Memory leader Micron opened semiconductor earnings season. FY26Q1 corresponds to September through November 2025.
Micron FY26Q1 Earnings:
Revenue $13.64B, up 57% year over year, up 21% sequentially, above consensus of $12.92B. Projected FY26Q2 revenue $18.7B, up 132% year over year, up 37% sequentially.
GAAP gross margin 56%, up 17.6 pp year over year, up 11.3 pp sequentially. Projected FY26Q2 gross margin 67%, up 11 pp sequentially (far exceeding prior GAAP gross margin peak of 61% in FY18Q4).
GAAP operating income $6.14B, up 68% sequentially, operating margin 45% (far exceeding prior GAAP operating income peak of $4.3B in FY18Q4).
Operating cash flow $8.41B, up 47% sequentially (far exceeding prior operating cash flow peak of $5.2B in FY18Q4).
GAAP net income $5.24B, up 64% sequentially, above consensus of $4.33B. Non-GAAP net income $5.48B, up 58% sequentially, above consensus of $4.57B. Projected FY26Q2 GAAP net income $9.34B, up 78% sequentially; Non-GAAP net income $9.68B, up 77% sequentially (far exceeding prior GAAP net income peak of $4.33B in FY18Q4).
This quarter repurchased $300M. 80% of employees use AI tools; ~30% of code involves AI assistance.
Business Segments:
DRAM revenue $10.04B, up 57% year over year, ninth consecutive quarter of growth, up 12% sequentially, 74% of revenue. DRAM bit shipments up slightly sequentially; ASP up 20% sequentially.
NAND revenue $2.45B, up 9% year over year, returned to growth, up 9% sequentially, revenue share at a historical low of 18%. NAND bit shipments up mid-to-high single digits sequentially; ASP up mid-teens% sequentially.
By End Market:
CMBU business, represented by cloud customer DRAM and overall data center HBM, revenue $5.28B, up 100% year over year, up 16% sequentially, 39% of revenue, gross margin 66%, up 7 pp sequentially.
CDBU business, represented by OEM data center DRAM and overall data center NAND, revenue $2.38B, up 4% year over year, up 51% sequentially, 17% of revenue, gross margin 51%, up 10 pp sequentially.
MCBU business, represented by smartphone/PC DRAM and NAND, revenue $4.26B, up 63% year over year, up 13% sequentially, 31% of revenue, gross margin 54%, up 18 pp sequentially.
AEBU business, represented by auto/industrial/consumer DRAM and NAND, revenue $1.72B, up 49% year over year, up 20% sequentially, 13% of revenue, gross margin 45%, up 14 pp sequentially.
Server shipments are expected to grow high-teens% year over year in 2025 (raised); 2026 server demand will remain robust. The company's core data center products fall into three categories: HBM, high-density D5/LP5, and data center SSDs. Micron's server LPDRAM consumes one-third the power of DDR DRAM modules. The company sampled 192GB LP SOCAMM2 products this quarter. Data center NAND revenue exceeded $1B this quarter, with strong data center SSD demand. Micron launched its first PCIe Gen6 SSD, currently in hyperscaler qualification. In mainstream storage, G9 NAND SSD demand is strong. In high-capacity storage, QLC 122TB/245TB G9 SSDs are in qualification at multiple hyperscalers.
HBM revenue hit a new sequential record this quarter (over $2B). By comparison, SK hynix's Q3 HBM revenue was approximately $5.2B. Management stated that 2026 HBM revenue will be composed of both HBM3E and HBM4, and is expected to grow significantly year over year, though no specific guidance was provided.
On the product side, 2026 HBM capacity is sold out, with volume and pricing locked in — unlike the previous D5 environment where prices could float. HBM4 (logic die developed in-house, 1-beta node) will ship in 2026 Q2, with yield ramp expected to be faster than HBM3E. The logic die for HBM4E, slated for volume production in 2027, was announced to be in partnership with TSMC, enabling customization; custom versions carry higher gross margins than standard products, and customer interest in custom versions is high. The 2025 HBM TAM is estimated at over $35B (unchanged), rising to $100B by 2028 (raised), reaching the $100B milestone two years early. The 2028 HBM TAM will exceed the entire 2024 DRAM TAM. However, management did not provide a specific 20%+ market share target this time.
