Stunning Micron Results Keep Memory Boom At Full Throttle

Micron (MU) announced its third quarter earnings after the bell on Wednesday, beating analysts’ expectations on the top and bottom lines and surpassing estimates for the company’s Q4 revenue outlook.

Micron also declared a quarterly dividend of $0.15 per share.

Micron stock rose more than 6% on the news, pushing chip stocks broadly higher after tumbling earlier this week.

MU

For Q4, the company said it expects to bring in between $49 billion and $51 billion in revenue. Wall Street was projecting revenue of $43.2 billion.

For the quarter, Micron reported earnings per share (EPS) of $25.11 on revenue of $41.5 billion. Analysts were anticipating EPS of $20.39 and revenue of $35.1 billion, according to Bloomberg analyst consensus estimates.

Micron’s adjusted gross margins topped 84.9%, beating expectations of 81.83%.

Micron’s earnings report comes after the company and Anthropic (ANTH.PVT) announced a strategic agreement under which Micron will supply Anthropic with its memory and storage chips.

Data center construction is driving immense demand for both memory (DRAM) and storage (NAND) chips.

DRAM is a vital component in AI servers, serving as a kind of holding place for important data that GPUs and CPUs need to access quickly. It’s used to build high-bandwidth memory, or HBM, which is the memory used in AI data centers. But it’s also used to produce DDR RAM, found in everything from your smartphone and laptop to video game consoles.

In Q3, Micron’s DRAM memory revenue for the quarter hit $31.3 billion, versus expectations of $27.5 billion, while NAND storage revenue came in at $9.9 billion. Analysts were projecting revenue of $7.7 billion.

Micron stock has soared a staggering 727% over the past 12 months and is up 270% since January. Rival memory maker SK Hynix (000660.KS) has seen similar stock movement, with shares rocketing 826% higher over the past 12 months and 296% year to date.

But those kinds of massive gains have raised concerns among some analysts and investors. AI bulls say the proof is in the earnings numbers.

The incredible demand from deep-pocketed data center builders has put pressure on electronics manufacturers, which are battling to get their share of memory and storage chips for their devices.

Video game consoles were among the first to take it on the chin, with Sony (SONY), Microsoft (MSFT), and Nintendo (NTDOY) each raising the prices of their systems. But the memory shortage-induced price increases have since spread across the consumer technology space.

Apple (AAPL) has already said it will have to raise prices on some of its devices due to the shortage and will likely take a hit to its margins in the coming quarters.

Industry analysts have also warned that laptop and smartphone sales could decline in the months ahead as consumers balk at higher prices.

Wow! Wow! Wow!

Micron’s share buyback plans are incredible. Listen to this exchange between an analyst and the finance director.

I’m looking at the numbers here for the next quarter, right? And free cash flow is going to be somewhere around $30 billion plus. I just want to make sure really the buy side and investors understand what you’re saying here with regard to cash return. So you’re saying 100% will go back to shareholders. I assume the vast majority of that is in buyback. I mean, if you go from $30 billion in free cash flow and grow it, you could buy back 10% of the company next calendar year. Just basically if we say something close to this quarter is what you do next year. Are you prepared to do that and buy back at that level? I just want to have you kind of react to the math and the commentary. At a $1.2 trillion market cap, that’s where it is, 10% of the company. And I just want to make sure that you can react to that.

This is what the finance director replied.

We’re really pleased with the financial trajectory of the business. The combination of memory being so important to so many markets, AI data center, the edge, enabling this or helping enable this technology revolution we have underway. And we’ve got — between our technology products and manufacturing performance, we are delivering record cash flow numbers. The last 2 quarters, we’ve generated as much as in the company’s previous history. So — and we expect, as you point out, that cash flow growth will increase in the fourth quarter.

We’ve paid down quite a bit of debt over the past year. And there’s — cash will build, and we will maintain levels of cash that we feel comfortable that we can invest through all seasons in the business. But as you heard today, we feel good about the durability of the performance of the business given the secular demand drivers, the need for more and higher performance memory, the structural supply challenges that we’ve talked about the last couple of years, slower node or node migration yielding less HBM soaking up more wafers and the need for greenfield for incremental wafer capacity. And then we have these strategic customer agreements, which we announced today, a meaningful number of these. And we expect more.

So we will hold what we believe is appropriate excess cash. And then we’ve always said that we intend to grow the dividend over time. You saw us do a 30% increase recently. But the principal capital return we have will be share repurchase. I said today in the prepared remarks that we intend to increase our capital return from December 9, which is the second anniversary of our CHIPS agreement signature. And the rate and pace from there will be based on a number of factors, but absolutely committed to capital return.

He didn’t exactly say yes, no company would, but he didn’t say no. And the shares are super cheap on a fiscal 2028 PE ratio, which may well be in single figures, so why wouldn’t he want to invest heavily in the company’s own shares? What better thing could they do for shareholders after making the necessary spend on research and development and capital expenditure, which themselves add value, so effectively reward shareholders.

