GF SEC: AI storage demand continues to surge, long-term agreements boost growth certainty.

GF SEC released a research report stating that AI memory has become a fundamental capability supporting contextual continuity, personalization, and the reuse of historical information, continuously expanding the model's capabilities boundaries, and is expected to accelerate the landing of applications such as AIAgent. The value of AI memory is shifting from a "cost item" to an "asset item", and the value and importance of related upstream infrastructure will continue to rise. It is recommended to focus on core beneficiaries in the industry chain. GF SEC's main points are as follows: Overseas storage original factory CY26Q1 revenue & profit increased compared to the previous quarter (1) Micron: In 26Q1, revenue reached $23.9 billion, yoy +196%, qoq +75%, gross margin 74.9%, yoy +37pcts, qoq +18pcts; (2) Samsung Electronics: In 26Q1, revenue reached $91.4 billion, yoy +68%, qoq +41%, gross margin 61.2%, yoy +26pcts, qoq +14pcts; (3) Intel: In 26Q1, revenue reached $35.9 billion, yoy +196%, qoq +58%, gross margin 79.3%, yoy +22pcts, qoq +11pcts; (4) SanDisk: In 26Q1 (corresponding to FY2026Q3), revenue reached $6 billion, yoy +251%, qoq +97%, gross margin 78.4%, yoy +56pcts, qoq +27pcts; (5) Kioxia: In 26Q1 revenue reached $6.4 billion, yoy +181%, qoq +81%, gross margin 64.1%, yoy +45.7pcts, qoq +31.6pct; (6) Western Digital: In 26Q1, revenue reached $3.3 billion, yoy +45%, qoq +11%, gross margin 50.5%, yoy +10pcts, qoq +4pcts; (7) Seagate: In 26Q1, revenue reached $3.1 billion, yoy +44%, qoq +10%, gross margin 47.0%, yoy +11pcts, qoq +5pcts. AI storage demand continues to explode, long-term contracts improve growth certainty In terms of DRAM, Micron stated that by CY26, data center DRAM+NAND bit demand is expected to exceed 50% for the first time, and some customers can only meet 50%-66% of the demand and have signed the first 5-year SCA. Regarding NAND, SanDisk's NBM model landing is more clear, with signed 5 multi-year agreements, the longest of which can last 5 years, covering over 1/3 of the bit for FY27, and introducing fixed/floating prices, prepayments, financial guarantees, and RPO mechanisms. Three contracts correspond to approximately $42 billion RPO, and five agreements include over $11 billion in financial guarantees. In terms of HDD, Western Digital stated that the contract period has been extended to CY29, and Seagate's near-line capacity is almost sold out until CY27, and is advancing customized contracts with cloud and hyperscale customers by the end of FY27 with clear configuration and pricing. Overall, AI demand reinforces customer's long-term supply guarantee demands, and the storage original factory supply model is evolving from traditional quarterly and annual bargaining to long-term demand binding, and the predictability of industry income, profitability, and capital expenditures is expected to increase. CY26Q2 revenue & profit guidance suggests sequential growth, optimistic about the continuous uptrend in the storage cycle (1) Micron guided a median revenue of $33.5 billion for CY26Q2, qoq +41.1%, median gross margin of 81%, qoq +6.6pct; (2) SanDisk guided a median revenue of $8 billion for CY26Q2, qoq +34.5%, median gross margin of 80%, qoq +1.6pcts; (3) Western Digital guided a median revenue of $3.65 billion for CY26Q2, qoq +10.6%, median gross margin of 51.5%, qoq +1.0pcts. (4) Seagate guided a median revenue of $3.5 billion for CY26Q2, qoq +11.3%. Risk warning: AI industry development and demand are lower than expected; AI server shipments are lower than expected, and domestic manufacturers' technology and product progress is lower than expected.