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 24.8% and the prior guide midpoint by $5.16B, with non-GAAP gross margin of 74.4% — 640bps above the prior guide high. The Q3 FY26 guide of $33.5B at the midpoint implies +260% YoY off the $9.30B Q3 FY25 base, with gross margin guided to ~81% (another ~650bps sequential step) and non-GAAP EPS of $19.15 — more than 2.3x this quarter's $12.20 print. Management committed to FY26 CapEx above $25B (up from $20B framed last quarter) and disclosed FY27 construction-related CapEx will step up by more than $10B YoY on top of that, signaling that the supply-demand gap they have been quantifying for three quarters is now being underwritten with multi-year capital deployment rather than near-term capacity sweating.

Headline numbers

EPS

Q2 FY2026

$12.20

Revenue

Q2 FY2026

$23.86B

+196.5% YoY

+24.8% 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+196.5%$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+76.6%

Guidance

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 guide (27.6% above midpoint)Beat
EPS (Non-GAAP)Q2 FY2026$8.42 ± $0.20$12.20+$3.78 above guide (44.9% above midpoint)Beat
Gross marginQ2 FY202668.0% ± 1.0% (Non-GAAP)74.4%+6.4 percentage points above Non-GAAP guide highBeat
Operating expensesQ2 FY2026$1.56 billion ± $20 millionNot separately disclosed in actuals—Beat

New guidance

MetricPeriodGuideYoY
RevenueQ3 FY2026$33.5 billion ± $750 million+259.7–+263.4% YoY
EPSQ3 FY2026$19.15 ± $0.40 (non-GAAP)—
Gross marginQ3 FY2026Approximately 81%—
Operating expensesQ3 FY2026Approximately $1.40 billion—
CAPEXFY 2026Above $25 billion—
CAPEXFY 2027Meaningfully higher than FY2026—
Tax rateFY 2026Around 15.1%—
Operating expensesFY 2027Increase expected (qualitative)—

Segment performance

Q2 FY2026
SegmentQ2 FY2026YoY
Cloud Memory Business Unit$7.749B+163.2%
Core Data Center Business Unit$5.687B+210.9%
Mobile and Client Business Unit$7.711B+244.8%
Automotive and Embedded Business Unit$2.708B+161.9%

Capacity & utilization

Q2 FY2026
SegmentQ2 FY2026
Operating Cash Flow$11.90 billion
Capital Expenditures (net)$5.00 billion
Cash and Marketable Investments$16.7 billion

Profitability

Q2 FY2026
SegmentQ2 FY2026
Cloud Memory Operating Margin66%
Core Data Center Operating Margin67%
Mobile and Client Operating Margin76%
Automotive and Embedded Operating Margin62%

Other KPIs

Q2 FY2026
SegmentQ2 FY2026
Quarterly Dividend Increase30% increase to $0.15/share

Management tone

Narrative arc: Q3 FY25 HBM scaling faster than planned → Q4 FY25 Cloud memory at scale, building for the next leg → Q1 FY26 Supply-constrained pricing power with multi-year customer lock-in → Q2 FY26 Memory recast as strategic asset, capex committed for a 20-year cycle.

Three quarters ago memory was framed as a beneficiary of AI workloads. Last quarter it was framed as supply-constrained with pricing power. This quarter Sanjay opened with: "Memory has fundamentally been recast as a defining strategic asset in the AI era." The shift signals management has moved from defending the cycle's durability to claiming a category re-rating — and is asking investors to underwrite memory at infrastructure multiples, not component multiples. The 30% dividend raise and two credit upgrades are the financial-policy manifestation of that re-rating.

The CapEx posture has structurally broken from prior cycles. In Q4 FY25 the FY26 CapEx framing was ~$18B. In Q1 FY26 it stepped to ~$20B. This quarter it is "above $25B" — and FY27 construction-related CapEx will increase by more than $10B YoY on top of that. Two quarters ago Idaho 1's first wafer was H2 CY27; this quarter Sanjay confirmed initial vapor output at the first Idaho fab in mid-CY27 and broke ground on the first New York fab ahead of plan. The shift from reactive supply management to a multi-site, multi-year build-out with disclosed timelines is the most concrete signal in three quarters that management believes the demand environment extends well beyond the typical 2-year memory cycle.

Supply-gap quantification was repeated but not tightened. Last quarter Sanjay disclosed Micron could only meet 50-67% of demand from several key customers. This quarter Joe Moore at Morgan Stanley pressed for an update; Sanjay confirmed the 50-67% range is "unchanged from prior quarter" and supply is "tight across all end markets." The signal is dual: the supply gap has not narrowed (bullish for pricing), but management is not yet willing to claim it is widening (which would imply a CY27 demand shock not yet in numbers).

