[Edaily Reporter Kim Hyun-ah ] Investments in AI data centers are significantly boosting the earnings of NAND flash manufacturer SanDisk. With demand for data center storage devices surging, revenue and profitability are improving rapidly. SanDisk’s growth momentum is also a noteworthy sign for FADU INC., a South Korean fabless company that supplies solid-state drive (SSD) controllers for data centers.

In an earnings analysis report on SanDisk released on the 30th of last month, Morgan Stanley maintained its “Overweight” rating and a target price of $1,750. The firm raised its earnings per share (EPS) forecast for fiscal year 2027 to $271. Based on this upwardly revised earnings outlook, Morgan Stanley noted that the current price-to-earnings ratio (P/E ratio) is less than 5 times, assessing that the risk-reward profile is attractive.

SanDisk’s revenue for the first quarter of fiscal year 2027 (ended October 2026) was $11.031 billion, up 23.0% from the previous quarter and 377.9% from the same period last year, exceeding market expectations of $10.694 billion. Non-GAAP earnings per share also came in at $49.51, exceeding the forecast of $46.36.

The data center business was the key driver of these results. Data center revenue rose 61.3% from the previous quarter to $4.802 billion, accounting for 43.5% of total revenue. Compared to revenue of $269 million in the same period last year, this represents a 1,685% increase—roughly an 18-fold rise. Morgan Stanley analyzed that SanDisk is securing market share in the rapidly growing data center market.

The company’s business structure is also changing. The revenue share of SanDisk’s Edge and Consumer segments has declined from about 90% last year to about 56% currently. The data center segment is rapidly growing within a business structure that was previously centered on personal devices. Morgan Stanley believes this shift will reduce the risk of earnings volatility caused by a slowdown in demand for consumer devices.

The NAND flash supply shortage is another factor supporting improved earnings. Morgan Stanley projected that the tight balance between NAND supply and demand could persist for the next few years, and that NAND prices are likely to continue rising through next year.

SanDisk’s growth momentum is also significant for FADU INC.(440110). FADU INC. is a fabless company that designs controllers, which are key components of data center SSDs. SSD controllers manage data read and write operations between NAND flash and servers, and they determine the performance and stability of storage devices. If SanDisk expands its supply of enterprise SSDs based on NAND flash, this could have a positive impact on demand for controllers.

In particular, FADU INC. supplies SSD controllers and power management integrated circuits (PMICs) to SanDisk. Consequently, SanDisk’s expansion of its data center SSD business could impact FADU INC.’s component supply opportunities and financial performance.

However, an increase in SanDisk’s data center revenue does not necessarily translate directly into higher supply volumes or revenue growth for FADU INC. The actual extent of the benefit depends on product adoption, supply contracts, and delivery schedules.

The outlook for the next quarter’s earnings is also positive. SanDisk has set its midpoint revenue guidance for the second quarter of fiscal year 2027 at $12.4 billion, exceeding the market consensus of $12.311 billion. The company forecasts a non-GAAP gross margin of 84.5% to 85.5% and earnings per share (EPS) of $55 to $57.

Morgan Stanley also highlighted SanDisk’s low capital intensity. The firm estimates that the company has the capacity to repurchase shares equivalent to approximately 50% of its revenue. SanDisk actually repurchased $5 billion worth of its own shares this quarter. Analysts note that the combination of growing demand for AI data centers, rising NAND prices, and shareholder returns is creating significant potential for improved earnings and enhanced shareholder value.