Author: Bao Yilong
SanDisk and Western Digital both delivered strong quarterly results, but Goldman Sachs believes that overly high market expectations make it difficult for the two companies' stock prices to benefit from the impressive performance, and expects both stocks to face downward pressure after the earnings release.
According to the ZhuiFeng trading desk, on August 5, Goldman Sachs' James Schneider team released two reports commenting on the latest earnings of SanDisk and Western Digital, The core contradiction currently facing the storage industry is not a deterioration in fundamentals, but that market expectations have already run too far ahead of reality.
Both companies delivered impressive quarterly reports, with revenue, gross margin, and earnings per share all exceeding expectations to varying degrees. However, when expectations themselves already imply the assumption of "flawless execution + continuous outperformance," any guidance that returns to a normal trajectory will be interpreted by the market as a negative signal.
For investors, in the short term, they need to be wary of the risk of sentiment pullback in both stocks. Goldman Sachs also pointed out that given the high overlap in end-market exposure between Micron and SanDisk, it expects the negative reaction to SanDisk's earnings to transmit to Micron, and investors should keep an eye on the short-term movement of Micron's stock price.
Western Digital: Gross margin beat expectations, but guidance failed to surprise
Western Digital's second fiscal quarter revenue for the period ending June 2026 was $3.747 billion, roughly in line with Goldman Sachs' forecast of $3.763 billion and the Wall Street consensus of $3.714 billion, up 43.8% year-over-year.
Gross margin was 54.4%, higher than Goldman Sachs' forecast of 52.4% and the market consensus of 51.9%, exceeding by approximately 200 to 250 basis points. Non-GAAP earnings per share was $3.56, higher than Goldman Sachs' forecast of $3.43 and the market consensus of $3.35, exceeding by approximately 4% to 6%.
For the third fiscal quarter guidance, Western Digital provided a revenue midpoint of $4.1 billion, which is broadly in line with Goldman Sachs' forecast of $4.166 billion and the market consensus of $4.04 billion.
The gross margin guidance range is 55% to 56%, higher than Goldman Sachs' forecast of 54.1% and the market consensus of 54.0%, exceeding by approximately 140 to 148 basis points. The non-GAAP EPS guidance midpoint is $4.00, slightly higher than Goldman Sachs' $3.94 and the market consensus of $3.80.
Goldman Sachs stated that market expectations were already highly optimistic entering the earnings season. Investors had high confidence in continued improvement in HDD (hard disk drive) pricing, momentum in margin expansion, and long-term demand visibility driven by capital expenditures from large cloud computing vendors.
In this context, guidance that merely meets market expectations is seen as "not surprising enough."
Goldman Sachs maintains a 12-month price target of $650 for Western Digital, based on a 23x P/E ratio applied to normalized EPS of $28.00, implying approximately 18.5% upside from the current price of $548.56, with a "Neutral" rating.
SanDisk: Quarterly results significantly beat expectations, but forward guidance disappointed the market
SanDisk's second fiscal quarter revenue was $8.965 billion, higher than Goldman Sachs' estimate of $8.841 billion and the Wall Street consensus of $8.713 billion, representing a year-over-year increase of 371.6%.
Gross margin was 84.6%, roughly in line with Goldman Sachs' estimate of 84.3%, but higher than the market consensus of 83.6%. Non-GAAP EPS was $39.25, higher than Goldman Sachs' estimate of $38.16 and the market consensus of $35.45, exceeding by approximately 3% to 11%.
However, the third fiscal quarter guidance clearly disappointed the market.
SanDisk provided a revenue guidance midpoint of $10.55 billion, lower than Goldman Sachs' estimate of $11.653 billion and the market consensus of $11.148 billion, with gaps of 9.5% and 5.4%, respectively.
Gross margin guidance midpoint was 84.0%, lower than Goldman Sachs' estimate of 84.7% and the market consensus of 86.7%, with gaps of approximately 74 to 267 basis points. Non-GAAP EPS guidance midpoint was $45.00, lower than Goldman Sachs' estimate of $49.95, but broadly in line with the market consensus of $45.34.
Goldman Sachs noted that although SanDisk's stock has fallen approximately 40% from its June high, partially digesting some overly high expectations, entering the earnings season, market optimism about strong NAND pricing, accelerated adoption of AI data centers, and strong results from peers remained strong, so guidance below expectations will still cause further pressure on the stock.
Goldman Sachs maintains a "Buy" rating on SanDisk with a 12-month price target of $2,200, based on a 20x P/E ratio applied to normalized EPS of $110, implying approximately 54.1% potential upside from the current price of $1,427.62.
At the industry transmission level, Goldman Sachs believes that SanDisk's guidance below expectations has dragged down the overall sentiment of the storage industry. The report clearly pointed out that, given similar end-market exposure, Micron Technology is expected to react negatively after SanDisk's earnings release.
