tapebrief
MU · Q1 2026

MU · Q2 2026 Earnings

Bullish

Micron

Reported March 18, 2026

30-second summary

Micron printed $23.86B in Q2 FY26 revenue (+196% YoY, +75% QoQ), beating consensus by 24.9% and crushing the prior quarter's guide high by $5.2B, with GAAP gross margin of 74.4% — roughly 740bps above the guided high. The Q3 FY26 guide of $33.5B at midpoint implies another ~40% sequential step and ~260% YoY growth off the $9.30B Q3 FY25 base, with gross margin guided to ~81% (+650bps from Q2). Management quantified the supply constraint again — key customers receiving only 50-67% of requested demand, unchanged from last quarter — disclosed a first signed Strategic Customer Agreement (SCA), raised FY26 CapEx above $25B (up from ~$20B last quarter), and previewed FY27 construction CapEx up over $10B YoY.

Headline numbers

EPS

Q2 FY2026

$12.20

Revenue

Q2 FY2026

$23.86B

+196.4% YoY

+24.9% vs est.

Gross margin

Q2 FY2026

74.4%

Free cash flow

Q2 FY2026

$6.90B

Operating margin

Q2 FY2026

67.6%

Key financials

Q2 FY2026
MetricQ2 FY2026YoYQ1 FY2026QoQ
Revenue$23.86B+196.4%$13.64B+74.9%
EPS$12.20—$4.78+155.2%
Gross margin74.4%—56.0%+1840bps
Operating margin67.6%—45.0%+2260bps
Free cash flow$6.90B—$3.91B+76.7%

Guidance

Exceptional Q2 beat across revenue, EPS, and margins sets stage for record Q3; guidance implies 259-261% YoY revenue growth and continued margin strength at ~81%, signaling sustained AI-driven memory demand.

Guidance is issued one quarter forward. The Prior-guide column references the guide issued last quarter for the period just reported; the New-guide column is for next quarter.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueQ2 FY2026$18.70 billion ± $400 million$23.86 billion+$5.16 billion above high end of guideBeat
Diluted EPS (GAAP)Q2 FY2026$8.19 ± $0.20$12.07+$3.88 above high end of guideBeat
Diluted EPS (Non-GAAP)Q2 FY2026$8.42 ± $0.20$12.20+$3.78 above high end of guideBeat
Gross marginQ2 FY202667.0% ± 1.0% (GAAP), 68.0% ± 1.0% (Non-GAAP)74.4%+7.4-6.4 points above high endBeat
Operating expensesQ2 FY2026$1.56 billion ± $20 millionNot explicitly reported—Met

New guidance

MetricPeriodGuideYoY
RevenueQ3 FY2026$33.5 billion ± $750 million+259-261% YoY
Diluted EPS (GAAP)Q3 FY2026$18.90 ± $0.40—
Diluted EPS (Non-GAAP)Q3 FY2026$19.15 ± $0.40—
Gross marginQ3 FY2026Approximately 81%—
Operating expensesQ3 FY2026Approximately $1.60 billion—

Segment performance

Q2 FY2026
SegmentQ2 FY2026YoY
Cloud Memory Business Unit$7.749B+163.0%
Core Data Center Business Unit$5.687B+210.8%
Mobile and Client Business Unit$7.711B+244.7%
Automotive and Embedded Business Unit$2.708B+161.8%

Profitability

Q2 FY2026
SegmentQ2 FY2026
Cloud Memory Business Unit Gross Margin74%
Cloud Memory Business Unit Operating Margin66%
Core Data Center Business Unit Gross Margin74%
Core Data Center Business Unit Operating Margin67%
Mobile and Client Business Unit Gross Margin79%
Mobile and Client Business Unit Operating Margin76%
Automotive and Embedded Business Unit Gross Margin68%
Automotive and Embedded Business Unit Operating Margin62%

Management tone

Narrative arc: Q3 HBM scaling faster than planned → Q4 Cloud memory at scale → Q1 Supply-constrained pricing power with multi-year lock-in → Q2 Strategic Customer Agreements with capital-allocation pivot.

Three quarters ago HBM share parity was the framing question. Two quarters ago it was margin sustainability. Last quarter it was multi-year LTAs being signed. This quarter management has moved to a fundamentally different commercial framework — the Strategic Customer Agreement (SCA) — with the first one signed with a large customer and discussions ongoing with multiple customers across multiple markets. Sanjay told Cantor's CJ Muse the SCAs "allow investment with confidence and provide demand visibility and stability," language that signals a structural shift from spot-cycle dependence to contracted-revenue visibility. The shift signals memory is being commercialized like a strategic foundry input rather than a commodity, but management's refusal across four separate questions to disclose commercial terms is itself the signal that the customer-side negotiating leverage matters more than analyst optics.

