Micron Earnings: Impressive AI-Driven Pricing Beat Guidance

Key Morningstar Metrics for Micron Technology

• Fair Value Estimate: $150.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of Micron Technology’s Earnings

Micron Technology’s MU quarterly results exceeded its updated guidance from mid-August, with revenue rising 46% year over year to $11.3 billion. Management guided for more than 40% year-over-year growth in the October quarter. High-bandwidth memory quarterly revenue hit $2 billion.

Why it matters: Micron’s guidance for continuing rapid growth far exceeded our estimates, and implies a torrid rate of artificial intelligence chip investment continuing. Micron is one of two leading HBM suppliers and is gaining share against incumbent SK Hynix, which further boosts its growth.

• HBM chips remain heavily supply-constrained, which is buoying pricing and greatly expanding Micron’s profitability. Gross margin guidance above 50% handily beat our model. A greater mix of HBM within Micron’s sales going forward elevates our view of durable margins.
• We expect Micron to hit its HBM market share target of around 20% in the next quarter. Going forward, we see less opportunity for share gains against Hynix and improved competition from Samsung. We still expect HBM revenue to double in fiscal 2026 and rise in the double digits thereafter.

The bottom line: We raise our fair value estimate for no-moat Micron to $150 per share from $120 as we incorporate higher DRAM pricing, led by HBM. This drives our medium-term revenue and margin estimates higher. Shares still look overvalued to us, considering longer-term memory cyclicality.

• We model an AI-driven DRAM upcycle in the medium term, but still see memory chips as cyclical. Longer-term, we expect more pricing pressure from competition with Hynix and Samsung to weigh on growth and profitability. We don’t see Micron holding these profit levels over a five-year period.
• Micron shares have doubled year to date, and we see significant upside priced in, shown by a modest 3% pop after hours despite impressive guidance. Buying at current levels requires investors to believe in durable profitability at these levels, of which we’re skeptical.