A while ago, Sandisk (NASDAQ:SNDK) turned in the kind of quarter most chip companies only see in investor-day slide decks. In fiscal Q4 2026, revenue reached $8,965 million, up 372% from a year earlier, and gross margin came in at 84.6%. Yet the stock trades at just 7.75 times expected earnings, a fraction of what investors pay for the sector average.
The company makes flash memory, the chips that keep data stored when the power goes off. Shoppers know the name from its consumer storage gear, but the real money now comes from drives sold into edge devices and enterprise SSDs (solid-state drives) built for AI infrastructure. So is the market missing a transformed business, or is it quietly betting this is what the top of a memory cycle looks like? The answer turns on how much of that growth came from price and how much from staying power.
From Card Maker to AI Supplier
Sandisk describes itself as a vertically integrated memory company, meaning it designs and manufactures its own products rather than relying on someone else’s chips. That matters when supply is tight, because the company controls the very thing customers are scrambling for.
The proof shows up in the margins. A year earlier, fiscal Q4 gross margin was 26.2% on a GAAP basis. This past quarter it was 84.6%. A commodity supplier doesn’t get that kind of swing without real pricing power, even if only for a while.
The mix has changed too. Datacenter revenue hit $2,977 million in fiscal Q4, up 103% from the prior quarter, and reached $5,153 million for fiscal 2026, up 437%. Edge revenue came in at $5,432 million for the quarter, up 48% sequentially. For investors tracking broader market leaders scaling similar heights, it helps to examine the Stocks Near All-Time Highs.
Customers Are Signing Up Early
The most interesting development isn’t a revenue line. Since its April earnings call, Sandisk has signed five more agreements under what it calls its New Business Model, three with new customers and two expanding earlier deals. When it calculates adjusted free cash flow for fiscal 2026, the company backs out $2,476 million tied to prepayments and deposits under these agreements. Customers don’t hand over cash in advance for a product they expect to find cheaply next year. That’s a sign buyers are planning around scarce supply for longer than a single quarter.
Management expects the momentum to keep going, guiding for fiscal Q1 2027 revenue of $10.30 billion to $10.80 billion and non-GAAP earnings per share (an adjusted figure that strips out certain items) of $44.00 to $46.00. The board also approved another $14 billion in buybacks, bringing the remaining authorization to $15.5 billion. Memory stocks don’t all trade at the same discount, so see how one close rival’svaluation stacks up.
Isn’t This Just a Price Spike?
That’s the strongest case against the stock, and Sandisk’s own numbers support it. About two-thirds of fiscal Q4’s sequential growth came from higher prices, with only one-third from higher volume. Memory has historically moved this way: prices soar when supply runs short, then slump once producers add capacity.
Consumer revenue also fell 32% from the prior quarter, a reminder that not every end market is booming. And the stock tends to trade alongside memory peers like Micron, rising and falling with each new read on the cycle. The prepayment agreements soften that worry but don’t erase it. Price still matters more than volume right now.
Cheap for a Reason, or Too Cheap?
At 7.75 times forward earnings, as of October 6, Sandisk trades far below the sector’s 23.74 P/E. Investors are paying less than $8 for every $1 of expected earnings, against nearly $24 for the typical peer. That gap would make sense if earnings were about to shrink. But analysts expect EPS to grow 23.72% in 2027, which is hard to square with a single-digit multiple. Fiscal Q4 GAAP EPS of $43.97 also came in above the non-GAAP figure of $39.25, so the headline profit isn’t being dressed up by adjustments.
The catch is one cyclical investors know well: memory stocks often look cheapest right at the peak, when earnings are at their highest. The market is clearly pricing in some fade from here. The real question is whether that discount is too steep. Hedge funds are leaning in, with 128 holding the stock in the most recent quarter, up from 114 in the prior one. Short interest sits at 6.03% of the float, showing some bearish positioning but not a crowded bet against the shares.
What Would Change the Math
The evidence points to a business that has changed more than its valuation suggests. Fresh long-term customer agreements, a datacenter segment that grew 437% in fiscal 2026, and expected EPS growth of 23.72% in 2027 don’t fit a stock priced as if earnings are about to fall off a cliff. That setup suits investors who can stomach memory-sized volatility in exchange for a deep discount to the sector. The picture would change if guidance began pointing to falling prices before datacenter volume could pick up the slack.
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