Micron's Q1 2026: Contradictions Emerge on HBM TAM, CapEx, Market Share, and Pricing

Date of Call: December 17, 2025

Financials Results

• Revenue: $13.6B, up 21% sequentially and up 57% year-over-year
• EPS: $4.78 non-GAAP diluted, up 58% sequentially and up 167% year-over-year
• Gross Margin: 56.8%, up 11 percentage points sequentially
• Operating Margin: 47%, up 12 percentage points sequentially and up 20 percentage points year-over-year

Guidance:

• Fiscal Q2 revenue expected to be $18.7B ± $0.4B
• Fiscal Q2 gross margin expected ~68% ± 100 bps
• Fiscal Q2 operating expenses ~ $1.38B ± $20M
• Fiscal Q2 non-GAAP EPS expected ~$8.42 ± $0.20 (share count ~1.15B)
• Fiscal 2026 CapEx projected ~ $20B (weighted to H2)
• Fiscal Q2 and FY 2026 tax rate ~15.5%
• Expect free cash flow to strengthen and be significantly higher year-over-year

Business Commentary:

* Revenue and Gross Margin Growth: - Micron Technology reported record revenue of $13.6 billion for fiscal Q1 2026, up 21% sequentially and 57% year-over-year. - The growth was driven by strong demand across end markets and tight supply conditions, particularly in the DRAM segment.

• DRAM and NAND Revenue Increase:
• DRAM revenue reached a record $10.8 billion, up 69% year-over-year, while NAND revenue was $2.7 billion, up 22% year-over-year.

• The increase was due to high demand, pricing execution, and favorable mix in both DRAM and NAND segments.

• Strong Performance in Cloud and Data Center Business:

• Cloud memory business unit revenue was a record $5.3 billion, contributing 39% of total revenue.

• Growth was driven by increased bit shipments and higher pricing, reflecting strong demand for high-value data center solutions.

• Investment in New Cleanroom Space:

• Micron plans to invest approximately $20 billion in fiscal 2026, up from the previous estimate of $18 billion.
• The increase is primarily to address tight supply conditions and to support HBM and 1-gamma DRAM supply, with a focus on expanding cleanroom space in Idaho and New York.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management described an "outstanding start to fiscal 2026," delivered record revenue for a third consecutive quarter and guided Q2 revenue of $18.7B with a 68% gross margin; they increased fiscal 2026 CapEx to ~$20B to support HBM and 1-gamma ramps and said HBM 2026 is sold out, reflecting strong demand and confidence.

Q&A:

• Question from Timothy Arcuri (UBS): Can you discuss the nature of the multiyear LTAs and explain the rationale for raising CapEx to $20B and how that affects capital intensity?
  Response: LTAs are multiyear, stronger contracts with specific commitments (no further details); CapEx raised to ~ $20B to support HBM and 1-gamma ramps (brick‑and‑mortar construction roughly doubling year-over-year), with disciplined spending and expectation of higher CapEx in '27 while optimizing capital efficiency.

• Question from Christopher Muse (Cantor Fitzgerald): Why is Micron being conservative on near-term cleanroom expansion and how will you address capacity constraints?
  Response: Supply is constrained; principal supply growth will come from node transitions (1-gamma/G9); Micron is accelerating tool orders, Idaho construction and maximizing existing fabs but still expects tight supply and will allocate bits accordingly.

• Question from Christopher Muse (Cantor Fitzgerald): How should we model cost-downs and potential startup cost impacts as you transition nodes and ramp HBM4?
  Response: Cost execution and yields are strong; 1-gamma and G9 ramps are tailwinds to cost, startup costs for new fabs arrive in H2 '26 into '27 but should have relatively small margin impact; HBM4 expected to ramp with faster yields than HBM3E.

• Question from Harlan Sur (JPMorgan): With rising ASIC/XPU demand for HBM3E and HBM4 ramping, how will you manage allocation and customer demand for both products?
  Response: Micron will allocate HBM3E and HBM4 based on customer requirements and manage mix amid tight HBM supply, noting strong YoY HBM growth and elevated demand across the ecosystem.

• Question from Harlan Sur (JPMorgan): Is enterprise SSD demand accelerating and are you entering long-term agreements with eSSD customers; is SSD intensity higher for inferencing vs training?
  Response: Enterprise SSD momentum and share gains are strong; data center SSDs are included in multiyear contract discussions; GenAI (particularly inferencing/video) is driving higher SSD demand.

• Question from Thomas O'Malley (Barclays): What percentage of DRAM revenue is HBM and how do you view competitive positioning into next year?
  Response: Micron declined to disclose HBM revenue share but reiterated a strong competitive position: industry‑leading HBM4 performance (>11 Gb/s), low power advantage, and a roadmap to sustain differentiation while managing product mix in a tight supply environment.