The contract framework moved one notch further. Last quarter management confirmed multi-year LTAs were being signed; this quarter Sanjay disclosed "the first five-year SCA" (Strategic Customer Agreement) — and described SCAs as "different from prior LTAs" with "specific commitments over a multi-year time horizon." But on Timothy Arcuri's direct question about downside protections, Sanjay declined to disclose terms, citing confidentiality. This is the most evasive thread on the call: three analysts pressed for SCA economics and got generic "robust" language each time. The framework is now confirmed; the economic terms remain a black box.

Margin commentary has stopped being apologetic about deceleration. Last quarter Mark front-loaded a "mathematical saturation" narrative to manage expectations into FY26. This quarter, with Q3 guided to ~81% gross margin, Mark told Krish Sankar at TD Cowen that current margins reflect "durable AI demand drivers and structural supply constraints" — declining bits per wafer, rising HBM trade ratios, greenfield capacity requirements — rather than cyclical peaks. The framing has flipped from "margins will decelerate, but slowly" to "margins are structurally different from historical precedent." That is a meaningfully different defense.

Recurring themes management leaned on this quarter:

Memory as strategic asset in AI era with fundamental role in compute architecturesStructural supply constraints extending beyond calendar 2026 underpinning pricing powerAccelerating CapEx investment across multiple geographies to capture long-term demandTechnology leadership across DRAM (1-gamma), NAND (G9), and HBM product roadmap differentiationExpansion into emerging AI-native markets: robotics, autonomous vehicles, on-device agentic AI, vector databasesCustomer consolidation through multi-year SCAs providing visibility and portfolio lock-in

Risks management surfaced:

Trade and geopolitical developments impacting supply chains (explicitly noted as not in guidance)PC and smartphone unit declines in low double-digit percentage range in calendar 2026 due to supply constraintsClean room construction delays and longer lead times constraining manufacturing expansionExecution risks on multiple simultaneous FAB projects across US, Taiwan, Japan, and SingaporeCompetition in emerging HBM and specialized memory markets from other suppliers

Q&A highlights

Chris Sankar · TD Cowen

How should we think about gross margin sustainability at 81% as HBM4 is brought into the mix, and what is the outlook for gross margins in Q3 and beyond?

Mark indicated 600 basis points sequential gross margin improvement to Q3, but declined to provide Q4 guidance. Management attributes strong margins to AI driving multi-year investment cycles requiring more high-performance memory, and notes supply factors will remain tight beyond 2026. At these margin levels, incremental price increases have diminishing effects on gross margin.

81% gross margin guidance600 basis points sequential improvement to Q3No Q4 gross margin guidance providedMarket conditions expected to remain tight beyond 2026

Timothy Arcuri · Evercore ISI

Do SCAs contain downside protections on gross margins when the cycle rolls over, and what is Micron's capital allocation strategy with $35-40B expected free cash flow and $50B+ cash by year-end?

Sanjay declined to detail SCA specifics citing confidentiality but emphasized they are multi-year with robust terms providing stability. Mark outlined capital allocation priorities: balance sheet strength, organic investment, R&D, and capacity CapEx, with 30% dividend increase announced. Significant capacity remains for opportunistic share repurchases to offset dilution.

30% dividend increase announcedExpected free cash flow roughly doubling sequentially in Q3Record net cash and record free cash flow in Q2, beating prior quarter by 77%Two credit upgrades received in quarter; now rated solid triple-B

Joseph Moore · Morgan Stanley

How is Micron managing supply allocation across end markets (AI vs. consumer segments like PCs/smartphones)? What are current fulfillment levels to key customers?

Sanjay stated supply is tight across all end markets with strong overall demand, though price-sensitive consumer markets may experience some demand impact. Micron aims to maintain diversified supplier position. Confirmed key customers currently receiving 50-67% of requested demand in the medium term, unchanged from prior quarter.

Key customers receiving 50-67% of requested demandSupply tight across all end marketsData center becoming larger portion of industry TAMAI trend driving memory content requirements across all markets

Harlan Sur · JPMorgan

What is the runway for continued sequential ESSD growth through 2024-2025 with G9 node ramping, and is Micron pursuing R&D in high-bandwidth flash?

Sanjay highlighted strong data center SSD growth trajectory with well-positioned portfolio across capacity and performance using TLC and QLC. On high-bandwidth flash, acknowledged some positive attributes but noted limitations (read speed, power, retention). Management indicated it is early stage and requires customer engagement to understand business value proposition, with Micron continuing to study the area.

ESSD business doubled sequentially in Feb quarterESSD represents 50% of NAND mixPortfolio spans capacity-optimized, performance-optimized, and mainstream SSDs on G9High-bandwidth flash identified as early-stage opportunity

Vivek Arya · Bank of America Securities

Will Micron achieve the target 20-25% HBM share immediately in Vera Rubin or build toward it over time? How do current margin peaks compare to historical precedents?

