Micron Says Memory Supercycle Has No End in Sight as It Hikes Capex and Locks In $32 Billion of Customer Deposits
Fiscal Q4 2026 earnings call, September 30, 2026
Micron closed out fiscal 2026 with numbers that would have sounded implausible a year ago: revenue of $133.2 billion, up 256% year-over-year, gross margins of 81.1%, and earnings per share up 811% to $75.52. But the headline from Wednesday's call was not the magnitude of the quarter just reported, it was management's insistence that the memory market is nowhere near finding equilibrium, and that the company is widening its capital spending plans to chase a shortage that CEO Sanjay Mehrotra says has no visible end date. "Even with additional industry DRAM cleanroom space plans, with robust demand trends including new upside requests from customers, we do not have line of sight to when supply and demand will return to balance," Mehrotra said, a statement that sets the tone for the entire print.
Capex Guidance Moves Higher, Weighted Toward Construction
The most consequential new data point was Micron's decision to raise fiscal 2027 capital expenditures above prior plans, with first-half spending alone guided to approximately $25 billion and the second half expected to be higher still, implying a full-year figure north of $50 billion. CFO Mark Murphy was explicit that the incremental dollars are going into cleanroom construction rather than equipment, a distinction that matters because it signals Micron is racing to secure physical capacity years in advance of needing to tool it. "A majority of the increase is for construction CapEx, most of which is to help accelerate cleanroom space availability in late calendar 2028 and beyond," Mehrotra said. Analyst Krish Sankar of TD Cowen pressed on whether equipment lead times were capping near-term spending; Murphy's response made clear the constraint is structural and multi-year, tied to greenfield buildouts across Virginia, Idaho, New York, Japan, Taiwan and Singapore, several of which won't produce meaningful output until 2028 or later. Despite the step-up in capex, Murphy noted capital intensity remains well below historical mid-30s percentage norms, a point he attributed to the industry's "structural reset" rather than underinvestment.
Strategic Customer Agreements Scale to $32 Billion in Commitments
Micron now has 26 signed strategic customer agreements, representing north of 35% of revenue through 2030 and generating $150 billion in remaining performance obligations, up sharply from the 16 agreements disclosed last quarter. Financial commitments backing those contracts, mostly cash deposits, have grown to $32 billion. Three-quarters of the SCA revenue has a defined pricing framework, mostly with floor-and-ceiling bands, and management reiterated that even at floor pricing, margins should run meaningfully above any prior cycle peak. More notably, Mehrotra disclosed that customers are now asking for supply assurance beyond 2030, with some agreements already extended into 2031. He also volunteered that more than 75% of Micron's calendar 2027 output is already spoken for across SCA and non-SCA customers combined, and that the bulk of current customer conversations are now centered on 2028 allocations, an unusually long planning horizon for a historically cyclical industry.
HBM Pricing Jumps, Narrowing the Margin Gap With Conventional DRAM
Micron said it has now completed agreements covering the vast majority of its calendar 2027 HBM bit supply at prices significantly higher year-over-year, a dynamic management says is closing the margin gap between HBM and conventional DRAM. The company also confirmed it is co-developing a custom HBM4E implementation with NVIDIA, branded NVHBM, for adoption in next-generation GPU and NVLink Fusion platforms, an unusually specific disclosure about a named customer collaboration. On the question of whether a large customer is "despec-ing" HBM content to manage costs, a concern analyst Krish Sankar raised directly, Mehrotra pushed back on the framing, arguing that any content optimization is being done to let customers ship more units rather than reflecting weaker underlying demand, and that HBM bit demand will continue to outgrow conventional DRAM through 2028.
Gross Margin Guidance Dips Before Reaccelerating
Fiscal Q1 revenue guidance of $61.5 billion, plus or minus $1.5 billion, was paired with a gross margin guide of roughly 86.25%, down from Q4's 87%, which initially reads as a deceleration. Murphy explained the drag is almost entirely self-inflicted: Micron boosted fiscal 2026 incentive compensation for every employee, most of which was capitalized into inventory in the fourth quarter and will flow through cost of goods in the first quarter, compounded by similarly elevated fiscal 2027 incentive comp accruals. Combined, these costs represent roughly $1 billion of pressure in the November quarter alone. Management was unambiguous that fiscal Q1 will mark the gross margin floor for the year, with margins expected to climb through fiscal 2027 as pricing continues to rise and the comp-related drag normalizes.
Capital Returns to Step Up From December
With $73.5 billion of cash and investments on the balance sheet, a net cash position of $68.3 billion, and two credit rating upgrades pushing Micron to BBB+ across all three major agencies, the conversation naturally turned to capital return. UBS analyst Timothy Arcuri noted Micron now holds roughly double the cash of Apple or NVIDIA and asked for a specific target cash level. Murphy did not provide a hard number but confirmed Micron expects to reach its target cash balance by the end of fiscal Q1 and will begin increasing capital return, primarily via buybacks, starting December 9, 2026, the second anniversary of its CHIPS Act agreement. Bank of America's Vivek Arya pushed further, noting that free cash flow from Q2 onward alone could exceed $100 billion for the year, but management declined to size the return beyond reaffirming its long-stated intent to eventually return 100% of excess cash to shareholders. The current repurchase authorization stands at just $2.2 billion, which Murphy said will be refreshed "in the near term."
Physical AI Emerges as a New Long-Term Demand Pillar
Beyond data center AI, Micron used the call to introduce physical AI, autonomous vehicles and humanoid robots, as an incremental demand driver it expects to matter by the end of the decade. Management quantified the opportunity for the first time: Level 4-plus autonomous vehicles require more than 200 gigabytes of memory and multiple terabytes of storage, more than an order of magnitude above today's Level 2+ and Level 3 vehicles, with humanoid robots expected to carry comparable requirements. Several physical AI customers are already sampling next-generation products, and Micron said it is increasing technology roadmap investment specifically to capture this emerging category, a signal that the company views robotics and autonomy as a genuine third leg alongside data center and mobile/PC demand rather than a speculative aside.
Supply Growth Structurally Lagging Demand Through 2028
Micron's industry-level bit growth forecasts reinforce the tight-supply narrative underpinning the entire print. For calendar 2027 and 2028, the company expects industry DRAM bit shipments to grow only in the low-20s percentage range and NAND in the mid-20s range, with both markets remaining supply constrained in both years. Server unit growth is expected to stay in the high teens percentage range through 2027, even as per-unit memory content growth moderates slightly from prior expectations, which Mehrotra attributed to customers optimizing configurations to ship more units rather than any softening in underlying demand. HBM's higher trade ratio relative to conventional DRAM, combined with diminishing productivity gains from future node transitions, was cited as a structural headwind to supply growth that will persist even as new cleanrooms in Japan, Singapore and upstate New York come online toward the end of the decade.