TLDR
- Micron reported Q2 revenue of $23.9B and EPS of $12.20, beating estimates by 21% and 36%
- May quarter guidance came in at $33.5B revenue and EPS of $19.15, beating forecasts by 42% and 70%
- Gross margin guided to 81% for Q3 — higher than Nvidia’s 75%
- Citi and UBS both raised price targets to $510, while Cantor Fitzgerald went as high as $700
- Despite the blowout quarter, MU dropped ~4% after-hours on capex concerns and peak margin fears
Micron Technology posted one of the strongest quarterly earnings reports in its history, yet the stock fell. That’s the kind of thing that makes you do a double take.
The memory chipmaker reported fiscal Q2 revenue of $23.9 billion — up 196% year over year and a 75% sequential jump. Adjusted EPS came in at $12.20, a 682% increase from the same period last year.
Those numbers beat Wall Street estimates by 21% on revenue and 36% on earnings.
CEO Sanjay Mehrotra said revenue for DRAM, NAND, HBM, and each business unit hit new highs. The AI data center buildout is driving near-insatiable demand for high-bandwidth memory and storage.
Despite all that, MU fell around 4% in after-hours trading after the print.
Two things spooked investors. First, Micron raised its capital expenditure guidance for fiscal 2027. Second, there were concerns that gross margins may be peaking — even though 81% is an extraordinary figure for a hardware manufacturer.
The stock had already surged 354% over the prior year heading into earnings, so some profit-taking was expected too.
Analyst Reaction
Citi analyst Atif Malik reiterated his Buy rating and raised his price target to $510 from $430, citing better-than-expected margins. He framed the key debate as whether MU can keep rising alongside DRAM prices — fueled by AI demand and limited new fab capacity — or whether prices soften after a strong Q1 run.
Malik did flag a potential near-term rotation into semiconductor capital equipment names given the higher capex outlook.
UBS analyst Timothy Arcuri also lifted his target to $510 from $475, keeping a Buy rating. He was more measured, noting that with gross margins now above 80%, much of the upside from further beat-and-raise quarters may already be reflected in the price.
UBS also pointed to new long-term customer agreements Micron signed, including one five-year deal — longer than UBS expected. The firm sees these deals as a sign customers view memory as strategically critical.
Several other analysts followed with upgrades. Cantor Fitzgerald set a target of $700. Rosenblatt moved to $600. Wolfe Research lifted to $550.
Outlook and Valuation
May quarter guidance was the headline number. Micron projected revenue of $33.5 billion and EPS of $19.15 — beating forecasts by 42% and 70% respectively.
Gross margin guidance came in at approximately 81%, up from 38% in Q3 of fiscal 2025 and 75% in Q2 of fiscal 2026.
On a forward price-to-earnings basis, MU trades at just 8x — historically low for a stock growing at this pace. But some analysts view a single-digit forward multiple on a cyclical chip stock as a warning sign rather than a buying opportunity, as the market tends to price in a peak well before it arrives.
UBS has a historical view that Micron typically peaks around nine months ahead of peak margins.
As of the most recent session, MU was trading at $443.52 before pulling back to $395.14.
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