Sandisk Corporation ($SNDK)

All right. Good afternoon, everybody. Thank you for joining us at the 2026 Mizuho Global Tech Conference. It's my distinct absolute pleasure to welcome back CEO, David Goeckeler, and CFO, Luis Felipe Visoso. I hope I got that right.

That was great. Thank you.

Perfect. Thank you for joining at the Mizuho Tech Conference. Again, what [indiscernible] David. Last year stock was around $60 [Audio gap] $1800 now, 30x. And I think that's a mic-drop moment, I think the [indiscernible] is over. Should we go on from here.

It's kind of how you drop the mic...

Yes, yes. I think if there was a Times Magazine for the best of the company and best management right here, guys. And what can I say, I think -- thank you for joining us again. Welcome back. We really appreciate it. What did they say AI is hungry for compute, but survives and storage.

Very nice, very nice.

There you go. My team did some good work on you guys. Trying to get these 1 liners. So let me start off...

Hey, before we start, if you don't mind, just want to read this. We will be making forward-looking statements today's discussions, including with respect to our technology, our products, our business plans and performance, market trends and opportunities and our future financial results. These forward-looking statements are subject to risks and uncertainties and actual results may differ materially from expectations. Please refer to the risk factors of our annual report on Forms 10-K and 10-Q and other filings with the SEC for more information. Thank you, Vijay.

Fantastic. I think we got all of it. So I just want to start off with a quick run through the numbers. Last year, fiscal '25 June, you guys are doing $7 billion. This year, fiscal 26 June, $20 billion. Next year's street consensus is like $45 billion. What's happening here in this? Just kidding, but I mean, I think I wanted to take a step back and David maybe give us a little bit of the lay of the land. What are you seeing on the supply-demand side, NAND bit growth has been growing low 20s. And how do you see that going forward? Demand is obviously accelerating. But maybe you can take a step back and give us a peek into what you are seeing.

Yes. So your question, what's happening here is, like anything markets dynamic, a lot of things are happening at the same time. So it's fun to be here, by the way, to be here with you and a year on. This is also the same room where we actually launched the company. We did...

Yes. Hopefully, next year when we come back, it's a 10x.

We did our Investor Day here. So it's good to be back here. And if you look back to then, we had the same level of conviction we have now. I mean we see a market with sustained mid- to high teens growth. And we always thought that the technology wasn't fully appreciated for the value that we were bringing. And I think over the last year, we've done a good job of figuring that out, right, and kind of understanding what the value of the technology is. Clearly, there's a lot of AI demand that's helping that equation. Data center has now become are is quickly becoming the largest market in NAND. And we've had many, many revisions of data center CapEx going up. I think, Luis, you were telling me earlier, it's like 14 revisions now...

14x.

14x, all going up. And a lot of that is as AI moves into inference, I think our customers are figuring out the architecture of [indiscernible] microphone got way. Our customers are working on what is the architecture for inference. And that's when NAND comes into -- NAND becomes a big part of that equation. We've seen it with -- people talk about with KB Cash or REG. NAND has always been the most scalable semiconductor technology. So as you start to scale any architecture, I think it's naturally going to come towards NAND if you need storage. And I think that, that -- it's a very difficult question, I think our customers have, which is what is the right architecture for scaling inference on a global basis? And figuring out what's the right concentration of processing power, what's the right concentration of DRAM, HBM, what's the right concentration of NAND. It's very use case dependent trying to figure out what the use case is several years in the future is an issue all of its own. And I think that as our customers go through that equation and figuring that out, I come to the conclusion that having longer-term relationships with suppliers of NAND is a very good idea. And I think that's what we together with these business agreements. And it's kind of changing the trajectory of our business, I think, in a very positive way. And it's a very powerful relationship between us and our customers. And it's very much of a win-win conversation. So a lot has changed in the last year. But I really do think we're just getting started. I mean we are -- I think AI is -- there's been a lot said about AI, but extremely fundamental technology shift that we're clearly in the very early innings. I think the productivity that people are seeing out of this technology is nothing short of spectacular. And I think our technology is a big part of delivering that on a global basis.

