Micron locks in AI demand with long-term contracts, guides record Q4
In brief
- Micron posts $41.5B Q3 revenue; adjusted EPS $25.11, shares up 15% after-hours
- Company sells entire 2026 HBM production under long-term contracts with major customers
- Q4 guidance: $49–$51B revenue, 81–86% gross margins; capex forecast $27B
Record margins and forward guidance
Micron shares jumped roughly 15% in after-hours trading following the earnings release. Current gross margins are running around 81%, well above the historical average range of 60% to 70%. For Q4, Micron is guiding to revenue of $49 billion to $51 billion, with gross margins projected between 81% and 86%. That guidance reflects both near-term strength and the company's confidence in sustained demand.
Bank of America raised its price target for Micron shares to $500 following the release, signaling Wall Street's belief in the company's trajectory.
Strategic commitments in a generational shift
CEO Sanjay Mehrotra framed the investment cycle as a deliberate commitment to capturing a generational demand shift, emphasizing record technology and production investments as central to the company's forward strategy. Micron is forecasting capex above $25 billion for fiscal 2026, rising toward $27 billion to address AI-driven demand.
The stakes are significant. The HBM total addressable market is projected to surpass $100 billion by 2027, according to the company's research. Yet competition is fierce. Samsung and SK Hynix are Micron's primary rivals in HBM, and both are investing heavily in their own capacity expansions.
By locking in revenue through long-term contracts, Micron is betting it can sustain the current cycle and avoid the severe downturns that have historically plagued semiconductor makers. The strategy trades some upside optionality for predictability—a calculated choice given investor concerns about cyclicality in the memory chip business.
