Sandisk's contracts guarantee at least $17.8 billion in the next year, about 40% of today's sales pace

Sandisk's quarterly filing, published a day after its results, shows how much of its contracted revenue falls due in the next year. The contracts, which the company calls new business models (NBMs), carried $88.9 billion of revenue still to be recognised at the end of the quarter. That is a large sum spread over several years. The company expects about 20% of it to become revenue in the next twelve months, or roughly $17.8 billion.

Set that against what the business now sells. In the September 2026 quarter revenue was $11.0 billion; four quarters at that pace make about $44.1 billion a year. On that rough measure, calculated from the filed figures, the contracts guarantee at least 40% of a year's sales at floor prices over the coming twelve months. Because the contracts cover about half of this year's output and pay more than the floor when prices are higher, their real share is likely larger; the rest of the output is sold at market prices.

That split matters more now because the business has stopped getting dramatically better each quarter. Gross margin excluding stock-based pay (the company's non-GAAP measure) was 85.1% last quarter, and the company's guidance for the current quarter is 84.5% to 85.5%: the margin is expected to hold, not widen. Revenue growth is slowing as well: each of the last two quarters grew roughly half as fast as the one before it, and the midpoint of the company's guidance implies roughly half again for the current quarter.

The contracts are why management describes its model as more durable. Chief executive David Goeckeler said the company is "at half the bits for this fiscal year and 2/3s for next year" under these agreements, bits being the units of storage capacity it ships. That is a commitment on volume. Price is looser: in August the company said the contracts mix fixed and variable pricing with floors and ceilings, and that their minimum value assumed floor prices, with actual revenue expected to come in above it. A contracted figure like $88.9 billion is therefore a base the company expects to beat, not a forecast of what the contracts will earn.

The base grew last quarter, from $59.8 billion at the end of the previous quarter to $88.9 billion, as the two agreements signed in the quarter were added; both had closed before the August results call. Counting those deals, the company put the obligations at $91.1 billion in August; the filed figure is slightly lower, which is what delivering against the contracts with no further deals would produce.

What fills the gap between the contracted base and today's sales has also changed. In the quarter before, most of the sequential increase came from higher prices. Last quarter roughly 60% came from selling more storage and 40% from price. Volume is limited by the factories, with the contract pipeline larger than supply to the end of the decade: Goeckeler restated a plan for bit growth in the mid to high teens. Chief financial officer Luis Visoso said he expects prices to increase modestly through the year, and asked analysts to be cautious when modelling growth from the current quarter to the next, which is usually the company's weakest. At the cheap end, consumer revenue shrank on the quarter, which Visoso put down to the market adjusting to higher prices.

The quarter's cash from operations also lagged its net income. Receivables, the money customers owe, rose 39.9% in the quarter, against revenue growth of 23%. Visoso said this was mostly a change in customer mix; the balance is worth watching in the next filing.

None of this makes the contracts weak. They tie up half of this year's output with large customers and set floors under price. What the filing shows is their limit: they guarantee at floor prices at least two-fifths of a year's sales at today's pace, while the company's gross margin still depends on memory prices for the output the contracts do not cover and on where contract prices sit between their floors and ceilings.