Sandisk Corp 10-Q

Item 1. Financial Statements (unaudited) SANDISK CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in millions, except par value) (Unaudited) March 28, 2025 June 28, 2024 ASSETS Current assets: Cash and cash equivalents $ 1,507 $ 328 Accounts receivable, net 979 935 Inventories 2,160 1,955 Income tax receivable 53 7 Other current assets 391 221 Notes due from Western Digital Corporation — 102 Total current assets 5,090 3,548 Property, plant and equipment, net 603 791 Notes receivable and investments in Flash Ventures 662 1,001 Goodwill 4,997 7,207 Deferred tax assets 51 96 Income tax receivable, non-current 79 11 Other non-current assets 1,478 852 Total assets $ 12,960 $ 13,506 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 363 $ 357 Accounts payable to related parties 395 313 Accrued expenses 446 424 Accrued compensation 114 195 Income tax payables 37 20 Notes due to Western Digital Corporation — 814 Current portion of long-term debt 20 — Total current liabilities 1,375 2,123 Deferred tax liabilities 17 15 Long-term debt 1,927 — Other liabilities 480 286 Total liabilities 3,799 2,424 Commitments and contingencies (Notes 10, 11, 14 and 16) Shareholders’ equity: Common stock, $ 0.01 par value; authorized — 450 shares; issued and outstanding — 145 shares $ 1 $ — Additional paid-in capital 11,227 — Accumulated deficit ( 1,761 ) — Accumulated other comprehensive loss ( 306 ) ( 452 ) Net investment from Western Digital Corporation — 11,534 Total shareholders’ equity 9,161 11,082 Total liabilities and shareholders’ equity $ 12,960 $ 13,506 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 4 Table of Contents SANDISK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024 Revenue, net $ 1,695 $ 1,705 $ 5,454 $ 4,903 Cost of revenue 1,313 1,242 3,740 4,467 Gross profit 382 463 1,714 436 Operating expenses: Research and development 285 277 847 763 Selling, general and administrative 139 107 411 338 Goodwill impairment 1,830 — 1,830 — Business separation costs 9 12 50 46 Employee termination and other — 2 5 ( 44 ) Gain on business divestiture — — ( 34 ) — Total operating expenses 2,263 398 3,109 1,103 Operating income (loss) ( 1,881 ) 65 ( 1,395 ) ( 667 ) Interest and other expense: Interest income 6 3 11 9 Interest expense ( 16 ) ( 9 ) ( 22 ) ( 31 ) Other expense, net ( 10 ) ( 5 ) ( 55 ) ( 11 ) Total interest and other expense, net ( 20 ) ( 11 ) ( 66 ) ( 33 ) Income (loss) before taxes ( 1,901 ) 54 ( 1,461 ) ( 700 ) Income tax expense 32 27 157 92 Net income (loss) $ ( 1,933 ) $ 27 $ ( 1,618 ) $ ( 792 ) Net income (loss) per common share: Basic and diluted $ ( 13.33 ) $ 0.19 $ ( 11.16 ) $ ( 5.46 ) Weighted average shares outstanding: Basic and diluted 145 145 145 145 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 5 Table of Contents SANDISK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in millions) (Unaudited) Three Months Ended Nine Months Ended March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024 Net income (loss) $ ( 1,933 ) $ 27 $ ( 1,618 ) $ ( 792 ) Other comprehensive income (loss), before tax: Foreign currency translation adjustment 24 ( 29 ) ( 11 ) ( 21 ) Net unrealized gain (loss) on derivative contracts 101 ( 71 ) 175 ( 46 ) Total other comprehensive income (loss), before tax 125 ( 100 ) 164 ( 67 ) Income tax benefit (expense) related to items of other comprehensive income (loss), before tax 7 15 ( 8 ) 10 Other comprehensive income (loss), net of tax 132 ( 85 ) 156 ( 57 ) Total comprehensive loss $ ( 1,801 ) $ ( 58 ) $ ( 1,462 ) $ ( 849 ) The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 6 Table of Contents SANDISK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (Unaudited) Nine Months Ended March 28, 2025 March 29, 2024 Cash flows from operating activities Net loss $ ( 1,618 ) $ ( 792 ) Adjustments to reconcile net loss to net cash used in operations: Depreciation and amortization 127 170 Stock-based compensation 133 115 Goodwill impairment 1,830 — Deferred income taxes 7 3 Gain on disposal of assets ( 1 ) ( 60 ) Non-cash portion of impairment of cost method investments 1 — Unrealized foreign exchange (gain) loss ( 6 ) 12 Gain on business divestiture ( 34 ) — Amortization of debt issuance costs and discounts 1 — Equity loss in investees, net of dividends received 68 11 Gain on sale of investments — ( 1 ) Other non-cash operating activities, net 17 96 Settlement of accrued interest on Notes due to Western Digital Corporation ( 99 ) — Changes in: Accounts receivable, net ( 11 ) ( 275 ) Inventories ( 241 ) 539 Accounts payable 99 80 Accounts payable to related parties ( 28 ) 18 Accrued expenses 3 ( 96 ) Accrued compensation ( 38 ) 43 Other assets and liabilities, net ( 220 ) ( 42 ) Net cash used in operating activities ( 10 ) ( 179 ) Cash flows from investing activities Purchases of property, plant and equipment ( 159 ) ( 128 ) Proceeds from the sale of property, plant and equipment — 134 Proceeds from dispositions of business 401 — Notes receivable issuances to Flash Ventures ( 274 ) ( 184 ) Notes receivable proceeds from Flash Ventures 428 391 Distributions from Flash Ventures 176 — Strategic investments and other, net 1 — Net cash provided by investing activities 573 213 Cash flows from financing activities Taxes paid on vested stock awards under employee stock plans ( 6 ) — Proceeds from debt 1,970 — Debt issuance costs ( 32 ) — Proceeds from borrowings on Notes due to Western Digital Corporation 550 — Proceeds from principal repayments on Notes due from Western Digital Corporation 101 — Repayments of principal on Notes due to Western Digital Corporation ( 76 ) ( 102 ) Transfers from (to) Western Digital Corporation ( 1,887 ) 340 Origination of Notes due from Western Digital Corporation — ( 187 ) Net cash provided by financing activities 620 51 Effect of exchange rate changes on cash ( 4 ) — Net increase in cash and cash equivalents 1,179 85 Cash and cash equivalents, beginning of year 328 292 Cash and cash equivalents, end of period $ 1,507 $ 377 Supplemental disclosure of cash flow information: Cash paid for interest $ 102 $ 10 Cash received for interest 2 8 Cash paid for income taxes 10 — Non-cash transfers of: Notes due to (from) Western Digital Corporation 1,223 ( 113 ) Other assets and liabilities, net, from Western Digital Corporation 105 — Contribution of equity interest in Unis Venture from Western Digital Corporation 61 — Property, plant and equipment from Western Digital Corporation 27 5 Tax balances to Western Digital Corporation 8 2 Tax indemnification liability to Western Digital Corporation ( 112 ) — The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 7 Table of Contents SANDISK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (in millions) (Unaudited) Common Stock Shares Amount Additional Paid in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Net Investment from Western Digital Corporation Total Balance at June 28, 2024 — $ — $ — $ — $ ( 452 ) $ 11,534 $ 11,082 Net income — — — — — 211 211 Foreign currency translation adjustment — — — — 43 — 43 Net unrealized gain on derivative contracts — — — — 166 — 166 Stock-based compensation — — — — — 41 41 Net transfer from Western Digital Corporation — — — — — 583 583 Balance at September 27, 2024 — — — — ( 243 ) 12,369 12,126 Net income — — — — — 104 104 Foreign currency translation adjustment — — — — ( 78 ) — ( 78 ) Net unrealized loss on derivative contracts — — — — ( 107 ) — ( 107 ) Stock-based compensation — — — — — 48 48 Net transfer to Western Digital Corporation — — — — ( 6 ) ( 86 ) ( 92 ) Balance at December 27, 2024 — — — — ( 434 ) 12,435 12,001 Net loss — — — ( 1,761 ) — ( 172 ) ( 1,933 ) Foreign currency translation adjustment — — — — 24 — 24 Net unrealized income on derivative contracts — — — — 108 — 108 Stock-based compensation 20 24 44 Employee stock plans — — ( 7 ) — — — ( 7 ) Net transfers to Western Digital Corporation, including spin-off-related adjustments — — — — ( 4 ) ( 1,072 ) ( 1,076 ) Issuance of common stock and reclassification of net transfers from Western Digital Corporation 145 1 11,214 — — ( 11,215 ) — Balance at March 28, 2025 145 $ 1 $ 11,227 $ ( 1,761 ) $ ( 306 ) $ — $ 9,161 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 8 Table of Contents SANDISK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY CONT. (in millions) (Unaudited) Common Stock Shares Amount Additional Paid in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Net Investment from Western Digital Corporation Total Balance at June 30, 2023 — $ — $ — $ — $ ( 343 ) $ 11,782 $ 11,439 Net loss — — — — — ( 518 ) ( 518 ) Foreign currency translation adjustment — — — — ( 16 ) — ( 16 ) Net unrealized loss on derivative contracts — — — — ( 39 ) — ( 39 ) Stock-based compensation — — — — — 40 40 Net transfer from Western Digital Corporation — — — — — 19 19 Balance at September 29, 2023 — — — — ( 398 ) 11,323 10,925 Net loss — — — — — ( 301 ) ( 301 ) Foreign currency translation adjustment — — — — 24 — 24 Net unrealized gain on derivative contracts — — — — 59 — 59 Stock-based compensation — — — — 37 37 Net transfer from Western Digital Corporation — — — — — 152 152 Balance at December 29, 2023 — — — — ( 315 ) 11,211 10,896 Net income — — — — — 27 27 Foreign currency translation adjustment — — — — ( 29 ) — ( 29 ) Net unrealized gain on derivative contracts — — — — ( 56 ) — ( 56 ) Stock-based compensation — — — — 38 38 Net transfer from Western Digital Corporation — — — — — 63 63 Balance at March 29, 2024 — $ — $ — $ — $ ( 400 ) $ 11,339 $ 10,939 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 9 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Organization and Basis of Presentation Description of the Company Sandisk Corporation (“Company,” “we,” “us,” or “our”) is a leading developer, manufacturer and provider of data storage devices and solutions based on NAND flash technology. With a differentiated innovation engine driving advancements in storage and semiconductor technologies, our broad and ever-expanding portfolio delivers powerful flash storage solutions for everyone from students, gamers, and home offices to the largest enterprises and public clouds to capture, preserve, access, and transform an ever-increasing diversity of data. The Company operates primarily in the United States (“U.S.”), and also internationally, with a significant concentration in the Asia Pacific region. On October 30, 2023, Western Digital Corporation (“WDC”) announced that its board of directors (the “WDC Board of Directors”) authorized WDC management to pursue a plan to separate the Company into an independent public company (the “separation” or the “spin-off”). The separation received final approval by the WDC Board of Directors and was completed on February 21, 2025. Prior to February 21, 2025, the Company was wholly owned by WDC. On February 24, 2025, following the separation, the Company began trading as an independent, publicly traded company under the stock symbol “SNDK” on Nasdaq. WDC executed the spin-off of the Company through WDC’s pro rata distribution of 80.1 % of the Company’s outstanding shares of common stock to holders of WDC’s common stock as of the close of business on February 21, 2025. Each WDC stockholder received one-third (1/3) of one share of the Company’s common stock for each share of WDC’s common stock held by such WDC stockholder as of February 12, 2025, the record date of the distribution. Upon completion of the separation, WDC owned 19.9 % of the shares of the Company’s common stock, which WDC is expected to retain for a period of up to twelve months following the distribution. In connection with the separation, on February 21, 2025, the Company entered into definitive agreements