Yes. I want to get to those LTAs and NBMs a little bit later, so we can get Louis involved in that. But I want to get back to the technology road map. Obviously, your enterprises has just grown massively. It's almost 25% of the revenues now. Used to be a much smaller number, might be mid-single digit last year, grown 7x year-on-year. How -- and it's just starting off because you guys are just starting to get qualified on enterprises as [indiscernible], et cetera. How do you see that as you -- if you get to roll this forward 12 months, how do you see that market growing? How do you see your wins? How sticky is this with the CSPs.

I mean so first of all, you're 100% correct it all starts with the technology, right? If you don't have great products, I mean we're a technology company. You have to have great products. That's -- let's take the basics. And we do have great products, all the way from the fundamental NAND, which we can talk about into the portfolio we have. And it's been no secret, we've been investing heavily in enterprise SSD. It's a part of the market where we've been penetrated. And it's about building the right portfolio to increase our mix in that part of the market. There's really two major categories products there. There's a performance-based TLC NAND products used a lot for KB Cash and a number of things. That's been the driver of the portfolio the last year. The second part of the portfolio is the storage-based product. It's called Start Project [indiscernible]. You talked about it again here back in February when we launched company. This is the first quarter we'll recognize revenue on that product. So you're right, we're just getting started on that leg of the portfolio. So obviously, we've got one side of the portfolio in kind of full bloom and declared across multiple, multiple customers the significant growth you mentioned earlier, and now we've got the second leg of that growth coming. So where is that going to lead to over the next year? I think you're going to see the mix of [indiscernible]. I'm not going to put a specific number [indiscernible] because what we like to have is a lot of optionality in our portfolio. Every quarter is different. It's changing a little bit now with the business models, and we'll get into that. But we believe that a robust portfolio where we can cover as much of the market as possible is the best for long-term profitability of our franchise. We're unique in the fact that we have a global consumer business that already gives us a great starting point. We have a great client business, and now we're building out that great new price [indiscernible]. So I think it puts the portfolio -- it puts the company in just a fantastic position as far as what options we're going to have in the future to get the best financial return.

Yes, definitely. I think talking about optionality and trying to optimize the business to get the most profitability out of it, obviously, when you're looking at the enterprise SSD market, it gives you good visibility. You have massive orders coming in from the CSPs. On the other side, you have exposure to many of the conventional markets where you have much better pricing power. How do you decide where to allocate?

You want to take that?

Yes. So we like all our customers, right? And we want them all to be successful. And at the end of the day, we produce a wafer, and we have to make a decision of where we are located. We want to have a portfolio that's balanced across segments, right, because that's more sustainable over time. We don't want to maximize value just for this quarter but over time. But we're constantly making choices on where we allocate beds, and the new business models are a foundation for that.

Got it. So let me flip that question. You see pricing in conventional land going up. When you look at these SSD, LTA, so the contracts that you get on the CSP side, are those kind of tethered to where market pricing would be because you don't want to leave money on the table either, right? I mean it's not on running a charity, you're running a business model. So how does that -- how do those arguments work out?

Yes. So in general, there are fixed price components within these new business models, which I believe are important. And then there are parts of the agreement are with, let's call it, a floor and a ceiling of pricing. And the reason we did that is because none of us wanted to be unhappy, right? If prices go up, then we would be unhappy because we would not be capturing the upside if prices go down, our customers would be uncompetitive because their peers would be paying lower prices we established this floor and ceiling concept for some of our contracts and for some of the time within that. Now importantly, as we said in our earnings call, even in the low prices we like the margins, right? This is how we structure them and margins will be consistent with the margins that we guided in -- for the fourth quarter for our fiscal fourth quarter.

Got it.

