Micron Technology (MU) — Earnings Preview Memo
Key Factors to Watch in the Upcoming Q4 2026 Report
| Factor | What to Watch For | Context / Notes |
|---|---|---|
| Revenue Growth | Q4 2026 guidance: $50.0B ± $1.0B; consensus: $50,784M | Sequential and YoY growth is extremely high; compare to Q4 2025 actuals ($11,315M) |
| Gross Margin | Guidance: ~86% (record level); consensus: 86.3% | Up from 84.9% in Q3 2026 and 44.7% in Q4 2025; sustainability and drivers of margin expansion |
| EPS (GAAP/Non-GAAP) | Guidance: $30.73 ± $1.00 (GAAP), $31.00 ± $1.00 (Non-GAAP); consensus: $31.16 | Massive YoY jump; Q4 2025 actual GAAP EPS was $2.83 |
| Free Cash Flow | Q3 2026 FCF: $18.3B; Q4 2026 expected to increase substantially | Watch for cash generation and capital allocation commentary |
| Strategic Customer Agreements | Progress on SCAs: % of revenue under SCA, cash deposits, pricing bands, impact on visibility/durability | 16 SCAs signed as of Q3 2026, targeting ~half of revenue under SCA by end of Q4 |
| CapEx | Q4 2026 guide: ~$10B; FY26E: ~$27B; FY27E: above $40B | Construction spend is majority of increase; watch for updates on fab buildouts and supply ramp |
| Supply/Demand Balance | Management expects tightness in DRAM/NAND to persist beyond 2027 | Any change in tone or signals of supply catching up would be material |
| Segment Mix | Data center, HBM, and SSDs are key drivers; watch for mix shifts and commentary on non-HBM DRAM/NAND | Data center revenue run-rate >$100B annualized in Q3 2026 |
| Pricing Trends | Moderation in rate of price increases flagged for Q4 2026 | Watch for management color on pricing environment and SCA price band impacts |
| Cost Structure | Commentary on start-up costs for new fabs, DRAM bit cost trends, and impact of greenfield investments | Management expects blended DRAM cost per bit to rise near term |
Summary and Conclusions
- Micron is set to report another record quarter in Q4 2026, with guidance for revenue ($50B), gross margin (~86%), and EPS ($31) all at unprecedented levels.
- The company is coming off a period of extraordinary growth, with Q3 2026 revenue up +346% YoY and gross margin at 84.9%.
- Key focus will be on the durability of these results: management has flagged that a meaningful portion of revenue will be under multi-year Strategic Customer Agreements (SCAs) with take-or-pay, floor/ceiling pricing, and large cash deposits.
- Supply remains structurally constrained, and management expects tightness in DRAM and NAND to persist well beyond 2027.
- CapEx is scaling rapidly to address demand, but greenfield capacity will not materially impact supply until 2028.
- Investors should watch for any change in tone on supply/demand, SCA progress, pricing moderation, and cost structure as new fabs ramp.
- Year-over-year comparables are extremely easy, with Q4 2025 revenue at $11.3B and gross margin at 44.7%.
Quarterly Financial Snapshot — Actuals and Consensus
Quarterly Income Statement: Q4 2026 Guidance vs. Prior Quarters
| Quarter | Revenue ($M) | Gross Margin (%) | Net Income ($M) | EPS (GAAP) | Free Cash Flow ($M) | CapEx ($M) |
|---|---|---|---|---|---|---|
| Q4 2026E | 50,000 ±1,000 | ~86 | 30.73 ±1.0 | Substantially ↑ | ~10,000 | |
| Q3 2026 | 41,456 | 84.9 | 28,243 | 24.67 | 18,304 | 7,100 |
| Q2 2026 | 23,860 | 74.9 | 13,785 | 12.07 | 6,899 | 5,004 |
| Q1 2026 | 13,643 | 56.8 | 5,240 | 4.60 | 3,906 | 4,505 |
| Q4 2025 | 11,315 | 44.7 | 3,201 | 2.83 | 803 | 4,927 |
Note: Q4 2026E figures are company guidance; Q4 2026 consensus revenue is $50,784M, gross margin 86.3%, EPS $31.16.