with WDC that set forth the terms and conditions of the spin-off and provided a framework for the relationship between WDC and the Company following the separation. These agreements include the Separation and Distribution Agreement, which contains certain key provisions related to the spin-off, as well as a Transition Services Agreement, a Tax Matters Agreement, an Employee Matters Agreement, an Intellectual Property Cross-License Agreement, a Transitional Trademark License Agreement, and a Stockholder and Registration Rights Agreement , as described in and filed as Exhibits to the Company’s Current Report on Form 8-K on February 24, 2025 and incorporated by reference to this Quarterly Report on Form 10-Q. Additionally, the Company adopted certain compensation plans filed as Exhibits to the Company’s Registration Statement on Form 10, initially filed with the U.S. Securities and Exchange Commission (“SEC”) on November 25, 2024, and as further amended thereafter and declared effective on January 31, 2025 (as amended, the “Form 10”). The Company also entered into various sublease agreements and established a stock compensation incentive plan in connection with the separation. On February 21, 2025, in connection with the separation, the Company entered into a $ 1.5 billion revolving credit facility, which was undrawn at the separation date, and a $ 2.0 billion term loan facility due in 2032. The Company used a portion of the proceeds received from the term loan facility and cash on hand to make a net distribution payment of $ 1.5 billion to WDC in exchange for assets, liabilities, and certain legal entities of WDC associated with the Company. After the separation, outstanding restricted stock units (“RSU”) and performance stock units (“PSU”) previously granted by WDC to employees of the Company were adjusted per the terms of the Employee Matters Agreement, in an attempt to maintain the economic value of those awards before and after the separation. Generally, continuing Sandisk employees with outstanding RSU awards held as of the spin-off date were converted solely to equivalent RSU awards of the Company, and any outstanding WDC RSU awards held as of the spin-off date were canceled. Outstanding RSU and PSU awards at the time of the spin-off, held by employees at levels equal to Vice President and above, were converted into RSU and PSU awards of both the Company and WDC. The completion of the separation was subject to certain conditions as described in our Form 10. The accounting policies followed by the Company are set forth in Note 1, Organization and Basis of Presentation of the Notes to the Combined Financial Statements for the year ended June 28, 2024, included in Exhibit 99.1 to our Form 10. 10 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Basis of Presentation On February 21, 2025, the Company became a standalone publicly traded company, and our financial statements are now presented on a consolidated basis. Prior to the separation, the Company’s historical combined financial information was derived from WDC’s consolidated financial statements and accounting records and prepared as if the Company existed on a standalone basis. The financial statements for all periods presented, including the historical results of the Company prior to February 21, 2025, are now referred to as “Condensed Consolidated Financial Statements” and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All intercompany accounts and transactions within the Company have been eliminated in the preparation of the Condensed Consolidated Financial Statements. Unless otherwise noted, all figures within the Condensed Consolidated Financial Statements are stated in U.S. Dollars (USD) and millions. Periods Prior to the Separation Prior to the separation on February 21, 2025, the Company was an operating segment of WDC. Consequently, standalone interim financial statements were not historically prepared for the Company. The accompanying Condensed Consolidated Financial Statements were prepared based upon WDC’s historical consolidated interim financial statements and accounting records. They were presented on a standalone basis as if the Company’s operations had been conducted independently from WDC. The Company utilized allocations and carve-out methodologies to prepare these historic Condensed Consolidated Financial Statements. The Condensed Consolidated Financial Statements included the historical results of operations, financial position, and cash flows of the Company and were prepared in accordance with GAAP, and the Company has adopted accounting policies and practices generally accepted in the industry in which it operates. As no single legal entity of the Company had a controlling financial interest in any other legal entities, Condensed Consolidated Financial Statements were prepared. Intercompany transactions were eliminated. With the exception of balances associated with lending arrangements reflected within Notes due to (from) Western Digital Corporation in the Condensed Consolidated Balance Sheets, transactions between the Company and WDC were generally considered to be effectively settled in the Condensed Consolidated Financial Statements at the time the transactions were recorded. The total net effect of the settlement of these transactions was reflected in the Condensed Consolidated Statements of Cash Flows as a financing activity and in the Condensed Consolidated Balance Sheets as Net investment from Western Digital Corporation. General financing activities included the net impact of any cash movements resulting from WDC’s centralized treasury cash management. The Condensed Consolidated Balance Sheets included all assets and liabilities that were identifiable or otherwise attributable to the Company. Assets and liabilities shared between the Company and WDC were included in the standalone financial statements to the extent that the asset was primarily used by the Company. If the Company was not the primary user of the asset, it was excluded entirely from the Condensed Consolidated Financial Statements. WDC historically used a centralized approach to cash management and financing of its operations, as needed. Certain of our cash was transferred to WDC according to centrally managed cash programs by treasury, and WDC funded our operating and investing activities, as needed. Cash transfers to and from WDC’s cash management accounts were reflected as a component of the Net investment from Western Digital Corporation in the Condensed Consolidated Balance Sheets. Cash and cash equivalents in our Condensed Consolidated Balance Sheets primarily represented cash held locally by entities included in our Condensed Consolidated Financial Statements. None of the debt obligations of WDC or corresponding interest expense were included in the Condensed Consolidated Financial Statements, as the Company was neither the legal obligor nor transferee for any portion of such debt. WDC’s debt obligations were secured by a lien on substantially all assets and properties of WDC and certain key subsidiaries, which included assets and properties of the Company prior to the completion of the separation. 11 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) included all revenues and costs directly attributable to the Company as well as an allocation of expenses related to facilities, functions, and services provided by WDC. Allocation of general corporate expenses from WDC included, but was not limited to, executive management, finance, tax, legal, information technology, employee benefits administration, treasury, risk management, procurement, and other shared services. These corporate expenses were allocated to the Company based on direct usage or benefit, where identifiable, with the remainder allocated based on headcount, revenue, or other relevant measures. The allocated costs were deemed to be settled between the Company and WDC in the period in which the expense was recorded in the Condensed Consolidated Statements of Operations. The Condensed Consolidated Statements of Cash Flows present these corporate expenses as cash flows from operating activities, as these costs were incurred by WDC on our behalf. We consider these allocations to be a reasonable reflection of the utilization of services by, or the benefits provided to, the Company. The allocations may not, however, reflect the expense the Company would have incurred as a standalone company for the periods presented. Additionally, these costs may not be indicative of the expenses that the Company will incur in the future or would have incurred if the Company had obtained these services from an unrelated third party. It is not practicable to estimate the actual costs that would have been incurred had the Company been a standalone company during the periods presented. The actual costs that may have been incurred would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by employees, and decisions with respect to areas such as facilities, information technology, and operating infrastructure. WDC maintains various stock-based compensation plans at a corporate level. Employees of the Company participated in those programs, and a portion of the compensation cost associated with those plans was included in the Company’s Condensed Consolidated Statements of Operations for the periods presented in this Quarterly Report on Form 10-Q. Before the spin-off, stock-based compensation expense was included within Net investment from Western Digital Corporation . The amounts presented in the Condensed Consolidated Financial Statements are not necessarily indicative of future awards and may not reflect the results that the Company would have experienced as a standalone entity. Current and deferred income taxes and related tax expenses were determined based on the standalone results of the Company by applying Accounting Standards Codification (“ASC”) No. 740, Income Taxes, to the Company’s operations in each country as if it were a separate taxpayer (i.e., following the “Separate Return Methodology”). P eriods Post Separation After the separation on February 21, 2025, the Company’s financial statements for the period from February 22, 2025, through March 28, 2025 are consolidated financial statements based on the Company’s reported results as a standalone company. All significant transactions and accounts within the Company were eliminated. Intercompany transactions between the Company and WDC prior to the separation were included within Net investment from Western Digital Corporation on the accompanying Consolidated Financial Statements or were paid in cash. Following the separation, certain functions continue to be provided by or for WDC for up to fifteen months under the Transition Services Agreement (“TSA”) or are being performed using the Company ’ s own resources or third-party service providers. As of March 28, 2025 , charges under the TSA were not material. The Company incurred certain costs in its establishment as a standalone public company and expects to incur ongoing additional costs associated with operating as an independent, publicly traded company. Costs incurred for the three and nine months ended March 28, 2025 , are included in Business separation costs within our Condensed Consolidated Statements of Operations. Unaudited Interim Financial Information The Company has prepared the accompanying Condensed Consolidated Financial Statements pursuant to the rules and regulations of the SEC for interim financial reporting. These Condensed Consolidated Financial Statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our operations, financial position, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year due to seasonal and other factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations of the SEC. These Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited Combined Financial Statements and accompanying notes for the year ended June 28, 2024, included in our Form 10. 