SanDisk Ships Fewer Chips but Posts Record Margins as AI Demand Reshapes Memory Economics

SanDisk reports record gross margins of 78.4% as revenue triples amid AI data center boom, despite double-digit volume decline. Stock surges 467% in 2025.

The NAND flash market has entered uncharted territory, and SanDisk is rewriting the rules of memory pricing. The company’s latest results reveal an unusual reality: physical chip volumes actually declined sequentially in the high double digits, yet revenue nearly doubled and gross margins exploded. This paradox lies at the heart of a stock that has surged more than 467% since the start of 2025.

Shares closed at $1,562.34 on Friday after a single-day jump of roughly 16–17%, pushing the market capitalization past $250 billion. The rally has been relentless — the stock gained 83.42% in the past 30 days alone. But the breakneck pace has pushed the relative strength index to 79.5, firmly in overbought territory and prompting caution among technical analysts.

Data Center Revenue Jumps 645% as Western Digital Exits

The engine of SanDisk’s transformation is its data center business, where year-over-year revenue surged 645%. Hyperscalers are loading up on high-speed storage for AI servers, and SanDisk’s concentrated focus on enterprise customers has magnified the payoff. With NAND capacity tight and Gartner projecting price increases of up to 234% in 2026, the company is riding the strongest pricing environment in memory history.

Meanwhile, a structural overhang has finally lifted. Western Digital, which spun off SanDisk in February 2025, has offloaded roughly 653,000 shares through an exchange with institutional investors and plans to dispose of the remaining million shares via further swaps or distributions. The exit ends years of concern that a large block sale could depress the stock. The market now treats SanDisk as a pure-play AI memory specialist, unencumbered by its former parent.

Gross Margin Hits 78.4% as Long-Term Contracts Lock in $42 Billion

The financials paint a picture of extreme pricing power. Third-quarter revenue reached $5.95 billion — roughly 3.5 times the prior-year figure. Adjusted earnings per share came in at $23.41, crushing the consensus estimate of $14.17. The gross margin vaulted from 22.5% to 78.4% quarter over quarter, a leap fueled entirely by higher prices and a richer product mix rather than volume growth.

To insulate against future price swings, SanDisk has signed five multiyear supply partnerships that guarantee minimum revenues of about $42 billion. These contracts cover nearly a third of the production capacity expected for 2027 and include variable pricing components designed to capture further upside if NAND prices keep rising. The company also completed the repayment of all long-term debt and announced a $6 billion share buyback program.

ETF Inflows and Institutional Demand Amplify the Rally

The stock’s ascent has been turbocharged by index effects. SanDisk is a heavyweight in the new Roundhill Memory ETF, which ballooned to $6.25 billion in assets within 30 days of launch. Inclusion in major benchmarks has broadened the investor base, adding a steady stream of passive buying that helps sustain momentum.

Cantor Fitzgerald and Bernstein have set price targets in the $1,700–$1,800 range, while more aggressive forecasts stretch to $4,000. Those higher targets assume the NAND shortage persists and hyperscaler capital spending on AI infrastructure remains unabated.

Spot Market Signals a Cooling Risk

For all the optimism, warning lights are flickering in the spot market. Although NAND and DRAM prices are still climbing sharply in the current quarter, mixed signals have emerged. Rising costs are beginning to dampen demand, and Bernstein warns of a noticeable slowdown in the third quarter. The weekly NAND spot price data has become the most closely watched indicator for near-term direction.

Management’s outlook for the fourth quarter is robust: around $8 billion in revenue and a gross margin of up to 81%. The guidance provides fundamental support for the rally, but it also leaves little room for error. Any disappointment in pricing, contract renewals, or the investment plans of major cloud providers could quickly reverse the gains — especially given the stock’s current valuation and extreme overbought condition.