Memory leader Micron opened semiconductor earnings season. Its FY26Q3 corresponds to March through May 2026.
Micron FY26Q3 Results:
Revenue reached $41.46B, up 346% year over year and 74% sequentially, well above the $35.43B consensus estimate. FY26Q4 revenue guidance is $50B, implying 342% year-over-year and 21% sequential growth.
GAAP gross margin was 84.6%, up 46.9 percentage points year over year and 10.2 points sequentially. FY26Q4 gross margin is expected to reach 86%, up another 1.4 points.
GAAP net income was $28.24B, up 1,398% year over year and 75% sequentially, well above the $23.66B consensus estimate. Non-GAAP net income reached $28.86B, up 1,223% year over year and 106% sequentially, versus the $23.42B consensus. FY26Q4 guidance calls for GAAP net income of $35.19B and non-GAAP net income of $35.5B.
Net assets reached $100.72B. Beginning December 9, 2026, the second anniversary of the final CHIPS agreement, Micron plans to increase capital returns and ultimately return 100% of excess cash to shareholders.
Business Segments:
DRAM revenue reached $31.33B, up 343% year over year and 67% sequentially for an eleventh straight quarter of growth, representing 76% of total revenue. Bit shipments rose by low single digits sequentially, while ASP increased in the low-60% range.
NAND revenue reached $9.94B, up 361% year over year and 99% sequentially for a third straight quarter of growth, representing 24% of total revenue. Bit shipments rose by mid-single digits sequentially, while ASP increased in the mid-80% range.
Neither DRAM nor NAND growth was driven primarily by shipment volume; pricing did most of the work. NAND outpaced DRAM in both bit-shipment growth and ASP gains.
By End Market:
CMBU, which includes cloud-customer DRAM and data center HBM, generated $13.77B in revenue, up 307% year over year and 78% sequentially. Operating margin reached 78%, up 12 percentage points.
CDBU, which includes OEM data center DRAM and data center NAND, generated $11.52B in revenue, up 653% year over year and 103% sequentially. Operating margin reached 83%, up 16 percentage points.
MCBU, which includes handset and PC DRAM and NAND, generated $11.52B in revenue, up 254% year over year and 49% sequentially. Operating margin rose 10 points to 86%, exceeding the data center businesses for a second straight quarter.
AEBU, which includes automotive, industrial, and consumer DRAM and NAND, generated $4.63B in revenue, up 311% year over year and 71% sequentially. Operating margin reached 75%, up 13 percentage points.
Non-data-center markets, including handsets, PCs, industrial, and automotive, contributed 39% of revenue and 40% of operating profit. Their gains came almost entirely from pricing rather than demand, making them the most exposed when the cycle turns.
Data center revenue exceeded $25B, implying an annualized run rate above $100B. Data center SSD revenue topped $5B and more than doubled sequentially. Micron raised its 2026 server shipment outlook to high-teens growth, with mid-teens growth in traditional servers and faster growth in AI servers, although average DRAM content per server was revised slightly lower. AI context-memory storage and HDD replacement continue to expand the SSD TAM.
Non-HBM products currently carry higher margins than HBM. The 1-beta-based HBM4 12-High ramp is progressing twice as fast as HBM3E 12-High, with more than $1B of HBM4 already shipped. Micron still targets an HBM share close to its DRAM share, while 1-gamma-based HBM4E is scheduled for production in 2027.
Memory revenue is expected to grow despite declining PC and smartphone unit shipments, reflecting resilient demand for higher-priced premium devices. On-device AI and pent-up replacement demand should increase memory content in both PCs and smartphones.
ADAS remains the main driver of automotive memory content. The share of L2+ vehicles is expected to more than double to above 20% this year and exceed 40% by 2030; these vehicles carry more than five times the memory content of the average vehicle. A humanoid robot carries roughly ten times the memory of an average L2+ vehicle, potentially starting a major multi-decade demand cycle later this decade.