12 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Fiscal Year The Company’s fiscal year ends on the Friday nearest to June 30 and typically consists of 52 weeks. Approximately every five to six years, we report a 53-week fiscal year to align the fiscal year with the foregoing policy. Fiscal year 2025, which will end on June 27, 2025 , and fiscal year 2024, which ended on June 28, 2024 , are each comprised of 52 weeks, with all quarters presented consisting of 13 weeks. Unless otherwise indicated, references herein to specific years and quarters are to fiscal years and fiscal quarters, and references to financial information are on a condensed, consolidated basis. Segment Reporting Operating segments are components of an enterprise for which separate financial information is available and are evaluated regularly by the Company’s Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company currently operates as both a single operating and reportable segment. Business Separation Costs The Company has incurred separation and transition costs related to the completion of its separation from WDC. The separation and transition costs are recorded within Business separation costs in the Condensed Consolidated Statements of Operations. Use of Estimates Management has made estimates and assumptions relating to the reporting of certain assets and liabilities in conformity with GAAP. These estimates and assumptions have been applied using methodologies that are consistent throughout the periods presented, with consideration given to the potential impacts of current macroeconomic conditions, including the evolving impacts from tariffs. However, actual results could differ materially from these estimates. Note 2. Recent Accounting Pronouncements Recently Issued Accounting Pronouncements Not Yet Adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which expands on segment reporting requirements primarily through enhanced disclosures surrounding significant segment expenses. This ASU expands on existing segment reporting requirements to require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to an entity’s CODM, a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources. These incremental disclosures will be required beginning with the Company’s financial statements for the year ending June 27, 2025. The Company expects to provide any required disclosures at that time. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU calls for enhanced income tax disclosure requirements surrounding the tabular rate reconciliation and income taxes paid. The Company is currently compiling the information required for these disclosures. These incremental disclosures will be required beginning with the Company’s financial statements for the year ending June 26, 2026, with early adoption permitted. The Company expects to provide any required disclosures at that time. In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which is intended to improve disclosures about the expenses of public entities. This ASU requires more detailed information about the types of expenses in commonly presented expense captions (such as cost of sales and selling, general and administrative expenses) and requires public entities to disclose, on an annual and interim basis, the amounts of expenses included in each relevant expense caption presented on the face of the income statement within continuing operations, in a tabular format. Additionally, public entities will be required to disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, the total amount of selling expenses, and, in annual reporting periods, the definition of selling expenses. This ASU is effective on either a prospective or retrospective basis for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently compiling the information required for these disclosures and assessing the basis of adoption. The Company expects to provide any required disclosures for annual reporting periods included in the Company’s financial statements for the year ending June 30, 2028. 13 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 3. Geographic Information and Concentrations of Risk Disaggregated Revenue The Company’s broad portfolio of technology and products addresses multiple end markets. Cloud represents a large and growing end market comprised primarily of products for public or private cloud environments and enterprise customers. Through the Client end market, the Company provides its original equipment manufacturer (“OEM”) and channel customers a broad array of high-performance flash solutions across personal computer, mobile, gaming, automotive, virtual reality headsets, at-home entertainment, and industrial spaces. The Consumer end market is highlighted by the Company’s broad range of retail and other end-user products, which capitalize on the strength of the Company’s product brand recognition and vast points of presence around the world. The Company’s disaggregated revenue information was as follows: Three Months Ended Nine Months Ended March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024 (in millions) Revenue by end market: Cloud $ 197 $ 97 $ 747 $ 155 Client 927 1,035 3,024 3,002 Consumer 571 573 1,683 1,746 Total revenue $ 1,695 $ 1,705 $ 5,454 $ 4,903 Revenue by geography: Asia $ 1,038 $ 1,140 $ 3,274 $ 3,313 Americas 375 272 1,207 759 Europe, Middle East and Africa 282 293 973 831 Total revenue $ 1,695 $ 1,705 $ 5,454 $ 4,903 The Company’s top 10 customers accounted fo r 41 % and 43 % of its net revenue for the three and nine months ended March 28, 2025, respectively, and 43 % and 41 % of its net revenue for the three and nine months ended March 29, 2024, respectively. For the three months ended March 28, 2025, one c ustomer accounted for more than 10 % of the Company’s net revenue. For the nine months ended March 28, 2025 and the three and nine months ended March 29, 2024, no customer accounted for 10% of the Company’s net revenue. Note 4. Revenues Contract assets represent the Company’s rights to consideration where performance obligations are completed but the customer payments are not due until another performance obligation is satisfied. The Company had no contract assets as of March 28, 2025 or June 28, 2024. Contract liabilities relate to customers’ payments in advance of performance under the contract and primarily relate to remaining performance obligations under professional service, support, and maintenance contracts. Contract liabilities as of March 28, 2025, and June 28, 2024, and changes in contract liabilities for the three and nine months ended March 28, 2025, and March 29, 2024, were not material. The Company incurs sales commissions as direct incremental costs to obtain sales contracts. The Company has applied the practical expedient to recognize sales commissions as an expense when incurred if the amortization period is expected to be one year or less or the amount is not material, with these costs charged to Selling, general and administrative expenses. The Company had no other direct incremental costs to obtain contracts with an expected benefit of more than one year. The Company applies the practical expedients and does not disclose the transaction price allocated to the remaining performance obligations for (i) arrangements with an original expected duration of one year or less, mainly consisting of professional service, support, and maintenance contracts, and (ii) variable consideration for sale-based or usage-based royalties for intellectual property license arrangements, which typically range longer than one year. The remaining performance obligations are mainly attributed to right-to-access patent license arrangements, professional service arrangements, and customer support and service contracts, which will be recognized over their contract period. The transaction price allocated to the remaining performance obligations as of March 28, 2025, was not material. 14 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 5. Supplemental Financial Statement Data Goodwill The following table provides a summary of goodwill activity for the period presented: (in millions) Balance at June 28, 2024 $ 7,207 Divestiture (1) ( 382 ) Impairment charges ( 1,830 ) Foreign currency translation adjustment 2 Balance at March 28, 2025 $ 4,997 (1) On September 28, 2024, the Company sold its majority interest in a subsidiary. See further discussion in Part 1, Item 1, Note 10, Related Parties and Related Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Goodwill attributed to the Company represents the historical goodwill balances in WDC’s business arising from acquisitions specific to the Company. The Company determined that its single operating segment was also its single reporting unit. Goodwill is not amortized. Instead, it is tested for impairment annually as of the beginning of the Company’s fourth quarter or more frequently if events or changes in circumstances indicate that goodwill may be impaired. The Company uses qualitative factors to determine whether goodwill is more likely than not impaired and whether a quantitative test for impairment is considered necessary. If the Company concludes from the qualitative assessment that goodwill is more likely than not impaired, the Company is required to perform a quantitative assessment to determine the amount of impairment. The Company is required to use judgment when assessing goodwill for impairment, including evaluating the impact of industry and macroeconomic conditions and the determination of the fair value of the reporting unit. In addition, the estimates and assumptions used to determine the fair value as well as the actual carrying value may change based on future changes in the Company’s results of operations, macroeconomic conditions, or other factors. Changes in these estimates and assumptions could materially affect the Company’s assessment of the fair value and goodwill impairment. In addition, if negative macroeconomic conditions continue or worsen, goodwill could become impaired, which could result in an impairment charge and materially adversely affect the Company’s financial condition and results of operations. Subsequent to the completion of the separation, the Company identified potential impairment indicators related to macroeconomic indicators, industry developments, the trading price of the Company’s common stock and resulting market capitalization that warranted a quantitative impairment analysis of long-lived assets and goodwill. In accordance with FASB Accounting Standards Codification (“ASC”) No. 360, Property, Plant, and Equipment , the Company performed a recoverability test at the asset group level, which was determined to be equivalent to its reporting unit to assess potential impairments of long-lived assets comprised of property, plant and equipment. The results of the recoverability test showed that the estimated undiscounted net cash flows to be generated from the use and eventual disposition of the Company’s long-lived assets exceeded its net carrying value. As a result, no write-down of long-lived assets was recognized as of March 28, 2025. Next, in accordance with ASC No. 350, Intangibles - Goodwill and Other , the Company performed a quantitative test by measuring the fair value of its reporting unit based on a weighing of two valuation methodologies: an income approach and a market approach. The income approach valued the projected discounted cash flows that are expected to be generated by the Company’s reporting unit and required judgments and estimates surrounding general economic conditions and company-specific performance inputs such as revenue growth rates, gross margins, operating costs, capital expenditures, assumed tax rates and other assumptions deemed reasonable by management. The market approach valued the reporting unit based on financial performance and market multiples of comparable public companies, including consideration of a control premium representing the estimated amount a market participant would pay to obtain a controlling interest in the Company. The results of the quantitative test indicated that the carrying value of our reporting unit exceeded its estimated fair value, resulting in the recognition of a $ 1.8 billion impairment charge as of, and for the period ended, March 28, 2025, which was recorded in the accompanying Condensed Consolidated Statements of Operations. 