SanDisk's Meteoric Rise: Record Profits Meet Technical Warnings

SanDisk crushes Q3 estimates with $5.95B revenue, signs $42B in long-term contracts, but overbought stock and AI concentration risks raise caution.

SanDisk has delivered a quarter that left Wall Street scrambling to revise its models. The memory chip specialist posted third-quarter revenue of $5.95 billion, crushing the analyst consensus of roughly $4.73 billion. Adjusted earnings per share came in at $23.41, nearly doubling the $14.66 estimate. The stock responded in kind, hitting an all-time high of $1,255.86 on May 4.

The numbers tell a story of a company that has successfully reinvented itself. Revenue surged 251% year-over-year, driven overwhelmingly by data center demand. That segment alone grew 233% sequentially in the third quarter, as SanDisk pivoted hard from consumer markets toward enterprise and artificial intelligence customers.

Long-Term Contracts Lock In Future Growth

The centerpiece of this transformation is what the company calls its New Business Model partnerships. SanDisk signed three such agreements in the third quarter, with two more added in the current fourth quarter. These contracts come with fixed minimum guarantees, collectively securing roughly $42 billion in committed volume. For fiscal 2027, they are expected to cover more than a third of planned bit shipments.

The strategy is already paying dividends beyond the top line. SanDisk has retired all its debt and announced a $6 billion share buyback program. Pricing power is also on the rise — the company is increasing prices faster than the industry average, a sign that customers are willing to pay a premium for guaranteed supply.

Guidance That Raises the Bar

The fourth-quarter outlook has only intensified the bullish narrative. SanDisk expects revenue between $7.75 billion and $8.25 billion, with adjusted earnings per share ranging from $30.00 to $33.00. Both figures tower over previous analyst estimates, prompting multiple firms to raise their price targets.

Yet beneath the euphoria, cracks are beginning to show. The stock has surged more than 350% since the start of the year, and technical indicators are flashing warning signals. The relative strength index has climbed to nearly 80, deep in overbought territory. Retail traders on forums like WallStreetBets have driven trading volumes well above historical averages, adding a layer of speculative froth.

The Valuation Debate Heats Up

Wall Street is split on what comes next. Bernstein has set a price target of $1,700, while Fox Advisors is aiming for $1,500. More cautious voices point to a potential ceiling on margins. SanDisk has already locked in a third of its 2027 volumes at current prices. If NAND memory prices continue to climb, the company's ability to capture additional upside will be limited.

The concentration risk is another concern. Revenue is increasingly dependent on a small group of deep-pocketed AI customers. Should these tech giants trim their budgets, the impact on SanDisk's balance sheet would be immediate. Long-term supply contracts provide some buffer, but they offer little protection against a broad industry price collapse.

A Market Priced for Perfection

The stock has fully priced in flawless execution of the AI strategy. Any shortfall — even a minor one — against the ambitious guidance could leave shares with no margin for error. The structural demand for AI infrastructure remains a powerful tailwind, but the market is now demanding proof that SanDisk can deliver on its promises quarter after quarter.

For now, the company has the momentum, the contracts, and the pricing power to make its case. The fourth-quarter results will be the next test of whether this rally has more room to run — or whether the technical warnings are the first sign of a correction.