Sandman 2 (April/May 1975) features a Jack Kirby cover, but the story itself is by Michael Fleisher, Ernie Chan and Mike Royer.
So it neither looks or feels quite like the first issue, though the creative team does a pretty good job at trying. In this issue a submarine of cloaked men come to Jed's home one night. They stun the grandfather and kidnap Jed. It turns out that Jed's nightmares are far stronger than those of most people. So strong that their absence is noticable in the Dream Stream.
The cloaked men work for Dr. Spider, who uses Jed's nightmares, bringing them to life. He demonstrates how he can do this with one of his men, who is too inquisitive. Dr. Spider plans to use the monsters to conquer the world.
Sandman wonders what is affecting the Dream Stream, and goes to question the Nightmare Wizard. This character is a resident of the Dream Stream, unlike Sandman. We learn almost nothing about him, but considering later developments in the Neil Gaiman series this would seem to be one of Dream's creations. He explains to Sandman about Dr. Spider using Jed.
Sandman returns to the real world, using his sand to battle the monsters, but gets captured by Dr. Spider. Brute and Glob once again leave the tubes to go free Sandman, although in this story Sandman never finds out that they escaped and helped him. He is asleep when they release him from his bonds.
Dr. Spider sends Sandman into Jed's nightmares, hoping the monsters will kill him. Sandman uses his sonic whistle to defeat them, then smashes Dr. Spider's machines.