So there's kind of a little implicit I think with your question, I just want to kind of touch on. We're not trading duration for price, right? That's not the value proposition. The value proposition is continuity of supply, and price is price, right? Price is whatever is fair for both of us. You can assume we have somewhat unique insights into price being in the market you'd like to discuss price. But -- and then the other thing I'll say, look, there's -- I think there's three things we're trying to do. And there's three things, I think, in any technology franchise will want to do. Number one, we want to get a fair price for our technology. We work very hard on it. People are professionals, want to get a fair price. I think we've kind of got to that point, right? You can argue, could we get more? If we can get more, we'll get more. That's our job. We'll continue to have that conversation. Number two, we want to get rid of the volatility on the economics. And I think especially in our industry, this is an issue. There's been so much volatility. It'd be down, cyclicality. It's I've said this many times, it's just corrosive on the industry. It makes it difficult to invest in the industry. It makes all the decisions harder. So we want to work on that. And then the third thing we want to do is we want to grow, right? We're a business. We want to grow as a business Well, I think one of the most interesting things about our technology franchise is we have a built-in growth lever of more volume every year. We're talking about mid- to high teens bit growth at more volume every year. I think that's fairly unusual in a large technology business, just like next year, we know we're going to have more volume. And we have a debate sometime about, well, should you be growing faster? And the issue is all three of these variables are related if you start growing faster, you oversupply the market and then pricing comes down and volatility goes up. And so it's really about balancing all three of these. And that's really what we're trying to do as a management team. It's got all those three balance to a point, not leaving anything on the table. But you -- the future is uncertain. So you couldn't get to the future, and you find out it tips in the other drugs. And so that's where the mid business models are really getting at that second issue. How do we put -- that's why we call them new business model. That was Louis's name...

[indiscernible]

How do we get a new business model around this -- our business with our customers in a way that we can achieve all of these things. And I think we're not done yet, but I think we're making good progress on that.

Got it. Going back to the cyclicality point that you just raised, that's -- it's a very interesting point because this industry hasn't plagued with that whole -- it's kind of a very cyclical, and so it comes with a much lower multiple, I guess. How do you convince the investor base that this time it's different? You have better visibility. There is a technology road map here. The players are more rational, more disciplined. There is more of a focus on making profit than being cyclical supply.

Yes. Well, there's nothing I can do about other players in the market or any else only really manage our company. And what we can do is be transparent about what we're doing and explain what we're doing and why do we think that the way we're doing it is better than the way it's been done in the past. I think generally, that's what we do all the time, right? We're innovators. We invent things, we do things differently. We have the confidence that we can change things and get a better outcome in the future. We're not [ visitors ] to the past. Yes -- and believe me, I've been told many, many times about the cyclicality in this industry. Whenever you bring up the word LTA, the first thing the person trusts the statement on things they won't work.

They start rolling their eyes.

Like there's so much scar tissue, and there's so much history. I get it, like how do I disprove something? It's very hard to disprove something except you just keep putting points on board, that's what we do. We keep putting the numbers up. I mean, again, we were here back in February '25, and we stood on the stage in this very room, and we made the case for our company. And did people believe us? I don't know if they did or not. They gave us like a $6 billion or $7 billion valuation. Now they have a little more belief. So for the people that believed 1.5 years ago, it's turned out very, very well for them. Everybody has to make their own decisions. We've clearly made our decisions. I mean I spend every day all day at the company, managing this company, and we're fully invested in it, and we have a lot of confidence in what the future is going to hold. And you're going to keep being transparent, and we're going to keep doing very -- what we think are very smart things. We're going to be open. We're going to keep coming to meeting. We had great meetings all day, where we hear feedback from the people that own our company. We factor that in, and we move forward and make the best decisions we can. And we think we have a tremendous franchise, and we're very focused on getting the most out of it we can.

That's very great to hear. So I remember last -- since you brought it up, talking about things being done better. Last February, at the Analyst Day asked you a question, why did you move from WD to SanDisk. And you said because you saw much better innovation, a much more exciting road map at SanDisk. And I guess you prove it right. So -- but to that point, as you look at your whole TLC, SSDs and QLC SSDs on the enterprise SSD side, you guys have lagged the market, but now you are catching up. What changed? What is the differentiation in your SSD road map today that is giving you that design win right versus your peers that is not their last year?

