Micron Technology delivered record-breaking results for the fourth quarter of fiscal 2026 and issued guidance for the next quarter that was significantly above market expectations. The company also judged that AI-driven memory demand is still strengthening, and that supply-demand conditions in the DRAM and NAND markets will tighten further in 2027 and 2028 compared with 2026.

Micron expects first-quarter fiscal 2027 revenue of $61.5 billion, plus or minus $1.5 billion, versus market expectations of $57.02 billion; non-GAAP adjusted earnings per share of $38.15, plus or minus $1, versus market expectations of $35.40. The midpoint of both guidance figures is above Wall Street expectations.

For the fourth quarter of fiscal 2026 ended September 3, Micron reported revenue of $54.229 billion, up 31% quarter over quarter and up 379% year over year, above market expectations of $51.49 billion. On a non-GAAP basis, net income was $38.398 billion, with adjusted earnings per share of $33.42, up 33% quarter over quarter. Gross margin was 87.0%, up 2.1 percentage points from the previous quarter.

After the earnings release, Micron's shares briefly rose in after-hours trading before pulling back. But Morgan Stanley noted that the market's focus is shifting from "how high can the industry upcycle go?" to "how long can this high level of prosperity last?"

The company expects first-quarter gross margin of about 86.25%, below the 87% recorded in the fourth quarter and below analysts' expectations of 86.7%. CFO Mark Murphy said the first quarter is expected to be the low point for gross margin in fiscal 2027. Gross margin is then expected to improve further over the remaining quarters of the year, though the pace of price increases will moderate.

CEO Sanjay Mehrotra said industry demand has strengthened further since the last earnings report, and the company expects memory and storage supply-demand conditions in 2027 and 2028 to be significantly tighter than in 2026.

Data center business share rises to 33%

AI data center demand remains the core driver of Micron's earnings growth.

In the fourth quarter, core data center business revenue reached $18.002 billion, up 56% quarter over quarter, accounting for 33% of the company's total revenue, with gross margin reaching 90%, up 2.9 percentage points from the previous quarter.

Cloud storage business revenue was $16.283 billion, accounting for 30% of total revenue; mobile and client business revenue was $13.114 billion, accounting for 24%; automotive and embedded business revenue was $6.824 billion, accounting for 13%.

By product, fourth-quarter DRAM revenue reached $39.8 billion, up 343% year over year, accounting for 73% of the company's total revenue. DRAM bit shipments grew in the mid-single-digit range quarter over quarter, while prices rose in the high-single-digit range, which the company said was mainly driven by tight industry supply.

NAND revenue reached $14.1 billion, up 526% year over year and up 42% quarter over quarter. NAND bit shipments rose about 10%, while prices rose about 30%, also reflecting tight supply.

Strong HBM demand, most 2027 capacity already under contract

Micron management said AI applications are continuously raising requirements for memory capacity and performance.

As model parameter scales expand, context lengths increase, and concurrency rises, AI workloads require more memory and storage capacity. The company believes memory and storage performance is becoming an important part of AI platform competitiveness.

HBM is one of the most direct beneficiaries of this trend.

Micron said fourth-quarter HBM revenue growth exceeded the company's overall revenue growth, and the company has completed agreements for most of its 2027 HBM bit supply, with related prices significantly higher than in 2026.

The company is also continuing to advance HBM4 and is working with Nvidia to develop custom HBM4E products for next-generation GPU and NVLink Fusion platforms.

In NAND, AI context storage, KV Cache offloading, and HDD replacement demand are expanding the data center SSD market. Micron's fourth-quarter data center SSD revenue approached $10 billion, up more than 10 times year over year, accounting for more than two-thirds of the company's total NAND revenue.

Micron expects supply-demand to remain tight in 2027 and 2028

CEO Sanjay Mehrotra said industry demand has strengthened further since the last earnings report, and the company expects memory and storage supply-demand conditions in 2027 and 2028 to be significantly tighter than in 2026.

Micron expects global NAND bit shipment growth in the mid-20% range in 2027 and 2028, but the industry will still be constrained by supply.

On DRAM, the company expects industry bit shipment growth in the low-20% range over the same period, with the industry also continuing to face supply constraints.

More notably, Micron said that even if the industry adds DRAM cleanroom capacity, with demand remaining strong and customers continuously raising new demand, the company currently still cannot determine when supply and demand will return to balance.

26 strategic agreements lock in long-term demand

To improve the predictability of future results, Micron is reducing the traditional cyclicality of the memory industry through strategic customer agreements.

As of now, the company has signed 26 strategic customer agreements, and revenue covered by these agreements is expected to account for more than 35% of total revenue through 2030.

About three-quarters of the related revenue already has a pricing framework in place, with most agreements including price floors and ceilings; the remaining roughly one-quarter is periodically negotiated based on market prices.

Customer financial commitments under these agreements have increased to $32 billion, the vast majority of which are cash deposits.

Micron said these agreements all include "take-or-pay" provisions, meaning customers are required to meet purchase obligations under the contracts. The company's current remaining performance obligations are about $150 billion, and calculated at the minimum prices under the agreements, related margins are still expected to be significantly higher than the peak of any past cycle.

Sanjay Mehrotra said the strategic customer agreements are strengthening the company's confidence in the sustainability of future financial performance.

Increasing capital expenditure to prepare for capacity expansion after 2028

Continued strong demand also means Micron needs to further expand capacity.

The company expects first-quarter fiscal 2027 capital expenditure of about $11.5 billion, about $25 billion in the first half, with capital expenditure in the second half of the year rising further.

Management said the main portion of the increase in fiscal 2027 capital expenditure will be used for plant and cleanroom construction to accelerate the release of capacity in the second half of 2028 and beyond.

New wafer fabs cannot immediately translate into effective supply. From the start of production to capacity truly reaching scale, several quarters of ramp-up are required.

Therefore, with AI demand continuing to grow, the market's focus in the coming quarters will shift further from simple demand growth to the gap between the pace of new capacity release and the growth in AI memory demand.