Micron is generating record profits amid a NAND and DRAM shortage driven by AI demand.

Memory supplier Micron reported surging revenues in its latest quarter as persistent memory undersupply enabled substantial price increases, resulting in a gross margin of 86.8 percent.

Revenues of $54.23 billion were up 379 percent year-over-year, significantly exceeding the company's guidance of $50 billion ± $1.0 billion. GAAP profits surged 1,078 percent to $37.7 billion, exceeding the company's entire second quarter revenue of $23.8 billion and representing 69.5 percent of quarterly revenues.

For full fiscal 2026, Micron delivered revenues of $133.2 billion, a 256 percent increase, with GAAP profit of $85 billion, up 895 percent year-over-year. Revenue was 3.5 times the prior year's record, with data center revenue up fourfold. DRAM revenue for fiscal 2026 surpassed $100 billion.

Chairman and CEO Sanjay Mehrotra stated: "Micron delivered record fiscal 2026 results, and we expect an even stronger fiscal 2027. AI is becoming Super Intelligence, and memory enhances this intelligence and the competitiveness of our customers' platforms. We are increasing our investments in technology, products and manufacturing to help drive SI forward with our customers, and our Strategic Customer Agreements provide added confidence in the durability of Micron's financial performance."

On the earnings call, Mehrotra added: "These multi-year take or pay agreements sharpen our long-term supply planning and enhance the durability and predictability of our strong financial performance."

Micron has signed 26 Strategic Customer Agreements to date, estimated to represent over 35 percent of revenue through 2030, with total financial commitments from customers reaching $32 billion, the vast majority in cash deposits. The company has secured SCAs extending into 2031, as well as one-year extensions through 2031 for two agreements.

Mehrotra noted that the supply-driven agreements benefit both parties: "They provide our customers supply assurance and deepen technology roadmap collaboration. This, in turn, helps our customers invest more confidently in their business and enables their end consumers to benefit from their products and services."

Gross margin improved to 86.8 percent from 44.7 percent in the prior year quarter. Operating cash flow reached $43.97 billion compared to $25.4 billion the prior quarter, while free cash flow increased to $33.2 billion from $18.3 billion. Diluted earnings per share surged to $32.87 from $2.83 year-ago. Cash, marketable investments, and restricted cash totaled $73.5 billion, up from $30.2 billion last quarter.

Memory revenues (DRAM and HBM) were $39.8 billion, up 331 percent and representing 73 percent of total revenue, while NAND revenues rose 526 percent to $14.1 billion, comprising 26 percent of revenue.

By business unit, results were:

- Cloud: $16.3 billion, up 258.5 percent

- Core Data Center: $18.0 billion, up 1,041 percent

- Mobile & Client: $13.1 billion, up 248.8 percent

- Automotive & Embedded: $6.8 billion, up 375.9 percent

Core Data Center became Micron's largest business unit, accelerating growth from 653 percent year-over-year last quarter to 1,041 percent this quarter, driven by GPU server memory demand. High-bandwidth memory demand remains strong, with Micron securing agreements for the vast majority of calendar 2027 HBM bit supply at significant year-over-year price increases. The company noted it is "working with Nvidia on the industry's first custom-HBM4E implementation, NVHBM, to be adopted on next generation of GPUs and NVLink Fusion platforms."

Data center SSD revenue in fiscal Q4 reached nearly $10 billion, more than 10 times the prior year quarter and representing over two-thirds of total company NAND revenue, as KV caching offload and HDD displacement opportunities expand the addressable market for SSDs.

PC and mobile industry revenue remains on track to grow this calendar year despite potential double-digit overall unit declines in both markets, driven by strength at the premium end. The automotive and embedded sector, increasingly termed "physical AI," is growing with less certain near-term outlook. Regarding future demand, the company noted that "humanoid robots are expected to have comparable memory and storage requirements to autonomous vehicles," and physical AI "can become a significant driver of memory and storage demand by the end of this decade."

Capacity expansion plans include the company's first Idaho fab, ID1, on track to commence wafer output in mid-calendar 2027, with ID2 expected to start in late calendar 2028. A new Japan-based fab has initial output expected in late calendar 2028, and a new NAND facility in Singapore should begin output in the second half of calendar 2028.

Regarding future demand conditions, Micron stated: "As strong as fiscal 2026 was, we expect fiscal 2027 to be even better. Industry demand has strengthened since our last earnings call, and we expect memory and storage supply-demand conditions to be much tighter in fiscal 2027 and 2028 than they were in 2026." The company added: "Even with additional industry DRAM cleanroom space plans, with robust demand trends including new upside requests from customers, we do not have line of sight to when supply and demand will return to balance."

Guidance for Q1 FY2027 is $61.5 billion ± $1.5 billion, representing a 48.4 percent year-over-year increase. Micron plans to increase capital expenditure in fiscal 2027 versus prior plans, with most increases directed toward construction capex to accelerate cleanroom space availability in late calendar 2028 and beyond.

Micron sits atop strong market dynamics, leveraging leading DRAM, HBM and NAND technology while serving supply-constrained customers. With visibility to sustained demand through 2030 and beyond driven by AI server adoption, the company operates from a position of considerable strength. Chinese competition remains a factor but not a primary concern. The combination of undersupply, robust demand, and significant customer commitments positions Micron favorably, though sustained success will require maintaining technological edge and execution across multiple fabs coming online.