Goldman Sachs comments on SanDisk and Western Digital's financial reports: strong performance, but market expectations are too high

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 stock prices of both companies to benefit from the impressive performance, predicting that both stocks will face downward pressure after the earnings reports are released.

According to news from the trading desk, on August 5, Goldman Sachs' James Schneider team released two reports commenting on the latest earnings reports of SanDisk and Western Digital. The core contradiction currently facing the storage industry is not a deterioration in fundamentals, but rather that market expectations have overly outpaced reality.

Both companies presented impressive quarterly reports, with revenue, gross margin, and earnings per share exceeding expectations to varying degrees. However, when expectations themselves already imply the assumption of "perfect execution + continued outperformance," any guidance returning to normal will be interpreted by the market as a negative signal.

For investors, there is a need to be cautious of the emotional pullback risk for both stocks in the short term. Goldman Sachs also pointed out that considering the high overlap in end-market exposure between Micron and SanDisk, the negative reaction to SanDisk's earnings report is expected to transmit to Micron, and investors should pay attention to the short-term trend of Micron's stock price.

Western Digital: Gross margin exceeds expectations, but guidance fails to impress

Western Digital's revenue for the second fiscal quarter ending June 2026 was $3.747 billion, roughly in line with Goldman Sachs' forecast of $3.763 billion and Wall Street consensus of $3.714 billion, representing a year-on-year increase of 43.8%.

Gross margin was 54.4%, which is higher than Goldman Sachs' forecast of 52.4% and market consensus of 51.9%, exceeding by about 200 to 250 basis points. Non-GAAP earnings per share were $3.56, higher than Goldman Sachs' forecast of $3.43 and market consensus of $3.35, exceeding by about 4% to 6%.

Regarding third fiscal quarter guidance, Western Digital provided a revenue midpoint of $4.1 billion, which is generally consistent with Goldman Sachs' forecast of $4.166 billion and market consensus of $4.04 billion.

The gross margin guidance range is 55% to 56%, higher than Goldman Sachs' forecast of 54.1% and market consensus of 54.0%, exceeding by about 140 to 148 basis points. The non-GAAP earnings per share guidance midpoint is $4.00, slightly higher than Goldman Sachs' $3.94 and market consensus of $3.80.

Goldman Sachs stated that market expectations were highly optimistic before entering the earnings season. Investors have high confidence in the continued improvement of HDD (hard disk drive) pricing, the momentum of margin expansion, and the long-term demand visibility driven by capital expenditures from large cloud computing companies.

In this context, guidance that is only in line with market expectations is viewed as "not surprising enough."

Goldman Sachs maintains a 12-month target price of $650 for Western Digital, based on a 23 times price-to-earnings ratio corresponding to a normalized earnings per share of $28.00, which has about an 18.5% upside potential compared to the current stock price of $548.56, maintaining a "neutral" rating.

SanDisk: Significantly exceeds expectations for the quarter, but forward guidance disappoints the market

SanDisk's revenue for the second fiscal quarter was $8.965 billion, higher than Goldman Sachs' forecast of $8.841 billion and Wall Street consensus of $8.713 billion, with a year-on-year increase of as much as 371.6%.

Gross margin was 84.6%, essentially in line with Goldman Sachs' forecast of 84.3%, but higher than market consensus of 83.6%. Non-GAAP earnings per share were $39.25, higher than Goldman Sachs' forecast of $38.16 and market consensus of $35.45, exceeding by about 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' forecast of $11.653 billion and market consensus of $11.148 billion, with gaps of 9.5% and 5.4%, respectively.

The gross margin guidance midpoint is 84.0%, lower than Goldman Sachs' forecast of 84.7% and market consensus of 86.7%, with a gap of about 74 to 267 basis points. The non-GAAP earnings per share guidance midpoint is $45.00, lower than Goldman Sachs' forecast of $49.95, but generally in line with market consensus of $45.34.

Goldman Sachs pointed out that although SanDisk's stock price has fallen about 40% from its June peak, partially digesting some of the overly high expectations, the market's optimism regarding strong NAND pricing, accelerated adoption in AI data centers, and strong performance from peers remains robust, leading to the lower-than-expected guidance still putting further pressure on the stock price.

Goldman Sachs maintains a "buy" rating on SanDisk with a 12-month target price of $2,200, based on a 20 times price-to-earnings ratio corresponding to a normalized earnings per share of $110, which has about a 54.1% potential upside compared to the current stock price of $1,427.62.

At the industry transmission level, Goldman Sachs believes that SanDisk's lower-than-expected guidance poses a certain drag on the overall sentiment in the storage industry. The report clearly states that given the similar end-market exposure, Micron Technology is expected to experience a negative reaction after SanDisk's earnings report is released.