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SanDisk's Future Output Priced In
1 Sep
Summary
- Over half of 2027 output is under long-term contracts.
- Agreements ensure roughly 80% gross margin on committed bits.
- Supply growth for 2027 is expected to be in the mid-teens.
SanDisk has shifted its business model over the past year, moving from quarterly repricing to long-term supply agreements. These agreements are projected to cover more than 50% of the company's fiscal year 2027 output, with approximately two-thirds committed for fiscal year 2028, extending over four years on average. The committed portion of this output has its price capped.
These long-term agreements are expected to yield around an 80% gross margin. While the variable component within these contracts has price ceilings, SanDisk asserts that margins remain attractive. The company's current quarterly non-GAAP gross margin is robust, with fiscal Q1 2027 guidance between 83% and 85%.
Supply growth for fiscal year 2027 is projected to be in the mid-teens, a limitation due to production methods rather than wafer capacity. SanDisk's enterprise SSDs for the datacenter market have seen significant growth, now representing a substantial portion of its portfolio. The overall NAND market is anticipated to approach $500 billion by calendar 2027, with demand reportedly exceeding SanDisk's supply.
