Key Takeaways
- Q2 results showed $23.9B in revenue with EPS reaching $12.20, surpassing analyst expectations by 21% and 36% respectively
- Forward guidance for May quarter projects $33.5B revenue and $19.15 EPS, exceeding consensus by 42% and 70%
- Q3 gross margin outlook of 81% outpaces Nvidia’s 75% margin
- Multiple firms upgraded targets, with Citi and UBS at $510 and Cantor Fitzgerald reaching $700
- Shares declined approximately 4% in extended trading due to elevated capital expenditure plans and margin peak worries
Micron Technology delivered what many consider its most impressive quarterly performance ever, yet investors responded by selling off shares. The market’s reaction seems counterintuitive at first glance.
The semiconductor memory manufacturer announced fiscal second-quarter revenue of $23.9 billion — representing a massive 196% surge compared to last year and a 75% increase from the previous quarter. Adjusted earnings per share reached $12.20, marking a staggering 682% jump year-over-year.
These figures comfortably exceeded analyst projections, with revenue beating by 21% and earnings surpassing expectations by 36%.
Chief Executive Sanjay Mehrotra highlighted that revenues across DRAM, NAND, HBM products, and every business segment achieved record levels. The explosive growth in AI infrastructure continues to fuel unprecedented demand for advanced memory solutions and storage capacity.
Yet despite this stellar performance, Micron shares declined roughly 4% during after-hours trading following the announcement.
Investor anxiety centered on two main factors. The company increased its capital spending forecast for fiscal 2027, which raised questions about future return on investment. Additionally, market participants worried that gross margins might have reached their zenith — despite the 81% figure representing exceptional performance for any hardware company.
With the stock having skyrocketed 354% over the preceding twelve months before earnings, some degree of profit-taking was hardly surprising.
Wall Street’s Response
Citi’s Atif Malik maintained his Buy recommendation while increasing his price objective to $510 from $430, emphasizing the stronger-than-anticipated margin performance. He identified the central question facing investors: can Micron continue climbing alongside DRAM pricing — supported by AI infrastructure needs and constrained manufacturing capacity — or will prices soften following the robust first-quarter performance?
Malik did suggest investors might consider rotating into semiconductor equipment manufacturers given the elevated capital expenditure outlook.
UBS’s Timothy Arcuri similarly boosted his target from $475 to $510 while maintaining a Buy stance. His tone was more cautious, observing that with gross margins now exceeding 80%, much of the potential upside from additional earnings beats may already be baked into current valuations.
UBS also highlighted new extended customer agreements that Micron secured, including a five-year contract — longer than the firm anticipated. These agreements signal that customers view memory chips as mission-critical components.
Other Wall Street firms joined the upgrade wave. Cantor Fitzgerald established a $700 target. Rosenblatt pushed to $600. Wolfe Research elevated to $550.
Future Expectations and Stock Metrics
The May quarter projection stole the spotlight. Micron forecast revenue of $33.5 billion with EPS of $19.15 — crushing consensus estimates by 42% and 70% respectively.
Gross margin guidance came in around 81%, up dramatically from 38% in fiscal 2025’s third quarter and 75% in fiscal 2026’s second quarter.
Based on forward earnings, MU currently trades at merely 8x — an unusually low multiple for a company experiencing this growth trajectory. However, some market observers interpret such compressed valuations on cyclical semiconductor stocks as red flags rather than entry points, since markets typically anticipate peak performance well before actual results materialize.
UBS maintains a historical perspective that Micron generally reaches its valuation peak approximately nine months before margins top out.
Shares were trading at $443.52 in the most recent regular session before retreating to $395.14.
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