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Micron's 26 SCAs: Can Take-or-Pay Deals Boost Earnings Stability?
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Key Takeaways
Micron's 26 SCAs are expected to cover over 35% of revenues through 2030, improving long-term visibility.
Customer commitments reached $32B, backed by roughly $150B in SCA-linked remaining performance obligations.
Micron expects margins from price-band deals to exceed historical quarterly peaks, even at floor prices.
Micron Technology, Inc. (MU - Free Report) is using long-term strategic customer agreements (SCAs) to make its earnings more predictable in the cyclical memory industry. By the end of fourth-quarter fiscal 2026, the company has signed 26 SCAs, which are expected to cover more than 35% of its revenues through 2030. These agreements require customers to pay for committed memory volumes, even if they do not take delivery of all the products.
The agreements are backed by significant customer commitments. As of fourth-quarter fiscal 2026, these commitments had reached $32 billion, mostly in cash deposits. Micron also reported approximately $150 billion in remaining performance obligations (RPO) linked to SCAs with established pricing terms. Three-quarters of expected SCA revenues have a defined pricing framework, including floor and ceiling prices for most of that portion. Some agreements extend into 2031, giving Micron greater visibility beyond the current memory cycle.
These deals could help Micron plan production, manage investment and reduce the risk of sudden demand changes. Management expects gross margins from agreements with price bands to remain above the company’s peak quarterly margins in previous cycles, even at floor prices. This could support earnings and cash flow if market conditions weaken.
Overall, Micron’s SCAs are a meaningful step toward more stable earnings. With strong customer commitments and continued AI-driven memory demand, the agreements could make future revenues and margins more predictable. The Zacks Consensus Estimate for fiscal 2027 revenues and earnings indicates a year-over-year increase of 108.4% and 135.3%, respectively.
Micron’s Rivals Also Focus on Long-Term Deals
Micron’s competitors, including SK hynix Inc. (SKHY - Free Report) and Sandisk Corporation (SNDK - Free Report) , are also focusing on long-term contracts to improve revenue visibility.
SK hynix competes with Micron in DRAM and high-bandwidth memory (HBM). In the third quarter of 2026, its revenues jumped 328% year over year to 104.62 trillion Korean won, while operating profit surged 632% and reached a record 83.33 trillion won.
SK hynix has signed long-term agreements with 14 customers, covering more than 50% of its production capacity for 2027 and 2028. These deals can improve demand visibility and support production planning.
Sandisk is another competitor in NAND flash memory and data-center storage. Its first quarter fiscal 2027 revenues surged 378% year-over-year to $11.03 billion, while non-GAAP earnings per share jumped to $49.51 from $1.22 in the year-ago quarter.
By August 2026, Sandisk had signed 10 New Business Model agreements with customers, helping secure future demand. These contracts include volume commitments and pricing terms designed to improve revenue predictability and protect against cancellations.
Micron’s Price Performance, Valuation & Estimates
Shares of Micron have surged 141.8% year to date compared with the Zacks Computer and Technology sector’s return of 4.2%.
Micron Technology YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, MU trades at a forward price-to-earnings ratio of 3.78, significantly lower than the sector’s average of 16.79.
Micron Technology 12-Month Forward P/E Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Micron’s fiscal 2027 and 2028 earnings implies year-over-year increases of 133.1% and 20.1%, respectively. Bottom-line estimates for fiscal 2027 and 2028 have been revised downward over the past seven days.
View the Zacks #1 Rank List
Image: Shutterstock
Micron's 26 SCAs: Can Take-or-Pay Deals Boost Earnings Stability?
Key Takeaways
Micron Technology, Inc. (MU - Free Report) is using long-term strategic customer agreements (SCAs) to make its earnings more predictable in the cyclical memory industry. By the end of fourth-quarter fiscal 2026, the company has signed 26 SCAs, which are expected to cover more than 35% of its revenues through 2030. These agreements require customers to pay for committed memory volumes, even if they do not take delivery of all the products.
The agreements are backed by significant customer commitments. As of fourth-quarter fiscal 2026, these commitments had reached $32 billion, mostly in cash deposits. Micron also reported approximately $150 billion in remaining performance obligations (RPO) linked to SCAs with established pricing terms. Three-quarters of expected SCA revenues have a defined pricing framework, including floor and ceiling prices for most of that portion. Some agreements extend into 2031, giving Micron greater visibility beyond the current memory cycle.
These deals could help Micron plan production, manage investment and reduce the risk of sudden demand changes. Management expects gross margins from agreements with price bands to remain above the company’s peak quarterly margins in previous cycles, even at floor prices. This could support earnings and cash flow if market conditions weaken.
Overall, Micron’s SCAs are a meaningful step toward more stable earnings. With strong customer commitments and continued AI-driven memory demand, the agreements could make future revenues and margins more predictable. The Zacks Consensus Estimate for fiscal 2027 revenues and earnings indicates a year-over-year increase of 108.4% and 135.3%, respectively.
Micron’s Rivals Also Focus on Long-Term Deals
Micron’s competitors, including SK hynix Inc. (SKHY - Free Report) and Sandisk Corporation (SNDK - Free Report) , are also focusing on long-term contracts to improve revenue visibility.
SK hynix competes with Micron in DRAM and high-bandwidth memory (HBM). In the third quarter of 2026, its revenues jumped 328% year over year to 104.62 trillion Korean won, while operating profit surged 632% and reached a record 83.33 trillion won.
SK hynix has signed long-term agreements with 14 customers, covering more than 50% of its production capacity for 2027 and 2028. These deals can improve demand visibility and support production planning.
Sandisk is another competitor in NAND flash memory and data-center storage. Its first quarter fiscal 2027 revenues surged 378% year-over-year to $11.03 billion, while non-GAAP earnings per share jumped to $49.51 from $1.22 in the year-ago quarter.
By August 2026, Sandisk had signed 10 New Business Model agreements with customers, helping secure future demand. These contracts include volume commitments and pricing terms designed to improve revenue predictability and protect against cancellations.
Micron’s Price Performance, Valuation & Estimates
Shares of Micron have surged 141.8% year to date compared with the Zacks Computer and Technology sector’s return of 4.2%.
Micron Technology YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, MU trades at a forward price-to-earnings ratio of 3.78, significantly lower than the sector’s average of 16.79.
Micron Technology 12-Month Forward P/E Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Micron’s fiscal 2027 and 2028 earnings implies year-over-year increases of 133.1% and 20.1%, respectively. Bottom-line estimates for fiscal 2027 and 2028 have been revised downward over the past seven days.
Image Source: Zacks Investment Research
Micron currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.