Revenue nearly doubled, gross profit margin doubled! Despite Micron's explosive earnings report, Wall Street remains concerned

Ask AI · Why did Micron’s stock price fluctuate despite its earnings report exceeding expectations?

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American memory chip giant Micron Technology delivered an earnings report that far exceeded expectations, but its soaring capital expenditure plans left investors feeling uneasy.

On March 18 local time, Micron Technology released its financial report for the second fiscal quarter of 2026, ending February 26. The company’s revenue surged to $23.86 billion, compared to $8.05 billion in the same period last year, a year-on-year increase of 196%, far exceeding market expectations of $20.07 billion; GAAP net profit soared to $13.79 billion, up from just $1.58 billion in the same period last year; the non-GAAP adjusted earnings per share (EPS) was $12.20, higher than the market expectation of $9.31. Meanwhile, the company’s gross margin significantly improved to 74.4%, doubling from 36.8% in the same period last year.

In terms of guidance, Micron Technology expects third-quarter revenue to be $33.5 billion, compared to $9.3 billion in the same period last year, an increase of over 200%, exceeding market expectations of $24.3 billion; adjusted EPS is projected to be $19.15, higher than the market expectation of $12.05.

Micron Technology CEO Sanjay Mehrotra stated, “In the second fiscal quarter of 2026, Micron Technology set records in revenue, gross margin, EPS, and free cash flow, thanks to a strong demand environment, tightening industry supply, and the company’s excellent execution. We expect to set multiple records again in the third fiscal quarter. In the AI era, memory has become a strategic asset for customers, and we are increasing our investments in global manufacturing capabilities to support the growing demand from customers.”

Mehrotra noted that based on confidence in the company’s continued strong performance, the board has approved a 30% increase in the quarterly dividend.

Micron Technology’s last quarter performance summary. Source: Financial Report

As memory suppliers have shifted most of their capacity to prepare HBM4 high-bandwidth memory for AI tasks, demand for ordinary storage chips continues to soar. In the past, memory profits were lower than other silicon products, and contract terms were generally shorter. However, in recent months, as major semiconductor manufacturers strive to secure future capacity, memory producers have begun signing long-term contracts.

In the second fiscal quarter, Micron Technology’s cloud storage business revenue grew over 160%, reaching $7.75 billion. Revenue from mobile and client businesses grew even stronger, surging from $2.24 billion in the same period last year to $7.71 billion. Mehrotra stated during the earnings call that both AI servers and traditional servers are facing a “shortage of DRAM and NAND (the two main products of storage chips).”

The company emphasized that the memory chip industry is currently in a state of supply shortage, and this situation is expected to persist until after 2026, providing solid support for product pricing in the short and medium term. With the development of AI, it is expected that computing architectures will become increasingly dependent on memory, “firmly believing that Micron is one of the biggest beneficiaries and drivers in the AI field.”

Mehrotra stated that the HBM4 memory for NVIDIA’s latest computing platform Vera Rubin began mass production in the first fiscal quarter of this year, and shipments of the next-generation HBM4e products are expected to increase significantly starting in 2027. Previously, NVIDIA indicated that it would use customized HBM in its next-generation Feynman GPU, which is set to launch in 2028.

However, with regard to capital expenditure, Micron Technology’s expectations are also soaring. The company anticipates that capital expenditures for fiscal year 2026 (ending this August) will exceed $25 billion, higher than the market expectation of $22.4 billion. Mehrotra also pointed out that the capital expenditures for fiscal year 2027 will “increase significantly,” with construction-related costs rising by over $10 billion.

Currently, Micron Technology is building two giant manufacturing plants in Idaho and New York to enhance its memory manufacturing capabilities in the United States. Mehrotra stated that the Idaho plant is expected to begin production in mid-2027. The new plant in New York started construction in January this year and is expected to begin wafer production in the second half of 2028.

On the 18th, Micron Technology (Nasdaq: MU) saw a slight increase of 0.01%, closing at $461.73 per share, with a total market capitalization of $519.68 billion. After the earnings report was released, the company’s stock price briefly rose before falling, dropping more than 5% at one point. So far this year, the company’s stock price has risen over 60%.

Due to the cyclical nature of rising storage prices, investors are taking a wait-and-see approach, focusing on whether suppliers can achieve returns on investment before this current boom ends.

Ben Bajarin, CEO of investment firm Creative Strategies, believes that the higher capital expenditure outlook for Micron Technology is reasonable: “Given the demand situation, they need to continue investing to meet capacity needs—there are no signs of relief in the short term.”

Hendi Susanto, portfolio manager at investment firm Gabelli Funds, stated, “Based on the stock price movement prior to the earnings report, I think the biggest risk is that investors’ expectations are too high. However, Micron Technology’s guidance for the third fiscal quarter is very strong, far exceeding the expectations of analysts, including myself.”