tkalAI Capital Flows
Earnings deep dive · Tier M Memory

Micron Q3 FY26 — The Supercycle Gets a Contract

Record on every line that matters — $41.5B revenue, an 84.9% gross margin, $25.11 of EPS, and a current-quarter guide near $50B. But the print isn't the story. The story is the book behind it: sixteen take-or-pay customer agreements carrying roughly $100B of minimum-price backlog and a margin floor above any peak Micron has ever posted. Memory has always been a business with no floor. That's the thing that changed today.
Published · Post-print analysis · NASDAQ: MU · For analysts covering memory, storage, HBM, and AI infrastructure

The setup

This is the print the whole memory complex had been pricing toward — and the one this newsletter flagged a week out, when no vendor wanted to move ahead of it. Micron walked in with the bar already at the ceiling: the stock had roughly tripled off its 2025 base, sell-side targets had been marched into four figures, and UBS's Tim Arcuri had nearly tripled his target to $1,625, arguing HBM's supply-demand gap is structurally durable enough to earn an AI-adjacent multiple. When expectations are that stretched, a merely good print disappoints. This one cleared the high end of guidance on revenue, margin, and EPS — and then guided the next quarter ~16% above the Street (~$50B vs. ~$42.9B consensus). Shares closed near $1,075 and traded up roughly 13% after hours toward $1,216. Unverified to the tick.

Micron is the only U.S.-based maker of DRAM, NAND, and HBM at scale — the domestic leg of a three-supplier oligopoly alongside Samsung and SK hynix. Like a fab rather than a packager, it captures the price move at the source. The fiscal third quarter (ended late ) is the quarter in which two things converged: the AI memory shortage hit full force, and Micron formalized a new commercial structure designed to outlast the cycle that created it.

Micron Q3 FY26 Income Statement Q3 FY26 · quarter ended · GAAP · $ in billions Revenue $41.46B +346% Y/Y $13.77B Cloud Memory HBM and DRAM for hyperscale AI $11.52B Core Data Center enterprise DRAM, data-center SSD $11.52B Mobile & Client $4.63B Automotive & Embedded $0.01B All other residual to total revenue Gross profit $35.06B 84.6% margin Cost of revenue ($6.40B) 15.4% of revenue Operating profit $33.32B 80.4% margin Operating expenses ($1.74B) Net profit $28.24B 68.1% margin Tax ($4.98B) 15.0% of pre-tax Other non-operating, net of interest & equity income ($0.10B) $321M other expense less $215M interest income and $9M equity income R&D ($1.32B) 3.2% of revenue SG&A ($0.41B) 1.0% of revenue Other operating expense ($0.01B) Source: Micron Q3 FY26 8-K, Exhibit 99.1 · chart: tkal.news
Where Micron's Q3 FY26 revenue dollar went: 84.6% survives cost of goods, 80.4% survives operating expense, 68.1% lands as net income — the two data-center units are 61% of revenue. Y/Y computed from the release ($41.46B against $9.30B a year earlier). All other = $41,456M − the four business units ($41,448M). Other non-operating, net = $321M other non-operating expense − $215M interest income − $9M equity in net income of equity method investees: $33,318M − $4,978M − $97M = $28,243M. Quarter ended .

The numbers

Fiscal Q3 revenue was $41.5B, up 74% sequentially and 346% year-on-year — the fifth straight quarterly record. The $17.6B sequential dollar increase is the largest in company history, itself eclipsing last quarter's $10.2B record gain. DRAM revenue was a record $31.3B (76% of the total, +343% YoY, +67% QoQ), with bit shipments up only low-single-digits while prices rose in the low-60s percent range — a price-led quarter, the signature of genuine shortage rather than a volume ramp. NAND revenue was a record $9.9B (24%, +361% YoY, +99% QoQ), prices up in the mid-80s percent range.

Consolidated gross margin reached a record 84.9%, up 10 points sequentially; operating margin was 81.2% on $33.7B of operating income; non-GAAP EPS landed at $25.11 (+106% QoQ) against a ~$19.15 guide. Free cash flow was a record $18.3B ($25.4B operating cash flow, $7.1B capex). The balance sheet is the strongest in the company's history: cash and investments of $30.2B, net cash of $24.4B after a $4.4B debt reduction, and a BBB+ upgrade from all three agencies this year. By unit: Cloud Memory $13.8B (83% GM), Core Data Center $11.5B (87% GM), Mobile & Client $11.5B (87% GM), Auto & Embedded $4.6B (79% GM). Data-center revenue alone exceeded $25B — a >$100B annualized run-rate — and data-center SSD revenue topped $5B, more than doubling sequentially.

Guidance reinforces it: FQ4 revenue of ~$50B ±$1B, gross margin of ~86%, and EPS of ~$31 ±$1 — every one a record. FY26 capex is set at ~$27B (~$10B in FQ4), rising further in FY27 with the increase weighted to construction.

Paid subscribers

The rest of this dive is for paid subscribers.

The headline numbers are above. The 6 sections below carry the mechanism, the peer read, the valuation work, and the dated tests that decide it.

  • What's actually driving it
  • How peers read this
  • Valuation reality check
  • What we'd watch from here
  • Listed-market read-through
  • Bottom line
Unlock the full dive →

Already a subscriber? Sign in.

Subscribe · free weekly

This is one print. The pipeline runs every week.

Every Monday, the single sharpest call from the pipeline — a dated, falsifiable read on credit, demand, and capex, then graded in public on the scorecard. Free.

One email to confirm. Unsubscribe any time.

Sources