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Micron beat its revenue, margin and EPS guides, not its cost guide; contracts now carry its shortage

Micron's operating margin reached 80.7% as price gains faded, and the case for tight supply for years now leans on customer contracts whose early price ceilings management left unanswered on the call.

Published · Updated · Inve Research Desk

Micron Technology stock page → More news from Oct 1, 2026

80.7%

operating margin last quarter (GAAP)

By our arithmetic, most of each sales dollar survived operating costs; the climb has slowed: GAAP rose 0.3 points on the quarter before, after a $500 million patent license charge, while non-GAAP margin of 82.3% rose 1.1 points.

How they did last quarter

Better than guided on revenue, gross margin and non-GAAP earnings per share; worse than guided on operating expenses, which ran far above the guide.

  • Revenue
    $54,229 million, +379.3% on a year ago
    vs Guidance of 24 June 2026: "$50 billion, plus or minus $1 billion"
    Above the top of the range by 6.3% and the midpoint by 8.5%, by our arithmetic.
  • Gross margin
    87.0% non-GAAP, 86.8% GAAP
    vs Guidance of 24 June 2026: "approximately 86%"
    About a point above the guide on the non-GAAP basis, by our arithmetic; the quarter before was 84.9% non-GAAP.
  • Operating expenses
    $2,568 million non-GAAP; $3,296 million GAAP
    vs Guidance of 24 June 2026: "approximately $1.65 billion" non-GAAP, and about $1.86 billion GAAP
    55.6% over the non-GAAP guide, by our arithmetic; the GAAP figure includes a $500 million patent license charge.
  • Earnings per share
    $33.42 non-GAAP
    vs Guidance of 24 June 2026: "$31 per share, plus or minus $1"
    $1.42 above the top of the range, by our arithmetic.

Revenue beat its guide again; the cost line did not

Micron's sales in the quarter ended 3 September 2026 beat the top of the range the company guided in June. It is the sixth quarter in a row to do so against the opening guide, counted over the last eight quarters, but its margin over the midpoint has narrowed from 27.6% two quarters ago to 23.7% and then 8.5%, by our arithmetic.

The line that went the other way was cost. The company guided operating expenses in June; the quarter came in 55.6% over that guide on a non-GAAP basis, by our arithmetic. It attributes the rise to higher incentive pay and a community contribution, and now guides a much larger rise in next year's costs than it did in June.

The price gains that lifted the margin have faded

Operating margin, the share of sales left after running costs, is 80.7%, up 0.3 points on the quarter before on a GAAP basis by our arithmetic, after a patent license charge; the company's non-GAAP margin was 82.3%, up 1.1 points. The company says the gross margin rise came primarily from higher pricing and strong execution, partly offset by mix. Management said DRAM price gains slowed sharply from the quarter before. It guides gross margin lower for next quarter and called that quarter the low point of the year.

Guided sales for next quarter, at the midpoint of the guide, need single-digit bit growth plus further price and mix gains, by our arithmetic.

The shortage rests on contracts; one price question is open

Management now says supply stays tight for years, and that more than 75% of 2027 output is already committed. Asked how long the imbalance lasts, the chief operating officer said "we really don't have line of sight to when supply and demand balances". The contracts carry that case: customer supply agreements are up sharply since June, and the deposits behind them are owed back later and booked outside free cash flow.

The open question is price. In June the largest agreements generally had a ceiling at the market price then prevailing. Asked on the call whether those ceilings reset to today's conditions, the same executive said most frameworks have floor and ceiling bands and that newer ones are "negotiated with an eye towards the current market conditions"; he described the earlier ones as set at second-quarter market conditions but did not say whether they moved. DRAM prices rose again last quarter, so an unchanged ceiling would cap the upside on those volumes. That is our reading, not the company's.

Cash flow, last four fiscal years

Free cash flow here is operating cash flow less spending on property, plant and equipment; customer deposits are booked in financing, so they are not in it.

$ million

Operating cash flowFinancing cash flowFree cash flow
Sep 202215,181−2,9803,114
Aug 20231,5594,983−6,117
Aug 20248,507−1,842121
Aug 202517,525−8501,668

Most added spending is construction; clean rooms late 2028+

Capital spending for the year just ended was $27.4 billion net, against its last guide of about $27 billion, after management raised its guide at each of the three calls following its first figure of about $18 billion in September 2025. For the next fiscal year it guides the first half alone at about $25 billion, with the second half higher. Most of the increase is construction, and the chief financial officer agreed that "the spend there doesn't translate into bits".

The last downturn shows the downside path: operating margin fell from 34.8% to -62.4% within a year. The business now differs in mix, with contracts and high-bandwidth memory, so this is a path, not a forecast.

Debt, equity and cash at the latest four balance-sheet dates

Debt fell and equity rose from the first date shown, so borrowing is no longer the constraint.

$ million

DebtEquityCash
Aug 202514,57754,1659,642
Nov 202511,75658,8069,731
Feb 202610,14272,45913,908
May 20265,722100,72424,995

What we do not know yet

Cash is not the constraint: debt fell by about 64% over the year, by our arithmetic. The company intends to raise capital returns from December, and we will see then how large they are. We also do not know whether the early price ceilings moved.

