TLDR
- Micron shares climbed 15.74% following fiscal Q3 results that delivered adjusted EPS of $25.11 and revenue of $41.46 billion, before retreating more than 5% in premarket trading Friday
- The memory chip manufacturer achieved an 85% gross margin in fiscal Q3 with guidance for approximately 86% in Q4, alongside Q4 revenue expectations of roughly $50 billion
- The company has secured 16 multi-year take-or-pay agreements with clients, anticipated to represent about 40% of total revenue through the end of the decade
- Wall Street analysts significantly increased earnings projections following the report — consensus forward EPS now reaches $144.27, jumping from $101.74 a month earlier
- Barclays boosted its price objective to $2,000; the mean analyst target stands at $1,477.17, with 50 analysts maintaining Buy recommendations
Micron Technology (MU) shares rocketed 15.74% higher Thursday following the chipmaker’s exceptional fiscal third-quarter earnings report. However, by Friday’s premarket session, shares had surrendered over 5% of those gains, hovering near $1,150 as traders took profits after the dramatic surge.
The financial performance was nothing short of remarkable. The company delivered adjusted earnings per share of $25.11 against revenue totaling $41.46 billion. Adjusted gross profit margin reached 84.9%. Looking ahead to Q4, management projected adjusted EPS around $31 with revenue approaching $50 billion.
During the earnings conference call, CEO Sanjay Mehrotra emphasized that customers now recognize that memory and storage supply constraints “will take considerable time to improve.” He explained that despite anticipated gradual supply improvements beginning in 2028, the company currently lacks visibility into when memory availability will meet surging demand.
The current memory scarcity traces back to strategic choices made during the post-pandemic downturn. Throughout 2023, Micron experienced negative gross margins across four consecutive quarters and significantly reduced capital investment plans. These conservative moves have created what is now the industry’s most severe supply constraint on record.
Additional manufacturing capacity isn’t expected to become operational until approximately 2027, with further expansion planned for 2028. This extended timeline has granted Micron unprecedented pricing leverage in the marketplace.
Long-Term Contracts Lock In the Upside
Micron has strategically capitalized on this advantage by securing customers into three-to-five-year take-or-pay commitments featuring both price floors and ceilings, along with upfront cash deposits. To date, the company has executed 16 such agreements, projected to account for approximately 40% of revenue when fully implemented.
According to Mehrotra, the price floor established in these contracts sits “well above” the highest quarterly margins from any previous cycle. For context, the prior peak reached 61% in Q4 2018. Since 2010, half of Micron’s quarterly results showed gross margins below 32% — making these 60%+ floor guarantees extending through 2030 a fundamental transformation rather than a temporary cyclical upturn.
BNP Paribas analyst Karl Ackerman characterized this as a “transformative shift towards long-term supply agreements,” which strengthens demand visibility and diminishes cyclical volatility. Bank of America’s Vivek Arya offered a more emphatic view, telling CNBC that the memory sector is experiencing a structural evolution rather than a conventional cycle, propelled by artificial intelligence demand and stricter supply discipline. He highlighted that memory now represents 35–40% of cloud infrastructure capital expenditure.
What Analysts Are Saying
In the wake of the earnings release, 35 of 42 analysts monitored by FactSet revised their EPS projections upward. The consensus forward EPS estimate surged to $144.27 from $101.74 recorded just one month prior.
Barclays elevated its price target to $2,000. Citigroup adjusted its objective to $1,400. Goldman Sachs, maintaining a Neutral stance, increased its target to $1,100. Across 50 analysts with Buy ratings, the average price target currently rests at $1,477.17.
Despite the post-earnings surge, shares continue trading below 10 times forward earnings on certain metrics — substantially beneath the S&P 500’s valuation multiple.
Micron reached a 52-week peak of $1,255 in June. Critical resistance exists at that threshold, while the closest support level appears at the 20-day moving average near $1,025. As of Friday’s premarket activity, MU was changing hands at approximately $1,150.
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