Key Takeaways
- Micron (MU) stock rallied 15.74% Thursday following fiscal Q3 results showing adjusted EPS of $25.11 and revenue of $41.46 billion, before retreating over 5% Friday morning
- The chipmaker delivered an 85% gross margin in its third quarter and projected approximately 86% for Q4, with expected revenue around $50 billion
- The company has secured 16 long-term take-or-pay supply agreements with clients, expected to represent roughly 40% of total revenue extending to 2030
- Wall Street analysts significantly increased EPS projections after the report — consensus forward EPS now sits at $144.27, climbing from $101.74 a month earlier
- Price target upgrades included Barclays moving to $2,000; the mean analyst target across all Buy ratings now stands at $1,477.17 among 50 analysts
Micron Technology (MU) stock skyrocketed 15.74% Thursday after the memory chip manufacturer delivered exceptional fiscal third-quarter earnings. However, by Friday’s premarket session, shares had surrendered more than 5% of those gains, hovering near $1,150 as traders took profits following the dramatic surge.
The financial results were impressive by any measure. Micron delivered adjusted earnings per share of $25.11 against revenue of $41.46 billion. The company’s adjusted gross margin reached 84.9%. Looking ahead to Q4, management projected adjusted EPS near $31 alongside revenue approaching $50 billion.
During the earnings conference call, CEO Sanjay Mehrotra emphasized that customers now recognize memory and storage supply constraints “will take considerable time to improve.” He noted that despite anticipated gradual supply expansion expected around 2028, the company presently sees no clear timeline for when memory availability will match demand levels.
The current memory shortage traces back to strategic choices made during the post-pandemic downturn. Throughout 2023, Micron experienced negative gross margins across four consecutive quarters and scaled back capital investment initiatives. These strategic pullbacks have created what is now the industry’s most constrained supply environment on record.
Additional manufacturing capacity isn’t anticipated to launch until approximately 2027, with further expansion planned for 2028. This supply-demand imbalance is providing Micron with unprecedented pricing leverage.
Multiyear Agreements Secure Revenue Visibility
Micron has capitalized on this market position by securing customers into three-to-five-year take-or-pay contracts featuring defined price floors and ceilings along with advance cash deposits. The company has executed 16 such agreements to date, which will encompass approximately 40% of revenue when fully implemented.
According to Mehrotra, the price floors established in these contracts sit “well above” the highest quarterly margins from any previous cycle. For context, the prior peak margin was 61% during Q4 2018. Half of Micron’s quarterly results since 2010 registered below 32% gross margin — making the locked-in floors above 60% through 2030 a fundamental transformation rather than cyclical fluctuation.
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 elaborated further during a CNBC appearance, describing the memory sector’s evolution as a structural transformation rather than conventional cyclicality, fueled by AI requirements and improved supply discipline. He highlighted that memory currently represents 35–40% of cloud infrastructure capital expenditure.
Wall Street’s Response
Following the quarterly report, 35 out of 42 analysts monitored by FactSet increased their earnings projections. The consensus forward EPS forecast surged to $144.27 from $101.74 just one month prior.
Barclays elevated its price target to $2,000. Citigroup adjusted upward to $1,400. Goldman Sachs, maintaining a Neutral stance, raised its target to $1,100. The average price target among 50 analysts with Buy recommendations currently stands at $1,477.17.
Despite the earnings-driven rally, the stock continues trading at less than 10 times forward earnings under certain calculations — significantly below the broader S&P 500 valuation multiple.
Micron reached its 52-week peak of $1,255 in June. Critical resistance exists at that level, while immediate support appears around the 20-day moving average near $1,025. As of Friday’s premarket trading, MU was changing hands at approximately $1,150.