Cost is where this quarter's guide broke: non-GAAP operating expenses were over the guide a quarter earlier too.

Micron Technology stock page →

The record: notes, full financial tables

Notes

  1. Impact 4/5 Order book Mixed

    Micron has 26 supply deals, $12.7B of customer cash; no answer on early price ceilings

    Micron said it has 26 strategic customer agreements, up from 16 on 24 June 2026, with about $150 billion of remaining performance obligations at minimum volume and price. Noncurrent customer contract liabilities were $12,895 million at 3 September 2026, against $568 million at 28 May 2026. In June the largest agreements generally carried ceilings at the then-current market price; asked on the call whether those reset, the chief operating officer said most frameworks have floor and ceiling bands and newer ones reflect current conditions; he described the earlier ones as set at second-quarter conditions but did not say whether they moved. By our reading, standing ceilings cap upside.

  2. Impact 4/5 Demand Mixed

    Micron's DRAM price gain slows to high teens from low 60s; sees tighter supply in 2027-28

    Management said DRAM prices rose in the high teens last quarter, after a low-60s percent rise the quarter before, and NAND prices about 30% after the mid-80s. Even so it says supply will be much tighter in 2027 and 2028, with more than 75% of 2027 output already committed, a figure it did not give on the call of 24 June 2026; in June it said conditions would stay tight beyond calendar 2027. Guided revenue of $61.5 billion for next quarter is 13.4% above last quarter's on single-digit bit growth, so by our arithmetic price and mix must still add roughly 4% to 13% at the midpoint of the guide.

    “we really don't have line of sight to when supply and demand balances”— Manish Bhatia, President and Chief Operating Officer

  3. Impact 4/5 Guidance Negative

    Micron's non-GAAP costs ran 55.6% over guidance; fiscal 2027 rise now $2.5B, not $1B

    Operating expenses in the quarter ended 3 September 2026 were $2,568 million non-GAAP and $3,296 million GAAP, above the June guides of about $1.65 billion non-GAAP and about $1.86 billion GAAP. GAAP includes a $500 million patent license charge, so non-GAAP is 55.6% over the guide by our arithmetic; that includes a $300 million community contribution, and without it the quarter was still 37% over, by our arithmetic. Management now guides fiscal 2027 operating expenses up about $2.5 billion, as presented on the calls, mainly R&D and incentive pay, where on 24 June 2026 it guided about $1 billion; the base year is not stated on the call.

    “excluding the incentive comp effects, the year-over-year R&D is going to be more than the $1 billion that we said last quarter”— Mark Murphy, Chief Financial Officer

  4. Impact 4/5 Capex Mixed

    Micron's fiscal 2027 capex tops $50B by our sum; most of the increase is construction

    Micron guided about $11.5 billion of capital spending in the first fiscal quarter and about $25 billion for the first half of fiscal 2027, with the second half higher; it gave no full-year figure on the call. By our sum that is more than $50 billion for the year, against $27.4 billion net in fiscal 2026, versus a last guide of about $27 billion that management reached by raising it at each of three calls after its first figure of about $18 billion on 23 September 2025. The company said most of the increase is construction, much of it clean rooms that come online in late 2028 and beyond.

    “the spend there doesn't translate into bits”— Mark Murphy, Chief Financial Officer

  5. Impact 3/5 Balance sheet Mixed

    Micron holds $73.5B cash and investments, plans larger returns; no size on the call

    Micron had $73.5 billion of cash, marketable investments and restricted cash and $5.2 billion of debt at 3 September 2026, and said it intends to raise capital returns from 9 December 2026. New since 24 June 2026, the chief financial officer expects to reach a target cash level, which he did not size on the call, by the end of the first fiscal quarter, and said to expect a request for more repurchase authorisation than the current $2.2 billion. In fiscal 2026 dividends and repurchases came to $1,260 million, 2.0% of adjusted free cash flow of $62.3 billion by our arithmetic.

Financials

Income statement, last 8 quarters

$ million; YoY and margin in %
Quarter endSalesYoYOperating profitOp. marginPBTNet profit
May 202641,456+345.7%33,31880.4%33,21228,243
Feb 202623,860+196.3%16,13567.6%16,16013,785
Nov 202513,643+56.7%6,13645.0%6,0615,240
Aug 202511,315+46.0%3,65432.3%3,6313,201
May 20259,301+36.6%2,16923.3%2,1131,885
Feb 20258,053+38.3%1,77322.0%1,7581,583
Nov 20248,709+84.3%2,17425.0%2,1521,870
Aug 20247,750+93.3%1,52219.6%1,510887

Balance sheet

$ million
As ofEquityDebtCashFixed assetsTotal assets
May 2026100,7245,72224,99556,426134,112
Feb 202672,45910,14213,90851,408101,509
Nov 202558,80611,7569,73148,47785,971
Aug 202554,16514,5779,64246,59082,798

Cash flow

$ million
Year endOperatingInvestingFinancingFree cash flow
Aug 202517,525−14,087−8501,668
Aug 20248,507−8,309−1,842121
Aug 20231,559−6,1914,983−6,117
Sep 202215,181−11,585−2,9803,114