Sandisk Locks In Two Thirds of Next Year's Output

Sandisk Corporation (NASDAQ: SNDK) has signed buyers for roughly half of its output this fiscal year and two-thirds of next year's, under long-term contracts that carry floor prices the company says keep margins attractive even at the bottom. The deal structure is the flash maker's central defense against the next memory downturn — and the untested variable in a stock that has already gained more than 640% this year, more than any other name in the S&P 500.

The rally rests on a single mismatch between supply and demand. AI data centers need enormous amounts of flash storage, and there is not enough of it. In its most recent quarter, ended July 3, Sandisk's revenue rose 372% from a year earlier to $8.97 billion. Data-center sales now account for about a third of the total. The company swung to a profit of nearly $7 billion from a loss a year earlier.

A spin-off that became the S&P 500's best performer

Western Digital spun Sandisk off only in February 2025. The stock entered the S&P 100 on September 21. In the months between, it became the market's clearest expression of the AI storage squeeze.

The numbers behind that run are unusual for a memory company. Gross margin hit 84.6% last quarter — a level that reflects real pricing power in flash, not cost discipline. And earnings have grown as fast as the share price: even after the run, the stock trades at about eight times the earnings analysts expect for the current fiscal year, which ends in early July. The multiple has not expanded even as the stock climbed.

The contracts: volume, guarantees, floors and ceilings

Sandisk's argument is that this cycle is different because of how it has sold the capacity. At its investor day in August, the company said it had signed ten of these agreements with eight customers, under what it calls a new business model. The contracts commit volumes, carry minimum financial guarantees, and set price floors and ceilings instead of leaving Sandisk exposed to the spot market.

On the back of those contracts, management set targets for fiscal 2028 through 2030 of mid-to-high-teens revenue growth and adjusted gross margins around 80%. It also committed to returning all excess cash to shareholders after reinvesting in the business. The company authorised an additional $14 billion buyback alongside its August results.

That is a bold set of promises for an industry with Sandisk's history. Flash memory is a commodity, and every previous shortage has ended in a glut when the industry added capacity.

The cycle has not been repealed

The competitive threat is concrete. Samsung, SK Hynix and Micron are all adding capacity or moving to denser chips. Kioxia — Sandisk's own manufacturing partner — is doing the same. The pricing power that took gross margin to 84.6% last quarter will erode the moment supply catches up with demand.

The long-term contracts cover volume and set floors. But the real test is not whether the committed volumes show up; the customers building AI data centers need the storage regardless. The test is whether the floor prices sit above where NAND trades in a glut. Sandisk has not disclosed them.

That gap defines the investment case. If the floors hold above glut-level NAND pricing, Sandisk has converted a commodity cycle into something closer to an annuity — mid-to-high-teens growth and roughly 80% gross margins through fiscal 2030, with excess cash returned to shareholders. If they do not, the contracts soften rather than prevent the downturn, and the 84.6% margin quarter becomes a peak rather than a baseline.

Management's own framing points the way to watch: the company says margins stay attractive even at the floor. Investors will find out what that means only when flash prices turn — and with three of the world's largest memory makers plus its own fab partner adding capacity, that test is a question of timing, not direction.