Sandisk Stock Drops as Profit Estimates Come Up Short on Fab Startup Costs

Sandisk shares slumped after the company issued weaker-than-expected adjusted EPS guidance of $0.70-$0.90 for fiscal 2026 first-quarter, missing analyst estimates of $0.95, primarily due to increased fab startup costs of $60 million. This cautious outlook overshadowed strong fiscal 2025 fourth-quarter results, where Sandisk reported adjusted EPS of $0.29 and revenue of $1.90 billion, both exceeding expectations. While CEO David Goeckeler anticipates these costs will decrease and market conditions will become favorable, the immediate impact on the stock was negative, despite shares remaining significantly up since their February spin-off from Western Digital.

Analysis

Sandisk's shares are facing pressure due to a weaker-than-expected first-quarter profit forecast, which is overshadowing a significant fourth-quarter earnings and revenue beat. The company's Q1 adjusted EPS guidance of $0.70-$0.90 falls short of the $0.95 consensus forecast, a discrepancy management attributes to a rise in fab startup costs to $60 million from $42 million in the prior quarter. Despite this short-term headwind, the preceding quarter's performance was robust, with adjusted EPS of $0.29 massively beating the $0.05 estimate and revenue growing 12% year-over-year to $1.90 billion, also above expectations. CEO David Goeckeler frames the startup costs as a temporary, "episodic event" that is expected to convert into a tailwind later in the fiscal year, within what he describes as a "favorable supply and demand environment." The market's negative reaction, a nearly 5% share price drop, should be viewed in the context of the stock's 25% appreciation since its February spin-off from Western Digital, indicating a potential recalibration of near-term expectations rather than a fundamental souring on the business.

Key Decisions for Investors

• Investors with a long-term horizon could view the current stock pullback, driven by temporary costs, as a potential buying opportunity given the strong underlying Q4 performance and management's optimistic outlook.
• It is critical to monitor the progression of fab startup costs in the coming quarters to validate the CEO's assertion that they are episodic; any failure to reduce these costs could signal a more persistent margin headwind.
• Given the stock's significant 25% gain since its spin-off, investors might consider trimming positions to realize some profits while maintaining core exposure to the anticipated recovery and favorable market dynamics.