $49.51 a share beat the $46.67 FactSet▲+1.70% — FactSet, up 1.70 percent today consensus; adjusted gross margin reached 85.1%, against 29.9% a year earlier↗ ¹². Datacenter revenue of $4.80 billion, up 61% in a single quarter, is now 43.5% of sales ¹².

The December quarter is guided to $12.2–12.6 billion of revenue and $55–57 of adjusted earnings per share↗, above FactSet's $12.31 billion and $53.60 ¹². An eight-for-one stock split takes effect November 19, after $5.0 billion of buybacks last quarter ¹. One line missed: operating cash flow of $6.36 billion fell short of the roughly $6.7 billion analysts expected, as receivables swelled by $1.9 billion in the quarter ¹³.

Beats are getting sold across the memory trade

Sandisk fell 5.3% to $1,330.05 in the regular session ². After the bell it swung between $1,275 and $1,371 before settling about 2.7% below the close ⁴⁵. Seagate▼−3.24% — Seagate, down 3.24 percent today, the disk-drive maker, and Western Digital each fell about 3% in the same extended session ⁵. The week set the pattern.

Seagate beat estimates and raised its dividend, and still slid↗ ⁶. Western Digital dropped after its capital outlays fed worries over the durability of AI spending ³. Silicon Motion▼−4.38% — Silicon Motion, down 4.38 percent today, which makes the controller chips inside solid-state drives, has now guided above the high end for two straight quarters, and Wedbush, the brokerage, notes the shares barely react, trading near 10 times 2027 estimates ⁷. Its read: the market is discounting everything past 2027 ⁷.

What the contract book bought

The book: at least $93.9 billion of expected revenue at contractual floor prices↗, across eight customers with a weighted-average duration beyond four years, backed by $16.5 billion of financial guarantees ⁸. Remaining performance obligations, the signed orders not yet shipped, stood at $59.8 billion at the last quarter-end, $91.1 billion including deals signed after it closed ⁸.

The agreements should cover roughly half of what Sandisk ships this fiscal year; the rest still sells at market prices ⁹. Management cites customer signals running past fiscal 2030 ³. The mix shows who pays: datacenter revenue up 61% in a quarter, consumer revenue down 29%, at $397 million ¹. The Inference laid out this gap on October 21; tonight priced it.

No downturn has tested these floors

The bear case keeps its own receipts. In fiscal 2023, the last flash downturn, revenue at this business fell 38% and gross margin went from about 24% to below zero within two quarters, closing the year at a $2.1 billion net loss ⁹.

Roughly two-thirds of the sequential growth in the quarter ended in July came from price, not volume ⁹. The contracts promise floors, not immunity from a cycle ⁸. SK hynix▼−6.56% — SK hynix, down 6.56 percent today, the Korean memory maker, with more than half its 2027–28 capacity already committed and a shortage it says could run through 2030, still lost 19% of its value in a month ⁶.

The next test is cash conversion, not the guide

The next evidence is cash conversion, not the revenue guide: whether the $1.9 billion receivables build unwinds in the December quarter, and whether gross margin holds its guided 84.5–85.5% band while TrendForce, the industry price tracker, expects contract prices to rise another 15–20%↗ ¹⁹. The floors guarantee a minimum price on contracted shipments; they do not guarantee that investors will pay up for profits past 2027 ¹⁹. The next reading is the December quarter, due in late January.