Micron Technology Inc. Micron (MU) stock surged over 17% in premarket trading Thursday after the memory-chip maker reported fiscal third-quarter results that topped Wall Street expectations and issued stronger-than-expected fourth-quarter guidance.
Micron reported adjusted earnings of $25.11 per share, beating the analyst consensus estimate of $20.78, on revenue of $41.46 billion. Adjusted gross margin was 84.9%.
For the fiscal fourth quarter, the company forecast adjusted earnings of about $31 per share on revenue of approximately $50 billion.
CEO Sanjay Mehrotra said Micron's multi-year strategic customer agreements are expected to improve the durability and predictability of the company's financial performance.
Strong Guidance Reinforces Pricing Power
Following the earnings release, Susquehanna analyst Mehdi Hosseini told CNBC that Micron's earnings beat and outlook underscore the premium customers are paying for DRAM and NAND used in AI server infrastructure.
Hosseini noted that Micron's fourth-quarter earnings guidance of about $31 per share was well above the consensus estimate of roughly $25, reflecting continued pricing strength driven by what he described as the “memory wall.”
He said customers “have no choice but to pay a premium” and expects that trend to persist despite concerns the cycle may be nearing its peak.
Hosseini also said the current memory cycle differs from previous ones because Micron continues to generate positive free cash flow despite elevated capital expenditures.
He identified the expected transition from AI training to inference workloads in 2028 and the potential easing of restrictions on Chinese memory producers Yangtze Memory Technologies Co. Ltd. and ChangXin Memory Technologies as longer-term risks.
Investors See Further Upside
Requisite Capital's Bryn Talkington told CNBC that Micron's improving fundamentals support additional upside following the earnings report.
She cited accelerating earnings growth, tight memory supply, sustained AI demand and increasing investor attention on capital spending and long-term customer agreements as key drivers.
Talkington also pointed to elevated options activity and higher call option premiums, saying they suggest investors are positioning for further gains rather than a period of consolidation.
Durability Of The Cycle Remains Key Question
Before the earnings release, Silvant Capital Chief Investment Officer Michael Sansoterra told CNBC that investors were focused on whether the current memory cycle represents a structural change or simply reflects short-term momentum.
Sansoterra said demand continues to outpace supply, supporting pricing, but the key question is how long that imbalance will persist as additional capacity comes online.
He added that Micron's valuation will depend on its ability to maintain strong margins, particularly operating margins. While he expected a solid quarter and favorable guidance, he cautioned that lofty expectations following the stock's strong rally could make it difficult to satisfy short-term investors.
Analysts Focus On Margins, AI Demand
Ahead of the results, Evercore ISI analyst Amit Daryanani told CNBC investors should closely watch Micron's gross margins and updates on 2027 memory capacity allocations.
Daryanani said gross margins in the 40% to 80% range would indicate whether pricing remains healthy, while commentary on future capacity commitments could provide insight into the longevity of the AI-driven memory cycle.
He added that robust capital spending by major technology companies continues to support demand for Micron, SanDisk Corp. (SNDK) and Western Digital Corp. (WDC).
According to Daryanani, investors are no longer debating whether the memory upcycle exists but rather how much of the long-term AI opportunity has already been priced into memory stocks.
He also said memory manufacturers must demonstrate they can sustain stronger earnings and build more durable business models beyond the current cycle.
MU Price Action: Micron Technology shares were up 17.50% at $1232.00 during premarket trading on Thursday. The stock is trading at a new 52-week high, according to market data.
