SanDisk's ability to secure prepayments under its NBM agreements is structurally bullish for a company historically valued as a cyclical.

While the initial design favored large upfront prepayments, tax inefficiencies led to a pivot toward escrow arrangements: if a customer walks away or fails to take delivery, SanDisk immediately receives the escrowed cash recognized at 100% gross margin. The 400m in prepayments still sitting on the Q1 balance sheet confirms that some direct prepayment components remain in place alongside the escrow structure.

The revenue visibility embedded in these deals is substantial: the three signed agreements carry a minimum lifetime revenue commitment of 42bn, with the longest contract running five years. Combined with coverage of more than one-third of FY27 bit shipments, these agreements provide a meaningful floor under FY27 earnings estimates that the market has yet to fully price in.

This is why the durability debate is still the central investment question. The near-term earnings strength is widely acknowledged; the real disagreement is whether it persists. The majority of the market continues to apply a cyclical framework to NAND, treating the current earnings peak as transient and inevitable to mean-revert. The NBM structure directly challenges that assumption: customers signing multi-year supply agreements with financial penalties for non-performance are signaling that they view memory shortages as a multi-year constraint to AI infrastructure buildout, not a temporary imbalance.