Annual Financial Snapshot — Actuals and Consensus
| Fiscal Year | Revenue ($M) | Gross Margin (%) | Net Income ($M) | EPS (GAAP) | Free Cash Flow ($M) | CapEx ($M) |
|---|---|---|---|---|---|---|
| FY2026E | 129,736 | 80.7 | 84,044 | 72.67 | 27,000+ | |
| FY2025 | 37,378 | 39.8 | 8,539 | 7.59 | 3,721 | 13,804 |
| FY2024 | 25,111 | 22.4 | 778 | 0.70 | 386 | 8,121 |
Segment Performance — Q3 2026
| Segment | Revenue ($M) | Gross Margin (%) | Operating Margin (%) |
|---|---|---|---|
| Cloud Memory Business Unit | 13,769 | 83 | 78 |
| Core Data Center Business | 11,524 | 87 | 83 |
| Mobile & Client Business | 11,521 | 87 | 86 |
| Automotive & Embedded | 4,634 | 79 | 75 |
Guidance — Q4 2026
| Metric | Guidance (Q4 2026) | Notes |
|---|---|---|
| Revenue | $50.0B ± $1.0B | Record level; consensus $50,784M |
| Gross Margin | ~86% | Record level; up from 84.9% in Q3 2026 |
| Operating Expenses | ~$1.65B | Up from $1.52B in Q3 2026 |
| Diluted EPS (GAAP) | $30.73 ± $1.00 | Consensus $31.16 |
| Diluted EPS (Non-GAAP) | $31.00 ± $1.00 | |
| CapEx | ~$10B | Full year FY26: ~$27B; FY27: above $40B |
| Free Cash Flow | Substantial increase | Q3 2026 FCF: $18.3B |
Guidance — Strategic Customer Agreements (SCAs)
- 16 SCAs signed as of Q3 2026, covering ~20% of DRAM volume and 1/3 of NAND volume through 2030.
- Targeting ~half of company revenue under SCA by end of Q4 2026.
- SCAs are take-or-pay, non-cancellable, with annual volume commitments and price bands (floor/ceiling).
- $22B in customer cash deposits and related financial commitments already secured; expected to rise as more SCAs are signed.
- Floor prices provide gross margins "well above" prior cycle peaks (prior peak ~62%).
- SCAs include both data center and non-data center customers; four large and three medium-sized agreements.
What Happened Last Year? (Q4 2025)
- Q4 2025 revenue: $11,315M (+46% YoY)
- Gross margin: 44.7% (+9.4pp YoY)
- Net income: $3,201M
- EPS (GAAP): $2.83
- Free cash flow: $803M
- CapEx: $4,927M
Q4 2026 is coming off an extremely easy YoY comparable, with revenue and profitability expected to be more than 4x higher than Q4 2025.
Key Management Commentary and Themes
On Demand and Supply:
- Demand signals have increased further since last earnings; aggregate demand for DRAM and NAND is "far above" industry supply.
- Management expects 2027 to be even tighter than 2026, with no line of sight to supply/demand balance.
- "We now expect that 2027 calendar year will be even tighter than 2026 because the growth in demand that is taking shape is faster than the growth in supply for calendar 2027 on an industry basis."
On Strategic Customer Agreements:
- SCAs are transformative, providing long-term visibility, binding volume and price commitments, and significant upfront cash deposits.
- "These SCAs are structured as take-or-pay agreements, we are binding commitments to purchase specific volumes over this multiyear term."
- "When completed, we expect approximately half or more of our company revenue to be under these SCAs with customers across end markets."
On Margins and Pricing:
- Gross margin guidance for Q4 2026 is ~86%, with management noting that even at SCA floor prices, margins are "well above" prior cycle peaks.
- Rate of price increases is moderating, but price levels remain extremely high.
- "Our fiscal Q4 gross margin outlook reflects a meaningful moderation in the rate of price increases."
On CapEx and Capacity:
- CapEx is scaling rapidly: Q4 2026 guide ~$10B, FY26E ~$27B, FY27E above $40B.
- Majority of incremental CapEx is for construction (greenfield fabs), which will not contribute to bit supply until 2028.
- Start-up costs for new fabs will begin to impact P&L in Q4 2026 and FY27, but are expected to be modest relative to the scale of the business.
On Segment Mix and Product Roadmap:
- Data center, HBM, and SSDs are key growth drivers; data center revenue run-rate >$100B annualized in Q3 2026.
- HBM4 ramp is proceeding at twice the rate of HBM3E; HBM4E (on 1-gamma node) to ramp in 2027.
- Non-HBM DRAM and NAND also remain highly constrained.
What to Watch For in the Print
- Execution on Q4 2026 guidance: Revenue, gross margin, and EPS are all at record levels; any deviation will be closely scrutinized.
- SCA Progress: Update on % of revenue under SCA, additional agreements signed, and impact on forward visibility.
- Pricing Environment: Any change in tone on pricing moderation, especially as SCAs with price bands become a larger share of revenue.
- CapEx and Supply Ramp: Updates on fab construction timelines, start-up costs, and when new capacity will impact supply.
- Segment Mix: Data center, HBM, and SSD performance; commentary on non-HBM DRAM/NAND allocation and margins.
- Cost Structure: Impact of greenfield investments and product transitions (e.g., LP6, DDR6, HBM4E) on cost per bit and margin sustainability.
- Cash Generation and Capital Returns: Magnitude of free cash flow, plans for buybacks/dividends post-CHIPS Act restrictions.
Conclusion
Micron enters Q4 2026 with record momentum, driven by AI-fueled demand, structural supply constraints, and a transformed business model anchored by multi-year SCAs. The upcoming print will be a test of the durability of these trends, the company's ability to execute on massive CapEx plans, and the sustainability of historically high margins and cash flow. With extremely easy YoY comps, investor focus will be on forward visibility, SCA coverage, and any early signs of normalization in pricing or supply/demand balance.
