Micron Bets on Long-Term SCA Deals: Can It Lower Earnings Cyclicality?

Micron Technology, Inc. MU is taking steps to reduce one of the biggest challenges in the memory industry — sharp swings in revenues and profits. Its new Strategic Customer Agreements (SCAs) could provide more predictable demand and pricing while helping the company manage future memory cycles.

Micron has signed 16 SCAs covering customers across data centers, consumer markets and automotive. Most agreements run for five years through 2030, while automotive deals generally run for three years. Together, the contracts represent about 20% of Micron’s DRAM volume and one-third of its NAND volume.

The financial impact could be significant. During its third-quarter fiscal 2026 results, Micron revealed the SCAs signed so far represent about $100 billion of remaining performance obligations based on minimum committed volumes and pricing. The company also expects to receive about $22 billion in customer deposits and related financial commitments, with roughly $18 billion expected as cash deposits.

The key benefit is greater stability. The agreements are structured as take-or-pay contracts, meaning customers commit to specific volumes. Many also include fixed prices or price floors and ceilings. This can protect Micron from severe pricing declines during weaker memory cycles.

Micron’s recent results show why it is betting on SCAs. Third-quarter revenues jumped to $41.46 billion from $9.30 billion a year earlier, while non-GAAP earnings surged to $25.11 per share from $1.91. This is a massive year-over-year swing, primarily boosted by the ongoing AI-driven demand for memory and storage.

As SCAs expand, MU could gain greater earnings visibility and stronger cash flow planning. This will make Micron's growth story less dependent on short-term memory pricing and potentially more durable over the long term.

MU Rivals’ Strategy to Reduce Business Cyclicality

SK hynix SKHY and Sandisk Corporation SNDK are pursuing strategies similar to Micron by building stronger customer commitments.

SK hynix has finalized long-term agreements with around 10 customers. These multi-year deals are designed to improve supply stability and support longer-term growth. In the second quarter of 2026, SK hynix’s revenues jumped 257% year over year to 79.32 trillion Korean won, while operating profit soared 557% to 60.54 trillion won.

Sandisk is also moving toward longer-term customer contracts through its New Business Model agreements. The company has signed eight such agreements, covering about 50% of its bits in fiscal 2027 and roughly two-thirds in fiscal 2028. These contracts include committed volumes, financial guarantees and pricing structures that can reduce exposure to traditional NAND price swings.

SanDisk's strategy is already supported by strong growth. The company’s fiscal 2026 revenues rose 175% to $20.25 billion, while data center revenues increased 437%.

For Micron, these competitors show that long-term contracts are becoming an important tool across the memory industry. However, Micron's 16 SCAs, covering about 20% of DRAM and one-third of NAND volume, give it significant visibility as it seeks to reduce earnings volatility.

Micron’s Price Performance, Valuation and Estimates

Shares of Micron have surged around 242.3% year to date compared with the Zacks Computer and Technology sector’s return of 18%.

Micron Technology YTD Price Return Performance

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From a valuation standpoint, MU trades at a forward price-to-earnings ratio of 6.16, significantly lower than the sector’s average of 20.63.

Micron Technology 12-Month Forward P/E Ratio

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The Zacks Consensus Estimate for Micron’s fiscal 2026 and 2027 earnings implies a year-over-year increase of 791% and 113.7%, respectively. Bottom-line estimates for fiscal 2026 have been revised upward over the past 60 days, while estimates have been raised upward for fiscal 2027 in the past 30 days.

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Micron currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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