Micron (MU) is down about 7% in early trading on Thursday, extending losses from the previous session, despite reporting a strong fiscal Q2 results, as investors react to higher spending plans and a mixed outlook. The company posted earnings of $12.20 per share on revenue of $23.9 billion, both well ahead of expectations, but the reaction suggests the rally may be starting to cool.
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AI Demand Drives Strong Results
Micron’s results clearly showed how strong the memory cycle is right now. Revenue nearly tripled from a year ago, while margins and free cash flow hit record levels, driven by AI demand and tight supply across the industry.
Management said demand remains strong, especially for high-bandwidth memory, and supply is still constrained. In fact, the company noted that some customers are not getting all the memory they need, highlighting just how tight the market is.
But none of this came as a surprise. Investors already expected a strong quarter, and the focus has now shifted from current demand to how long these favorable conditions can last.
Spending Plans Raise New Questions
The bigger shift in sentiment came from Micron’s investment outlook. The company now expects fiscal 2026 capital spending to exceed $25 billion and signaled an even larger step-up in 2027, as it builds capacity to meet AI demand.
That is where investors are getting cautious. While the spending is needed to support long-term growth, it also raises concerns about how sustainable current margins are once supply starts catching up.
Management also hinted that today’s tight supply environment will not last forever. Over time, as capacity comes online, pricing gains are expected to normalize — something the market is already starting to factor in.
Top Analysts Are Divided on the Stock’s Next Move
- Top Bernstein analyst Mark Li raised his price target to $510, citing Micron’s strong guidance and continued AI momentum.
- Goldman Sachs 5-star analyst Toshiya Hari maintained a Buy rating, calling the higher CapEx an “offensive move” to capture more share in AI memory.
- Piper Sandler analyst Harsh Kumar reiterated an Overweight rating, saying the pullback could be a buying opportunity given ongoing supply tightness.
- However, Summit Insights analyst Kinngai Chan downgraded the stock to Hold, warning that pricing gains could slow and stock outperformance may moderate in the second half of FY26.
Micron’s results confirm that the AI-driven memory cycle remains strong. But with expectations already high and spending rising, investors are starting to question how much upside is left.
Is Micron a Good Stock to Buy?
Turning to TipRanks, Wall Street has a Strong Buy consensus rating on Micron stock based on 24 Buy and two Hold recommendations. The average 12-month MU stock price target of $473 indicates 2.44% upside potential.