Sanjay confirmed Micron reached HBM share target aligned with DRAM share in Q3 2025 (corrected from prior misspoken reference to 2026) and will no longer break out HBM share quarterly. Feels good about HBM4 and HBM3E positioning in 2026. Mark argued current margins reflect durable AI demand drivers and structural supply constraints (declining bits per wafer, rising HBM trade ratios, greenfield capacity requirements) rather than cyclical peaks, distinguishing current environment from historical precedent.

HBM share reached target parity with DRAM share in Q3 2025No further quarterly HBM share breakouts providedBoth HBM4 and HBM3E will be supplied in calendar 2026AI identified as transformational secular driver vs. cyclical peak

Answers to last quarter's watch list

Q2 FY26 non-GAAP gross margin vs 68% guide; Q3 guide above 70% or signs of mathematical saturation — Q2 non-GAAP gross margin came in at 74.4%, 640bps above the guide high. Q3 FY26 gross margin guided to ~81%, another ~650bps sequential step. The "mathematical saturation" narrative Mark front-loaded last quarter has been replaced with a "structurally different from historical precedent" framing. No deceleration signal in the print or the guide.
Resolved positively
Supply-gap disclosure (50-67% of customer demand) — Sanjay confirmed to Morgan Stanley the 50-67% range is unchanged from last quarter, and supply is tight across all end markets. The gap has neither narrowed (which would have capped pricing power) nor been quantified more precisely. Status: Resolved positively, with continued opacity on precision.
HBM revenue disclosure posture — Management took disclosure backward this quarter. Sanjay confirmed Micron reached HBM share parity with overall DRAM share in Q3 CY25 — and then said the company will "no longer break out HBM share quarterly." The bull case reads this as confidence (parity achieved, mission accomplished); the bear case reads this as defensive posturing as competitors enter. Status: Resolved negatively on disclosure granularity.
Multi-year LTA contract specifics — Sanjay disclosed the first five-year SCA has been signed and that SCAs are structurally different from prior LTAs with "specific commitments over a multi-year time horizon." But three analysts (Arcuri, Muse, Sur) pressed for SCA economics — pricing mechanisms, ROIC-linked terms, CapEx commitments, downside protections — and management declined each time citing confidentiality. The framework is now firmer; economic terms remain undisclosed. Status: Resolved positively on existence, Continue monitoring on terms.
FY26 CapEx mix and progression — FY26 CapEx now "above $25B" (up from ~$20B last quarter and ~$18B in Q4 FY25). FY27 construction-related CapEx will step up by more than $10B YoY on top of that. Idaho 1 first vapor output confirmed for mid-CY27; New York site broken ground ahead of plan; first Idaho fab supports product shipments beginning fiscal 2028. The DRAM/HBM/construction split was not granularly broken out, but the directional trajectory is sharper than expected. Status: Resolved positively on magnitude, Continue monitoring on granularity.
Named ASIC/TPU program HBM share wins — Not disclosed in available exchanges this quarter; the discussion stayed within generic "key customer" frames, and the company explicitly stopped HBM share quarterly disclosure.
Continue monitoring

What to watch into next quarter

Whether Q3 FY26 gross margin lands at or above the ~81% guide, and whether management guides Q4 above 82% or finally signals a margin ceiling. The "structurally different from historical precedent" framing this quarter has raised the bar — a Q4 guide flat to or below Q3 actual would be the first concrete sign of cycle-peak framing.

Whether the supply-gap disclosure (50-67% of customer demand) is repeated a third consecutive quarter, widened, or narrowed. A widening would confirm the FY27 CapEx step-up is reactive to incremental demand; a narrowing would suggest the multi-year SCAs are now the pricing floor and incremental demand is being deflected.

Any quantitative disclosure on SCA economics — minimum volume commitments, pricing structure (fixed, indexed, or ROIC-linked), CapEx pass-through provisions, or downside protections. Management stonewalled three analysts this quarter; a single quantified data point would be a material signal in either direction.

FY27 CapEx framing precision — this quarter's "meaningfully higher than FY26 with $10B+ construction step-up" implies a $35B+ FY27 CapEx number. Watch whether the next print provides a dollar figure and the equipment-vs-construction split.

Whether Cloud Memory regains operating margin leadership from Mobile & Client. Mobile & Client at 76% operating margin (highest in the portfolio) is the print's most surprising line — if it persists, the on-device agentic AI thesis (32GB minimum memory configs) is structural; if it reverts, this quarter's mix was opportunistic.

HBM disclosure posture — management stepped down disclosure this quarter (no more quarterly HBM share breakouts). Watch whether competitive entry in HBM4/HBM4e prompts management to restore disclosure as a defensive signal, or whether the silence persists.

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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