Western Digital Stock Falls 13% and Sandisk Slides 7% as Guidance Disappoints

Key Takeaways

• Western Digital stock closed 13.03% lower at $451.52, while Sandisk fell 6.81% to $1,258.58 after both companies released quarterly results.
• Western Digital and Sandisk reported strong revenue, earnings and data-centre growth, but their forward guidance failed to clear the exceptionally high expectations surrounding AI memory stocks.
• The sell-off initially spread to Micron, SK Hynix and Nasdaq 100 futures, although Citi continues to argue that the AI-driven memory upcycle remains in its early stages.

Western Digital and Sandisk Stocks Fall Despite Strong Earnings

Western Digital and Sandisk shares fell sharply on Thursday as investors looked beyond their better-than-expected quarterly results and focused instead on forward guidance that failed to match the market’s most optimistic forecasts.

Western Digital stock dropped more than 14% during pre-market trading, while Sandisk declined over 9%. The selling intensified shortly after the opening bell before both stocks recovered part of their intraday losses. Western Digital eventually closed 13.03% lower at $451.52, while Sandisk ended the session down 6.81% at $1,258.58. The Nasdaq Composite slipped 0.06%, while the S&P 500 declined 0.18%.

The negative reaction highlighted how elevated expectations have become across the AI memory and data-storage sector. Both companies delivered strong growth and offered forecasts that still pointed to expanding revenue and profitability. However, after their substantial share-price rallies, investors appeared to be demanding much larger earnings beats and stronger-than-expected guidance.

The results therefore presented an expectations problem rather than clear evidence of weakening AI storage demand.

Sandisk Reports Record Revenue but Outlook Falls Short

Sandisk delivered fiscal fourth-quarter revenue of $8.97 billion, representing growth of 51% from the previous quarter and 372% from the same period last year. Non-GAAP earnings reached $39.25 per diluted share, while gross margin expanded to 84.6% from 78.4% in the previous quarter.

The company’s performance continued to benefit from rising NAND flash prices and growing demand from AI data centres. Datacentre revenue more than doubled sequentially to $2.98 billion, while edge revenue increased 48% to $5.43 billion. Consumer revenue was the main area of weakness, falling 32% from the previous quarter to $556 million.

For the full fiscal year, Sandisk generated revenue of $20.25 billion, an increase of 175%. Datacentre revenue grew 437% as the company shifted its business towards higher-value enterprise and hyperscale customers. Sandisk also expanded its share-repurchase authorisation by $14 billion.

Despite these results, investors concentrated on the fiscal first-quarter forecast. Sandisk expects revenue of between $10.3 billion and $10.8 billion, non-GAAP earnings of $44 to $46 per share and a gross margin of 83% to 85%. The margin range implies that profitability could remain broadly flat or soften slightly from the fourth-quarter level.

The revenue outlook still signals significant sequential growth, but it left limited room for further upgrades. Concerns that NAND price increases could begin to slow also contributed to the Sandisk stock pullback.

Western Digital Revenue Rises 44% as Margins Expand

Western Digital also exceeded its previous outlook. Fiscal fourth-quarter revenue reached $3.75 billion, up 12% sequentially and 44% year over year. Non-GAAP earnings increased 109% from the previous year to $3.56 per share.

Profitability improved considerably. Western Digital’s non-GAAP gross margin climbed to 54.4%, compared with 50.5% in the previous quarter and 41.3% one year earlier. Operating margin reached 44.2%, while free cash flow rose 90% year over year to $1.28 billion.

Cloud customers accounted for approximately 89% of revenue, reflecting strong demand for high-capacity hard drives from hyperscalers and AI data centres.

For the fiscal first quarter of 2027, Western Digital forecast revenue of $4.1 billion, plus or minus $100 million. The company expects a non-GAAP gross margin of 55% to 56% and adjusted earnings of $3.85 to $4.15 per share. At the midpoint, the forecast represents further revenue, margin and earnings growth.

Nevertheless, the guidance was viewed as good rather than exceptional. Western Digital shares had already priced in a prolonged AI storage boom, leaving the stock vulnerable when the forecast failed to deliver a much larger upside surprise.

Memory Stock Sell-Off Weighs on Nasdaq 100 Futures

The initial weakness spread beyond Western Digital and Sandisk. Nasdaq 100 futures traded around 1% below fair value before the opening bell, while Micron, SK Hynix, Seagate, Intel and Marvell also came under pressure.

Western Digital and Sandisk were approximately 15% and 10% lower during the pre-market session, creating a broader pullback in momentum and AI infrastructure stocks.

Much of that wider pressure eased later in the session. Micron closed down about 1.4%, while Seagate recovered to finish higher. The Nasdaq Composite’s relatively small decline also suggested that the sell-off remained concentrated in memory and storage companies rather than developing into a broad technology-market correction.

The reaction nevertheless demonstrated how closely investors are watching memory pricing, gross margins and AI capital expenditure. Even companies reporting strong growth can experience sharp declines when valuations already assume near-perfect execution.

Is the AI Memory Upcycle Starting to Weaken?

The quarterly figures do not yet indicate a clear collapse in AI-related storage demand. Sandisk’s datacentre revenue more than doubled sequentially, while Western Digital expects continued revenue growth and further margin expansion.

Citi maintains that the current memory upcycle remains in its early stages and could last longer than previous cycles because AI is simultaneously increasing demand for DRAM, NAND flash and high-capacity storage. Three- to five-year customer agreements may also provide greater revenue visibility than memory companies enjoyed during earlier cycles.

However, strong industry demand does not eliminate share-price risk. Memory and storage stocks remain exposed to changing chip prices, new production capacity, slower AI investment, margin normalisation and elevated valuations. Thursday’s sell-off showed that the market can distinguish between a healthy underlying business and a stock price that already reflects extremely optimistic assumptions.

Conclusion

Western Digital and Sandisk delivered strong quarterly earnings, but their forecasts were not powerful enough to support the expectations embedded in their share prices. Western Digital’s 13% decline and Sandisk’s nearly 7% fall therefore reflected a reassessment of valuation and future upside rather than an immediate breakdown in AI storage demand.

Future performance will depend on whether Sandisk can maintain its unusually high gross margins and convert long-term customer agreements into durable growth. For Western Digital, investors will focus on cloud demand, high-capacity drive shipments and further margin expansion. The AI memory cycle may remain intact, but Thursday’s reaction confirmed that the sector now faces a much higher bar.