Micron on Wednesday evening delivered a much better-than-expected quarter and indicated that its fiscal year 2027 will be another strong one as demand for its memory products continues to exceed supply. Revenue in the fiscal 2026 fourth quarter, which ended Sept. 3, rose 379% year-over-year to $54.23 billion, a beat versus the $51.07 billion consensus forecast, according to estimates compiled by LSEG. Adjusted earnings per share (EPS) increased 1,002% to $33.42, beating expectations of $31.61, LSEG data showed. MU YTD mountain Micron YTD Shares traded in a tight range in after-hours trading, but settled around the flat line after management finished its post-earnings conference call. The stock had a good September, rallying roughly 11%. For the year, Micron is up roughly 275%. However, it is down 12% from its record close of $,1213 on June 25. Bottom line It was a record-setting year for Micron as tight supply conditions and surging demand for memory in AI applications led to healthy increases in its average selling prices, resulting in soaring revenue, gross margins, and EPS. Remember, there are two main products in the memory market. There is NAND, which is storage memory, like a flash drive. There is also dynamic random access memory, or DRAM for short, which is considered working memory, like the RAM in your computer. There’s also a specialized form of DRAM called HBM, or high-bandwidth memory, which is the key enabling technology for modern AI workloads. While AI accelerators do the math that underpins AI computing, they rely on HBM to store and feed them data. For AI to be deployed efficiently and at scale, systems require higher memory bandwidth and greater memory capacity. Due to the growing memory needs of AI systems, DRAM and NAND industry demand has significantly exceeded supply, and no one truly knows when the two will find a balance. As tight as memory and storage supply and demand conditions were in 2026, Micron expects conditions to be even tighter in calendar 2027 and 2028 because supply simply can’t catch up to demand. Roughly 75% of Micron’s expected output in 2027 is already spoken for, and customers are already speaking with the company on their allocations for 2028. “The structural gap between DRAM supply and demand growth rates is resulting in ongoing supply tightness, and cleanroom additions are required to augment node-transition supply growth and help narrow the gap,” CEO Sanjay Mehrotra said in the company’s prepared remarks. Cleanroom additions refer to the physical expansion of manufacturing capacity by building and installing more equipment. Jim Cramer recently visited one of the company’s massive semiconductor fabrication sites, or fabs as the industry calls them, which is under construction near headquarters in Boise, Idaho. “Even with additional industry DRAM cleanroom space plans, with robust demand trends including new upside requests from customers, we do not have line of sight to when supply and demand will return to balance,” Mehrotra added. Demand for memory has fundamentally changed in this superintelligence era, and products from the three main players, U.S.-based Micron, as well as South Korean companies Samsung and SK Hynix , have become increasingly differentiated. While we should still think of memory as a cyclical industry where prices peak and decline as demand is overestimated and supply catches up, fears of peak pricing are why Micron trades at an incredibly cheap price-to-earnings multiple of around 6 times forward EPS estimates. This ongoing imbalance is driving price increases each quarter and causing customers to race to secure access to memory chips. Micron is signing more and more strategic customer agreements, or SCAs, to change its business model and provide greater visibility into future revenue and pricing. The goal of these SCAs is to move away from memory’s boom-bust characterization and create a cycle that stays higher for longer, with more defined pricing bands. Micron has now signed up 26 SCAs to date, up from 16 last quarter. Typically, these agreements were supposed to last from calendar 2026 through the end of calendar 2030. However, Micron said more customers want to secure supply beyond that date, and the company is meeting those requests by signing one-year extensions to 2031. To help meet these customer agreements, Micron is committed to increasing capital expenditures to build new fabs and boost production. There is always risk when a company plans major capacity expansion programs because of shortages and price increases. In any cycle, the industry reaches a point where adding new capacity stokes fear of overbuilding, which would cause prices to plummet. However, Micron believes the revenue visibility the SCAs offer, as well as the cash deposits required in these deals, give them confidence to keep investing to meet soaring demand. There was nothing new in terms of a share repurchase program, but we still think a big one could be announced later this year. Micron has been prohibited from buying back stock beyond offsetting stock-based compensation due to a CHIPS Act funding agreement. Those restrictions are set to ease in December. With free cash flow of $33 billion in this quarter alone and an additional $128 billion expected to be generated in the new fiscal year, according to FactSet, Micron could potentially announce a share repurchase program that could rival Nvidia’s recent record-setting $150 billion increase to its previously authorized $85 billion program. The market is currently treating Micron’s beat and upside guidance as a good enough outcome to support the stock’s recent rally. Micron can be volatile after earnings, so we’ll wait and see where the chips fall Thursday morning. But with industry conditions in 2027 and 2028 expected to be even tighter than in 2026, Micron’s earnings should continue to grow, while a massive buyback program could provide further support for the stock. We are increasing our price target to $1,200 from $1,100. We are also reiterating our buy-equivalent 1 rating, which is consistent with our most recent addition to the position on Sept. 3. Why we own it Micron should continue to benefit from the growing memory demands of AI, which are driving supply shortages and higher average selling prices. Newly signed strategic customer agreements (SCAs) should make earnings more durable than in past memory cycles, while growing free cash flow provides significant capacity for future share buybacks. Competitors: Samsung, SK Hynix Last buy: Sept. 3, 2026 Initiation date: Aug, 11, 2026 Outlook Turning to the guide, Micron expects revenue in its fiscal 2027 first quarter to be $61.5 billion, plus or minus $1.5 billion. That’s stronger than the $57.02 billion consensus estimate, according to LSEG. Over the full year, the company anticipates sequential revenue growth each quarter. Gross margin in the current quarter is expected to be approximately 86.25%, which is a slight dip from the Q4 result of 87% and slightly below estimates of 86.31%, according to FactSet. While that may be a little disappointing, the dip is mostly tied to the company’s decision to increase compensation for its employees. That’s an important distinction because a dip tied to softening average selling prices would be more worrisome. Easing any concerns around the gross margin decline, management said it believes fiscal Q1 will be the floor for gross margins for the year. Finally, off the strong revenue forecast, adjusted EPS is expected to be $38.15, plus or minus $1, which is above the consensus estimate of $35.40, according to LSEG. (Jim Cramer’s Charitable Trust is long MU. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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We’re raising our Micron price target after an incredible quarter and robust guidance
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