SanDisk Corp. delivered a fourth fiscal quarter performance that exceeded expectations, achieving record highs in revenue, EPS, and gross margin. Early Thursday morning Beijing time, memory storage giants Western Digital and SanDisk collectively released their fiscal 2026 fourth-quarter earnings.

SanDisk Corp. reported that its fourth fiscal quarter results were exceptionally strong, with revenue, EPS, and gross margin all setting single-quarter records. The company's revenue surged 372% year-over-year to $89.7 billion, surpassing the anticipated $83.9 billion. On a non-GAAP basis, adjusted earnings per share (EPS) reached $39.25, a staggering 135 times the $0.29 recorded a year ago and more than 10% above analyst projections. The adjusted gross margin hit 84.6%, more than triple the figure from the prior year and exceeding the market consensus of 81.5%.

Specifically, the data center business emerged as the highlight of SanDisk Corp.'s growth this quarter. The company's data center revenue was $29.8 billion, representing a 103% sequential increase and a 1298% jump compared to the same period last year. Company management emphasized in the earnings report that the data center has become a key growth pillar for the firm. Additionally, the edge computing business remained SanDisk Corp.'s largest revenue source, generating $54.3 billion in the fourth quarter, up 48% sequentially and 392% year-over-year. In contrast, the consumer business segment underperformed, with fourth-quarter revenue of $5.56 billion, falling 32% sequentially and 5% year-over-year. The company stated that since April, it has signed five additional agreements under a new business model, including three new customer agreements and two expansions of existing deals.

It is also noteworthy that the board of SanDisk Corp. approved an additional $14 billion stock repurchase program, bringing the company's total remaining buyback authorization to $15.5 billion. Regarding guidance, SanDisk Corp. projected first-quarter fiscal 2027 revenue of $10.3 billion to $10.8 billion, with a midpoint of approximately $10.55 billion. This represents a 359% year-over-year increase but is nearly 5.5% below the analyst estimate of $11.16 billion. Furthermore, the company forecast first-quarter adjusted EPS of $44 to $46, with a midpoint of $45, slightly below the market expectation of roughly $45.58. The adjusted gross margin guidance is set at 83.0% to 85.0%, essentially maintaining a high level compared to the fourth quarter's 84.6% but showing no signs of further significant expansion.

As a result, shares of SanDisk Corp., which had already fallen over 5% in regular trading on August 5th, continued to drop in after-hours trading, declining by as much as 8%. Notably, Western Digital, the other storage giant reporting earnings on the same day, also saw its stock price fall more than 10% in after-hours trading, despite its guidance comprehensively surpassing expectations. As of Wednesday's market close, shares of both SanDisk Corp. and Western Digital have declined about 40% from their June highs, impacted by the recent broad pullback in the artificial intelligence sector. Nonetheless, shares of Western Digital have more than tripled since the start of the year, while shares of SanDisk Corp. have risen roughly 468%. Over the same period, the S&P 500 index has gained 13%.

Analysts suggest that the primary reason for the sharp stock price decline is not the fourth-quarter results themselves, but rather SanDisk Corp.'s current-quarter revenue guidance falling short of market expectations. The adjusted EPS guidance range is largely in line with market forecasts, while the gross margin guidance is roughly flat sequentially, showing potential signs of peaking. Considering the year-to-date stock price gains, both Western Digital and SanDisk Corp. appear to have already priced in the earnings improvement driven by the recovery in AI storage demand. Therefore, even with quarterly results beating analyst estimates, the companies still need to demonstrate that their future growth rate can justify their current valuations.