EquitiesMarket noteThursday 1 October 2026, 22:44
Micron says the memory shortage will get worse, not better
Revenue rose 379% to $54.2bn and the gross margin reached 87%. Micron expects supply to be much tighter in 2027 and 2028. The shares, up 273% this year, rose 3%.
By The Notebook Desk
Micron Technology reported revenue of $54.2bn for the three months to 3 September, up 379% from a year earlier, and said the shortage of memory chips behind that growth will get worse. “We expect memory and storage supply-demand conditions to be much tighter in fiscal 2027 and 2028 than they were in 2026,” Sanjay Mehrotra, the chief executive, said in the company’s prepared remarks.
The results beat forecasts on every line. Analysts polled by LSEG expected revenue of $51.07bn and adjusted earnings of $31.61 a share, CNBC reported. Micron earned $33.42. For the three months to early December it guided to revenue of $61.5bn, give or take $1.5bn, and $38.15 a share. Analysts had pencilled in $35.40 a share on revenue of $57bn, according to CNBC.
Margins that chipmakers rarely see
The gross margin was 87.0% on Micron’s adjusted measure, up from 45.7% a year earlier. Operating profit was 82.3% of revenue. Net income, on standard accounting, was $37.7bn in one quarter, against $8.5bn in the whole of the previous year.
That is a higher margin than Nvidia’s. The maker of AI processors reported a gross margin of 75.0% for its quarter to July. Memory chips are a far more standard product than Nvidia’s processors, and Micron sells them against Samsung and SK Hynix. The margin shows how short supply is.
Prices did most of the work. DRAM, the working memory in servers, phones and PCs, brought in a record $39.8bn, 73% of the total. Its average price rose by a percentage in the high teens on the previous quarter, while the number of bits shipped rose by a mid-single-digit percentage. NAND, the memory used for storage, rose about 30% in price.
Revenue has risen every quarter for a year. A year ago Micron’s quarterly revenue was $11.3bn. In the three months to February it was $23.9bn, and the quarter just reported more than doubled that.
The data-centre business grew fastest. Revenue in Micron’s Core Data Center unit rose to $18.0bn from $1.58bn a year earlier, an elevenfold increase. Sales of solid-state drives for data centres were nearly $10bn, more than ten times the year-ago figure. Revenue for the whole year to September was $133.2bn, up from $37.4bn.
Why the shortage lasts
New supply takes years. Micron expects the industry to ship a little over 20% more DRAM bits a year in 2027 and 2028 and to stay short of supply in both years. “We do not have line of sight to when supply and demand will return to balance,” the company said.
The constraint is factory space. Micron’s first new plant in Idaho should start output in the middle of 2027, a second in late 2028, and the first New York fab in 2030. It will spend about $11.5bn in the current quarter and about $25bn in the first half of the financial year, with more to come in the second half. Most of the increase on earlier plans is for new buildings.
Customers are paying to secure supply. Micron has signed 26 multi-year supply agreements, up from 16 a quarter earlier, under which buyers must take the volumes or pay for them. Micron estimates they cover more than 35% of its revenue through 2030. Customers have committed $32bn to them, mostly as cash deposits. Even at the floor prices in those contracts, Micron said, it expects margins “meaningfully above any prior cycle peak”.
Why the shares barely moved
The stock was flat before the open on Thursday and closed up 3.0% at $1,097.39. It has risen 273% this year, according to CNBC, and more than 500% over the past twelve months. Micron’s market value has passed $1.2 trillion.
Much of the good news was expected. Goldman Sachs, which rates the shares neutral, pointed to “elevated investor expectations” and some pressure on the gross margin. Micron raised pay for every employee in fiscal 2026, and its operating expenses rose $1.1bn in the quarter. It expects the gross margin to dip to about 86.25% this quarter, which it called the floor for the year. Deutsche Bank and Bank of America both set a price target of $1,550.
The bigger question for the shares is how long the shortage lasts, because prices, not volumes, drove the latest quarter’s growth. Micron’s own answer is at least two more years.
What to watch
Micron plans to raise its returns to shareholders from 9 December, the second anniversary of its agreements under the CHIPS Act, and expects to return all of its excess cash over time. Its next results will show whether the margin holds near 86% as pay rises. The first test of new supply comes in early 2027, when Micron’s HBM packaging plant in Singapore starts output, and in mid-2027, when the Idaho fab does.
Disclosure
This is analysis and opinion, not investment advice.