2025 PC shipments are expected to grow high-single-digits year over year (raised). 2026 PC shipments are expected to be impacted by constrained memory supply. Micron completed qualification of 16Gb 1-gamma D5 and G9 PCIe Gen4 QLC SSDs with multiple customers. 2025 smartphone shipments are expected to grow low-single-digits year over year (unchanged). Smartphone DRAM content continues to rise; 59% of flagship phones this quarter shipped with 12GB+ DRAM. This quarter, 16Gb LPD6 and 24Gb LP5X products based on 1-gamma process began sampling. In consumer electronics, memory and storage demand may be affected by price increases, and phone and PC customers may adjust product mixes to cope with supply constraints.
Industrial demand recovered this quarter. Automotive design wins reached billions of dollars, with strong D4/LP4 demand. The Virginia fab expansion announced in June supports industrial customer D4/LP4 needs.
Earnings Call Highlights:
2025 DRAM bit demand growth is expected in the low-20% range (raised); NAND bit demand growth in the high-teens% range (raised). Micron expects both DRAM and NAND bit shipments to grow 20% year over year in 2026.
DRAM and NAND supply-demand tightness is expected to persist beyond 2026 (raised). Capacity is primarily constrained by cleanroom space, not equipment. 2026 NAND capacity growth will be driven mainly by the G9 QLC node; by end of FY26, G9 will become the largest QLC NAND node. DRAM capacity growth will come from expansions: Idaho ID1 targets DRAM volume production by mid-2027; ID2 breaks ground in 2026, with volume production in 2028; Japan fab cleanroom expansion; New York fab plans to break ground early 2026, with volume production starting 2030; Singapore HBM assembly/test factory targets 2027 volume production; India assembly/test plant has begun trial production and will reach volume production in 2026.
FY26 capex guidance raised to $20B (previous quarter was $18B), with the majority related to HBM and other DRAM.
The company is negotiating multi-year contracts covering DRAM and NAND with several key customers. These contracts differ from traditional LTAs, containing specific commitments and stronger contractual structures. Because the company can only fulfill a portion of demand (50%-67%), overall supply capability must be factored into contract discussions.
This quarter DIO was 126 days, with DRAM DIO below 120 days. No gross margin guidance provided beyond FQ2, but given the continued favorable market environment, management believes gross margin still has upside, with both DRAM and NAND gross margins rising — though not as steeply as before at these already elevated levels (68%).
Micron's new front-end capacity additions are focused on the 1-gamma node for mainstream DRAM, which serves overall DRAM bit growth and the cost curve and does not directly correspond to incremental HBM supply. The more direct HBM expansion path is: as non-HBM DRAM currently running on the 1-beta node gradually migrates to 1-gamma, the freed-up 1-beta capacity and resources can be reallocated to support the front-end DRAM wafer supply needed for HBM.
Overall, Micron's earnings significantly exceeded expectations, with guidance in particular signaling that 2026 will mark the true onset of the earnings explosion for US-listed AI semiconductors — this year is merely the appetizer.
As previously noted, with Micron's valuation logic having shifted from cyclical to growth, the market needed more positive signals on HBM TAM upgrades. Management finally delivered guidance for the TAM to breach $100B two years early. Long term, Micron's core growth pillars remain HBM, high-density D5/LP5, and data center SSDs. In the near term, however, non-HBM business margins have significantly outpaced HBM, buoyed by the pricing upcycle.
Following the official HBM TAM update, assuming Micron maintains 25% HBM share in 2028 and a 30% net margin, that implies $7.5B net income. At a PEG of 1, that equates to a 40x P/E, valuing the HBM business at roughly $300B. Unfortunately, management declined to guide for 25% HBM share.