Sandisk Corporation (NASDAQ:SNDK) has locked in buyers for roughly half of its output this fiscal year and two-thirds of next year’s. The long-term contracts carry floor prices, and the company says its margins stay attractive even at the floor. That is meant to protect it when the next memory downturn comes. The shares have gained more than 640% this year, more than any other stock in the S&P 500. Western Digital spun the company off only in February 2025. It entered the S&P 100 on September 21. The question now is whether those contracts hold when flash prices turn.
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 are now about a third of the total. The company swung to a profit of nearly $7 billion from a loss a year earlier.
Long-Term Contracts Could Turn a Memory Boom Into a Durable Business:
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 said it would return all excess cash to shareholders after reinvesting in the business. It authorised an additional $14 billion buyback alongside its August results.
Earnings have grown as fast as the share price, so the multiple has not expanded even as the stock climbed. 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.
Memory Has Always Been a Cycle, and the Stock Already Knows It:
Flash memory is a commodity, and every previous shortage has ended in a glut when the industry added capacity. Samsung, SK Hynix and Micron are all adding capacity or moving to denser chips, and so is Kioxia, Sandisk’s own manufacturing partner. The pricing power that took Sandisk’s 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. The test is not whether the volume shows up but whether the floor prices are set above where NAND trades in a glut, and Sandisk has not disclosed them.
The market has already started to price that in. For all the gains this year, the shares closed Friday about 24% below their June record. An eight-times multiple is what memory stocks trade on at the top of a cycle, because investors expect earnings to fall from there. The $14 billion buyback is being funded by a single windfall year, which means Sandisk is spending peak-cycle cash at prices that may also prove to be peak-cycle.
The S&P 100 entry does not help from here either. Funds tracking that index are far smaller than those tracking the S&P 500, and the buying that came with inclusion was a one-day event.
Conclusion:
Sandisk has sold half of this year’s output and two-thirds of next year’s in advance, after AI storage demand turned a spun-off company into one of the largest in the country. It has multi-year contracts, an 80% margin target and a buyback worth $14 billion behind it. However, memory pricing has never stayed high for long. The stock is already well off its June peak, and the index buying that lifted it does not repeat. The next signal is the fiscal first-quarter report, expected in early November.
Market Sentiment:
Sandisk Corporation was held by 128 hedge funds with a combined stake value of about $25.6 billion at the end of Q2 2026 in the Insider Monkey database. This is up from 114 hedge fund holders with a cumulative investment value of around $11.4 billion in the previous quarter.
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This article is originally published at Insider Monkey.
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