Goldman Sachs Comments on Sandisk and Western Digital Earnings: Strong Results, But Market Expectations Too High

Both Sandisk and Western Digital delivered strong quarterly results, but Goldman Sachs believes that excessively high market expectations have prevented the two companies' stock prices from benefiting from their impressive performance. The firm expects both stocks to face downward pressure following the earnings announcements.

Zhuifeng Trading Desk news: On August 5, Goldman Sachs' James Schneider team released two reports analyzing the latest earnings of Sandisk and Western Digital. The core contradiction facing the storage industry is not a deterioration in fundamentals, but rather that market expectations have moved too far ahead of reality.

Both companies delivered impressive quarterly reports, with revenue, gross margins, and earnings per share exceeding expectations to varying degrees. However, when expectations already embed assumptions of "perfect execution + continuous beats," any guidance returning to a normal track is interpreted by the market as a negative signal.

For investors, there is a need to be wary of sentiment-driven correction risks for both stocks in the short term. Goldman Sachs also pointed out that given the high overlap in end-market exposure between Micron Tech and Sandisk, the negative reaction to Sandisk's earnings is expected to spill over to Micron. Investors should keep a close watch on Micron's short-term stock performance.

Western Digital: Gross Margin Beats Expectations, But Guidance Fails to Impress

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

Gross margin stood at 54.4%, higher than Goldman Sachs' forecast of 52.4% and the market consensus of 51.9%, exceeding them by approximately 200 to 250 basis points. Non-GAAP earnings per share were $3.56, higher than Goldman Sachs' forecast of $3.43 and the market consensus of $3.35, representing a beat of about 4% to 6%.

Regarding third-quarter guidance, Western Digital provided a revenue midpoint of $4.1 billion, broadly consistent 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 them by about 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 had become highly optimistic heading into the earnings season. Investors held high confidence in the continued improvement of HDD (hard disk drive) pricing, momentum in margin expansion, and long-demand visibility driven by capital expenditures from major cloud computing providers.

In this context, guidance that merely meets market expectations is viewed as "not surprising enough."

Goldman Sachs maintains its 12-month price target for Western Digital at $650, based on a 23x P/E ratio applied to normalized EPS of $28.00. This implies approximately 18.5% upside from the current stock price of $548.56, with the rating maintained at "Neutral."

Sandisk: Significant Beat in Current Quarter, But Forward Guidance Disappoints Market

Sandisk's second-quarter revenue was $8.965 billion, higher than Goldman Sachs' forecast of $8.841 billion and the Wall Street consensus of $8.713 billion, representing a substantial year-over-year increase of 371.6%.

Gross margin was 84.6%, basically in line with Goldman Sachs' forecast of 84.3%, but higher than the market consensus of 83.6%. Non-GAAP EPS was $39.25, higher than Goldman Sachs' forecast of $38.16 and the market consensus of $35.45, representing a beat of about 3% to 11%.

However, the third-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 the market consensus of $11.148 billion, representing 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 the market consensus of 86.7%, with gaps of approximately 74 to 267 basis points. The non-GAAP EPS guidance midpoint is $45.00, lower than Goldman Sachs' forecast of $49.95, but broadly consistent with the market consensus of $45.34.

Goldman Sachs pointed out that although Sandisk's stock price has fallen about 40% from its June highs, partially digesting some of the excessive expectations, market sentiment remained strongly optimistic heading into the earnings season due to strong NAND pricing, accelerated adoption in AI data centers, and strong peer performance. Consequently, the below-expectation guidance will still lead to further pressure on the stock price.

Goldman Sachs maintains its "Buy" rating and 12-month price target of $2,200 for Sandisk, based on a 20x P/E ratio applied to normalized EPS of $110. This implies approximately 54.1% potential upside from the current stock price of $1,427.62.

In terms of industry spillover, Goldman Sachs believes that Sandisk's below-expectation guidance poses a certain drag on overall sentiment in the storage sector. The report explicitly states that, given similar end-market exposures, Micron Tech is expected to see a negative reaction following Sandisk's earnings announcement.