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Micron May Become a Safe Haven Investment Prospect in 2027 and Beyond
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Key Takeaways
Micron's DRAM revenues reached $39.8 billion in fiscal Q4 2026, with supply constraints expected through 2028.
MU's 26 take-or-pay agreements could support revenue visibility, with customer commitments reaching $32 B.
Micron's HBM4 ramp, rising data center SSD sales and low forward P/E support its long-term growth prospects.
Micron Technology Inc. (MU - Free Report) has witnessed a meteoric rise in its stock price year-to-date, rallying more than 260%. The company reported blockbuster results in fourth-quarter fiscal 2026 along with strong guidance.
MU is set to continue its excellent performance through 2027 and beyond on extremely tight supply of DRAM, soaring demand for high-bandwidth memory (HBM), soaring growth of physical layer artificial intelligence (AI), new Strategic Customer Agreements (SCAs) to reduce earnings and cash flow volatility and effective strategic investment.
The chart below shows the price performance of MU year to date.
Image Source: Zacks Investment Research
Robust Business Opportunity
AI is becoming a major structural growth driver for Micron. Advanced AI systems need much more memory capacity and bandwidth, supporting demand for HBM, advanced DRAM and high-performance data center SSDs.
In contrast to traditional computing, AI computing desperately needs high-end memory chips without which, the Agentic AI and Large Language Models (LLMs) are impossible to run. Micron has been benefiting tremendously from the enormous growth of physical AI in day-to-day life, which has pushed up the demand for its memory chips.
Tight DRAM supply remains a major earnings driver for MU. Fourth-quarter fiscal 2026 DRAM revenue reached $39.8 billion, or about 73% of total sales, rising 27% sequentially. Bit shipments increased in the mid-single-digit range, while prices increased in the high-teens percentage range.
These gains helped lift MU’s non-GAAP gross margin to 87.0% from 84.9% in the prior quarter and 45.7% a year earlier. The situation for the DRAM crunch is likely to continue at least till 2028. AI workloads are driving higher memory requirements as models become larger and more complex. Growing model sizes, longer context windows and higher usage are increasing the amount of DRAM and storage needed to run AI efficiently.
Long-Term SCA Deals
As of fourth-quarter fiscal 2026, MU had signed 26 take-or-pay SCAs, which management estimates will represent more than 35% of revenues through 2030. Three-quarters of that expected revenue has a defined pricing framework, with most of those agreements using floor-and-ceiling bands. The contracts now extend into 2031, including two one-year extensions.
Customer financial commitments tied to the signed SCAs and extensions have risen to $32 billion, mostly cash deposits. Remaining performance obligations are approximately $150 billion for agreements with determined pricing frameworks, based on committed volumes and minimum pricing.
These new SCAs could provide more predictable demand and pricing while helping the company manage future memory cycles. Its rivals, such as SK Hynix Inc. (SKHY - Free Report) and Sandisk Corp. (SNDK - Free Report) are pursuing strategies similar to MU by building stronger customer commitments.
Strong Guidance
For the first quarter of fiscal 2027, Micron expects revenues of $61.5 billion, plus or minus $1.5 billion. Non-GAAP gross margin is projected at approximately 86.25%, operating expenses at about $2.06 billion and earnings at $38.15 per share, plus or minus $1.
Management expects fiscal 2027 to be another record year, with sequential revenue growth each quarter. It sees first-quarter gross margin as the floor for the year. Operating expenses are projected to increase by around $2.5 billion, mainly due to higher R&D and incentive compensation.
Image Source: Zacks Investment Research
Solid Estimate Revisions
For fiscal 2027 (ending August 2027), the Zacks Consensus Estimate currently shows revenues of $273.1 billion, suggesting an improvement of 105.1% year over year and earnings per share of $176.61, indicating an increase of 133.9% year over year. The Zacks Consensus Estimate for the current year has improved 7.9% in the last seven days.
For fiscal 2028 (ending July 2028), the Zacks Consensus Estimate currently shows revenues of $334.9 billion, suggesting an improvement of 22.6% year over year and earnings per share of $213, indicating an increase of 20.6% year over year. The Zacks Consensus Estimate for the current year has improved 13.3% in the last seven days.
Image Source: Zacks Investment Research
New Tech Trends to Drive Prospects
The performance of any AI model depends on memory performance and capacity. MU’s HBM is a highly sought-after product for NVIDIA Corp. (NVDA - Free Report) , Advanced Micro Devices Inc. (AMD - Free Report) and Alphabet Inc. (GOOGL - Free Report) to name a few, for their AI-enabled chipsets.
Micron is ramping HBM4 and is working with NVIDIA on NVHBM, a custom HBM4E implementation for next-generation GPUs and NVLink Fusion platforms. MU’s technology roadmap is broadening its exposure to higher-value memory and storage products.