The supply-gap disclosure was repeated verbatim — key customers receiving 50-67% of requested demand — but this quarter's framing extended the tightness commentary "beyond calendar 2026." Last quarter the gap was disclosed for the first time as a current-state metric; this quarter Mark told TD Cowen's Chris Sankar that "tight market conditions are expected to persist beyond 2026." The shift signals management is now underwriting a multi-year supply deficit, not a peak-cycle phenomenon — and the absence of any forward gross margin guidance beyond Q3 was framed not as caution but as commercial discipline at 81%.

The margin commentary shifted from "mathematical saturation" (Q1) to active deflection on the Q4 number. Last quarter Mark told the same analyst (Sankar) that margins would expand at "more gradual" pace because absolute levels limit percentage expansion. This quarter, with Q3 guided to 81%, Mark explicitly declined to guide Q4 — a notable change from prior quarters when management framed the trajectory openly. The signal: management is no longer willing to set a forward margin ceiling, which is consistent with the SCA structure flattening the cycle.

Capital allocation moved from "spending against the supply deficit" (Q1) to "shareholder return optionality." The 30% dividend increase to 15 cents/share is the first explicit signal that management views the cash generation as durable enough to commit incremental capital to distribution. Mark's commentary to Tim Arcuri on CHIPS Act buyback restrictions confirmed management is not actively pursuing relief — meaning capital deployment will remain bottlenecked at organic investment plus dividend, with opportunistic repurchases. FY26 CapEx is now above $25B (up from ~$20B last quarter), FY27 construction CapEx will be +$10B YoY, and credit ratings have moved to solid BBB on two upgrades this quarter.

The HBF (high bandwidth flash) response to JP Morgan's Harlan Sur was the one moment of explicit caution. Sanjay characterized HBF as having "positive attributes" but limitations of NAND (read speed, power, retention), saying the business value proposition still requires customer validation. In a quarter where everything else was framed as record-shattering, the HBF response signals management is willing to disclose where they are skeptical — which makes the rest of the optimism more credible.

Q&A highlights

Chris Sankar · TD Cowen

How to think about gross margin sustainability, particularly as HBM4 is brought into the mix, and guidance for August quarter and beyond?

Mark provided 600 bps sequential gross margin guidance for Q3 (81%) but declined to provide Q4 guidance. Emphasized that tight market conditions are expected to persist beyond 2026, and that AI's secular demand for higher-performance memory supports margin strength. Noted that incremental price increases have less impact on gross margin at these levels. Management expects market conditions to remain strong.

Q3 gross margin guidance of 81% (600 bps sequential improvement)Market conditions expected to remain tight beyond calendar 2026AI driving multi-year investment cycle with majority aheadNo Q4 gross margin guidance provided

Joseph Moore · Morgan Stanley

How is Micron allocating supply across end markets given extreme tightness? Is there concern about demand destruction in PCs and smartphones? Are they balancing big vs. small customers?

Sanjay emphasized maintaining a diversified supplier mix across all end markets while acknowledging data center's growing TAM share. Noted demand remains strong across all segments despite price sensitivity in consumer markets. Reiterated earlier statement that some key customers are receiving only 50-67% of their demand in the medium term. Highlighted that AI trends drive memory content growth even in consumer segments.

Key customers receiving 50-67% of requested demand (unchanged from prior quarter)Data center becoming larger share of industry TAM but maintaining diversity importantAI driving memory content growth across all end markets including PCs and smartphonesSupply tight across all end markets

Timothy Arcuri · Goldman Sachs

Do SCAs include mechanisms to limit gross margin downside when the cycle turns? Also, regarding massive cash generation (~$35-40B free cash flow this fiscal year), what will Micron do with it and can CHIPS Act restrictions on buybacks be reworked?

Sanjay declined to provide specifics on SCA downside protection mechanisms, citing confidentiality. Mark outlined capital allocation priorities: balance sheet strength, organic investment in technology and capacity, and returning cash to shareholders. Announced 30% dividend increase to 15 cents/share. Indicated capacity for opportunistic share repurchases to offset dilution, subject to CHIPS Act restrictions. No indication of reworking CHIPS restrictions.

30% dividend increase announced (to 15 cents/share)Q2 free cash flow record $6.9B, up 77% vs. Q1Expected Q3 free cash flow to roughly double sequentiallyTwo credit upgrades received in quarter; now solid BBB rated

CJ Muse · Cantor Fitzgerald

Can you discuss breadth of SCA customers (hyperscale vs. others)? Are there CapEx forward requirements or ROIC-tied pricing in SCAs?

