What They Do
Micron Technology is a leading global manufacturer of memory and storage semiconductors, producing DRAM and NAND flash memory chips that power everything from smartphones to data centers. They solve the critical need for high-performance memory in AI computing, serving hyperscale cloud providers, smartphone manufacturers, and enterprise customers. The company makes money by selling these memory chips directly to technology companies and through distribution partners worldwide.
Investment Thesis
**AI-Driven Supercycle**: Record quarterly revenue of $23.9B (+196% YoY) driven by insatiable AI demand, with the company only fulfilling 50-67% of key customer demand due to supply constraints**Unprecedented Profitability**: Gross margins reached all-time record of 75% in Q2 with guidance for 81% in Q3, driven by tight supply conditions and premium AI memory pricing**Technology Leadership**: First to market with HBM4 volume shipments for NVIDIA's next-gen platform and industry-leading 1γ DRAM technology ramping to majority of production by mid-2026Key Risks
**Cyclical Industry Exposure**: Memory semiconductors are notoriously cyclical, and current unprecedented margins may compress when supply-demand balance normalizes**Massive CapEx Burden**: Capital expenditure raised above $25B for fiscal 2026 with another $10B+ increase planned for 2027, straining cash flows despite current strengthGrowth Story
Revenue is experiencing explosive growth with CY26 estimated at 122.9% growth, followed by strong expansion to $115.9B in CY27 as AI demand reshapes the memory landscape. The company is in the early innings of an AI-driven memory supercycle, with management stating that "AI has fundamentally recast memory as a defining strategic asset." Growth is being fueled by data center AI training and inference workloads requiring high-bandwidth memory solutions.
Profitability Profile
Micron has achieved a dramatic profitability inflection with gross margins doubling year-over-year to record 75% and operating margins reaching 69%. The company generated record free cash flow of $6.9B despite massive capacity investments, demonstrating the powerful cash generation potential of the current cycle. Management expects gross margins to continue expanding to ~81% in Q3, driven by favorable product mix and tight supply conditions.
Competitive Position
Micron is one of only three major DRAM suppliers globally (alongside Samsung and SK Hynix), creating a rational oligopoly with significant barriers to entry due to massive capital requirements and technology complexity. The company has established a competitive moat through its advanced 1γ DRAM and G9 NAND technologies, with the fastest ramp to mature yields in company history. Strategic customer agreements and deep partnerships with AI leaders like NVIDIA further strengthen their market position.
Recent Momentum
The most recent quarter delivered a massive earnings beat with revenue exceeding estimates by 19.5% and EPS beating by $3.01, marking the largest sequential revenue increase in company history. The market has responded positively to the sustainability of the AI memory cycle, with management signing their first five-year strategic customer agreement and raising the dividend by 30%. Q3 guidance of $33.5B exceeds Micron's full-year revenue for every year through fiscal 2024, demonstrating the magnitude of the current opportunity.
What Wall Street Thinks
Analysts are increasingly bullish on Micron's positioning in the AI memory cycle, with the company consistently beating earnings estimates across the last four quarters. The consensus view has shifted from cautious optimism to aggressive growth expectations, with CY27 EPS estimates of $59.34 reflecting confidence in sustained profitability. Debates center on the duration of the current supercycle and whether unprecedented margins are sustainable long-term.
The Bottom Line
Micron is riding an AI-driven memory supercycle that has transformed the company from a cyclical commodity player into a strategic supplier of critical AI infrastructure, generating record profitability while supply constraints create a multi-year runway for exceptional returns.