15 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) For the three and nine months ended March 29, 2024, there were no impairment charges recorded. Accounts receivable, net From time to time, in connection with factoring agreements, WDC has sold certain of our trade accounts receivable without recourse to third-party purchasers in exchange for cash. As of March 28, 2025 , the Company does not have any factoring agreements in place. During the nine months ended March 28, 2025 , there were no trade accounts receivable sold by WDC or the Company. During the nine months ended March 29, 2024, WDC sold trade accounts receivable of the Company and received cash proceeds of $ 339 million. The discounts on the trade accounts receivable sold during the period were not material and were recorded within Other expense, net, in the Condensed Consolidated Statements of Operations. There were no factored receivables outstanding as of March 28, 2025 and June 28, 2024. Inventories March 28, 2025 June 28, 2024 (in millions) Inventories: Raw materials and component parts $ 1,625 $ 1,398 Work-in-process 210 237 Finished goods 325 320 Total inventories $ 2,160 $ 1,955 Property, plant and equipment, net March 28, 2025 June 28, 2024 (in millions) Property, plant and equipment: Land $ 10 $ 10 Machinery and equipment 1,481 2,340 Buildings and improvements 372 397 Computer equipment and software 170 123 Furniture and fixtures 18 16 Construction-in-process 46 108 Property, plant and equipment, gross 2,097 2,994 Accumulated depreciation ( 1,494 ) ( 2,203 ) Property, plant and equipment, net $ 603 $ 791 Product warranty liability Changes in the warranty accrual were as follows: Three Months Ended Nine Months Ended March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024 (in millions) Warranty accrual, beginning of period $ 44 $ 43 $ 48 $ 42 Charges to operations 5 7 14 21 Utilization ( 10 ) ( 8 ) ( 27 ) ( 25 ) Changes in estimate related to pre-existing warranties — 1 4 5 Warranty accrual, end of period $ 39 $ 43 $ 39 $ 43 16 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The current portion of the warranty accrual was classified in Accrued expenses and the long-term portion was classified in Other liabilities as noted below: March 28, 2025 June 28, 2024 (in millions) Warranty accrual: Current portion $ 19 $ 27 Long-term portion 20 21 Total warranty accrual $ 39 $ 48 Other liabilities March 28, 2025 June 28, 2024 (in millions) Other liabilities: Non-current lease liability $ 196 $ 171 Non-current net tax payable 119 56 Tax indemnification liability 110 — Other non-current liabilities 55 59 Total other liabilities $ 480 $ 286 In connection with the separation, the Company recorded a $ 112 million liability to indemnify WDC as a result of the Tax Matters Agreement entered into between the parties in connection with the separation. The indemnification pertains to certain WDC tax positions where the underlying issues are determined to be related to the Company’s business before the spin-off. As WDC receives tax assessments, settles with tax authorities, or when the statute of limitation lapses, the indemnification liabilities will be reassessed and adjusted accordingly. This liability was subsequently reduced by approximately $ 2 million reflecting the outstanding balance as of March 28, 2025. Accumulated other comprehensive loss Accumulated other comprehensive loss (“AOCL”), net of tax, refers to expenses, gains, and losses that are recorded as an element of equity but are excluded from net income. The components of AOCL were as follows: Foreign Currency Translation Adjustment Unrealized Income (Losses) on Derivative Contracts Total Accumulated Comprehensive Loss (in millions) Balance at June 28, 2024 $ ( 208 ) $ ( 244 ) $ ( 452 ) Other comprehensive income (loss) ( 11 ) 175 164 Income tax expense related to items of other comprehensive income — ( 8 ) ( 8 ) Net current-period other comprehensive income (loss) ( 11 ) 167 156 Net transfer to Western Digital Corporation ( 4 ) ( 6 ) ( 10 ) Balance at March 28, 2025 $ ( 223 ) $ ( 83 ) $ ( 306 ) During the three and nine months ended March 28, 2025, the amounts reclassified out of AOCL were losses related to foreign exchange contracts, substantially all of which were charged to Cost of revenue in the Condensed Consolidated Statements of Operations. As of March 28, 2025, substantially all existing net losses related to cash flow hedges recorded in AOCL are expected to be reclassified to earnings within the next twelve months. 17 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 6. Fair Value Measurements and Investments Financial Instruments Carried at Fair Value Financial assets and liabilities that are remeasured and reported at fair value at each reporting period are classified and disclosed in one of the following three levels: Level 1. Quoted prices in active markets for identical assets or liabilities. Level 2. Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3. Inputs that are unobservable for the asset or liability and that are significant to the fair value of the assets or liabilities. The following tables present information about the Company’s financial instruments that were measured at fair value on a recurring basis for the periods presented and indicate the fair value hierarchy of the valuation techniques utilized to determine such values: March 28, 2025 Level 1 Level 2 Level 3 Total (in millions) Assets: Cash equivalents - Money market funds $ 381 $ — $ — $ 381 Foreign exchange contracts (included in Other current assets) — 5 — 5 Total assets at fair value $ 381 $ 5 $ — $ 386 Liabilities: Foreign exchange contracts (included in Accrued expenses) $ — $ 55 $ — $ 55 Total liabilities at fair value $ — $ 55 $ — $ 55 June 28, 2024 Level 1 Level 2 Level 3 Total (in millions) Assets: Cash equivalents - Money market funds $ 28 $ — $ — $ 28 Foreign exchange contracts (included in Other current assets) — 7 — 7 Total assets at fair value $ 28 $ 7 $ — $ 35 Liabilities: Foreign exchange contracts (included in Accrued expenses) $ — $ 179 $ — $ 179 Total liabilities at fair value $ — $ 179 $ — $ 179 During the periods presented, the Company had no transfers of financial instruments between levels, and there were no changes in valuation techniques or the inputs used in the fair value measurement. Financial Instruments Not Carried at Fair value Financial instruments not recorded at fair value on a recurring basis (debt) had an estimated fair value of $ 2.0 billion at the end of the third quarter of 2025. The fair value of the debt was determined based on observable market prices in less active markets. The fair values do not indicate the amount we would have to pay to extinguish the debt. For more information regarding debt, see Part 1, Item 1, Note 8, Debt of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Note 7. Derivative Instruments and Hedging Activities As of March 28, 2025, the Company had outstanding foreign exchange forward contracts that were designated as either cash flow hedges or non-designated hedges. Substantially all of the contract maturity dates of these foreign exchange forward contracts do not exceed twelve months. 18 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Changes in the fair values of the non-designated foreign exchange contracts are recognized in Other expense, net, and are largely offset by corresponding changes in the fair values of the foreign currency-denominated monetary assets and liabilities. For the three months ended March 28, 2025 and March 29, 2024, total net realized and unrealized transactions and foreign exchange contract currency were a $ 8 million gain and zero , respectively. For the nine months ended March 28, 2025 and March 29, 2024, total net realized and unrealized transactions and foreign exchange contract currency wer e a $ 17 million loss and zero , respectively. Unrealized gains or losses on designated cash flow hedges are recognized in AOCL. For more information regarding cash flow hedges, see Part 1, Item 1, Note 5, Supplemental Financial Statement Data—Accumulated other comprehensive loss of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Note 8. Debt Loan Agreement Debt consisted of the following: March 28, 2025 (in millions) Variable interest rate Term Loan Facility maturing 2032 $ 2,000 $1.5B Revolving Credit Facility maturing 2030 — Total Debt 2,000 Unamortized Issuance Costs 53 Subtotal 1,947 Less: current portion of long-term debt 20 Long term debt $ 1,927 On February 21, 2025, the Company entered into a Loan Agreement (the “Loan Agreement”) by and among the Company, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent and the other parties party thereto. The Loan Agreement comprises a term loan B facility in the principal amount of $ 2 billion (the “Term Loan Facility”) and a revolving credit facility in the principal amount of $ 1.5 billion (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Facilities”). The obligations under the Loan Agreement are guaranteed by the Company’s wholly-owned subsidiary, Sandisk Technologies, Inc. (“SDT”), and are required to be guaranteed by any of the Company’s future material U.S. wholly-owned subsidiaries, subject to certain exceptions outlined in the Loan Agreement. The obligations under the Loan Agreement are secured by the Company’s assets and SDT’s assets and are required to be secured by the assets of any of the Company’s future material U.S. wholly-owned subsidiaries, subject, in each case, to certain exceptions outlined in the Loan Agreement. The Loan Agreement includes certain restrictions (subject to certain exceptions outlined in the Loan Agreement) on the ability of the Company and its subsidiaries to undertake certain activities, including to incur indebtedness and liens, merge or consolidate with other entities, dispose or transfer their assets, pay dividends or make distributions, make investments, make payments on junior or subordinated debt, enter into burdensome agreements or transact with affiliates. The Loan Agreement also includes a financial covenant, which is solely for the benefit of the lenders under the Revolving Credit Facility, that requires the Company to maintain a maximum Leverage Ratio (as defined in the Loan Agreement). On February 21, 2025, the Company borrowed $ 2 billion under its Term Loan Facility. The Company used a portion of the proceeds of the borrowing to make a net distribution payment of $ 1.5 billion to WDC, with the remainder to be used for general corporate purposes of the Company. The Revolving Credit Facility may be borrowed by the Company from time to time for general corporate purposes. In connection with the Loan Agreement, the Company and SDT entered into a security agreement to secure the obligations under the Facilities on a first-priority basis (subject to permitted liens) by a lien on substantially all the assets and properties of the Company and SDT, subject to certain exceptions. In connection with the Loan Agreement, the Company (solely with respect to obligations of any additional Borrower under the Loan Agreement) and SDT entered into a guaranty agreement to secure and unconditionally guarantee the obligations under the Loan Agreement, respectively, in each case, subject to certain exceptions. 