Earnings Report Surges! Micron Shuts Up the Bears

Micron Technology ended market doubts about the sustainability of the AI investment boom with a historic earnings report.

After hours on Wednesday, Micron released its third quarter results, with revenue, profits, and next quarter guidance all beating Wall Street expectations. Its stock price surged 14% after the bell, lifting Nasdaq futures as well.

This earnings report came at just the right time—over the past few days, technology stocks faced broad sell-offs, spreading from South Korean chip manufacturers to American optical fiber cable suppliers. Micron’s own share price had already dropped 7.5% this week.

After the report was published, analysts believed that these results were enough to inject new momentum into the recently battered tech sector. Micron CEO Sanjay Mehrotra stated during the earnings call that, the company expects the memory market’s supply shortage to persist beyond 2027 and has already signed long-term strategic agreements with several major clients to lock in current high price levels.

Record Gross Margin Surpasses Nvidia and Meta

The most stunning number for the market this quarter was Micron’s gross margin.

Micron’s third-quarter gross margin reached 84.9%, a significant jump from 74.9% last quarter and more than doubling the 39% from a year earlier. CFO Mark Murphy said on the call, “The third quarter gross margin more than doubled from a year ago, marking a new company high.”

This figure surpasses all major U.S. tech companies. Nvidia’s latest quarterly gross margin is 75%, Meta’s is around 81.9%, Broadcom’s is 69.5%, Microsoft’s is 67.6%, and Alphabet’s is 62.4%. Micron’s competitor SanDisk reported a 78.4% gross margin at the end of April, also far below Micron’s current level. It’s worth noting that Nvidia’s gross margin peaked at around 79% in early 2024, but Micron’s current level surpasses that by nearly six percentage points.

Micron also expects its gross margin to further rise to around 86% in the fourth quarter. Susquehanna analyst Mehdi Hosseini commented, “For an industry that has been out of favor with the market for 30 years since its inception, this is a complete transformation.”

Revenue and Profit Both Reach All-Time Highs

In addition to gross margin, Micron’s revenue and net income also set new records in the company’s 48-year history.

Third quarter revenue reached $41.46 billion, increasing by more than $20 billion from last quarter—which was itself the company’s previous all-time high. Net profit was $28.24 billion, more than doubling the previous peak, which was also just set last quarter.

As of Wednesday’s close, Micron’s share price has risen over 700% in the past year, and its market cap surpassed $1 trillion.

The driving logic behind this growth is the explosive expansion of AI infrastructure. Nvidia, AMD, and Google need Micron’s high-bandwidth memory (HBM) to support their AI processors, and data center operators are snapping up all available memory at any cost.

At the same time, consumer electronics manufacturers like Apple are also facing increased pressure from memory costs. According to The Wall Street Journal, Apple CEO Tim Cook stated last week that iPhone prices would have to rise to cope with what he described as an “unsustainable” memory pricing situation.

Long-Term Contracts to Lock in High Prices, Supply Shortage May Persist Beyond 2027

Faced with external doubts about the sustainability of the AI boom, Micron is reinforcing its profitability with structural measures.

Micron said it is signing long-term contracts with clients called “Strategic Customer Agreements” (SCAs), which set a price floor to ensure its gross margins remain above historical peaks. Mehrotra stated on the call, “The price floors in these agreements allow Micron to achieve significantly stronger gross margins than the peak of any previous cycle quarter.” The company has already signed such agreements with four ‘hyperscale customers’.

This strategy marks a major shift for the memory industry, which has traditionally relied on short-term supply contracts and seen prices fluctuate widely with the cycle, long viewed as a typical commodity business. Now, Micron is attempting to institutionalize its pricing power.

According to The Wall Street Journal, Goldman Sachs recently advised clients that “the investment boom may persist, and near-term expectations for its scale may still need to be revised upward. But with much of the value already priced in, the market is more vulnerable to news challenging the optimistic outlook.”

Market Volatility Increases, But the AI Narrative Remains Central

Despite Micron’s strong earnings, the market’s structural fragility cannot be ignored.

Earlier this week, investors pulled out of South Korea’s SK Hynix and Samsung en masse, affecting Micron, Nvidia, and Oracle as well, with the latter tumbling 15% this week. According to FactSet, a record $437 million flooded into an ETF aimed at triple-short semiconductors on Monday, leading to a sharp stock market drop the following day. Dow Jones market data shows that the index tracking U.S. semiconductor companies is trading over 60% above its 200-day moving average, the highest since 2000.

Ron Albahary, chief investment officer of multi-family office LNW, said, “Are these market sell-offs normal? I think they are. We are seeing more days with big swings up and down; it’s just a sign that the market is highly dependent on a specific narrative.”

Micron’s earnings, at least for now, provide strong support for this narrative. Hosseini maintains a buy rating on Micron stock, noting that as the ‘memory bottleneck effect continues to emerge, customers have no choice but to pay a premium.’