AKYLA
Equity Research
Semiconductors & Related Devices
Initiation of Coverage — BUY
Last Updated: June 28, 2026
Micron Technology, Inc. (MU)
Memory is no longer a commodity: SCAs, HBM and three-player supply discipline underwrite a path to 2x by mid-2028.
Thesis
- The FQ3'26 print is a regime change, not a cyclical bounce. Revenue of $41.46B (+74% QoQ, +346% YoY) on a record 84.9% non-GAAP gross margin, with FQ4 guided to ~$50B at ~86% GM and ~$31 EPS, reflects an industry that is now supply-determined. Mehrotra: demand 'continues to significantly exceed industry supply ... we expect tight conditions to persist beyond calendar 2027.'
- The 16 Strategic Customer Agreements structurally de-commoditize memory. 14 of 16 carry ~$100B cumulative minimum-price revenue commitments over a 5-year, non-cancelable take-or-pay term, backed by ~$22B of cash deposits and financial commitments (~$18B cash). Management expects ~half of company revenue under SCAs, with floor-price gross margins 'well above our peak quarterly margins in any past cycle.'
- HBM is the differentiator and it is sold out. >$1B HBM4 already shipped, HBM4 12-high ramping ~2x faster than HBM3E 12-high, with custom logic base dies (HBM4E on a TSMC node) turning DRAM into a design-win business. HBM is fully booked through CY2027 into 2028; Micron is deliberately holding HBM share near its DRAM share to protect non-HBM supply.
- Supply is structurally constrained in a disciplined three-player industry. Greenfield fabs are 'large, complex and time-consuming'; the HBM trade ratio and slowing per-node bit gains pressure non-HBM bits. Management has 'no line of sight as to when memory supply will be able to catch up with increasing demand,' with only gradual relief in 2028.
- PATH TO 2x: At ~$1,132 the stock trades at only ~12x the ~$98 FY2027 consensus EPS. A double does not require heroics — it is available via (a) re-rating toward a low-20s P/E as SCAs prove durability, and/or (b) FY2028 EPS growth on a $50B+/quarter run-rate. We anchor a base-case target of ~$2,250 (~$2.6T market cap, ~2x today), bridged below and corroborated by UBS's $1,625 and the >$1T re-rating framing.
Q1 FY27 Earnings Snapshot
Disclaimer
This is not financial advice.
This report is for informational purposes only and is not investment advice.
The Q3 call materially advanced the bull case, and did so in a way that is hard to dismiss as a cyclical sugar-high. Revenue of $41.46B beat the $35.69B Street figure by $5.77B (16%) and EPS of $25.11 beat by $4.62 (23%) — the fifth straight quarterly record and the largest sequential dollar increase ($17.6B) in company history. The composition matters: DRAM was a record $31.3B (76% of revenue) with pricing up in the low-60s% sequentially, and NAND a record $9.9B (24%) with pricing up in the mid-80s% — i.e. the quarter was overwhelmingly price, not bits (DRAM bits up only low-single-digits). That is the signature of a supply-determined market, and it carried gross margin to 84.9% and operating margin to 81.2% on just $1.5B of opex. The strategic news is the bigger story. Micron disclosed 16 Strategic Customer Agreements — 5-year, non-cancelable, take-or-pay contracts with price floor/ceiling bands — that management says will 'fundamentally transform our business model.' 14 of 16 carry ~$100B of cumulative minimum-price revenue, backed by ~$22B of deposits and financial commitments (~$18B in unrestricted cash). Crucially, Mehrotra stated the floor price still implies gross margins 'well above the peak ... in any past cycle,' which reframes the downside of the next memory cycle. Data-center revenue exceeded $25B in the quarter (>$100B annualized run-rate), and management guided FQ4 to a record ~$50B (+/-$1B) at ~86% GM and ~$31 EPS — sequential margin expansion even as it flags a 'meaningful moderation in the rate of price increases.'