Micron Price Target Raised After Strong Quarter and Guidance
Memory chip maker Micron Technology exceeded expectations in its fourth quarter, with strong outlook for 2027 driven by AI demand boosting memory product prices.
Micron Technology has raised its outlook following a strong fourth quarter and positive guidance, signaling continued demand for its memory products. The company stated that the escalating demand for AI applications continues to outpace the supply of memory chips, supporting average selling prices and the company's profitability.
The company's fourth fiscal quarter, ending September 3, reported a year-over-year revenue increase of 379% to $54.23 billion. Adjusted earnings per share rose by 1,002% to $33.42, both figures surpassing analyst expectations. Micron anticipates that fiscal year 2027 will also be robust, as demand for memory chips, particularly High Bandwidth Memory (HBM) for AI, significantly exceeds supply.
CEO Sanjay Mehrotra noted that the structural gap between DRAM supply and demand growth rates is leading to ongoing supply tightness. To address this, Micron plans to expand its production capacity by building new cleanroom facilities. Mehrotra indicated that despite industry plans to increase DRAM production space, strong demand trends, including new customer requests, will prevent a balance between supply and demand in the near future.
Micron is also evolving its business model by entering into Strategic Customer Agreements (SCAs) aimed at providing predictability for future revenue and pricing. The company has signed 26 SCAs, with many customers seeking to secure supply beyond calendar year 2030, leading to contract extensions to 2031. Paid pre-orders and these agreements provide the company with the confidence to continue investing in increased capacity.