Micron’s Record Q1 and AI-Driven Outlook
Key Points
- Micron posted record Q1 FY2026 revenue of $13.64 billion, far above guidance and estimates
- Guidance for Q2 FY2026 calls for revenue near $18.7 billion and EPS around $8.42
- AI data center demand and tight DRAM/HBM supply are driving sharp price and margin gains
- Micron is lifting FY2026 capex to about $20 billion and exiting its Crucial consumer line
Record Q1 results powered by AI memory demand
Micron Technology reported a third consecutive quarterly revenue record in its fiscal first quarter 2026, as AI-related demand and tight memory supply lifted both sales and profitability. Revenue for the quarter ended Nov. 27 rose 56.7% year over year to $13.64 billion, beating consensus estimates that ranged around $12.8–$12.9 billion and topping the company’s own guidance range of $12.2–$12.8 billion. Net income was $5.24 billion, with adjusted earnings per share of $4.78 versus analyst expectations of roughly $3.9–$3.96. Gross margin reached 56.8%, up 11 percentage points sequentially, driven by higher pricing, strong cost execution and favorable product mix. DRAM revenue climbed to a record $10.8 billion, up 69% year over year, while NAND revenue reached a record $2.7 billion, up 22%. All four business units – cloud, core data center, mobile and client, and automotive and embedded – posted record revenue and double‑digit sequential growth, with cloud memory revenue at $5.3 billion and core data center revenue at $2.4 billion. Free cash flow hit a company record $3.9 billion, more than 20% above the prior high from fiscal Q4 2018, and Micron ended the quarter with $12 billion in cash and investments and net cash slightly positive after reducing debt by $2.7 billion.
Q2 guidance signals further acceleration
Management’s outlook for fiscal second quarter 2026 points to another step‑change in scale and profitability. Micron guided to non‑GAAP revenue of $18.7 billion, plus or minus $400 million, well ahead of Wall Street expectations of roughly $14.2–$14.5 billion. The company expects non‑GAAP EPS of about $8.42, plus or minus $0.20, nearly double consensus estimates around $4.5–$4.8. Gross margin is projected at approximately 68%, plus or minus 1 percentage point, compared with about 56% in Q1 and prior consensus near the mid‑50s. Executives said they anticipate new company records for revenue, gross margin, EPS and free cash flow in Q2 and for full‑year fiscal 2026, supported by tight supply conditions and robust demand across end markets. Micron noted that industry demand for both DRAM and NAND exceeds supply, and that higher prices, lower costs and mix toward higher‑value products are all expected to contribute to further margin expansion beyond Q2, albeit at a more gradual pace than recent quarter‑to‑quarter jumps.
HBM leadership, supply constraints and long-term contracts
A central driver of Micron’s performance is surging demand for high‑bandwidth memory used in AI accelerators and data centers. The company said its HBM revenue reached a record in Q1 and disclosed that it has completed price and volume agreements for its entire calendar 2026 HBM supply, including its HBM4 products. Management forecasts the HBM total addressable market to grow from about $35 billion in 2025 to around $100 billion in 2028, implying roughly 40% compound annual growth and pulling that $100 billion milestone forward by two years versus prior expectations. Micron expects HBM supply, as well as non‑HBM DRAM, to remain tight through and beyond 2026, and said that in the medium term it can meet only about 50% to two‑thirds of demand from several key customers. To address this, the company is negotiating multiyear DRAM and NAND contracts with specific commitments and stronger structures than past agreements. Management emphasized that these long‑term agreements span multiple market segments and can bundle DRAM, HBM and NAND, reflecting customers’ focus on securing long‑term memory access for AI data center build‑outs.
Capacity expansion, technology roadmap and portfolio shift
Micron is increasing investment to expand advanced memory capacity while relying heavily on node transitions for near‑term bit growth. Fiscal 2026 capital expenditure is now projected at about $20 billion, up from a prior $18 billion outlook, with a substantial portion directed to DRAM, particularly HBM and the 1‑gamma node. The company expects its 1‑gamma DRAM to become the majority of DRAM bit output in the second half of calendar 2026, and is ramping its G9 NAND node, which is set to become its largest NAND node later in fiscal 2026. New and expanded fabs are planned across multiple regions: Micron has pulled in the timeline for its first Idaho fab to mid‑2027, plans to start construction of a second Idaho fab in 2026 for 2028 operation, and expects a New York fab to provide supply from 2030 onward. Additional clean room space is being added in Japan, and an HBM advanced packaging facility in Singapore is on track to contribute meaningfully in 2027. In parallel, Micron is sharpening its portfolio focus by exiting its Crucial‑branded consumer memory business, with shipments through the consumer channel to continue until the end of February 2026, as it concentrates resources on enterprise and AI‑centric products amid a global shortage of advanced memory, especially HBM.
Key Takeaways
- Micron’s Q1 FY2026 results and Q2 guidance confirm a sharp AI-driven upcycle, with revenue, margins and free cash flow all at or near record levels.
- Tight DRAM and HBM supply, combined with strong AI data center demand, is allowing Micron to lock in 2026 HBM contracts and negotiate multiyear DRAM and NAND agreements.
- The company is committing about $20 billion of FY2026 capex and accelerating global fab projects and node transitions to expand advanced memory capacity while exiting lower-priority consumer products.
References
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