19 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Term Loan Facility The Term Loan Facility bears interest, at the Company’s option, at (x) the Adjusted Term SOFR Rate (as defined in the Loan Agreement) plus an interest rate margin of 3.00 % per annum or (y) a base rate plus an interest rate margin of 2.00 % per annum. The outstanding principal balance of the Term Loan Facility is required to be repaid in quarterly installments beginning on June 27, 2025, in an aggregate amount equal to 0.25 % of the aggregate principal amount of the Term Loan Facility and a final payment comprised of all principal and interest due and payable at maturity on February 20, 2032. In connection with the issuance of the Term Loan Facility, the Company recognized issuance costs of $ 54 million , which will be amortized to Interest expense over the life of the facility. Revolving Credit Facility Borrowings under the Revolving Credit Facility, for U.S. dollar borrowings, will bear interest, at the Company’s option, at (x) the Adjusted Term SOFR Rate (as defined in the Loan Agreement), which rate includes a credit spread adjustment of 0.10 %, plus an interest rate margin of 2.00 % per annum (subject to step-ups based on the Company’s Leverage Ratio (as defined in the Loan Agreement)), or (y) a base rate plus an interest rate margin of 1.00 % per annum (subject to step-ups based on the Company’s Leverage Ratio (as defined in the Loan Agreement)). The Company will pay a commitment fee of 0.30 % per annum (subject to step-ups based on the Company’s Leverage Ratio (as defined in the Loan Agreement)) in respect of undrawn revolving commitments under the Revolving Credit Facility. The Revolving Credit Facility will also provide for borrowings in Euros, Yen, and additional currencies agreed to by the lenders under the Revolving Credit Facility. The Revolving Credit Facility will mature on February 21, 2030, at which time the commitments thereunder shall be terminated and will not have any amortization. In connection with the issuance of the Revolving Credit Facility, the Company recognized deferred costs, classified as Other non-current assets of $ 8 million , which will be amortized to Interest expense over the life of the facility. The Loan Agreement also includes a financial covenant, which is solely for the benefit of the lenders under the Revolving Credit Facility, that requires the Company to maintain a maximum Leverage Ratio (as defined in the Loan Agreement). As of March 28, 2025, the Company was in compliance with the financial covenant. As of March 28, 2025, the Company had no outstanding standby letters of credit, and the available capacity under the Revolving Credit Facility was $ 1.5 billion . Note 9. Employee Benefit Plans Defined Benefit Plan The Company sponsors a defined benefit pension plan that is solely available for employees located in South Korea. As of March 28, 2025, and June 28, 2024, the plan had a net unfunded status of $ 7 million a nd $ 6 million, respectively, classified as Other liabilities on the Condensed Consolidated Balance Sheets. Total pension expense included in Cost of revenue and Operating expenses in the Condensed Consolidated Statements of Operations was not material for the three and nine months ended March 28, 2025 and March 29, 2024. No employees of the Company participate in defined benefit pension plans sponsored by WDC or its subsidiaries. Note 10. Related Parties and Related Commitments and Contingencies Flash Ventures The Company procures substantially all of its flash-based memory wafers from its business ventures with Kioxia Corporation (“Kioxia”), which consists of three separate legal entities: Flash Partners Ltd. (“Flash Partners”), Flash Alliance Ltd. (“Flash Alliance”) and Flash Forward Ltd. (“Flash Forward”), collectively referred to as “Flash Ventures.” 20 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The following table presents the notes receivable from, and equity investments in, Flash Ventures for the periods presented: March 28, 2025 June 28, 2024 (in millions) Notes receivable, Flash Partners $ 37 $ 1 Notes receivable, Flash Alliance 38 5 Notes receivable, Flash Forward 296 485 Investment in Flash Partners 46 148 Investment in Flash Alliance 116 219 Investment in Flash Forward 129 143 Total notes receivable and investments in Flash Ventures $ 662 $ 1,001 During the three and nine months ended March 28, 2025, and March 29, 2024, the Company made net payments to Flash Ventures of $ 0.9 billion and $ 2.9 billion and $ 0.7 billion and $ 2.5 billion, respectively, for purchases of flash-based memory wafers and net loans. The Company makes, or will make, loans to Flash Ventures to fund equipment investments for new process technologies and additional wafer capacity. The Company aggregates its Flash Ventures’ notes receivable into one class of financing receivables due to the similar ownership interest and common structure in each Flash Ventures entity. For all reporting periods presented, no loans were past due, and no loan impairments were recorded. The Company’s notes receivable from each Flash Ventures entity, denominated in Japanese yen, are secured by equipment owned by that Flash Ventures entity. As of March 28, 2025, and June 28, 2024, the Company had accounts payable balances due to Flash Ventures of $ 283 million and $ 313 million, respectively. The Company’s maximum reasonably estimable loss exposure (excluding lost profits) as a result of its involvement with Flash Ventures, based upon the Japanese yen to U.S. dollar exchange rate at March 28, 2025, is presented below. Investments in Flash Ventures are denominated in Japanese yen, and the maximum estimable loss exposure excludes any cumulative translation adjustment due to revaluation from the Japanese yen to the U.S. dollar. March 28, 2025 (in millions) Notes receivable $ 371 Equity investments 291 Operating lease guarantees 1,379 Inventory and prepayments 1,318 Maximum estimable loss exposure $ 3,359 The Company is obligated to pay for variable costs incurred in producing its share of Flash Ventures’ flash-based memory wafer supply, based on its rolling three-month forecast, which generally equals 50 % of Flash Ventures’ output. In addition, the Company is obligated to pay for half of Flash Ventures’ fixed costs regardless of the output the Company chooses to purchase. The Company is not able to estimate its total wafer purchase commitment obligation beyond its rolling three-month purchase commitment because the price is determined by reference to the future cost of producing the semiconductor wafers. In addition, the Company is committed to fund 49.9 % to 50.0 % of each Flash Ventures entity’s capital investments to the extent that the Flash Ventures entity’s operating cash flow is insufficient to fund these investments. Flash Ventures has historically operated at nearly 100 % of its manufacturing capacity. During the three months ended March 28, 2025 and first two quarters of 2024, as a result of flash market conditions, the Company temporarily reduced its utilization of its share of Flash Ventures’ manufacturing capacity to an abnormally low level to more closely align the Company’s flash-based wafer supply with projected demand. During the three and nine months ended March 28, 2025 the Company incurred costs of $ 24 million, and during the nine months ended March 29, 2024 the Company incurred costs of $ 249 million, associated with the reduction in utilization related to Flash Ventures, which was recorded as a charge to Cost of revenue. No such charges were incurred during the three months ended March 29, 2024. 21 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The Company has facility agreements with Kioxia related to the construction and operation of Kioxia’s 300-millimeter wafer fabrication facility in Kitakami, Japan, referred to as “K1”, a wafer fabrication facility in Yokkaichi, Japan, referred to as “Y7”, and a wafer fabrication facility in Kitakami, Japan, referred to as “K2”. In connection with the construction of these facilities, the Company makes prepayments toward future building depreciation. In connection with the start-up of the K1, Y7 and K2 facilities, the Company has made prepayments over time, and as of March 28, 2025 , $ 938 million, with $ 127 million recorded within Other current assets and $ 811 million recorded within Other non-current assets in the Condensed Consolidated Balance Sheets, remain to be credited against future building depreciation charges. As of March 28, 2025, the Company is also committed to making additional building depreciation prepayments of $ 292 million, based on the Japanese yen to U.S. dollars exchange rate of ¥ 150.43 as of such date, payable as follows: $ 39 million for the remaining of fiscal year 2025, $ 31 million in fiscal year 2026, $ 116 million in fiscal year 2027, $ 93 million in fiscal year 2028 and $ 13 million in fiscal year 2029. As of March 28, 2025, in addition to the requirements to make building depreciation prepayments, the Company will also make payments for building depreciation of approximately $ 263 million at varying dates through fiscal year 2035. Inventory Purchase Commitments with Flash Ventures. Purchase orders placed with Flash Ventures for up to three months are binding and cannot be canceled. Research and Development Activities. The Company participates in common research and development (“R&D”) activities with Kioxia and is contractually committed to a minimum funding level. R&D commitments due for the remaining three months of 2025 are $ 40 million. Off-Balance Sheet Liabilities. Flash Ventures sells to, and leases back from, a consortium of financial institutions a portion of its tools and has entered into equipment lease agreements of which the Company guarantees half of all of the outstanding obligations under each lease agreement. The lease agreements are subject to customary covenants and cancellation events related to Flash Ventures and each of the guarantors. The occurrence of a cancellation event could result in an acceleration of Flash Ventures’ obligations and a call on the Company’s guarantees. The following table presents the Company’s portion of the remaining guarantee obligations under the Flash Ventures’ lease facilities in both Japanese yen and U.S. dollar-equivalent, based upon the Japanese yen to U.S. dollar exchange rate as of March 28, 2025: Lease Amounts (Japanese yen, in billions) (U.S. dollar, in millions) Total guarantee obligations ¥ 207 $ 1,379 The following table details the breakdown of the Company’s remaining guarantee obligations between the principal amortization and the purchase option exercise price at the end of the term of the Flash Ventures lease agreements, in annual installments, in U.S. dollars, based upon the Japanese yen to U.S. dollar exchange rate as of March 28, 2025: Annual Installments Payment of Principal Amortization Purchase Option Exercise Price at Final Lease Terms Guarantee Amount (in millions) Remaining three months of 2025 $ 104 $ 26 $ 130 2026 462 119 581 2027 227 102 329 2028 102 98 200 2029 36 53 89 2030 9 41 50 Total guarantee obligations $ 940 $ 439 $ 1,379 The Company and Kioxia have agreed to mutually contribute to and indemnify each other and Flash Ventures for environmental remediation costs or liabilities resulting from Flash Ventures’ manufacturing operations in certain circumstances. The Company has not made any indemnification payments nor recorded any indemnification receivables under any such agreements. As of March 28, 2025, no amounts have been accrued in the Condensed Consolidated Financial Statements with respect to these indemnification agreements. 