Micron Technology Earnings Call: AI Boom, Tight Supply

Micron Technology ((MU)) has held its Q1 earnings call. Read on for the main highlights of the call.

Micron Technology’s Earnings Call Signals Booming Demand Amid Tight Supply

Micron Technology’s latest earnings call painted a picture of a company riding powerful secular trends in AI and high-bandwidth memory, with record revenue, stronger profitability, and robust free cash flow. Management’s tone was broadly optimistic, highlighting accelerating demand and clear technology leadership, but also candid about persistent supply constraints that are preventing Micron from fully capitalizing on the current upcycle. The result is a rare combination of rapid growth, expanding margins, and structural scarcity that is shaping both the company’s near-term performance and long-term investment plans.

Record-Breaking Revenue and Broad-Based Growth

Micron posted fiscal Q1 revenue of $13.6 billion, a new quarterly high and the third consecutive record, up 21% sequentially and 57% year over year. This pace of growth underscores how quickly memory and storage demand has rebounded, particularly for AI and data-centric workloads. The strong top-line numbers also reflect firmer pricing and a healthier supply-demand balance in the broader memory market, positioning Micron as a key beneficiary of the current cycle.

All Business Units Fire on All Cylinders

Every major business unit reported record revenue, emphasizing that Micron’s momentum is not confined to a single end market. The Cloud Memory Business Unit led with $5.3 billion in revenue, reflecting cloud and AI infrastructure build-outs. The Core Data Center Business Unit reached $2.4 billion, while the Mobile and Client Business Unit delivered $4.3 billion, indicating robust demand in smartphones and PCs. The Automotive and Embedded Business Unit added $1.7 billion, showcasing growing memory content in vehicles and industrial applications. This broad diversification helps reduce cyclicality and spreads growth across multiple secular drivers.

Margin Expansion Fueled by Pricing and Mix

Profitability improved sharply, with consolidated gross margin hitting 56.8%, up 11 percentage points from the prior quarter. Management attributed this to stronger pricing, disciplined cost execution, and a favorable product mix skewed toward higher-value solutions, especially advanced DRAM and NAND for AI and data center applications. The margin expansion signals that Micron is not only selling more but also capturing more value per bit, which is critical for sustaining earnings growth in a cyclical industry.

HBM Market Leadership in a Rapidly Expanding TAM

Micron is positioning itself at the center of the high-bandwidth memory (HBM) boom, which is becoming a critical component for AI accelerators and advanced data center workloads. The company now expects HBM’s total addressable market to grow at roughly a 40% compound annual rate through 2028, reaching around $100 billion by that year—two years earlier than previously forecast. This accelerated timeline underscores how quickly AI adoption is pushing HBM into the mainstream, and management’s commentary suggested that Micron sees itself as a leading supplier into this rapidly expanding market.

Technological Advancements Underpin Future Supply and AI Growth

To sustain its competitive position, Micron is ramping next-generation manufacturing nodes, including its 1-gamma DRAM and G9 NAND. These nodes are expected to drive supply growth into 2026 while improving cost structure and performance. The company also highlighted its HBM4 product, which it claims delivers industry-leading performance tailored to AI workloads. These technology investments are central to Micron’s strategy: staying at the forefront of memory innovation to capture premium pricing and secure long-term customer relationships in AI, cloud, and high-performance computing.

Persistent Supply Constraints Across DRAM and NAND

Despite aggressive investment and capacity planning, Micron expects industry supply for both DRAM and NAND to remain substantially short of demand through and beyond 2026. This tightness reflects structural constraints in bringing on advanced capacity, alongside surging demand from AI, cloud, and edge applications. For investors, ongoing supply shortages can support firmer pricing and stronger margins, but they also limit the volume growth the company can capture in the near term, effectively capping upside while the demand wave continues to build.

Inability to Fully Meet Customer Demand

The supply-demand imbalance is particularly evident in Micron’s comments about customer fulfillment. Management acknowledged that for several key customers, the company can only supply about 50% to two-thirds of requested volumes. This shortfall highlights both the intensity of current demand—especially from large cloud and AI players—and the constraints in scaling advanced DRAM and HBM capacity quickly enough. While this scarcity supports a favorable pricing environment, it also underscores that Micron is leaving potential revenue on the table simply because it cannot ship enough product.

CapEx Surge to Unlock Future Capacity

To address these capacity bottlenecks and position for long-term growth, Micron plans to significantly increase capital expenditures, targeting roughly $20 billion in fiscal 2026. The bulk of this spend is aimed at expanding HBM and advanced DRAM supply capability. This elevated CapEx signals management’s confidence in sustained AI-driven demand and the durability of the current upcycle, even as it raises questions about longer-term returns and the risk of eventual oversupply. For now, however, the investment case hinges on Micron’s ability to convert this CapEx into incremental high-margin capacity in a structurally tight market.

Forward-Looking Guidance: More Records Ahead

Looking ahead, Micron’s guidance suggests that the current momentum is far from peaking. The company forecasts record revenue of $18.7 billion for fiscal Q2 2026, implying another substantial sequential jump from an already record Q1. Gross margin is projected to climb further to 68%, with earnings per share expected at $8.42, supported by a rich product mix and strong pricing. Management also reiterated expectations for a booming HBM market, with TAM reaching about $100 billion by 2028 and a 40% CAGR from 2025, and confirmed plans for approximately $20 billion in fiscal 2026 CapEx to support HBM and DRAM capacity. These targets point to a company leaning aggressively into the AI-driven memory supercycle while maintaining a focus on profitability and cash generation.

Micron’s earnings call portrayed a company at the heart of the AI and cloud infrastructure build-out, delivering record revenue, sharply higher margins, and strong free cash flow while grappling with capacity constraints that limit its ability to fully meet demand. With leadership in HBM, advanced DRAM, and next-generation NAND, and with a significant CapEx ramp aimed at unlocking future supply, Micron is positioning itself for continued growth. For investors, the story is one of robust secular tailwinds, disciplined execution, and the tension between surging demand and constrained supply that continues to define the memory cycle.