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Why Sandisk Stock Plunged Today
Key Points
Sandisk reported sales and profits that beat expectations by a wide margin.
Management announced an 8-for-1 stock split.
Investor concern about the durability of AI demand is weighing on the stock.
Shares of Sandisk (NASDAQ:SNDK) were trading sharply lower on Friday, tumbling as much as 11%. As of 10:49 a.m. ET, the stock was still down 9.6%.
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The catalyst that sent the semiconductor specialist lower was the company's financial results. While they were better than expected, investors wanted more.
Image source: The Motley Fool.
Chip shot
For its fiscal 2027 first quarter (ended Oct. 2), Sandisk generated revenue that surged 378% year over year and 23% quarter over quarter to $11 billion. This drove adjusted earnings per share (EPS) of $49.51, up more than 40-fold.
Given the falling stock price, you'd be excused for thinking that Sandisk missed the mark, but nothing could be further from the truth. Analysts' consensus estimates were calling for revenue of $10.7 billion and adjusted EPS of $46.67, so the company sailed past expectations with room to spare.
The catalyst that drove the results was no secret. Soaring demand for the memory chips critical to artificial intelligence (AI) processing continued. Data center revenue of $4.8 billion soared 1,682% year over year, also surpassing expectations of $4 billion. At the same time, edge computing revenue of $5.8 billion jumped 320% year over year and 7% sequentially.
Sandisk raised its second-quarter outlook above Wall Street's expectations and is now calling for revenue of $12.4 billion and adjusted gross margin of 85%, both at the midpoint of its guidance.
Management also announced a long-rumored 8-for-1 stock split "to make the stock more accessible, including to employees." Shareholders of record as of market close on Nov. 9, 2026 will receive seven additional shares for each share owned, which will be issued after market close on Thursday, Nov. 19, 2026. Post-split trading is expected to begin when the market opens on Friday, Nov. 20, 2026.
From all appearances, it was a stellar quarter, so why is the stock falling? Frankly, the magnitude of Sandisk's growth is the stuff of legend, but investors fear it simply can't last. Concerns about the continuing demand for all things AI, the resilience of consumer spending, and a ceiling on memory prices are all weighing on the stock -- despite the company's stellar performance.
If you believe -- like I do -- that we're still in the early innings of artificial intelligence adoption, Sandisk stock is a steal at 16 times earnings.
Danny Vena, CPA has positions in Sandisk. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.