22 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Sale of a Majority Interest in a Subsidiary In March 2024, SanDisk China Limited (“SanDisk China”), an indirect wholly-owned subsidiary of WDC, entered into an equity purchase agreement to sell 80 % of its equity interest in SanDisk Semiconductor (Shanghai) Co. Ltd. (“SDSS”) an indirect wholly-owned subsidiary of WDC which holds one of the Company’s manufacturing facilities, to JCET Management Co., Ltd. (“JCET”), a wholly-owned subsidiary of JCET Group Co., Ltd., a Chinese publicly listed company, thereby forming a venture between SanDisk China and JCET (the “Transaction”). The venture aims to provide independent semico nductor assembly, testing, and other related services in the People’s Republic of China for customers including, but not limited to, the Company and its affiliates. The Transaction closed on September 28, 2024, and SanDisk China completed the sale of 80 % of its equity interest in SDSS to JCET. Proceeds from the sale, including working capital adjustments, were $ 659 million (pre-tax). On October 1, 2024, the Company received an initial pre-tax installment of $ 262 million. On January 6, 2025, the Company received a second pre-tax installment of $ 210 million and expects to receive the remaining $ 187 million pre-tax proceeds in five equal installments of approximately $ 37 million on September 28 of each year through September 28, 2029. As of March 28, 2025, the outstanding consideration receivable was recognized at its present value of $ 166 million, with $ 36 million classified as Other current assets and $ 130 million classified as Other non-current assets in the Condensed Consolidated Balance Sheets. The remaining present value discount of $ 21 million as of March 28, 2025 will be recognized using the effective interest method over the next five years a s Interest income in the Condensed Consolidated Statements of Operations. The Company’s 20 % retained interest in SDSS was determined to be valued at $ 158 million based on the fair value of the total pre-tax consideration received and receivable from JCET for its purchase of its 80 % interest in SDSS. The Company accounts for its 20 % interest in SDSS as an equity method investment within Other non-current assets in the Condensed Consolidated Balance Sheets. The Company’s 20 % interest in the earnings of SDSS is recognized one quarter in arrears and is reported in Other expense, net in the Condensed Consolidated Statements of Operations. As of March 28, 2025, the 20 % retained interest in SDSS was valued at $ 160 million. The Transaction resulted in a pre-tax gain of $ 34 million, calculated as the difference between the total consideration for the sale, including the outstanding consideration receivable and the fair value of the Company’s 20 % retained interest, less the carrying value of the net assets divested, which included, among other items, $ 71 million of cash and cash equivalents and $ 382 million of goodwill that was allocated to SDSS. Subsequent to and in connection with the Transaction, Western Digital Technologies, Inc. (“WDT”) entered into a five-year supply agreement with SDSS (the “Supply Agreement”) to purchase certain flash-based products with a minimum annual commitment of $ 550 million (the “minimum annual commitment”). On January 10, 2025, the Company and WDT entered into an assignment agreement, pursuant to which, WDT assigned all of its rights and obligations under the Supply Agreement to the Company. The Supply Agreement contains specific penalties the Company must pay if SDSS fails to meet its minimum annual commitment. The Supply Agreement also provides that if SDSS purchases exceed the minimum annual commitment in any of the two years immediately succeeding any annual period where a shortfall penalty has been paid, SDSS shall reimburse the Company an amount not exceeding the previously paid penalty amount. The Supply Agreement expires on September 28, 2029, and automatically renews for additional one-year terms unless earlier terminated by either of the parties. The Company also entered into an agreement to grant SDSS certain intellectual property rights on a royalty-free basis for use in manufacturing products on the Company’s behalf for the term of and under the Supply Agreement. For the three and nine months ended March 28, 2025, the Company made purchases of $ 108 million and $ 219 million , respectively, under the Supply Agreement and had a $ 112 million accounts payable balance due to SDSS as of March 28, 2025. The Company also entered into an arrangement to provide certain transition services for a limited period following the closing of the Transaction. Charges under this arrangement were not material. Unis Venture On January 24, 2025, the Company and WDC entered into an equity transfer agreement (the “Equity Transfer Agreement”) to transfer WDC’s entire equity interest in its venture with Unisplendour Corporation Limited and Unissoft (Wuxi) Group Co. Ltd. (“Unis”), referred to as the “Unis Venture”, to the Company. The Unis Venture is 49 % owned by the Company and 51 % owned by Unis. The Unis Venture markets and sells the Company’s products in China and develops data storage systems for the Chinese market. 23 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Prior to the execution of the Equity Transfer Agreement, the Unis Venture was not historically managed as a component of the Company and as such, the related equity method investment was not reflected within our Condensed Consolidated Financial Statements. After the execution of the Equity Transfer Agreement, the Company accounts for its investment in the Unis Venture under the equity method of accounting. The Company’s 49 % interest in the earnings of the Unis Venture will be recognized one quarter in arrears from the date the Unis Venture was transferred to the Company and will be reported in Other expense, net in the Condensed Consolidated Statements of Operations. Revenue from products distributed by the Unis Venture is recognized upon sell-through to third-party customers. For the three and nine months ended March 28, 2025, and March 29, 2024, the Company recognized approximately 1 % and 1 % , respectively, of its condensed consolidated revenue on products distributed by the Unis Venture. The outstanding accounts receivable due from the Unis Venture were 2 % and 4 % of Accounts receivable, net, as of March 28, 2025 and June 28, 2024, respectively. Related Party Transactions Separation and Distribution Agreement and Other Related Party Transactions with WDC As described in Note 1, Organization and Basis of Presentation of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, on February 21, 2025, in connection with the separation, the Company entered into several agreements that provide a framework for Sandisk’s relationship with WDC after the separation. These include, but are not limited to, the following, which were active and in effect during the third quarter of fiscal year 2025: • Separation and Distribution Agreement - The separation and distribution agreement contains key provisions related to the separation of the Company from WDC, including the transfer of assets and assumptions of liabilities. In connection with this agreement, certain assets and liabilities included in the Company’s Condensed Combined Balance Sheets as of December 27, 2024 were retained by WDC and certain assets and liabilities not included in the Company’s Condensed Combined Balance Sheets as of December 27, 2024 were transferred to the Company as of the date of the separation. Separation-related adjustments resulted in a decrease to net assets and total equity of $ 1.1 billion and are reflected in the “Net transfers from (to) WDC, including spin-off related adjustments” line item of the Condensed Consolidated Statements of Shareholders’ Equity. • Transition Services Agreement – The Transition Services Agreement (“TSA”) governs the provision of transition services from WDC to Sandisk, and from Sandisk to WDC and its affiliates, on an interim, transitional basis following the separation. For the three months ended March 28, 2025, the Company recognized $ 2 million in expenses related to the TSA, and the Company expects to recognize an additional expense related to the TSA of approximately $ 10 million during the next twelve months. • Tax Matters Agreement - The Tax Matters Agreement governs, among other things, WDC’s and the Company’s respective rights, responsibilities and obligations after the spin-off with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes. In addition, the Tax Matters Agreement imposes certain restrictions on the Company and its subsidiaries (including restrictions on share issuances, business combinations, sales of assets, and similar transactions) that are designed to preserve the tax-free status of the spin-off and certain related transactions. As a result of this agreement, the Company recorded a tax indemnification liability of $ 112 million on February 21, 2025. This liability was subsequently reduced by approximately $ 2 million reflecting the outstanding balance as of March 28, 2025. The remaining tax indemnification liability of $ 110 million is classified as Other liabilities in the Condensed Consolidated Balance Sheets as of March 28, 2025. Notes Due to (from) Western Digital Corporation Prior to the separation, the Company received financing from certain of WDC’s subsidiaries in the form of borrowings under revolving credit agreements and promissory notes to fund activities primarily related to Flash Ventures. Additionally, cash generated by the Company was lent from time to time via promissory notes to certain of WDC’s subsidiaries for use in general corporate purposes. Outstanding balances due under these financing arrangements were due on demand. Prior to the separation, the Company had outstanding borrowings due to WDC’s subsidiaries of $ 553 million, inclusive of interest payable. As part of the separation, WDC contributed $ 550 million to the Company, and the Company repaid $ 6 million in cash, which included interest accrued until the date of the separation. 