This article first appeared on GuruFocus.

Sandisk (NASDAQ:SNDK) shares fell sharply Thursday after its September-quarter revenue outlook failed to meet elevated expectations, even as Wall Street analysts argued that tight NAND supply, extraordinary margins and multiyear customer contracts support the longer-term earnings story. The reaction shows how little room remains for disappointment after the stock's enormous AI-driven rally.

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Sandisk is a major producer of NAND flash memory used in data centers, smartphones, computers and consumer storage devices. The company sells solid-state drives, embedded flash products, memory cards and components, with pricing and profitability heavily influenced by semiconductor supply cycles.

Sandisk reported fiscal fourth-quarter revenue of $8.97 billion, up 51% sequentially, while adjusted earnings reached $39.25 per share. Data-center revenue more than doubled from the prior quarter to $2.98 billion, reflecting surging demand for storage supporting AI workloads. Gross margin expanded to 84.6%.

However, management forecast fiscal first-quarter revenue of $10.3 billion to $10.8 billion, with adjusted earnings of $44 to $46 per share. The revenue range fell short of more aggressive investor expectations, helping send the stock down roughly 13% despite the strong quarter.

Evercore cut its price target to $2,800 from $3,100, while Jefferies reduced its target to $1,750 from $3,000. Still, Morgan Stanley and Wedbush maintained bullish ratings.

Strength in NAND is clear and durable, Morgan Stanley analysts said.

The bull case rests on Sandisk's new long-term agreements. The company added five deals during the quarter, bringing its total to 10 and providing greater pricing and demand visibility.

Investors should watch NAND average selling prices, contract coverage and whether gross margins remain above 80% as new agreements ramp. Sandisk's August 13 investor day is the next major catalyst, with management expected to discuss capital allocation, High Bandwidth Flash and the durability of its customer contracts.

Continued data-center growth and disciplined industry supply could support earnings well beyond current estimates. Slower pricing gains, weaker contract enforcement or new manufacturing capacity would undermine the thesis and expose how much optimism remains embedded in the valuation.