SAN DIEGO, CALIFORNIA – SanDisk Corporation has provided guidance for the fourth quarter of 2022, with revenue and earnings per share (EPS) expected to exceed Street estimates. However, the company’s focus on US daily active users (DAUs) has missed expectations, with a decline in sequential growth and total DAU net adds. Despite this, management has highlighted continued improvements in artificial intelligence (AI) and machine learning (ML) driven enhancements, with Reddit Max adoption tripling quarter-over-quarter (QoQ) and first-week new-user retention rates improving double digits QoQ and 50% year-over-year (YoY).

Positives:

* Q3 total revenues beat Street and guidance, driven by strength in the core advertising business with ad revenue growing 54% year-over-year (YoY) on the back of higher pricing, impression growth, and broad-based strength across lower-funnel advertising demand.
* Logged-in and app DAUqs experienced sequential growth, reinforcing management’s focus on higher-engagement users, which account for over 80% of platform monetization.
* Management highlighted continued AI/ML driven improvements, with Reddit Max adoption more than tripling QoQ and first-week new-user retention rates improving double digits QoQ and 50% YoY.

Negatives:

* Q3 US DAUs declined sequentially and total DAU sequential net adds declined despite ongoing efforts to increase logged-in and app users through enhanced personalization and user marketing initiatives.
* Management noted search referral traffic declines accelerated through Q3 and have continued into early Q4, with current trends suggesting a potential lower-demand density (LDD%) decline in total DAUqs in Q4.

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