Next-generation DRAM and NAND nodes remain scheduled for volume production in the second half of calendar 2027. Micron has started shipping PCIe Gen 5 and Gen 6 data center SSDs for KV-cache applications, while 1-gamma LPDDR6 is sampling across multiple physical AI markets.
Growing Momentum for DRAM and HBM
Micron expects calendar 2027 and 2028 DRAM industry bit shipments to grow in the low-20s percentage range while the market remains supply constrained. Management expects server unit growth in the high-teens percentage range in both 2026 and 2027, providing a favorable demand backdrop for its DRAM products.
HBM is another important growth opportunity. Micron’s HBM revenues grew faster than total company revenues in the fiscal fourth quarter as shipments expanded across more customers. It has also completed agreements covering most of its 2027 HBM bit supply, with significantly higher prices compared with the prior year.
Product Differentiation
AI context storage and HDD displacement are expanding the addressable market for NAND-based data center storage. Fourth-quarter fiscal 2026 data center SSD revenues were nearly $10 billion, more than 10 times the year-ago level. Total NAND revenues reached $14.1 billion, up 42% sequentially, as bit shipments rose about 10% and prices rose about 30%.
Micron expects a fifth consecutive year of record data center SSD market share in calendar 2026. Management also expects industry NAND bit shipments to grow in the mid-20s percentage range in calendar 2027 and 2028 while supply remains constrained in both years.
Huge Short-term Price Upside
The short-term average price target of brokerage firms represents an increase of 52.9% from the last closing price of $1,029. The brokerage target price is currently in the range of $852-$3,000. This indicates a maximum upside of 191.5% and a maximum downside of 17.2%.
Image Source: Zacks Investment Research
Attractive Valuation
Micron has rallied more than 260% year to date. However, the stock price is currently trading at a 22% discount from its 52-week high posted on June 25. As a result, the stock looks very attractive. Moreover, the stock currently has a long-term (3-5 years) projected EPS growth rate of 32.6% compared with the S&P 500’s projected long-term growth rate of 13.7%.
MU trades at a forward 12-month price-to-earnings (P/E) multiple of 5.87X, which is significantly lower than the industry average of 20.05X and the S&P 500’s 17.53X. This discount adds to the appeal for long-term investors.
Micron Technologies has invested heavily in next-generation memory technologies, positioning itself to meet the growing performance and efficiency requirements of AI ecosystems. MU expects memory and storage supply-demand conditions to be much tighter in calendar years 2027 and 2028 than in 2026.
At this stage, it will be prudent to buy MU and hold it for the long term as the astonishing growth potential of the global AI-powered data centers and MU’s strong business visibility are likely to generate more value.
View the Zacks #1 Rank List
Image: Shutterstock
Micron May Become a Safe Haven Investment Prospect in 2027 and Beyond
Key Takeaways
Micron Technology Inc. (MU - Free Report) has witnessed a meteoric rise in its stock price year-to-date, rallying more than 260%. The company reported blockbuster results in fourth-quarter fiscal 2026 along with strong guidance.
MU is set to continue its excellent performance through 2027 and beyond on extremely tight supply of DRAM, soaring demand for high-bandwidth memory (HBM), soaring growth of physical layer artificial intelligence (AI), new Strategic Customer Agreements (SCAs) to reduce earnings and cash flow volatility and effective strategic investment.
The chart below shows the price performance of MU year to date.
Image Source: Zacks Investment Research
Robust Business Opportunity
AI is becoming a major structural growth driver for Micron. Advanced AI systems need much more memory capacity and bandwidth, supporting demand for HBM, advanced DRAM and high-performance data center SSDs.
In contrast to traditional computing, AI computing desperately needs high-end memory chips without which, the Agentic AI and Large Language Models (LLMs) are impossible to run. Micron has been benefiting tremendously from the enormous growth of physical AI in day-to-day life, which has pushed up the demand for its memory chips.
Tight DRAM supply remains a major earnings driver for MU. Fourth-quarter fiscal 2026 DRAM revenue reached $39.8 billion, or about 73% of total sales, rising 27% sequentially. Bit shipments increased in the mid-single-digit range, while prices increased in the high-teens percentage range.
These gains helped lift MU’s non-GAAP gross margin to 87.0% from 84.9% in the prior quarter and 45.7% a year earlier. The situation for the DRAM crunch is likely to continue at least till 2028. AI workloads are driving higher memory requirements as models become larger and more complex. Growing model sizes, longer context windows and higher usage are increasing the amount of DRAM and storage needed to run AI efficiently.
Long-Term SCA Deals
As of fourth-quarter fiscal 2026, MU had signed 26 take-or-pay SCAs, which management estimates will represent more than 35% of revenues through 2030. Three-quarters of that expected revenue has a defined pricing framework, with most of those agreements using floor-and-ceiling bands. The contracts now extend into 2031, including two one-year extensions.
