Sandisk slumps as soft gross margin guide offsets Q4 beat, upbeat revenue outlook

SanDisk (SNDK) shares declined approximately 10% in after-hours trading despite reporting stronger-than-expected fiscal Q4 results and providing Q1 revenue guidance above consensus. The sell-off was primarily driven by a softer-than-anticipated Q1 gross margin forecast of 29%, below the 30.2% consensus, attributed to underutilization and factory startup costs. While Q4 gross margin met expectations, the forward guidance overshadowed otherwise robust performance, though analysts suggest the market reaction may be overdone given the positive long-term NAND market outlook, projecting undersupply through 2026.

Analysis

SanDisk Corporation (SNDK) experienced a significant after-hours stock decline of approximately 10% despite reporting a substantial beat on its fiscal Q4 results and issuing strong Q1 revenue guidance. The company posted adjusted Q4 EPS of $0.29 on $1.90 billion in revenue, handily surpassing analyst estimates of $0.03 and $1.83 billion, respectively. Furthermore, its Q1 revenue forecast of $2.10-$2.20 billion is well ahead of the $1.98 billion consensus. The negative market reaction was driven almost entirely by the company's Q1 gross margin guidance of 29%, which fell short of the 30.2% consensus. Management attributed this margin softness to underutilization charges and factory startup costs, which are partially offsetting expected pricing gains. This near-term margin pressure overshadows a positive long-term outlook, supported by Mizuho analysts who view the sell-off as overdone, and by market projections of a NAND undersupply continuing through calendar 2026.

Key Decisions for Investors

• Investors should weigh the immediate negative impact of the soft Q1 gross margin guidance against the company's strong top-line growth forecast and positive long-term industry fundamentals.
• The 10% after-hours price correction could represent a tactical entry point for investors with a higher risk tolerance, betting that the margin pressures from startup costs are temporary and that the favorable NAND market dynamics will prevail.
• Monitor upcoming reports for evidence that gross margins are recovering toward the 30% level and for progress on new product sampling, as these will be key catalysts for a potential stock rebound.