TLDR
- Micron delivered Q2 revenue of $23.9B with EPS of $12.20, crushing Wall Street expectations by 21% and 36% respectively
- Q3 guidance projects $33.5B in revenue and $19.15 EPS, surpassing analyst estimates by 42% and 70%
- Q3 gross margin forecast at 81% — outpacing Nvidia’s 75% benchmark
- Multiple analyst upgrades followed, with Citi and UBS targeting $510 and Cantor Fitzgerald reaching $700
- Shares tumbled approximately 4% after-hours despite record results due to elevated capex outlook and margin peak concerns
Micron Technology delivered what may be its most impressive quarterly performance ever, yet investors sold off the stock. It’s a market reaction that demands closer examination.
The semiconductor manufacturer announced fiscal second quarter revenue of $23.9 billion — representing a staggering 196% year-over-year surge and 75% sequential growth. Adjusted earnings per share reached $12.20, marking a 682% climb compared to the prior year period.
These figures exceeded analyst projections by 21% for revenue and 36% for earnings.
Chief Executive Sanjay Mehrotra highlighted that revenue across DRAM, NAND, HBM, and every business segment achieved record levels. The explosive growth in AI data center infrastructure continues to fuel unprecedented demand for high-bandwidth memory solutions and advanced storage technologies.
Yet despite this stellar performance, MU shares declined approximately 4% during after-hours trading following the announcement.
Investor anxiety centered on two key factors. First, Micron increased its capital expenditure forecast for fiscal 2027. Second, market participants worried that gross margins might be reaching their peak — despite the remarkable 81% figure representing exceptional performance for any hardware company.
The stock had already climbed 354% in the year leading up to the earnings release, making some degree of profit-taking almost inevitable.
Analyst Reaction
Citi’s Atif Malik maintained his Buy recommendation while boosting his price objective to $510 from $430, highlighting the stronger-than-anticipated margin performance. He characterized the central investment question as whether MU can continue appreciating alongside DRAM pricing — driven by AI-related demand and constrained fabrication capacity — or if prices will moderate following a robust first quarter.
Malik suggested a possible near-term shift toward semiconductor capital equipment stocks given the elevated capex projections.
UBS analyst Timothy Arcuri similarly increased his target to $510 from $475 while maintaining his Buy stance. His commentary struck a more cautious tone, observing that with gross margins now exceeding 80%, much of the potential upside from subsequent earnings beats may already be priced into shares.
UBS also highlighted new extended customer contracts Micron recently secured, including one five-year agreement — exceeding UBS’s initial expectations. The firm interprets these contracts as evidence that customers consider memory products strategically essential to their operations.
Numerous other Wall Street firms issued upgrades. Cantor Fitzgerald established a $700 price target. Rosenblatt increased its objective to $600. Wolfe Research raised its target to $550.
Outlook and Valuation
The guidance for the May quarter captured the most attention. Micron forecasted revenue of $33.5 billion with EPS of $19.15 — exceeding consensus estimates by 42% and 70% respectively.
Gross margin projections came in at approximately 81%, a substantial improvement from 38% in Q3 fiscal 2025 and 75% in Q2 fiscal 2026.
On a forward price-to-earnings metric, MU currently trades at only 8x — remarkably low for a company experiencing this growth trajectory. However, some market observers interpret a single-digit forward multiple on a cyclical semiconductor stock as a cautionary signal rather than an attractive entry point, since markets often anticipate peaks well before they materialize.
UBS maintains a historical perspective that Micron typically reaches its valuation peak roughly nine months before margin peaks occur.
As of the latest trading session, MU was changing hands at $443.52 before retreating to $395.14.
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