So it really started more than last year. I mean, these are long design cycles. These are like 3 or 4 years, at least. Building an ASIC is not easy. And then getting qualified at a major customer can be a new year process. So this target years and years ago. And if I think SanDisk and kind of just the big picture, there's all these different episodes of SanDisk, if you will. I mean it was just a tremendous consumer company, a tremendous I think it went into Western Digital and inside of Western Digital, what you would have expected happened, it became a great client business. And it was like the rise of client. And why was that? I mean in my opinion, you were -- and I wasn't there. I didn't witness all of it, but I'm just looking at the history man was replacing the hard drive in the client. So you knew the customer, you do the use case, you knew how to test it, you knew what all the features were, and you could build a tremendous portfolio there and a lot of innovations and systems we're the first DRAM-less client all these innovations. And all of this expertise in building systems for consumer brought into building systems for clients. And then you had a new management team come in 6 years ago to have more of an enterprise background and started bringing an enterprise bent to this, like how do we get the right engineering teams, how do we get the right projects. And projects are very, very difficult. They go on for years, and it's the culmination of hundreds of decisions that have been every week that eventually lead you to having the right portfolio for the right market. And we've just run that play long enough now with an unbelievable internal team that has all of the expertise in how to build NAND controllers applying all of that to the enterprise market. And when you do that for long enough, you end up with great products, and we're very, very happy with where we are.

Fantastic. Last one -- last question on the SSD side. And then we move on to something more exciting HBF. But first on the SSD side, as you look at KV cash demand and some of the CMX recs that NVIDIA talks about, are you seeing that gain a lot of traction. You obviously have agent KI and all that demand coming in as well, but that's supposedly going a different route. But from the KV cash side itself, are you seeing a very big pull through from the CSPs.

Yes. I think undoubtedly, this is a very big backdrop in the industry. We're, as I said earlier, right, I think AI, there is just a huge focus in the early days, appropriately so on model training, right? You don't really have AI until you have a model so an enormous amount of focus on building out the systems for training models. And then I think we've all learned over the past several years that these models are extremely valuable, right, that they can -- you can do amazing things with them. I mean I'm an enterprise software guy for 30-plus years. The amount of change that's happening to the discipline of writing software is almost spectacular of what's happening with these models. You have pieces of software that people have worked on for decades and all of a sudden you can run a model against it and find defects that have been there for years and years. It's just -- as a professional, it's just kind of crazy the amount of productivity. So then once you get that, you have to scale it. You have to scale inference. And I think this is really there's been -- there's now a number of spectacular companies in the world that can scale technology globally in a way that's never happened for cloud-based computing is unbelievable. I mean it used to be -- to scale technology, you actually had to ship the technology to everything. I mean I'm old enough to understand this, right? You used to have to ship technology to every single person. Now you just point your device in a that has the most sophisticated technology in the world, and you're up and running. So the friction of deploying technology in the world has just almost been completely removed. Except for the people that are doing that work, it's extraordinary work to build a global infrastructure to distribute technology. And I think those companies are very focused on how do I scale inference globally. And to do that, it's got to be -- you got to know the use case you're scaling for. It's got to be done in an economic way and you have to be able to do it in a predictable time frame. And I think as those conversations have been going -- people have been going through those conversations, they've been -- what is the right mix of compute, what's the right mix of DRAM, what's the right mix of HBM, what's the right mix in NAND? And that's a very dynamic question, that changes based on what use case you're assuming, what's the power of the model, how big is it? So this is a very dynamic equation that's kind of happening in real time. And I think the big picture answer to that question is you need a lot more NAND because NAND is the most scalable semiconductor technology. And if you're going to scale something economically you're going to want to use as much of the most scalable technology that you possibly can. And I think that's led to this whole process of discovering what is the true value of this technology to the world.

Is the capacity versus cost question. How much capacity...

It's a capacity versus cost and -- yes, and NAND has been something where it's been almost always focused on density. And now it's focused more on high performance. It's a much more multidimensional equation.

