Sandisk has thumping quarter on AI boom, secures long-term contracts and unveils big buyback

Memory chip maker Sandisk on Thursday reported soaring revenue and profit while predicting another rosy quarter, adding it has signed long-term contracts worth at least $42 billion to help it counter any extreme price cycles.

It also said it would embark on a $6 billion buyback.

Sandisk has become one of the later beneficiaries of the artificial intelligence boom, with its main product - NAND storage memory - now in high demand as AI systems have ‌started to work ⁠with ⁠large legal documents and computer code bases. But like its relative DRAM memory, NAND has long been subject to extreme price cycles as demand ebbs and flows.


CEO David Goeckeler said the company has signed five long-term supply agreements with customers that range between one and five years in length. Three inked during the company's third quarter ended April 3 were worth $42 billion, while the other two were signed in the current quarter.

"The bane of this industry has been the boom-bust cycle," Goeckeler told Reuters in ⁠an interview. "We ‌want to get out of that. We want consistent, predictable economics."

For the third quarter, revenue more than tripled to $5.95 billion, comfortably beating an LSEG consensus estimate of $4.70 billion.

Adjusted ⁠profits came in at $23.41 per share, trouncing an estimate of $14.50 per share, and a huge turnaround from the same quarter a year ago when NAND memory was not used as much in AI data centers and it reported a loss of 30 cents a share.

For the current quarter, Sandisk forecast sales of $7.75 billion to $8.25 billion and adjusted profits of $30 to $33 per share, both well above LSEG estimates of $6.49 billion and $22.70 per share.

Goeckeler said that he understood some investor scepticism about long-term agreements in the memory business, which have been ‌tried before and failed when customers renegotiated them amid slack demand.

Sandisk has avoided those pitfalls, he said, by including a variety of terms such as price ceilings and floors, adjustments based on market demands, ⁠but also clear terms that do not allow customers to walk away without paying.

"Consistency is very important to me," Goeckeler said. "We put a financial structure in place that says at the beginning of the contract, if you make a financial commitment to me as the customer, if you walk away from a contract, I get that money."

The buyback authorisation was effective immediately but has no expiration date.

Sandisk shares, which have risen more than 360% this year and were up 3% during regular trading hours on Thursday, rose about 1% immediately after the results in after-hours trading but reversed course to fall 6%.