Micron locked in historically elevated HBM (high-bandwidth memory) prices with major customers via multiyear agreements.
Memory chip maker Micron has secured historically high pricing for its products over the next five years through 16 "strategic customer agreements" (SCAs) that include floor prices guaranteeing what CEO Sanjay Mehrotra described as "a very robust gross margin for Micron, well above our peak quarterly margins in any past cycle."
Most SCAs cover the 2026–2030 period and commit customers to purchase specified quantities at prices within a band featuring both floor and ceiling prices. The floor ensures Micron's elevated margins, while the ceiling protects customers against further price increases.
Mehrotra explained the appeal of these arrangements despite their high margins: "Our customers are recognizing that supply shortages in memory and storage will take considerable time to improve. Even as we expect industry supply to improve gradually in 2028, we currently do not have line of sight as to when memory supply will be able to catch up with increasing demand."
He noted that even ambitious fab-building efforts provide limited relief, as increased memory complexity extends construction timelines. When new facilities come online, capacity remains insufficient to meet concurrent demand for high-bandwidth memory required for AI alongside conventional NAND and DRAM products.
"Supply is structurally constrained in its growth and ability to meet industry demand, despite our comprehensive efforts to increase supply," Mehrotra said.
The SCAs will represent 40 percent of Micron's revenue, leaving the company free to negotiate pricing on the remainder of its inventory.
Micron expects 2026 DRAM output growth in the "low- to mid-20s percentage range," slightly above prior guidance. The SCAs include upfront customer payments, which will help fund fab expansions.
The company reported Q3 revenue of $41.5 billion—a fifth consecutive quarterly record and 346 percent year-over-year increase. DRAM revenue alone reached $31.3 billion, up 343 percent year-over-year, while NAND revenue rose 361 percent to $9.9 billion. Net income hit $28.9 billion with a consolidated gross margin of 84.9 percent.
For Q4, Micron guided to $50 billion in revenue with gross margins of approximately 86 percent. Executives predicted that memory's increasing complexity will command even higher costs in future products.
IT professionals will face pressure to optimize workloads for constrained memory availability. Mehrotra predicted conventional server sales will grow in the mid-teens percentage range during 2026, but anticipated "modest reduction in average server DRAM content growth as customers focus on maximizing unit shipments amid a very tight allocation of memory."
Investors responded positively, with Micron's share price rising 15 percent in after-hours trading.