Talking about high performance, I want to go to this HBF. There's obviously a lot of excitement around it, high-bandwidth flash, which is similar to HBM in the sense that you stack 16 layers of NAND, you have a logic-based CMOS monitor at the bottom. Maybe you can talk to how you see that technology evolving because it starts to deliver the bandwidth of DRAM at a cost that's one [indiscernible] of DRAM. But it has its challenges, whether it's right or endurance speed, enact cetera. So maybe you can talk to where you see your road map. I know you guys have talked about HBF in the second half of '26 and might be a controller hardware in the first half of '27. But maybe you can give us some more color.

Yes. So I think the original -- the whole original idea from HBF came out of the conversation we just had, except it happened like years ago by a bunch of very, very smart people inside the company that we're basically -- if you're a designer, for your whole life, you've been told, give me more density, like more density, more density, more density. That was kind of the whole idea of designing new NAND nodes. But now you have this -- I think they saw this -- well, I don't think they know, they saw this like inference use case coming. We have these very large models. And so I need a lot of storage. But for NAND to be -- to work in that inference use case, you had to solve some other problems, like you had to make the -- the one thing about inference is a very deterministic equation, like you know what the model is. It's not like training where you're building to, you know what the model is. You just need -- you need to load it into a CPU as fast as you can. So the team started thinking about how do I re-architect NAND for higher bandwidth, higher right bandwidth. How do I get to some of the endurance questions, right? And an enormous amount of intellectual property was developed over the years. Obviously, we don't talk about that. That's our intellectual property that basically said, "Hey, at some point, the world is going to need more storage inference. And can we design a NAND dye to solve that problem. And that's what's kind of, I think, the genesis of HBF. We are working on it for quite a long time before we launched the company last year. We thought that was the right time to start talking about it because we were launching the company. And I think one of the most satisfying things that happened over the last 1.5 years since we launched the company as I think there was a lot of skepticism when we first started talking about it. And I think that there's a lot less now. I think it's like people can see hey, like it inferences a main volume problem as much as is by GPU bound. So how can we bring more memory, more storage inference? And that's what HBF is all about. And so we're in -- now the challenging side of it is, it's not just a plug compatible replacement for something in the current AI inference architecture system play. You have to change other parts of the system to get the whole thing to work. And that's the process we're in now is talking to customers about how they're going to design inference, whether it's on a device or whether it's in the cloud and how does our technology plug into that, and that's an iterative process, right? They're trying to figure out what the use case is, what they want to build. We're telling them what the capabilities are and then you're constantly changing both sides of that equation. In the meantime, we're off building a die, right, which we expect to have later this year. And then we're building the controller that actually controls the die and actually delivers the product, and we'll have that available sometime next year. And we're going through that process, and we're iterating on that process with our customers to get it to lock in to a specific use case, which then we can commercialize. And so we're in that process, right now.

Got it. So when you're thinking about working with the customers, is that you're getting a lot of interest on the we have that customers, and we don't want to talk about that just don't.

So we think it plays across the device all the way to the cloud. I think that what's really good about the technology. And so as models get bigger, as text links that figure is agentic calms, mixture of experts models. All of these things are tailwinds for that kind of technology becoming more relevant.

And this would be more of like an on-die HBF similar to again like an HPM. Is that fair or that's not even...

That's not a Hyundai, it's like a fix product at a new die type for that that's optimized for this use case. Got it. The 1 other pushback we hear is the bandwidth seems to -- you seem to have solved the bandwidth problem. -- might be better is 1.6 arbit or higher versus similar to NHP but it has latency. What's your thoughts around that? -- the latency is higher than -- you get into a very technical conversation very quickly -- and that's the last question I go on to easy one. You're in a deterministic read here. So the pipeline like you know that you're going to -- the latency is only at the beginning. -- once you get going, you're going. That's a very high level, very, very simplistic.

Okay. I won't be live with it.

We understand that issue, and that's part of the issue of why we work with the is a system level. You're not just going to plug it in for something else that was in the system. Everybody needs to change a little bit to get a much better answer.

