SanDisk’s stock surged nearly 7% in early trading following a stellar second-quarter earnings report that significantly surpassed Wall Street expectations, propelled by an unprecedented surge in demand for its flash storage chips, largely driven by the artificial intelligence boom. The company’s fiscal second-quarter adjusted earnings came in at $6.20 per share, a substantial leap from the $3.62 per share anticipated by analysts polled by FactSet. Revenue for the quarter reached $3.03 billion, comfortably exceeding the $2.69 billion consensus forecast. This strong performance led to a more than 20% jump in premarket trading.
Looking ahead, SanDisk’s third-quarter outlook also painted a robust picture, projecting revenues between $4.4 billion and $4.8 billion, significantly higher than the $2.93 billion expected by FactSet. The company anticipates adjusted earnings per share in the range of $12 to $14 for the third quarter, more than doubling the $5.11 estimate from analysts.
In response to the impressive results and optimistic guidance, analysts at Raymond James upgraded SanDisk’s stock to an “outperform” rating. They cited the company’s strong pricing power amidst a tightening supply environment, noting that new production capacity is struggling to keep pace with demand. The firm expressed confidence in SanDisk’s ability to benefit from long-term data center build-outs, stating, “We know demand is exceptionally strong and likely only growing, supply is tightening to the point of potentially being sold out for years.”
The current surge in demand for memory solutions like those offered by SanDisk underscores the critical role of flash storage in the ongoing artificial intelligence revolution. As businesses race to build out the power-hungry data centers required to train and deploy AI models, the need for high-capacity and high-performance memory is escalating rapidly. SanDisk’s data center business, in particular, demonstrated this trend with a significant 64% sequential growth.
This imbalance between soaring demand and constrained supply has created a favorable market dynamic for memory chip manufacturers, allowing them to implement price increases and sustain robust profit margins. SanDisk indicated that it expects third-quarter gross margins to range between 65% and 67%, a considerable improvement over the 49.3% forecasted by analysts surveyed by StreetAccount.
The pervasive memory shortage is impacting various sectors within the technology industry. Apple, for instance, recently highlighted its own supply chain challenges when reporting its first-quarter earnings. CEO Tim Cook indicated that constraints in accessing advanced node manufacturing capabilities were limiting the production of iPhones, and that the company would be affected by rising memory prices. Cook noted that Apple was exploring “a range of options to deal with that.”
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