Two storage chip giants, SanDisk Corp. and Western Digital, are set to release their quarterly earnings after the U.S. market closes on Wednesday. The reports will test a key question: whether strong results and forward guidance can reignite investor confidence and end the selloff that has gripped the storage sector.

SanDisk Corp. shares plunged 47% in July, erasing over $150 billion in market value, marking the worst monthly performance since its listing in February 2025. Despite this, the stock is still up 501% year-to-date and remains the best-performing component of the S&P 500 for 2025. Entering this week, the stock has stabilized, rising 6% on Monday and another 11% on Tuesday. Meanwhile, Western Digital has fallen 26% from its all-time high on June 18, and the Philadelphia Semiconductor Index recorded its worst monthly decline since 2008, plummeting 21% in July.

Analysts generally expect SanDisk Corp. to deliver strong results, but the market remains divided on whether performance alone can catalyze a rebound. The recent example of SK Hynix, whose shares fell 30% intraday after disappointing earnings, has kept investors wary of the "high expectations trap." Options markets are pricing in a 14% swing in SanDisk Corp. shares after the earnings report, with no clear direction indicated.

SanDisk Corp.: Revenue Could Quadruple, Turning a Profit from a Loss

According to the average analyst estimate compiled by Bloomberg, SanDisk Corp. is expected to post net income of $5.5 billion for the fiscal fourth quarter ending June 30, compared to a net loss of $23 million a year earlier. Revenue is projected to exceed $8.6 billion, more than tripling from the same period last year.

Seeking Alpha's research arm, Cavenagh Research, forecasts SanDisk Corp.'s fourth-quarter revenue between $8.4 billion and $8.7 billion, with non-GAAP earnings per share of around $36, both above consensus estimates. The firm notes that cross-referencing signals from peers indicate NAND flash pricing, enterprise SSD demand, and customer commitments have all exceeded SanDisk Corp.'s previously strong guidance.

Melius analyst Ben Reitzes says SanDisk Corp.'s edge lies in the momentum from its new business model agreements and its substantial capacity and willingness to buy back shares on a large scale.

Forward Guidance as a Key Variable, Amazon and Microsoft Provide Support

Market participants widely believe the focus of this earnings report is not just on quarterly results but also on management's outlook for the future. Last week, Amazon and Microsoft, in their respective earnings reports, committed to continued heavy investment in AI computing infrastructure, providing validation for the sustainability of storage demand.

Dave Mazza, CEO of Roundhill Financial, commented: "Storage fundamentals are the best in a decade, and expectations are already priced in. So, only a significant beat and stronger guidance can clear this high bar." He also noted that SanDisk Corp. and Western Digital are at the high-beta end of the storage trade, offering the most upside during cyclical upswings but the most severe drawdowns when the cycle turns.

Notably, despite the sharp July correction, analysts' expectations for SanDisk Corp.'s fiscal 2027 earnings per share have been raised by 14% over the past month, indicating that Wall Street's long-term view on its fundamentals remains unchanged.

Valuation Pullback Opens a Buying Window, but High Expectations Remain a Double-Edged Sword

The deep July selloff has significantly compressed SanDisk Corp.'s valuation. Based on expected earnings over the next 12 months, the stock's price-to-earnings ratio is around 7x, well below its historical average of 11x since listing, presenting a relatively favorable entry point for bargain hunters.

Rob Thummel, senior portfolio manager at Tortoise Capital Advisors, said, "The selloff since late June has made valuations more attractive, but expectations are still high." The firm holds shares in SanDisk Corp.

Wall Street overall maintains a strong bullish stance on SanDisk Corp. Of the 30 analysts tracked by Bloomberg covering the stock, 25 have a buy rating, and none recommend selling. The average analyst price target is $2,433, implying about 70% upside from the August 4 closing price.

Larry Tentarelli, chief technical strategist at Blue Chip Daily, is cautious about the post-earnings move: "Market sentiment is shifting very quickly, and we cannot predict how the market will interpret SanDisk Corp.'s statements. A 10% to 15% move in either direction after the report would not surprise me."

Western Digital Reports in Tandem, Sector Sentiment Faces Dual Test

Western Digital will also report earnings after the close on the same day as SanDisk Corp., making tonight a crucial observation window for the storage sector. Since hitting its all-time high on June 18, Western Digital shares have fallen 26%, facing significant valuation repair pressure as well.

The July sector selloff was not an isolated event. In addition to SanDisk Corp. and Western Digital, AI-related stocks like Micron Technology and Intel fell more than 35% last month, while the Philadelphia Semiconductor Index dropped 21%, its worst one-month performance in nearly 18 years.

SK Hynix's earnings disappointment provides a recent risk reference. The South Korean memory chip giant posted second-quarter operating profit and revenue that both missed analyst estimates, causing its shares to plummet 30% intraday in the Korean market before partially recovering. This episode has made investors realize that, in the current high-expectation environment, any performance that falls short could trigger a severe reaction.