Micron Projects Record 86% Gross Margin Driven by AI

Micron Technology projects a fiscal fourth-quarter gross margin of approximately 86% on revenue of $50 billion, a figure that significantly exceeds its historical peaks of 61% in 2018 and 47.3% in 2021. The company also expects adjusted earnings per share of nearly $31.00. These projections follow a record third quarter that generated $41.46 billion in revenue and $18.30 billion in adjusted free cash flow.

Management attributes the surge to artificial intelligence data center demand outpacing industry supply. To mitigate the memory industry's traditional boom-bust volatility, the company signed 16 take-or-pay customer agreements spanning three to five years. These strategic contracts represent at least $100 billion in cumulative revenue at minimum contracted prices, supported by $22 billion in customer deposits.

Chief Financial Officer Mark Murphy noted a moderation in the rate of price increases, while CEO Sanjay Mehrotra stated that contractual price floors enable margins well above any past cycle. Wolfe Research recently maintained an Outperform rating and a $1,500 price target for the stock, suggesting the company could generate enough free cash flow to buy back up to 25% of its market capitalization through 2027. Micron is scheduled to report official results on September 30, 2026.