On December 17, 2025, Micron Technology (MU) surprised the market by posting record Q1 FY2026 results that separated its stock from a broader tech downturn. While the “Magnificent 7” and other AI companies like Broadcom and AMD faced significant selling, Micron’s shares rose more than 8% in after-hours trading.
What drove this performance? A strong “beat and raise” is attributed to a high demand for High-Bandwidth Memory (HBM) amid supply shortages.
Micron Q1 FY2026 Financial Highlights: By the Numbers
Micron didn’t just meet expectations—it exceeded them by a wide margin. The company reported record revenue and its highest-ever free cash flow, indicating that the AI boom is moving into its most profitable stage for memory makers.
| Metric | Q1 FY26 Actual | Wall Street Estimate | Year-Over-Year Change |
|---|---|---|---|
| Revenue | $13.64 Billion | $12.62 Billion | +56.7% |
| Adjusted EPS | $4.78 | $3.96 | +167% |
| Free Cash Flow | $3.90 Billion | N/A | New Record |
| Q2 Revenue Guidance | $18.70 Billion | $14.20 Billion | +130% (Estimated) |
The HBM4 Revolution: Why Supply is the New Currency
Micron’s “AI Story” now centres on not just selling more chips but gaining significant pricing power from a global shortage. CEO Sanjay Mehrotra announced that Micron has completely sold out its HBM supply for all of 2026.
- Rapid Transition to HBM4
Micron confirmed that its next-generation HBM4 is set to ramp up in the second quarter of 2026. This memory is crucial for NVIDIA’s new AI platforms, offering speeds beyond 11 gigabits per second. By securing long-term contracts with fixed pricing, Micron aims to avoid the usual boom-and-bust cycles of the memory market.
- The $100 Billion Milestone
The company has drastically improved its outlook for the HBM Total Addressable Market (TAM). Micron now anticipates the HBM market will reach $100 billion by 2028, a milestone that was previously expected in 2030. This growth shows a 40% CAGR, driven by the shift from training AI to “inference,” which needs large amounts of persistent memory.
Strategic Shift: Prioritising Profits Over PCs
One major takeaway from the earnings call was Micron’s choice to pull back on consumer-facing operations. By shifting manufacturing away from low-margin smartphones and PCs, Micron is now focusing its production on high-margin AI data centers.
- Data Centre NAND: Revenue from data centre SSDs (Solid State Drives) surpassed $1 billion for the first time this quarter.
- The “Half-Capacity” Problem: Mehrotra stated that Micron can only meet about 50% to 66% of the current demand from its biggest customers. In any commodity market, such scarcity leads to significant price hikes—some server memory modules have seen increases of up to 60% in late 2025.
Is Micron Still a “Buy” at These Levels?
Despite almost a 200% gain this year, many analysts believe Micron is still undervalued compared to its earnings potential.
- Forward P/E Ratio: Micron currently trades at a forward 12-month P/E of roughly 13.5x to 15x. This is a notable discount compared to the broader semiconductor sector average of around 28x.
- CapEx Commitment: The company raised its FY2026 capital expenditure target to $20 billion, indicating confidence that current demand is not a “bubble,” but a real shift in how data centres are being built.
- Price Targets: Following the report, Wall Street’s consensus is moving higher, with major firms like Morgan Stanley and Citi eyeing price targets between $300 and $338.
Risks to Watch in 2026
While the outlook is mostly positive, investors should monitor three specific challenges:
- Execution Risk: It’s critical to ramp up the new Singapore packaging facility and 1-gamma DRAM nodes on schedule.
- Competitor Response: South Korean competitors SK Hynix and Samsung are also aggressively increasing HBM capacity, which might result in oversupply by 2027.
- Consumer Squeeze: Higher memory prices could reduce demand for AI PCs and smartphones if manufacturers pass the 20% to 50% cost increases onto consumers.
The Bottom Line
Micron’s Q1 results demonstrated that the AI infrastructure development is ongoing. By shifting to high-value HBM and securing its 2026 revenue with firm contracts, Micron has evolved from a cyclical commodity player into a strategic powerhouse in the AI sector.
