Goldman Sachs said Sandisk and Western Digital delivered strong quarterly reports, but the setup going into earnings season was so optimistic that the results may not translate into post-earnings gains for either stock.
In two reports issued on Aug. 5, Goldman Sachs analyst James Schneider and his team said the core tension in the storage sector is not weakening fundamentals. It is that market expectations have already run ahead of what companies are now able to deliver in guidance.
Both companies beat expectations to varying degrees on revenue, gross margin and earnings per share. Goldman’s point was that once investors are already positioned for near-perfect execution and a fresh round of upside surprises, even guidance that looks solid on an absolute basis can be treated as disappointing.
The bank said investors should watch for a short-term pullback driven by sentiment. It also flagged Micron Technology, saying Sandisk’s negative post-earnings reaction is likely to spill over because the two companies have highly similar end-market exposure.
Western Digital: margins beat, but guidance did not deliver a fresh upside surprise
Western Digital reported fiscal second-quarter revenue for the period ending June 2026 of $3.747 billion. That was broadly in line with Goldman’s $3.763 billion estimate and Wall Street consensus of $3.714 billion, while marking 43.8% year-over-year growth.
Gross margin came in at 54.4%, above Goldman’s 52.4% forecast and the 51.9% consensus estimate, a beat of roughly 200 to 250 basis points. Non-GAAP EPS was $3.56, ahead of Goldman’s $3.43 estimate and the $3.35 Street consensus, or about 4% to 6% higher.
For the fiscal third quarter, Western Digital guided to revenue of $4.1 billion at the midpoint. Goldman said that was broadly consistent with its own $4.166 billion estimate and Wall Street consensus of $4.04 billion.
The company guided for gross margin of 55% to 56%, above Goldman’s 54.1% view and the 54.0% consensus by roughly 140 to 148 basis points. Midpoint non-GAAP EPS guidance was $4.00, modestly above Goldman’s $3.94 estimate and the $3.80 consensus.
Goldman said investor expectations had already become highly bullish before earnings, supported by confidence in continued HDD pricing improvement, margin expansion and long-term demand visibility tied to capital spending by large cloud companies. In that context, guidance that only matched what the market had already been looking for was seen as not surprising enough.
Goldman maintained its 12-month price target on Western Digital at $650. The target is based on a 23x multiple applied to normalized EPS of $28.00. Against the current share price of $548.56, that implies about 18.5% upside. The rating remains Neutral.
Sandisk: the quarter beat, but forward guidance disappointed
Sandisk also reported a strong fiscal second quarter. Revenue reached $8.965 billion, above Goldman’s $8.841 billion estimate and the Wall Street consensus of $8.713 billion, up 371.6% from a year earlier.
Gross margin was 84.6%, broadly in line with Goldman’s 84.3% estimate and above the 83.6% consensus. Non-GAAP EPS came in at $39.25, ahead of Goldman’s $38.16 estimate and the Street’s $35.45 consensus, a beat of around 3% to 11%.
The problem was the outlook for the fiscal third quarter. Sandisk guided to revenue of $10.55 billion at the midpoint, below Goldman’s $11.653 billion forecast and below Wall Street consensus of $11.148 billion by 9.5% and 5.4%, respectively.
Midpoint gross margin guidance was 84.0%, below Goldman’s 84.7% estimate and the 86.7% consensus, a gap of roughly 74 to 267 basis points. Midpoint non-GAAP EPS guidance was $45.00, below Goldman’s $49.95 forecast but broadly in line with Wall Street consensus of $45.34.
Goldman noted that Sandisk shares had already fallen about 40% from their June high, which had absorbed part of the earlier excess optimism. Even so, bullish sentiment around NAND pricing, faster AI data center adoption and strong peer results remained in place before earnings. That, in Goldman’s view, leaves room for renewed pressure when guidance comes in light.
Goldman maintained a Buy rating on Sandisk and kept its 12-month price target at $2,200. The valuation is based on a 20x multiple of normalized EPS of $110. With the stock at $1,427.62, Goldman said the implied upside is about 54.1%.
Read-through for the sector: Micron may also face pressure
On the industry read-through, Goldman said Sandisk’s weaker-than-expected guidance could weigh on sentiment across the broader storage group. The report explicitly said Micron is likely to see a negative reaction after Sandisk’s earnings because of the overlap in end-market exposure.