Yes. What's technology without the challenge, right?

Well, I mean, that's -- I mean, that's where the value is. If anybody can do it, if you could just like wake up and build this stuff because it takes a long time and a lot of very smart people, and it's very, very valuable. That's why that's why all these people here want to invest in our company before. We're doing stuff...

Maybe with the next 10x, I guess.

I just say we can -- it's not just there's an economic benefit for us. It's like the second order issue. The first order issue is it provides to our customers a very, very, very compelling value proposition. That allows them to build a more economic business or allows them to build -- to deliver a better service to their customers. That's the first step. And they have spectacular businesses. That's one you asked me why -- you said earlier about why did I come to the NAND business. Mean NAND business is incredible. It's like every device in the world uses NAND at some level. And our customers are just like a who's who of every single spectacular technology company in the world. Those are all the people we get to work with every single day and figure out how we can innovate so they can deliver an incredible product.

Yes. I think it's the satisfaction of solving problem and opening the next.

That's what you do in business.

Absolutely. I want to quickly pivot to Luis here. I think Luis eagerly waiting to answer the question. Might be on the NBM side. You obviously announced one -- a couple of engagements there. How do you see that pipeline growing on the MDM side? Maybe give us some broad strokes on how these are structured. I mean, obviously, supply is tight. Everybody is trying to get on the NBM sort of this LTA thing. But maybe you can tell us how do you see that mix of proportional revenues going out as you...

Probably. When we closed the quarter, we said we had signed 5 deals, right, and we're very happy about that. And we talked about the financial profile of those deals. And as I just mentioned, it's a win-win relationship with our customers. They are great. They're coming back, and we're in constant negotiations with them. As I also mentioned last quarter, there are several conversations going on, and they are progressing well. And we're talking to customers across all segments, right, from data centers to edge customers, really the consumer -- our consumer business is more transactional doesn't really apply there. But we're talking to all other customers. And as long as we're willing to operate in this new business model, we're open for business.

Got it. I want to ask you a slightly tougher question. You have big 10 coming, it's 300 layer plus it's what's out there. Things are tight now, right? But at some point, you're adding -- you have to add CapEx. You'll add CapEx, industry adds CapEx. How do you decide on that CapEx road map, your partner [indiscernible] you have other peers in the industry. How do you think through that dynamic of how you add capacity, how much do you add capacity?

Yes. I would start by saying we're adding capacity all the time. We're growing capacity in the mid- to high teens, right? That's what we said. So we're investing. You see that in our financials. We've also said that we made the most cost efficient transition of the big sale transition so far. Next year, we're going to be continuing that transition to big sale, and then we're going to start building some capacity for [indiscernible]. It will be a little bit more expensive per bit, right? So same growth but a little bit more cost -- higher cost, but it would still be lower percentage of revenue, obviously, as our prices have continued to go up. What we do is we take a long-term view of the market. We talk to our customers. We understand what that growth is and that's where we're planning to. We can't react to one quarter of what's happening today, right? It takes 110 days to produce a wafer. So we really take a long-term view, and we want to make sure that we're there to source profitable and sustainable bits.

Got it. One last question, I got a minute here. So your earnings for next year, consensus is close to $200 earnings per share. That's a massive cash flow. What are you going to do with all that cash?

Yes. I think it's just an easy question. We've been very consistent on that. Number one, we need to invest in the business. The CapEx that's required, we need to continue to fund the business. And we've made some strategic investments to strengthen our supply chain. We invested in NAND here to get more access to DRAM, which is very important to us, particularly as we expand into data center, which consumes more DRAM. We extended the JV agreement for another few years. So that's great investments in the business. We said we wanted to pay down our debt. So we started with $2 billion. That's all gone. And the third thing to do, which is really the role of our company is to return cash to our shareholders. We announced a $6 million share buyback program with earnings. As you can imagine, we should be executing on that. We will give you an update at the end of the quarter and then what's next.

Right. What a fantastic story. Any last questions? Any one last question. No? Done, gone, gone. Done. That's it. Fantastic.