Memory chips maker Micron (NYSE: MU) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 56.7% year on year to $13.64 billion. On top of that, next quarter’s revenue guidance ($18.7 billion at the midpoint) was surprisingly good and 29.3% above what analysts were expecting. Its non-GAAP profit of $4.78 per share was 20.7% above analysts’ consensus estimates.

Is now the time to buy MU? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Micron’s fourth quarter performance was met with a significant positive market reaction, as its results exceeded Wall Street expectations for both revenue and non-GAAP earnings. Management attributed the quarter’s outperformance mainly to surging demand for advanced memory products across data center, AI, and automotive applications. CEO Sanjay Mehrotra pointed to record results across all business units and highlighted that both DRAM and NAND sales benefitted from tight supply and higher pricing. He explained, “We achieved a number of records in fiscal Q1,” emphasizing that strong execution in a constrained supply environment and increasing AI adoption were central to the quarter’s results.

Looking ahead, management’s guidance is built around ongoing supply-demand tightness and accelerating AI-driven investment in high-performance computing. Mehrotra stated that Micron has already secured agreements for its entire 2026 HBM (High Bandwidth Memory) production and expects the HBM total addressable market to reach $100 billion by 2028, two years earlier than previously forecast. CFO Mark Murphy added that the company’s ability to maintain margin expansion will depend on continued yield improvements and cost execution as it ramps new technology nodes. Management acknowledged that supply constraints may limit the ability to fully meet customer demand, especially as AI memory content in servers and edge devices continues to rise.

Key Insights from Management’s Remarks

Management attributed quarterly momentum to robust AI-related demand, tight industry supply, and operational progress in advanced memory technologies, which drove margin expansion and record results across all business units.

• AI accelerates data center growth: The rapid build-out of AI data centers drove demand for high-performance memory, with HBM and data center DRAM at the center of this trend. Mehrotra noted that memory is “now essential to AI cognitive functions,” shifting its role from a system component to a strategic enabler for real-time processing.

• HBM and multiyear contracts: Micron finalized price and volume agreements for all of its 2026 HBM supply, including HBM4, and is negotiating multiyear contracts with stronger commitments than in past cycles. This approach reflects customer concerns around long-term access and further solidifies Micron’s competitive position in AI memory.

• Technology node transitions: The ramp of advanced DRAM (1-gamma) and NAND (G9) nodes is on track and will be primary drivers of bit growth in 2026. Management emphasized that these transitions are enabling higher yields, lower costs, and product differentiation, particularly in AI and automotive markets.

• Tight supply environment: Industry-wide constraints, especially for HBM, are expected to persist into and beyond 2026. Micron is only able to meet around half to two-thirds of demand from key customers in the medium term, and is accelerating investment in new clean room space and manufacturing sites in the U.S. and Asia.

• Cost discipline and margin expansion: Strong cost execution, improved product mix, and operational leverage led to a sharp improvement in gross and operating margins. Murphy indicated that while some startup costs are expected as new fabs ramp, yield improvements and scale should offset these pressures as new nodes become the majority of output.

Drivers of Future Performance

Micron’s near-term outlook is shaped by sustained AI infrastructure investment, persistent supply constraints, and the company’s ongoing transition to advanced memory nodes.

• AI-led demand and product mix: Management expects the surge in AI-related demand for HBM and high-performance DRAM to drive strong revenue and margin growth, but supply limitations may cap shipment volumes. Mehrotra explained that Micron’s “technology leadership is foundational” as AI platforms increasingly require higher memory content.

• Capacity expansion and supply risk: The company is investing in new clean room space and accelerating the timeline for manufacturing expansions in Idaho, New York, Japan, Singapore, and India. Murphy cautioned that despite these efforts, industry supply will remain tight and Micron will not be able to satisfy full customer demand in the near-term, particularly for HBM products.

• Technology transition execution: The pace and success of ramping 1-gamma DRAM and G9 NAND nodes will be crucial for cost competitiveness and profitability. Management highlighted that faster yield improvements and continued cost discipline are necessary to sustain margin expansion as new products become a larger share of output.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) how quickly Micron can ramp advanced DRAM and NAND nodes to sustain cost and margin advantages, (2) progress on manufacturing expansions in Idaho, New York, and Asia to relieve supply constraints, and (3) the pace of multiyear contract signings and their impact on visibility and pricing. Execution on new AI-enabled product launches and the ability to meet strong customer demand despite industry tightness will also be critical markers of success.

Micron currently trades at $243.72, up from $226.00 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).

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