24 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The following presents Interest expense and Interest income on notes due to (from) Western Digital Corporation, which were recorded within Interest expense and Interest income in the Condensed Consolidated Statements of Operations for the periods presented: Three Months Ended Nine Months Ended March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024 (in millions) Interest expense on notes due to Western Digital Corporation $ 3 $ 9 $ 7 $ 29 Interest (income) on notes due from Western Digital Corporation $ — $ ( 1 ) $ ( 1 ) $ ( 4 ) Allocation of Corporate Expenses Prior to the separation, WDC provided various corporate services to the Company in the ordinary course of business, including executive management, finance, tax, legal, information technology, employee benefits administration, treasury, risk management, procurement and other shared services. These corporate expenses were allocated to the Company based on direct usage or benefit, where identifiable, with the remainder allocated based on headcount, revenue or other relevant measures. Management believes the basis on which the expenses were allocated to be a reasonable reflection of the utilization of services provided to us or the benefit received by us. Effective at the beginning of the second quarter of fiscal year 2025, the Company was operationally separated from the operations that were ultimately retained by WDC following completion of the spin-off transaction. In connection with this operational separation, personnel serving the Company in shared service functions were transferred into legal entities dedicated to the Company, and substantially all assets, liabilities, and contracts pertaining to operations of the Company were transferred to legal entities dedicated to the Company as well. Accordingly, there was a substantial reduction in the pool of shared corporate overhead costs of WDC that were subject to allocation in the second and third quarters of fiscal year 2025. The table below summarizes the impact of expense allocations from WDC within the Condensed Consolidated Statements of Operations for the periods presented: Three Months Ended Nine Months Ended March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024 (in millions) Research and development $ — $ 190 $ 189 $ 520 Selling general, and administrative 10 109 158 328 Business separation costs 9 — 50 — Employee termination and other charges — 2 5 ( 44 ) Total allocation of Corporate Expenses $ 19 $ 301 $ 402 $ 804 Our historical financial statements do not purport to reflect what results of operations, financial position, equity or cash flows would have been if we had operated as a standalone company during the periods presented. Cash Management Prior to the separation, WDC provided funding for our operating and investing activities, including pooled cash managed by WDC’s treasury, to fund operating expenses and capital expenditures. WDC also directly collected certain of our receivables. These activities were reflected as a component of the Net investment from Western Digital Corporation, and this arrangement is not reflective of the manner in which we would operate on a standalone company separate from WDC during the periods presented. Western Digital Corporation Net Investment Prior to the separation, the Net investment from Western Digital Corporation on the Condensed Consolidated Balance Sheets represented WDC’s historical investment in the Company, the net effect of transactions with and allocations from WDC, the Company’s retained earnings and the allocation to the Company of cumulative effect adjustments from the adoption of new accounting standards. 25 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Net Transfers from (to) Western Digital Corporation A reconciliation of Net transfers from (to) Western Digital Corporation on the Condensed Consolidated Statements of Shareholders’ Equity to the corresponding amounts on the Condensed Consolidated Statements of Cash Flows is as follows: Nine Months Ended March 28, 2025 March 29, 2024 (in millions) Net transfers from Western Digital Corporation per Condensed Consolidated Statements of Shareholders’ Equity $ ( 585 ) $ 234 Notes due (to) from Western Digital Corporation ( 1,223 ) 113 Other assets and liabilities, net transferred from Western Digital Corporation ( 105 ) — Unis venture transferred from Western Digital Corporation ( 61 ) — Property, plant and equipment, net transferred from Western Digital Corporation ( 27 ) ( 5 ) Tax balances transferred from Western Digital Corporation ( 8 ) ( 2 ) Accumulated other comprehensive loss transferred to Western Digital Corporation 10 — Tax indemnification liability transferred to Western Digital Corporation 112 — Net transfers (to) from Western Digital Corporation per Condensed Consolidated Statements of Cash Flows $ ( 1,887 ) $ 340 Note 11. Leases and Other Commitments Leases The Company leases certain domestic and international facilities and data center space under long-term, non-cancelable operating leases that expire at various dates through fiscal year 2039. In connection with and subsequent to the separation, the Company entered into various sublease agreements with WDC under long-term, non-cancelable operating leases that expire at various dates through fiscal year 2031. These leases include no material variable or contingent lease payments. Operating lease assets and liabilities are recognized based on the present value of the remaining lease payments discounted using the Company’s incremental borrowing rate. O perating lease assets also include prepaid lease payments minus any lease incentives. Extension or termination options present in the Company’s lease agreements are included in determining the right-of-use asset and lease liability when it is reasonably certain the Company will exercise those options. Lease expense is recognized on a straight-line basis over the lease term. The following table presents right-of-use lease assets and lease liabilities included in the Company’s Condensed Consolidated Balance Sheets: March 28, 2025 June 28, 2024 (in millions) Operating lease right-of-use assets (included in other non-current assets) $ 216 $ 179 Operating lease liabilities: Current portion of long-term operating lease liabilities (included in accrued expenses) 24 11 Long-term operating lease liabilities (included in other liabilities) 196 171 Total operating lease liabilities $ 220 $ 182 26 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The following table summarizes supplemental disclosures of operating cost and cash flow information related to operating leases: Three Months Ended Nine Months Ended March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024 (in millions) Cost of operating leases $ 11 $ 7 $ 27 $ 20 Cash paid for operating leases 8 8 22 22 Operating lease assets obtained in exchange for operating lease liabilities 39 — 43 167 The weighted average remaining lease term and discount rate for the Company’s operating leases were as follows: March 28, 2025 June 28, 2024 Weighted average remaining lease term in years 11.3 13.7 Weighted average discount rate 7.3 % 7.5 % As of March 28, 2025, minimum lease payments were as follows: Lease Amounts (in millions) Minimum lease payments by fiscal year: Remaining three months of 2025 $ 9 2026 38 2027 34 2028 28 2029 24 Thereafter 202 Total future minimum lease payments 335 Less: Imputed interest 115 Present value of lease liabilities $ 220 Sale-Leaseback In September 2023, WDC completed a sale and leaseback of its facility in Milpitas, California and received net proceeds of $ 191 million in cash. A substantial majority of these assets are associated with the Company, and as a result, $ 134 million of the net proceeds from the sale-leaseback transaction were allocated to us on a relative square footage basis and reflected as a cash inflow from investing activities within the Condensed Consolidated Statements of Cash Flows for the nine months ended March 29, 2024. In connection with the sale and leaseback, the Company recorded a gain of $ 60 million upon the closing of the transaction. For more information, see Part 1, Item 1, Note 15, Employee Termination and Other Charges of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. The property is being leased back to the Company at a total annual rate of $ 16 million for the first year and increasing by 3 % per year thereafter through January 1, 2039. The lease includes three five-year renewal options and one four-year renewal option for the ability to extend through December 2057. The associated operating lease liability and right-of-use asset for this facility has been included in the Condensed Consolidated Balance Sheets as of March 28, 2025 and June 28, 2024. This facility is utilized in the Company’s operations, and before the separation, the total lease expense has been allocated to the Company based on the continued usage of the facility. 27 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Purchase Agreements and Other Commitments In the normal course of business, the Company enters into purchase orders with suppliers for the purchase of components used to manufacture its products. These purchase orders generally cover forecasted component supplies needed for production during the coming months, are recorded as a liability upon receipt of the components, and generally may be changed or canceled at any time prior to shipment of the components. The Company also enters into long-term agreements with suppliers that contain fixed future commitments, which are contingent upon certain conditions such as performance, quality and technology of the vendor’s components. As of March 28, 2025, the Company had the following minimum long-term commitments: Long-term commitments (in millions) Fiscal year: Remaining three months of 2025 $ 26 2026 372 2027 583 2028 570 2029 570 Thereafter 660 Total $ 2,781 Note 12. Shareholders’ Equity Prio r to the separation, certain employees participated in WDC’s stock incentive plans (the “WDC Plans”), whereby all awards granted under the plans consisted of WDC common stock. The Stock-based compensation expense recognized in the Company’s Condensed Consolidated Financial Statements was determined based upon employees who participated in the WDC Plans and exclusively supported the Company’s operations, as well as an allocation of WDC’s corporate and shared employee stock-based compensation expenses. In connection with the separation, all outstanding RSU and PSU awards held by former employees of WDC and its affiliates, who became Sandisk employees after the separation, were adjusted pursuant to conversion ratios determined in accordance with the terms of the Employee Matters Agreement. Outstanding RSU and PSU awards held by employees in the positions of Vice President and above as of the separation date were converted into RSU or PSU awards of Sandisk shares and RSU awards of WDC shares on a ratio of one-third (1/3) of one share of the Company’s common stock for each WDC award held by each such employee. For all other employees, the value of the converted RSU awards was designed to preserve the aggregate intrinsic value of the award immediately after the separation when compared to the aggregate intrinsic value of those award immediately prior to separation. Pursuant to the Employee Matters Agreement, the converted awards shall generally continue to be subject to the same terms and conditions as were applicable to the original WDC awards, including with respect to vesting, except as described in the Employee Matters Agreement. As a result of the conversion, the Company will incur approximately $ 41 million of incremental stock-based compensation expense over the remaining service period for the awards. Of this amount, $ 5 million were recognized during the quarter ended March 28, 2025, and approximately $ 36 million will be recognized over the awar ds’ remaining service periods. Additionally, the Company adopted the following incentive plans for Sandisk employees: (i) Sandisk Corporation 2025 Long-Term Incentive Plan (the “2025 Long-Term Incentive Plan”), and (ii) Sandisk Corporation 2025 Employee Stock Purchase Plan. Grants of equity awards made after the separation to our executive officers and other employees will be made under the 2025 Long-Term Incentive Plan, which became effective on January 25, 2025. After the separation, certain employees of the Company participate in stock incentive plans which allow for stock-based compensation in a number of forms, including RSU awards, PSU awards, and an employee stock purchase plan (“ESPP”). Restricted and Performance Stock Unit Awards The fair value of an RSU award equals