Micron's $61.5 billion forecast beats estimates, on a smaller step than last quarter

Micron on Wednesday reported revenue of $54.23 billion for the quarter ended September 3 and forecast $61.5 billion, plus or minus $1.5 billion, for the next quarter. Analysts had expected $57.02 billion on average, compiled by LSEG.

Two quarters ago, revenue was $23.86 billion. It rose by $17.6 billion in the next quarter, to $41.46 billion, and by $12.77 billion in the quarter just ended. The next increase is $7.27 billion at the middle of the new range. Even revenue of $63 billion, the top of the range, would be a smaller step up than either of those increases.

The revenue is still going up, in smaller jumps. Mark Murphy, the chief financial officer, said he expects revenue to rise in each quarter of the new financial year, and price increases to come at a more moderate pace.

Revenue was nearly five times the $11.32 billion of a year earlier, and above the high end of the June forecast of $50 billion, plus or minus $1 billion. Adjusted profit was $33.42 a share, up from $3.03. Adjusted gross margin, the share of sales left after the cost of making the chips, was 87%, up from 45.7%.

Murphy put the next quarter's adjusted gross margin at about 86.25%, below the 87% just reported. He said this quarter should be the low point for the new financial year.

Micron raised incentive pay last quarter. Most of the extra manufacturing pay went into the cost of chips still in inventory, and selling those chips pulls the margin down now. Murphy expects higher margins after this quarter.

The shares closed at $1,065.11, little changed on the day, and barely moved in trading after the report. After the June report, they jumped about 15% in trading after the close.

Micron is 26.5% of CDRAM, a fund that holds the big memory-chip makers. Micron's stake is through swaps, contracts that track the shares. Samsung and SK hynix are the other large holdings.

The fund fell 1.5% before the report and was little changed after it.

"As strong as fiscal 2026 was, we expect fiscal 2027 to be even better," Sanjay Mehrotra, chairman and chief executive, said on the call.

He said industry demand has strengthened since the last earnings call.

"We expect memory and storage supply-demand conditions to be much tighter in calendar 2027 and 2028 than they were in 2026," he said.

Those are years on a normal calendar, not Micron's financial year, which ends in early September.

Mehrotra said the company has no line of sight to when supply and demand will balance.

He said Micron has completed agreements for the vast majority of its high-bandwidth memory supply for calendar 2027, with significant price increases from a year earlier. High-bandwidth memory is the stacked chips used alongside AI processors.

New rooms arrive late

Murphy said Micron expects about $25 billion of spending on factories and equipment in the first half of the new financial year, close to the $27.4 billion it spent in the year just ended, with higher spending in the second half.

Mehrotra said the company will spend more for the year than it had planned. Most of the increase is for construction, to open cleanroom space in late calendar 2028 and beyond. Cleanrooms are the controlled rooms where chips are made.

In June, Manish Bhatia, executive vice president of global operations, said fiscal 2027 construction dollars "are not going to be producing bits in that time horizon." Bits are the chips. New factories, he said, start to add them in calendar 2028.

The cleanroom space is due in late calendar 2028, at the tail of the tight years, with more space after that. Mehrotra said supply stays tight even as those rooms start up.