SanDisk Surges Over 13%! Unveils 2030 Growth Blueprint with Gross Margin Expected to Stabilize at 80%

Memory giant SanDisk (SNDK-US) unveiled its latest long-term financial targets at an investor day, projecting annual revenue growth of 15-19% and maintaining an adjusted gross margin of around 80% for the fiscal years 2028 to 2030. This optimistic outlook has eased market concerns about a memory cycle downturn, driving the stock up 13.67% on Thursday (13th) to close at $1,528.11 per share, with a year-to-date gain of 455%.

SanDisk expects its adjusted operating margin to reach around 75% and its adjusted free cash flow margin to be about 50% for the fiscal years 2028 to 2030, with operating expenses accounting for approximately 5% of revenue. The company also anticipates continued growth in memory product production and shipments.

Management has committed to returning all excess cash to shareholders after completing necessary business investments, though the specific methods (such as stock buybacks or dividends) have not yet been disclosed.

This outlook addresses the market's most pressing concerns: whether memory demand and high profitability can be sustained beyond the current cycle. With AI applications driving storage demand and supply remaining tight, SanDisk's adjusted gross margin for the previous quarter reached 84.6%, far exceeding the 26.4% recorded a year earlier.

To mitigate the inherent price and demand volatility in the memory industry, SanDisk is accelerating the adoption of multi-year new business model agreements (NBMs). These agreements allow the company to pre-determine customer demand, shipment volumes, and production capacity allocation.

SanDisk has already signed such agreements with 8 customers, with an average contract term of approximately 4 years. Two of these customers expanded their cooperation in the most recent quarter. These agreements cover about 50% of bit shipments for fiscal year 2027, and the proportion is expected to rise to about two-thirds for fiscal year 2028.

SanDisk CFO Luis Visoso stated that multi-year agreements enable the company to better understand customer demand and plan production, inventory, and capital expenditures. SanDisk plans to establish a small amount of safety stock in fiscal year 2027 to ensure it can meet customer demand and will seek to secure more customers or extend existing contracts in the future.

Visoso acknowledged that some business areas are not yet covered by multi-year agreements, so operational performance cannot be completely free of volatility. However, he expects the degree of volatility to be lower than in the past.

Evercore ISI analyst Amit Daryanani noted that even if products are sold at contract minimum prices, these agreements are expected to deliver attractive returns.

In addition to its traditional NAND flash memory business, SanDisk sees high-bandwidth flash memory (HBF) as the next growth driver. As the AI industry expands from model training to inference applications, demand for large-capacity, high-efficiency storage technologies is expected to continue to grow.

SanDisk recently formed an alliance with SK Hynix to promote HBF industry standards and plans to provide HBF samples to customers next year. Visoso stated that the participation of Google and Meta in the relevant alliance further validates the importance of HBF technology for future AI infrastructure.

SanDisk's long-term growth targets have boosted the entire memory sector. Micron Technology (MU-US) surged 4.23%, Western Digital (WDC-US) soared 7.31%, and SK Hynix ADR (SKHY-US) rose 7.29%.

While the memory industry is inherently highly cyclical, with potential risks from demand cooling and supply recovery, SanDisk's use of multi-year contracts to improve future revenue and shipment visibility, along with its expectation of maintaining high profitability through fiscal year 2030, has been the primary driver of the recent stock surge.