Key Takeaways
- SanDisk exceeded Q3 projections with $5.95 billion in revenue, representing a 97% year-over-year increase, yet shares declined over 6% after market close
- The company’s Datacenter division revenue soared more than 300% to reach $1.47 billion during Q3
- Over the past year, Seagate and Western Digital shares have climbed approximately 600% and 850% respectively
- Bank of America characterizes the hard disk drive industry as an “oligopoly,” providing Seagate and Western Digital substantial pricing leverage
- Artificial intelligence-powered data storage requirements continue exceeding available supply, enabling pricing increases across the sector
SanDisk delivered impressive third-quarter results, yet investors responded with skepticism rather than enthusiasm. The company generated $5.95 billion in quarterly revenue, representing a 97% jump from the prior year and substantially exceeding the $4.70 billion analyst projection. On an adjusted basis, earnings reached $23.41 per share, significantly outperforming the $14.54 Wall Street forecast.
Despite previously climbing approximately 350% throughout the current year, shares tumbled more than 6% during Thursday’s extended trading session.
Management’s Q4 revenue outlook of $7.75 billion to $8.25 billion substantially surpassed the $6.49 billion analyst consensus estimate. Similarly, adjusted earnings guidance ranging from $30 to $33 per share exceeded the $22.70 Wall Street expectation by a considerable margin.
What triggered the selloff? Cerity Partners analyst Michael Ashley Schulman offered a straightforward explanation — the forward guidance lacked the compelling “wow factor” necessary to sustain the stock’s upward trajectory. Western Digital experienced a similar fate, declining nearly 8% during the same trading session despite also exceeding estimates and issuing above-consensus guidance.
Chief Executive David Goeckeler characterized the period as transformational. “This quarter marks a fundamental inflection point for Sandisk — where our technology leadership is enabling a deliberate shift in our mix toward the highest-value end markets, led by Datacenter,” he stated.
The Datacenter division emerged as the clear performance leader, generating revenue that increased more than threefold during Q3 to $1.47 billion. Artificial intelligence applications require massive volumes of flash storage capacity, and current demand significantly outstrips available supply — allowing SanDisk to implement premium pricing strategies.
Artificial Intelligence Sparks Storage Infrastructure Race
The storage industry has emerged as one of the most obvious beneficiaries of the artificial intelligence infrastructure expansion. Data centers require high-capacity storage solutions to archive, train, and manage extensive AI datasets. While graphics processing units provide computational power, hard disk drives and flash memory handle data management — and this requirement shows no signs of moderating.
Seagate announced fiscal 2025 annual revenue totaling $9.10 billion, reflecting a 39% year-over-year expansion. The company’s most recent quarterly performance reached $3.11 billion, up 44% and surpassing the $2.95 billion analyst estimate. Adjusted earnings per share of $4.10 exceeded the $3.50 consensus projection.
Western Digital reported fiscal 2025 revenue of $9.52 billion, representing a 51% year-over-year increase. Second-quarter revenue of $3.02 billion topped the $2.98 billion Wall Street forecast. Adjusted earnings per share of $2.13 surpassed the $1.95 expectation.
Bank of America analyst Wamsi Mohan characterized the hard disk drive sector as an “oligopoly,” featuring minimal competition and virtually no threat from new market entrants. This market structure provides Seagate and Western Digital considerable pricing authority as major technology companies compete for storage capacity.
Strategic Contracts and Innovative Technologies
Mohan also highlighted long-term supply contracts as representing a transition toward more stable, predictable revenue streams. Both Seagate and Western Digital are progressively securing customer commitments rather than depending exclusively on transactional hardware sales.
Heat-assisted magnetic recording (HAMR) technology represents another positive development. This innovation enables manufacturers to increase data density on existing drive platforms, reducing material expenses while expanding storage capacity.
Mohan’s optimistic scenario projects Seagate earnings approaching $45 per share by 2028, supporting a $700 price objective. For Western Digital, his analysis suggests potential earnings of $33 per share with a corresponding $495 price target.
SanDisk shares had appreciated roughly 350% during 2025 prior to Thursday’s after-hours decline.
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