The business and the whole memory industry are in incredibly good shape.

The demand that we have for HBM, our HBM product, HBM3E, HBM4 and of course, even ahead of the HBM4E quals, the asks from our customers for volume, not just in ’27, but as you know, due to these SCA agreements, we have been discussing — one huge advantage of these SCA agreements is we have been discussing these demand requests from customers for multiyear time horizon. So if we look at this multiyear time horizon, even going beyond 2027 into 2028, et cetera, we are able to get very high confidence demand from our customers that is far in excess of our ability to support using our supply.

So the demand continues to be well above our supply. Even when we do these SCAs for multiple years, these SCAs contain volumes that are less than customers would actually like to sign up for. And in fact, in a lot of these negotiations, we spend a lot of time helping customers understand that this is all we can do in this time frame. And so absolutely, our demand for HBM not just in ’27, but even ’28 is well above our ability to supply across all the different HBM flavors. And it’s also true — the same thing is also true, by the way, for non-HBM DRAM as well. It’s in the same category.

There was another great exchange on the supply/ demand equation.

The other thing I wanted to ask is it’s actually been over a year since the team has given us an update on your mid-term to long-term view on industry DRAM and NAND bit demand growth. Obviously, much has changed over the past 12 months. Inferencing workloads have crossed over training workloads, inferencing workloads themselves continues to evolve and become more complex. And then on the server CPU side, your CPU customers are now forecasting like 30%, 40% per year CAGRs given agentics like higher CPU intensity. I’m sure the mid- to long-term bit demand CAGR is also sort of guiding your discussions on these multiyear SCAs. So could you guys just give us an update on your mid-term views on DRAM and NAND bit demand CAGRs over the next, call it, few years?

The company’s response.

So that’s a good question. We have provided some updates to you on how we see 2026 bit demand forecasts change versus what we had provided earlier with DRAM forecast up a little bit, NAND relatively similar. The thing — the reason we are not really providing a lot of forward-looking views on the CAGRs [compound annual growth rates] is because for the foreseeable future, the bit demand — the shipment growth for bits is not really determined by demand anymore. It’s actually more determined by the supply. Because the demand is so much above the industry’s ability to supply that the supply growth, in fact, is going to determine how the shipment growth occurs far less so the demand growth because of its relative position versus supply.

So because of that, we are trying to point out what kind of growth trajectory we believe, we give you some kind of data points here and there around how we think this year’s supply growth or demand growth is going to be next year. But we are not providing sort of outlook too much further down because how the supply conditions change, we are continuing to constantly evaluate, but our expectation is that the supply growth will continue to remain short of what is needed to meet the demand. We don’t really see when the supply is going to be able to meet demand. That is not something we are able to project at this time.

Demand is insatiable.

we’ve mentioned a couple of times that the majority of the fiscal ’27 CapEx, Jim, is for construction, which kind of also gives you some indication of those — the construction dollars are not going to be producing bits in that time horizon, which is why we also talked about for us in the industry, the kind of greenfield capacity really starts to contribute to bits in calendar ’28. And that supply — and even with that supply improvement, like we don’t see, as Sumit was saying earlier, an intercept for supply with demand.

Has such a key component of the technology boom ever been in such short supply before? It is amazing what is happening, and all the benefits are flowing to a handful of companies.

I mean, our enterprise SSD momentum is exceptionally strong. And we provided you some data points on that with $5 billion quarter in FQ3 for enterprises — for data center SSDs outside of the — inside of the $25 billion overall data center revenue for the quarter. And so absolutely, we do feel really good about the fact that we have an incredibly strong portfolio of products, both on the NAND and DRAM side. They, of course, stand on their own feet individually in terms of their capabilities. We have hit record share after record share of data center SSDs over time due to the strength of that portfolio. And you know the strength of our DRAM portfolio, both in terms of HBM and non-HBM products.

Now in terms of the levels of constraint, both DRAM and NAND are very constrained. Of course, when we talk to customers across this long horizon of time through 2030 calendar year — through the end of 2030 calendar year, which is the term of a lot of these large SCAs. And they are definitely interested in getting their hands on NAND, but DRAM is certainly far more constrained and more difficult to supply in the quantities and volumes that our customers need. But like I said, I mean, NAND is very constrained, too, but the sense of concern and urgency in the minds of our customers around DRAM is very, very high.

All the memory shares look attractive, but I think a Famous Four is emerging (see below)

Share Recommendations

Kioxia. 285A

Micron Technology. MU

SanDisk. SNDK

SK Hynix. 000660

Strategy – Keep Buying

All these shares are super volatile and super strong. Remember that every time share prices swoon. It is all about money flows, nothing to do with the incredible company fundamentals. Investors sell for a million reasons. When they do, make sure you buy.