Sanjay confirmed first SCA is with a large customer and noted discussions ongoing with multiple customers across multiple markets. Emphasized SCAs allow investment with confidence and provide demand visibility and stability. Declined to provide specifics on CapEx requirements, pricing mechanisms, or whether agreements tie to customer ROIC targets due to confidentiality.

First SCA completed with large customerSCA discussions proceeding with multiple customers across multiple marketsSCAs enable capacity investment with greater visibilityAgreements have robust terms for both parties

Harlan Sur · JP Morgan

With data center ESSD business doubling sequentially and representing ~50% of NAND mix, can the team drive continued sequential growth through remainder of calendar 2026 and into 2027? Also seeking thoughts on high bandwidth flash (HBF) as potential R&D focus area.

Sanjay expressed strong positioning in data center SSDs across capacity and performance portfolio (TLC and QLC), noting this is part of strategy to shift toward higher-margin products. Regarding HBF, noted it has positive attributes (capacity) but limitations of NAND (read speed, power, retention). Indicated HBF is early stage and requires customer engagement to validate business value proposition, but company continues to study it.

Data center NAND demand significantly exceeds available supplyG9 NAND-based PCIe Gen 6 SSDs in high-volume production122 TB SSD delivering 16x sequential read throughput/watt vs. HDDESSD market share increased for 4th consecutive calendar year in 2025

Answers to last quarter's watch list

Q2 non-GAAP gross margin vs 68% guide; Q3 trajectory — Q2 non-GAAP gross margin came in at ~75% (GAAP 74.4%), 640-740bps above the guide high. Q3 was guided to ~81%, +650bps sequential — the opposite of "mathematical saturation." Management explicitly declined to guide Q4, which is a meaningful change in disclosure posture.
Resolved positively
Supply-gap disclosure: repeated, refined, or walked back? — Sanjay confirmed key customers still receiving 50-67% of requested demand — number unchanged. New addition: tight conditions extended "beyond calendar 2026," framing the gap as multi-year structural rather than peak-cycle.
Resolved positively
HBM revenue disclosure posture — Management did not disclose HBM as a % of DRAM this quarter either; the disclosure framework has not improved. Cloud Memory at $7.75B (74% gross margin, 66% operating margin) remains the closest proxy.
Continue monitoring
Multi-year LTA contract specifics — Significant disclosure shift: framework rebranded as Strategic Customer Agreements (SCAs), with first SCA signed with a large customer and multi-customer discussions disclosed. Commercial terms (duration, dollar value, pricing mechanism, ROIC linkage) remained confidential across four analyst attempts. The framework is now named and confirmed signed; the parameters remain undisclosed. Status: Resolved positively on framework, Continue monitoring on parameters.
FY26 CapEx mix and step-up trajectory — FY26 CapEx now guided above $25B, up from ~$20B last quarter (+25% in one quarter). FY27 construction CapEx will be +$10B YoY. Idaho/HBM/equipment split was not disclosed. Status: Resolved positively on direction and magnitude, Continue monitoring on granularity.
Named ASIC/TPU program HBM3E share gains — Not specifically addressed. Customer-naming posture unchanged.
Continue monitoring

What to watch into next quarter

Whether Q3 FY26 gross margin lands at or above the 81% guide and whether management finally guides Q4 — or extends the refusal to guide beyond one quarter. A continued no-Q4-guide posture would signal the SCA structure is materially changing how Micron thinks about forward visibility.

Whether the 50-67% customer-fulfillment gap is repeated again next quarter or quantified more precisely. A widening of the gap would signal accelerating supply tightness; a narrowing would signal the LTA/SCA pricing is the durable floor as supply catches up.

Any incremental SCA disclosure — number of agreements signed, total contracted volume, duration range, or aggregate revenue commitment. Even one quantitative parameter would re-rate the revenue-visibility story.

FY26 CapEx trajectory — $25B is up from $18B-$20B in two quarters. Watch whether the next move is to $28B+ and whether any of the construction spend is producing wafers in FY26 rather than the prior H2 CY27 framing for Idaho.

HBM revenue disclosure posture — management has refused for three consecutive quarters. Either disclosure or continued refusal at this point reveals how management views competitive entry from Samsung/SK Hynix into HBM4 supply.

HBF commentary — Sanjay's explicit skepticism this quarter creates a falsifiable test: if HBF is mentioned again with progress, it signals customer validation arrived faster than implied; continued cautious framing confirms the technology bet is being deferred.

Sources

  1. Micron Technology, Inc. Fiscal Q2 2026 Press Release (Form 8-K Exhibit 99.1), filed March 18, 2026. https://www.sec.gov/Archives/edgar/data/723125/000072312526000004/a2026q2ex991-pressrelease.htm
  2. Micron Technology Fiscal Q2 2026 earnings call Q&A (analyst exchanges as transcribed).

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