Key Takeaways
- Micron delivered Q2 results showing $23.9B in revenue and $12.20 EPS, surpassing expectations by 21% and 36% respectively
- The company’s May quarter outlook projects $33.5B revenue and $19.15 EPS, exceeding analyst estimates by 42% and 70%
- Q3 gross margin forecast stands at 81% — outpacing Nvidia’s 75% margin
- Wall Street firms including Citi and UBS increased their targets to $510, with Cantor Fitzgerald reaching $700
- MU declined approximately 4% in after-hours despite exceptional results due to capex worries and margin peak speculation
When a company delivers one of its most impressive quarterly performances ever but the stock tumbles, it’s worth examining what’s really happening beneath the surface.
The memory semiconductor manufacturer announced fiscal second-quarter revenue reaching $23.9 billion — representing a staggering 196% year-over-year surge and 75% quarter-over-quarter growth. Adjusted earnings per share hit $12.20, marking a remarkable 682% climb compared to the prior-year period.
These figures handily exceeded Wall Street projections, topping consensus revenue estimates by 21% and earnings forecasts by 36%.
Chief Executive Sanjay Mehrotra noted that revenue across all segments — including DRAM, NAND, HBM, and every business division — reached record levels. The ongoing expansion of AI data center infrastructure is creating seemingly unlimited appetite for high-bandwidth memory solutions and storage capacity.
Yet despite this stellar performance, MU shares dropped roughly 4% during extended trading following the announcement.
Investor anxiety centered on two primary factors. First, Micron increased its capital spending forecast for fiscal year 2027. Second, market participants worried that gross margins might have reached their zenith — despite 81% representing an exceptional level for any hardware producer.
The stock had already climbed 354% during the preceding twelve months before reporting earnings, setting the stage for some inevitable profit-taking.
Wall Street’s Response
Citi’s equity analyst Atif Malik maintained his Buy recommendation while boosting his price objective to $510 from $430, highlighting superior margin performance. He characterized the central investment question as whether MU can continue advancing alongside DRAM pricing — driven by artificial intelligence demand and constrained new manufacturing capacity — or whether pricing pressures emerge following a robust first-quarter period.
Malik identified a possible short-term investor shift toward semiconductor equipment manufacturers given the elevated capex projections.
UBS analyst Timothy Arcuri similarly elevated his target from $475 to $510 while retaining his Buy stance. He adopted a more cautious tone, suggesting that with gross margins now exceeding 80%, much of the potential upside from additional earnings beats may already be incorporated into the valuation.
UBS also highlighted new extended customer contracts Micron secured, including a five-year agreement — lengthier than UBS anticipated. The firm interprets these arrangements as evidence that customers consider memory products strategically essential.
Numerous other Wall Street firms issued upgrades. Cantor Fitzgerald established a $700 target. Rosenblatt advanced to $600. Wolfe Research increased to $550.
Forward Guidance and Valuation Metrics
The May quarter forecast emerged as the standout figure. Micron anticipates revenue of $33.5 billion and earnings per share of $19.15 — surpassing analyst projections by 42% and 70% respectively.
Gross margin guidance arrived at approximately 81%, climbing from 38% in fiscal 2025’s third quarter and 75% in fiscal 2026’s second quarter.
Based on forward price-to-earnings calculations, MU currently trades at merely 8x — an unusually modest multiple 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 typically discount peak conditions well in advance of their actual arrival.
UBS maintains a historical perspective suggesting Micron typically reaches its stock price peak approximately nine months before margin maximums.
As of the latest trading session, MU changed hands at $443.52 before retreating to $395.14.
