Micron Earnings: Pricing Has Shot Through the Stratosphere, with No Signs of Abating Soon

Key Morningstar Metrics for Micron Technology

What We Thought of Micron Technology’s Earnings

Micron Technology’s MU October-quarter results were strong, and January-quarter guidance was even better. At the midpoints, management is guiding sequentially to 37% revenue growth, 1,120 basis points of gross margin expansion, and 76% EPS growth.

Why it matters: Tight memory supply caused by immense artificial intelligence infrastructure demand is boosting incredible market pricing for Micron and its memory chip peers. This is driving very strong growth and profit expansion that well exceeds our previous expectations.

• We now expect supply to remain tight deep into 2027. High-bandwidth memory and traditional DRAM are critical enablers of generative AI model performance, which leads to immense demand. Simply put, supply expansion can’t keep up in the short term.
• We expect cyclicality to endure in memory, and don’t see the robust pricing environment this year lasting into the long term. This tempers our optimism, but the current cyclical upswing is generating tremendous shareholder value.

The bottom line: We raise our fair value estimate for no-moat Micron to $225 per share from $150 on significantly higher growth and profit forecasts over the next two years. Shares popped 8% after hours, and look roughly fairly valued to us.

• We forecast revenue to more than double in fiscal 2026 and grow strongly in the double digits in fiscal 2027. We project terrific profitability across these two years, with non-GAAP gross margins reaching 70%, well above our previous views of midcycle in the mid 30% range.
• We continue to worry about the cycle turning down after this torrid upcycle. Micron and peers are working to build out more supply, which takes years. If supply buildouts exceed demand toward the end of the decade, it could pressure pricing, sales, and profits, as seen in historical downturns.