SanDisk's 80% gross margin target through 2030, backed by long-term customer agreements, signals a structural shift for memory stocks. Micron's free cash flow could support a similar capital return strategy.
SanDisk laid out a new financial model at its investor day Thursday, projecting non-GAAP gross margins of roughly 80% for fiscal years 2028 through 2030. The target, supported by long-term agreements with customers, marks a departure from the boom-bust cycles that have historically defined NAND flash memory.
Under the model, SanDisk expects non-GAAP operating margins near 75% over the same period. The company said the long-term contracts lock in demand and pricing, providing greater visibility into future volumes. The objective is to structurally reset margins higher and reduce cyclicality.
Micron, which competes in both NAND and DRAM, has pursued similar long-term agreements. The company's free cash flow reached about $17.5 billion in the third quarter and is expected to hit roughly $50 billion in fiscal 2026, according to Micron's guidance. If Micron were to adopt a similar capital return policy – SanDisk plans to return 100% of excess cash to shareholders from 2028 to 2030 – the buyback potential would be significant.
SanDisk's projections assume sustained demand at elevated prices through the end of the decade. The memory market has historically swung violently with supply and demand. A slowdown in data center spending or a glut in supply would test those assumptions. The agreements reduce spot-price exposure, though they do not eliminate it entirely.
Micron's free cash flow trajectory gives it room to follow SanDisk's playbook. In fiscal 2027, based on estimated free cash flow of $124 billion, a 100% return policy would allow Micron to repurchase roughly 10% of its market capitalization. That would be a meaningful shift for a stock that has historically reinvested heavily in capacity.
The broader implication is that memory stocks could trade at higher price-to-earnings multiples if the new business models prove durable. SanDisk's presentation suggested the company sees itself as less cyclical than the commodity memory producers of the past. Micron executives have made similar arguments in recent quarters.
Still, the model depends on demand holding up. Enterprise and data center spending on NAND and DRAM has been strong, driven by AI infrastructure buildouts. A pullback in that spending would pressure volumes and pricing. The long-term agreements provide a floor, not a guarantee.
SanDisk shares rose after the presentation. The company's next quarterly report is scheduled for October.
Among the retailers reporting next week, TJX Companies holds an Alpha Score of 52 out of 100, reflecting mixed signals. The TJX stock page is available for further detail.
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