Micron Technology's revenue surged 346% to a record $41.5 billion as AI-driven demand for memory chips outstrips supply through at least 2027, with the company locking in $100 billion in guaranteed minimum revenue through long-term customer agreements.
Micron Technology Inc. has locked in $100 billion in guaranteed minimum revenue through 16 multi-year customer agreements, as AI-driven demand for memory chips pushes supply constraints beyond 2027 and sends the stock up more than sevenfold over the past year.
"These strategic customer agreements shift pricing dynamics and reduce quarter-end volatility in negotiations, supporting more stable long-term margins versus prior cycles," C.J. Muse, analyst at Cantor Fitzgerald, said. Muse raised his price target on Micron to $2,000 from $1,500 this week, implying 75% upside from Monday's close and a market capitalization above $2 trillion.
The Boise, Idaho-based memory specialist reported fiscal third-quarter revenue of $41.5 billion for the period ended May 28, up 346% year over year, with adjusted earnings per share of $24.67 — a thirteenfold increase. DRAM revenue reached $31.3 billion, up 343%, while NAND hit a record $9.9 billion, up 361%. Average selling prices jumped in the low-60% range for DRAM and the mid-80% range for NAND, as bit shipments grew only by single-digit percentages, underscoring that pricing power — not volume — is driving the surge. Management guided for fiscal Q4 revenue of $50 billion and adjusted EPS of $31, both above consensus estimates.
The supply-demand imbalance shows no signs of easing. Micron expects tight conditions for both DRAM and NAND to persist beyond calendar 2027, driven by AI workloads in data centers, high-end personal computers, smartphones, vehicles, and robotics. The company is ramping capital expenditure to $27 billion in fiscal 2026, nearly double the prior year, with quarterly spending set to exceed $10 billion in Q4 alone. Fiscal 2027 capex is on track to surpass $40 billion as Micron builds new fabrication facilities in Singapore, New York, Idaho, and Japan. Competitors are following suit: SK Hynix plans to double wafer capacity over five years, while Samsung committed $648 billion over a decade to expand production in South Korea.
The Strategic Customer Agreements change the earnings calculus
Fourteen of the 16 SCAs are take-or-pay contracts covering a significant portion of Micron's DRAM and NAND production through 2030. Management said the floor price embedded in these agreements alone would generate gross margins above the company's peak quarterly margins from any prior industry cycle. The contracts require security deposits from customers and lock in both volume and pricing for five years, reducing the cyclicality that has historically defined the memory industry.
The shift carries risks. Seeking Alpha contributor Tech Stock Pros argued that the upside is coming from higher average selling prices rather than bit shipment growth, and that margin expansion is already decelerating — Micron guided for only 1.4% sequential gross margin expansion in Q3 versus 6.1% in Q2. SK Hynix's decision to reallocate some HBM manufacturing capacity back to DRAM could ease shortages by year-end, potentially undermining Micron's pricing power.
Still, Wall Street remains broadly bullish. Eighty-eight percent of analysts rate Micron a buy or strong buy, with a consensus price target of $1,454 implying 27% upside. The stock trades at less than 16 times forward earnings, a discount to its growth rate given consensus estimates for EPS growth of 834% in fiscal 2026 and 111% in fiscal 2027. At Cantor Fitzgerald's $2,000 target, Micron would need annual revenue of roughly $227 billion — a figure that aligns with Wall Street's fiscal 2027 consensus of nearly $236 billion.
For investors, the question is whether the SCAs can permanently reshape Micron's earnings profile or whether memory remains a cyclical business masked by a temporary AI-driven demand spike. The answer will determine whether this chipmaker joins the $2 trillion club or reverts to its historical pattern of boom and bust.
This article is for informational purposes only and does not constitute investment advice.
