SanDisk on Thursday projected quarterly revenue and adjusted earnings substantially ahead of market forecasts, reinforcing a broader theme among major storage vendors that enterprise investment in data-center storage for artificial intelligence workloads remains vigorous.
The company said it expects revenue of between $7.75 billion and $8.25 billion for the fourth quarter, compared with analysts' average estimate of $6.49 billion, according to data compiled by LSEG. Sandisk also provided adjusted profit guidance of $30 to $33 per share, above consensus estimates of $22.70.
Market reaction to the results was mixed. Sandisk shares, which have climbed roughly 350% year-to-date, fell more than 6% in extended trading following the announcement. Western Digital, which has seen its stock more than double this year, also slipped nearly 8% in after-hours trade even though it, too, forecast quarterly revenue above estimates. Earlier in the week, a sharp rally across storage names was ignited by Seagate's own strong revenue outlook.
Commenting on the pullback in share prices, Michael Ashley Schulman, Partner at Cerity Partners, said that Western Digital and Sandisk's outlooks were "failing to provide the necessary 'wow factor' needed to sustain the breakneck momentum," addressing the sell-off of the stocks.
Company executives and analysts point to the rapid growth in generative artificial intelligence as the principal driver behind demand for high-performance enterprise solid-state drives used in data centers. AI workloads typically require large-scale compute and extensive storage capacity, and that has translated into rising need for flash-memory chips.
Firms in the sector report that demand for flash is outpacing supply, creating conditions that allow vendors such as Sandisk to charge higher prices for their higher-margin products. Sandisk said its Datacenter segment, which includes high-capacity flash memory storage solutions, more than tripled in revenue in the third quarter to $1.47 billion.
For the quarter ended in the third quarter, Sandisk reported revenue of $5.95 billion, a 97% increase from the year-ago period and above estimates of $4.70 billion. Adjusted profit for that period was $23.41 per share, compared with estimates of $14.54 per share.
"This quarter marks a fundamental inflection point for Sandisk - where our technology leadership is enabling a deliberate shift in our mix toward the highest-value end markets, led by Datacenter," said CEO David Goeckeler.
Taken together, the guidance and recent results from Sandisk and its peers highlight a persistent need across data centers for faster, higher-capacity storage driven by AI workloads. At the same time, investors have demonstrated sensitivity to whether company outlooks meet or exceed the heightened expectations set by a recent sector rally.