Earnings Call Highlights:
Micron now expects 2026 DRAM bit shipments to grow in the low-to-mid-20% range year over year, an upgrade, while NAND bit growth remains at 20%.
Micron raised its outlook for DRAM and NAND shortages to persist beyond 2027, with conditions easing gradually from 2028. NAND capacity growth in 2026 will come mainly from the G9 QLC node and a new Singapore fab scheduled for production in the second half of 2028. DRAM expansion includes an EUV-ready cleanroom at the acquired PSMC fab, now expected to begin high-volume shipments in mid-2027; Idaho ID1 remains on track for mid-2027, while ID2 is newly scheduled for late 2028. Construction has started on the first New York fab cluster, the Japan cleanroom expansion is progressing, and Singapore HBM advanced-packaging capacity has been pulled forward to the first half of 2027. The result is a meaningful wave of DRAM and HBM supply in 2027, with much less incremental NAND capacity.
FY26Q4 capex is expected to be about $10B, while FY27 capex has been raised to more than $40B. Over half of the year-over-year increase will fund cleanroom capacity. Micron also signed a multi-year EUV supply agreement with ASML to increase EUV adoption at the 1-delta node and beyond, with spending concentrated on new DRAM and HBM capacity.
Micron has signed 16 strategic customer agreements, up from one last quarter, covering data center, consumer, and automotive customers: four hyperscalers, three mid-sized customers, and several smaller automotive accounts. Most agreements run for five years through 2030, while automotive contracts typically run for three. Together they cover about 20% of Micron's DRAM shipments and one-third of NAND shipments over the period. The take-or-pay contracts include binding volume commitments, price ceilings near current calendar Q2 2026 market prices, and price floors. Fourteen agreements represent roughly $100B of RPO at floor prices, with more than $5B recognized this quarter. Micron expects $22B in cash deposits and related financial commitments, including $400M received this quarter and $10B expected next quarter. About 40% of future revenue should come from fixed-price arrangements or contracts capped near today's elevated prices, and even floor pricing is expected to support gross margin well above the prior 61% peak.
Days inventory outstanding fell three days sequentially to 120, with DRAM below 120 days. Next quarter's gross margin outlook implies a material slowdown in price increases.
Overall, Micron delivered another major beat. Late last year I wrote that 2026 would mark the real earnings breakout for U.S.-listed AI semiconductor companies and that 2025 was only the appetizer. The results now support that view.
Memory stocks have continued to outperform, even as skepticism about the durability of the cycle grows. Apple, once the dominant buyer in the supply chain, has finally begun raising prices broadly, showing how bargaining power has shifted. Some see Apple's frustration as a sign that the memory cycle is peaking, but the AI era has changed the industry and Apple is no longer in its former position.
Micron's 16 detailed long-term agreements provide a meaningful answer to both concerns. They extend through 2030 with price floors, enforceable commitments, and prepayments, supporting the cycle's durability. At the same time, price ceilings are capped around this year's Q2 level, limiting the risk that excessive memory inflation destroys downstream demand.
The memory market will always remain cyclical, but the near-term divergence between DRAM and NAND should widen, with NAND potentially outperforming DRAM.
DRAM expansion is substantial and clearly scheduled to arrive in 2027, while new NAND capacity is limited and its timing remains uncertain, potentially extending beyond 2028.
NAND has greater coverage than DRAM under Micron's new long-term agreements: 33% versus 20% of shipments.
HBM has ironically become the largest drag on gross margin because pricing was locked earlier, yields remain lower, and it consumes DRAM capacity that is now more valuable elsewhere. That dynamic is especially relevant for HBM leader SK Hynix, while NAND-heavy suppliers such as SanDisk, Kioxia, Samsung, and YMTC may have greater earnings leverage. Micron's sequential NAND bit and ASP growth already points in that direction.
Media reports suggest that SK Hynix, heavily committed to HBM, may expand NAND capacity for the first time since 2018.
Korean equities have swung sharply with the two major memory producers, affecting global technology shares as well. The next catalyst is SK Hynix's planned U.S. ADR listing on July 10 Eastern Time.