Sandisk Revenue Up 378% on Datacenter, Edge: Rapid Earnings Reaction

SanDisk reported a staggering 378% surge in quarterly revenue, reaching approximately $11.0 billion for the first quarter of 2027. The data center sector accounted for about 88% of this growth, driving the rapid earnings reaction. Shares experienced a nearly 3% increase in after-hours trading following the announcement. Revenue has surpassed its levels from the previous year by five times, with higher prices and product mix playing a significant role.

SanDisk anticipates a slowdown in growth to around 11% to 14% in the upcoming quarter, maintaining a steady gross margin near 85%. The increase in revenue per unit is the primary factor behind the jump, as cost of revenue remained nearly flat compared to the previous year, making shipment data insufficient to explain the significant growth.

Despite the release lacking specific pricing or shipment information, it indicates a shift towards AI infrastructure, with data center sales now representing 44% of overall revenue, while consumer sales declined. The changing mix from consumer to AI infrastructure is the lasting transformation, while pricing represents the more cyclical aspect.

Cash flow trailed profit, with accounts receivable growing by approximately 40% within a single quarter, exceeding revenue growth. Adjusted free cash flow, however, rose slightly less than revenue, possibly due to shipment timing, though the report does not explicitly clarify this. Investors should closely monitor whether gross margin sustains near 85% as revenue approaches the projected $12.2 billion to $12.6 billion range.

A decline in margin would suggest a softening of prices. Additionally, it is crucial to observe whether adjusted free cash flow continues to keep pace with revenue growth, as SanDisk allocated $5.0 billion towards buybacks during this quarter.