Customer financial commitments tied to the signed SCAs and extensions have risen to $32 billion, mostly cash deposits. Remaining performance obligations are approximately $150 billion for agreements with determined pricing frameworks, based on committed volumes and minimum pricing.
These new SCAs could provide more predictable demand and pricing while helping the company manage future memory cycles. Its rivals, such as SK Hynix Inc. (SKHY - Free Report) and Sandisk Corp. (SNDK - Free Report) are pursuing strategies similar to MU by building stronger customer commitments.
Strong Guidance
For the first quarter of fiscal 2027, Micron expects revenues of $61.5 billion, plus or minus $1.5 billion. Non-GAAP gross margin is projected at approximately 86.25%, operating expenses at about $2.06 billion and earnings at $38.15 per share, plus or minus $1.
Management expects fiscal 2027 to be another record year, with sequential revenue growth each quarter. It sees first-quarter gross margin as the floor for the year. Operating expenses are projected to increase by around $2.5 billion, mainly due to higher R&D and incentive compensation.
Image Source: Zacks Investment Research
Solid Estimate Revisions
For fiscal 2027 (ending August 2027), the Zacks Consensus Estimate currently shows revenues of $273.1 billion, suggesting an improvement of 105.1% year over year and earnings per share of $176.61, indicating an increase of 133.9% year over year. The Zacks Consensus Estimate for the current year has improved 7.9% in the last seven days.
For fiscal 2028 (ending July 2028), the Zacks Consensus Estimate currently shows revenues of $334.9 billion, suggesting an improvement of 22.6% year over year and earnings per share of $213, indicating an increase of 20.6% year over year. The Zacks Consensus Estimate for the current year has improved 13.3% in the last seven days.
Image Source: Zacks Investment Research
New Tech Trends to Drive Prospects
The performance of any AI model depends on memory performance and capacity. MU’s HBM is a highly sought-after product for NVIDIA Corp. (NVDA - Free Report) , Advanced Micro Devices Inc. (AMD - Free Report) and Alphabet Inc. (GOOGL - Free Report) to name a few, for their AI-enabled chipsets.
Micron is ramping HBM4 and is working with NVIDIA on NVHBM, a custom HBM4E implementation for next-generation GPUs and NVLink Fusion platforms. MU’s technology roadmap is broadening its exposure to higher-value memory and storage products.
Next-generation DRAM and NAND nodes remain scheduled for volume production in the second half of calendar 2027. Micron has started shipping PCIe Gen 5 and Gen 6 data center SSDs for KV-cache applications, while 1-gamma LPDDR6 is sampling across multiple physical AI markets.
Growing Momentum for DRAM and HBM
Micron expects calendar 2027 and 2028 DRAM industry bit shipments to grow in the low-20s percentage range while the market remains supply constrained. Management expects server unit growth in the high-teens percentage range in both 2026 and 2027, providing a favorable demand backdrop for its DRAM products.
HBM is another important growth opportunity. Micron’s HBM revenues grew faster than total company revenues in the fiscal fourth quarter as shipments expanded across more customers. It has also completed agreements covering most of its 2027 HBM bit supply, with significantly higher prices compared with the prior year.
Product Differentiation
AI context storage and HDD displacement are expanding the addressable market for NAND-based data center storage. Fourth-quarter fiscal 2026 data center SSD revenues were nearly $10 billion, more than 10 times the year-ago level. Total NAND revenues reached $14.1 billion, up 42% sequentially, as bit shipments rose about 10% and prices rose about 30%.
Micron expects a fifth consecutive year of record data center SSD market share in calendar 2026. Management also expects industry NAND bit shipments to grow in the mid-20s percentage range in calendar 2027 and 2028 while supply remains constrained in both years.
Huge Short-term Price Upside
The short-term average price target of brokerage firms represents an increase of 52.9% from the last closing price of $1,029. The brokerage target price is currently in the range of $852-$3,000. This indicates a maximum upside of 191.5% and a maximum downside of 17.2%.
Image Source: Zacks Investment Research
Attractive Valuation
Micron has rallied more than 260% year to date. However, the stock price is currently trading at a 22% discount from its 52-week high posted on June 25. As a result, the stock looks very attractive. Moreover, the stock currently has a long-term (3-5 years) projected EPS growth rate of 32.6% compared with the S&P 500’s projected long-term growth rate of 13.7%.
MU trades at a forward 12-month price-to-earnings (P/E) multiple of 5.87X, which is significantly lower than the industry average of 20.05X and the S&P 500’s 17.53X. This discount adds to the appeal for long-term investors.
Northward Journey to Continue
Micron currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron Technologies has invested heavily in next-generation memory technologies, positioning itself to meet the growing performance and efficiency requirements of AI ecosystems. MU expects memory and storage supply-demand conditions to be much tighter in calendar years 2027 and 2028 than in 2026.
At this stage, it will be prudent to buy MU and hold it for the long term as the astonishing growth potential of the global AI-powered data centers and MU’s strong business visibility are likely to generate more value.