Sandisk (SNDK) Q1 FY2027 Earnings Call: Q&A Summary

Q: Benjamin Reitzes from Melius asked if more NBMs are coming and what the bits under contract will be in the next few years.

A: David Goeckeler stated the pipeline is very strong and they expect more NBMs over the coming months and quarters. Luis Visoso added that 95% of NBM partners are investment grade, and bits under contract are 50% for fiscal year 2027 and 2/3 for 2028, with expectations for that number to grow.

Q: Benjamin Reitzes from Melius asked if there is NBM interest from the PC market and if that segment is becoming more attractive.

A: Luis Visoso noted they are open to NBMs with any customer. David Goeckeler added that while the PC market is at a trough, they expect exabytes to grow next year as content per device increases.

Q: Joe Moore from Morgan Stanley asked why the company's data center participation is so strong and if it is due to BiCS 8.

A: David Goeckeler attributed the growth to the BiCS 8 node and CBA architecture, noting that the QLC product ramp is faster than expected. He added that customers are refining AI inference architectures, which is pulling NAND into more parts of the stack.

Q: Joe Moore from Morgan Stanley asked where the product mix goes long term.

A: David Goeckeler stated they are working to catch up their portfolio mix to market bits and expect to reach a substantially higher number than in fiscal year 2026.

Q: Mark Newman from Bernstein asked how the price and volume mix will progress in the guidance.

A: Luis Visoso said they expect both volume and pricing to contribute, with pricing expected to increase modestly throughout the year.

Q: Mark Newman from Bernstein asked for an update on HBF and new NAND technologies in the data center.

A: David Goeckeler noted that HBF conversations are robust and that AI inference scaling is pulling NAND into more parts of the architecture, creating a dynamic environment for new NAND tiers.

Q: David Gibson from MST Financial asked if the company is looking to accelerate the BiCS transition to drive bit growth.

A: David Goeckeler stated there are no plans to change the fab plan and they remain committed to mid-to-high teens bit growth.

Q: David Gibson from MST Financial asked if there are limits to allocating more supply to the data center.

A: David Goeckeler and Luis Visoso explained that it is a constant fitting exercise, noting that the 120-day production cycle limits short-term flexibility.

Q: C.J. Muse from Cantor Fitzgerald asked how the NBM pipeline exceeding supply impacts CapEx and bit growth plans.

A: David Goeckeler said the process is working and NBMs provide better visibility, though they are still in negotiations and not yet at the point of changing supply plans.

Q: C.J. Muse from Cantor Fitzgerald asked if NBM deposits can be used for buybacks.

A: Luis Visoso clarified that most are financial guarantees held by third parties and not on the balance sheet, and while there is no legal restriction on using cash, prepayments are a small amount.

Q: Karl Ackerman from BNP Paribas asked how enterprise SSD content per server will progress in 2027.

A: David Goeckeler said they see 60 to 90 gigabytes per CPU in inference agent orchestration applications.

Q: Karl Ackerman from BNP Paribas asked for an update on the goal for enterprise SSD share.

A: David Goeckeler stated he is not setting specific share goals to avoid perverse choices in the portfolio, preferring to maximize value across all time horizons.

Q: Vijay Rakesh from Mizuho asked if the BiCS 8, 9, and 10 transitions help drive bits to meet demand.

A: David Goeckeler confirmed that BiCS 9 is a key part of the data center strategy for interface speeds.

Q: Vijay Rakesh from Mizuho asked about the impact of SLC NAND on the market.

A: David Goeckeler said it is early, but architectural discussions are happening regarding SLC use cases.

Q: James Schneider from Goldman Sachs asked for expectations regarding sequential growth for the March quarter.

A: Luis Visoso noted that the third quarter is historically the weakest, so investors should be conservative with sequential growth estimates.

Q: James Schneider from Goldman Sachs asked about the strategy for executing buybacks.

A: David Goeckeler reiterated the commitment to return 100% of excess cash to shareholders and stated they will continue to execute that program appropriately.

Q: An analyst from TD Cowen asked about the current demand mix between TLC and QLC bits.

A: David Goeckeler said the mix is around 70-30, but they are hearing from customers about a reacceleration of QLC in different use cases.

Q: An analyst from TD Cowen asked if mobile bits can grow next year.

A: David Goeckeler stated they expect exabyte growth in the mobile market next year despite a slightly declining unit count.

Q: Wamsi Mohan from Bank of America asked if AI labs or cloud customers are showing credit concerns.

A: Luis Visoso stated they are not seeing any credit issues and demand is strengthening.

Q: Wamsi Mohan from Bank of America asked about the increase in receivables.

A: Luis Visoso explained that the increase is mostly due to customer mix.

Q: Amit Daryanani from Evercore asked if the company will change its capital structure or leverage given the less cyclical business model.

A: David Goeckeler said they are comfortable with their debt-free strategy and plan to continue returning 100% of excess cash to shareholders.

Q: Amit Daryanani from Evercore asked about the HBF TAM and milestones.

A: David Goeckeler said they need to get the product in customers' hands to understand the TAM and that the next milestone is having a real product for integration.

Q: Mehdi Hosseini from SIG asked if SLC demand is cannibalizing TLC growth.

A: David Goeckeler said it is not cannibalization but an expansion of the TAM into areas requiring different endurance and performance attributes.

Q: Mehdi Hosseini from SIG asked about the flexibility to add SLC capacity.

A: David Goeckeler explained that their cells are flexible and can be run in SLC mode, allowing them to supply the market with existing wafers.