the closing share price on the grant date of the award. The fair value of a PSU award containing a market condition is estimated using a Monte Carlo simulation on the grant date. The expense associated with these awards is recognized over their requisite service period, usually four years for RSUs and three years for PSUs. 28 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The following table summarizes RSU and PSU award activity under the Company’s incentive plans during the nine months ended March 28, 2025: Number of Shares Weighted Average Grant Date Fair Value Aggregate Intrinsic Value at Vest Date (in millions) RSUs and PSUs outstanding at June 28, 2024 — $ — $ — Awards converted from Western Digital Corporation Plans (1) 6.4 35.32 — Granted 0.1 54.53 — Issued ( 0.4 ) 31.66 21.93 RSUs and PSUs outstanding at March 28, 2025 6.1 $ 35.95 $ 21.93 (1) This amount excludes 3.1 million of WDC equity awards held by Sandisk employees, which upon vesting will be issued in WDC shares instead of the Company’s shares. RSUs and PSUs are generally settled in an equal number of shares of the Company’s common stock upon vesting. Forfeitures are recognized as they occur. Compensation cost related to unvested RSUs, PSUs, and rights to purchase shares of common stock under the ESPP are amortized on a straight-line basis over the remaining service period. The following table presents the unamortized compensation cost and weighted average service period of all unvested outstanding awards as of March 28, 2025: Unamortized Compensation Costs Weighted average service period (in millions) (years) RSUs and PSUs $ 269 2.39 Total unamortized compensation cost $ 269 2.39 Employee Stock Purchase Plan We have an ESPP under which our stockholders have approved an aggregate of approximately 4.3 million shares of common stock for issuance to eligible employees. The fair value of the award at the grant date is based on the Black-Scholes valuation model. The plan permits eligible employees to purchase common stock, through payroll deductions, at 95 % of the fair market value of a share of common stock on the first day of the 24-month offering period in which the employees are participating or 95% of the fair market value of a share of common stock on the applicable exercise date, whichever is lower. Rights to purchase shares are granted during the second and fourth quarters of each fiscal year. Stock-based Compensation Expense The following tables present the Company’s stock-based compensation for equity-settled awards by type, financial statement line, and the related tax benefit included in the Company’s Condensed Consolidated Statements of Operations: Three Months Ended Nine Months Ended March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024 (in millions) RSUs and PSUs $ 43 $ 32 $ 124 $ 102 ESPP 1 6 9 13 Total $ 44 $ 38 $ 133 $ 115 29 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Three Months Ended Nine Months Ended March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024 (in millions) Cost of revenue $ 3 $ 5 $ 12 $ 15 Research and development 20 19 60 54 Selling general, and administrative 21 14 61 46 Subtotal $ 44 $ 38 $ 133 $ 115 Tax benefit 5 ( 5 ) ( 26 ) ( 15 ) Total $ 49 $ 33 $ 107 $ 100 Any shortfalls or excess windfall tax benefits and tax deficiencies for shortfalls related to the vesting and exercise of stock-based awards, which are recognized as a component of the Company’s Income tax expense, were not material for the periods presented. Note 13. Net Income (loss) per Common Share The separation was executed through WDC’s pro rata distribution of 80.1 % of the outstanding shares of common stock of the Company to holders of WDC’s common stock as of February 21, 2025. On the separation date, the Company issued 145 million shares of common stock, par value $ 0.01 per share. This share amount is utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the separation, and these shares are treated as issued and outstanding for purposes of calculating historical earnings per share. For periods prior to the separation, it is assumed that there are no dilutive equity instruments as there were no equity awards of Sandisk outstanding prior to the separation. The following table presents the computation of basic and diluted income (loss) per common share: Three Months Ended Nine Months Ended March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024 (in millions, except per share amounts) Net income (loss) $ ( 1,933 ) $ 27 $ ( 1,618 ) $ ( 792 ) Weighted average shares outstanding: Basic and diluted 145 145 145 145 Net income (loss) per common share: Basic and diluted $ ( 13.33 ) $ 0.19 $ ( 11.16 ) $ ( 5.46 ) Dilutive weighted-average shares (1) 2 — 2 — (1) Dilutive stock-based awards were excluded from the calculation of diluted shares because their effect would have been anti-dilutive. Basic net income (loss) per share is computed using (i) net income (loss) divided by (ii) weighted average basic shares outstanding. Diluted net income (loss) per share is computed as (i) net income divided by (ii) weighted average diluted shares outstanding. The treasury stock method is used to determine the dilutive impact of unvested equity awards. Potentially dilutive shares include dilutive outstanding employee RSUs, PSUs, and rights to purchase shares of common stock under the ESPP. For the three and nine months ended March 28, 2025, the Company recorded net losses, and as such, all potentially dilutive securities have been excluded from those periods as including them would be anti-dilutive. Note 14. Income Tax Expense On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, which contained significant changes to laws related to tax, climate, energy, and health care. The tax measures include, among other things, a corporate alternative minimum tax (“CAMT”) of 15% on corporations with three-year average annual adjusted financial statement income (“AFSI”) exceeding $1.0 billion. The Company does not expect to be subject to the CAMT of 15% for fiscal year 2025 as its average annual AFSI did not exceed $1.0 billion for the preceding three-year period. 30 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) On December 20, 2021, the Organization for Economic Co-operation and Development G20 (“OECD/G20”) Inclusive Framework on Base Erosion and Profit Shifting released Model Global Anti-Base Erosion rules under Pillar Two (“Pillar Two”). Several non-U.S. jurisdictions have either enacted legislation or announced their intention to enact future legislation to adopt certain or all components of Pillar Two, some of which are effective for the Company in fiscal year 2025. For fiscal year 2025, the Company currently expects to be able to meet certain transitional safe harbors and does not expect any material Pillar Two taxes. As more jurisdictions adopt this legislation in fiscal year 2026, there may be material increases in the Company’s future tax obligations in certain jurisdictions. The following table presents the Company’s Income tax expense and the effective tax rate: Three Months Ended Nine Months Ended March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024 (in millions) Income (loss) before taxes $ ( 1,901 ) $ 54 $ ( 1,461 ) $ ( 700 ) Income tax expense 32 27 157 92 Effective tax rate ( 2 ) % 50 % ( 11 ) % ( 13 ) % The relative mix of earnings and losses by jurisdiction, the goodwill impairment, the deduction for foreign-derived intangible income, credits and tax holidays in Malaysia that will expire at various dates during years 2028 through 2031 resulted in decreases to the effective tax rate below the U.S. statutory rate for the three and nine months ended March 28, 2025. The primary drivers of the difference between the effective tax rate for the three and nine months ended March 29, 2024 and the U.S. Federal statutory rate of 21% are the relative mix of earnings and losses by jurisdiction, the deduction for foreign-derived intangible income, credits and tax holidays in Malaysia. Uncertain Tax Positions With the exception of certain unrecognized tax benefits that are directly associated with the tax position taken, unrecognized tax benefits are presented gross in the Condensed Consolidated Balance Sheets. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits, excluding accrued interest and penalties for the nine months ended March 28, 2025: (in millions) Accrual balance at June 28, 2024 $ 47 Gross increases related to current year tax positions 10 Gross decrease related to prior year tax positions ( 1 ) Gross increase related to transfer from Western Digital Corporation 78 Gross decrease related to settlement ( 7 ) Accrual balance at March 28, 2025 $ 127 As of March 28, 2025 and June 28, 2024, the liability for unrecognized tax benefits (excluding accrued interest and penalties) was $ 127 million and $ 47 million, respectively. Interest and penalties related to unrecognized tax benefits are recognized in liabilities recorded for uncertain tax positions and are recorded in the provision for income taxes. Accrued interest and penalties included in the Company’s liability related to unrecognized tax benefits as of March 28, 2025 and June 28, 2024 was $ 4 million and $ 9 million, respectively. The Company believes that adequate provision has been made for any adjustments that may result from any other tax examinations. However, the outcome of such tax examinations cannot be predicted with certainty. If any issues addressed in the Company’s tax examinations are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. Any significant change in the amount of the Company’s liability for unrecognized tax benefits would most likely result from additional information relating to the examination of the Company’s tax returns. 31 Table of Contents SANDISK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 15. Employee Termination and Other Charges Business Realignment The Company periodically incurs charges to realign its operations with anticipated market demand, primarily consisting of organization rationalization designed to streamline its business, reduce its cost structure and focus its resources. The Company has taken actions to reduce the amount of capital invested in facilities, including the sale-leaseback of its facility in Milpitas, California, in September 2023, as discussed in Part 1, Item 1, Note 11, Leases and Other Commitments of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. The Company recorded the following net charges related to these actions for the periods presented: Three Months Ended Nine Months Ended March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024 (in millions) Employee termination benefits $ — $ — $ 2 $ 14 Contract termination and other — 2 3 2 Gain on sale-leaseback of facility — — — ( 60 ) Total employee termination and other charges $ — $ 2 $ 5 $ ( 44 ) The termination benefits accrual balance as of March 28, 2025 and the periodic activity during the three and nine months ended March 28, 2025 were not material. Note 16. Legal Proceedings In the normal course of business, the Company is subject to legal proceedings, lawsuits and other claims. Although the ultimate aggregate amount of reasonably possible monetary liability or financial impact with respect to these other matters is subject to many uncertainties, management believes that any monetary liability or financial impact to the Company from these matters, individually and in the aggregate, would not be material to the Company’s financial condition, results of operations or cash flows. However, any monetary liability and financial impact to the Company from these matters could differ materially from the Company’s expectations . 32 Table of Contents