• Question from Thomas O'Malley (Barclays): Any color on HBM contribution in the November quarter and in the Q2 guide?
  Response: No quarter-by-quarter HBM breakout provided; confirmed FQ1 HBM revenue was a record and expects strong YoY HBM revenue growth in fiscal 2026.

• Question from Sreekrishnan Sankarnarayanan (TD Cowen): How should we think about gross margins beyond Q2 — sustain or improve?
  Response: No margin guidance beyond Q2; management expects margins to expand through the year but more gradually at already-high levels due to math and mix factors, supported by cost execution.

• Question from Sreekrishnan Sankarnarayanan (TD Cowen): Should investors assume a specific long-term HBM market share for Micron?
  Response: Micron will not provide a specific HBM market share; will manage portfolio mix and customer relationships to drive profitable growth as the HBM TAM expands.

• Question from Christopher Danely (Citi): Any update on timing/holdups for signing long-term contracts and will customers help fund new fabs?
  Response: Company won't disclose timing or specific terms; said contracts are multiyear with stronger commitments and negotiations account for limited supply (able to meet ~50–66% of some customers' demand); no disclosure on customer funding of fabs.

• Question from Christopher Danely (Citi): Are HBM volumes for 2026 price‑locked or can pricing float with demand?
  Response: Calendar 2026 HBM volumes and pricing negotiations are completed and HBM for 2026 is sold out, implying contracted pricing/volumes for the year.

• Question from Vivek Arya (BofA): At what point do higher memory prices reduce consumer and traditional enterprise demand into 2026?
  Response: Some consumer unit demand and OEM mix adjustments may occur and have been accounted for in forecasts, but AI-driven content increases memory intensity across devices, partially offsetting elasticity.

Contradiction Point 1

HBM Supply and TAM

It involves the expectations for the high bandwidth memory (HBM) market, which is crucial for Micron's growth strategy.

What's the nature of these multiyear contracts (LTAs) with customers, and do they extend through 2026 or into 2028? - Timothy Arcuri (UBS Investment Bank, Research Division)

2026Q1: The long-term HBM TAM is expected to reach $100 billion by 2028, with HBM bits growing faster than DRAM CAGR. - Sanjay Mehrotra(CEO)

Can you clarify the guidance for the $1.2 billion sequential revenue split between DRAM and NAND? Also, what are the gross margin changes? - Timothy Arcuri (UBS Investment Bank, Research Division)

2025Q4: The long-term HBM TAM is expected to reach $100 billion by 2030, with HBM bits growing faster than DRAM CAGR. - Sanjay Mehrotra(CEO)

Contradiction Point 2

CapEx Growth

It involves the company's capital expenditure (CapEx) strategy, which is crucial for understanding Micron's investment in capacity expansion and future growth.

Why is Micron conservative on CapEx growth when market conditions seem favorable? - Christopher Muse (Cantor Fitzgerald & Co., Research Division)

2026Q1: We decided to do a $20 billion CapEx plan because of the accelerated demand and the need to have more supply for our customers. - Mark Murphy(CFO)

Update on CapEx breakdown of equipment vs. clean-room space and 2026 fiscal plans? - Christopher Muse (Cantor Fitzgerald & Co., Research Division)

2025Q4: We expect our net CapEx to be around $18 billion. Government incentives reduce the net, and we received $2 billion in incentives in fiscal '25 from U.S., Singapore, and Japan. - Mark Murphy(CFO)

Contradiction Point 3

HBM Market Share and Demand Outlook

It involves differing expectations for HBM market share and demand growth, which are crucial for assessing the company's strategic positioning and growth potential in the high-bandwidth memory market.

Is the 22%-23% HBM market share the new baseline? Will HBM growth in 2026 be driven by bit and ASP contributions? - Christopher Muse (Cantor Fitzgerald & Co.)

2026Q1: We expect to achieve a market share of greater than 20% in HBM4 in 2026, and we expect to achieve an HBM share that is in line with our DRAM share earlier than what we had previously expected. - Sanjay Mehrotra(CEO)

Is the 22%-23% HBM market share the new baseline? How should we assess HBM growth in 2026 considering bit and ASP contributions? - Christopher Muse (Cantor Fitzgerald & Co.)

2025Q3: We expect to reach HBM share in line with DRAM share earlier than expected due to strong execution. - Sanjay Mehrotra(CEO)

Contradiction Point 4

HBM Pricing Strategy

It involves differing statements on the pricing strategy for HBM products, which are important for understanding the company's revenue outlook and competitive positioning.

Is the HBM price fixed for 2026 or could it float with strong demand? - Christopher Danely (Citigroup Inc.)

2026Q1: HBM pricing for 2026 is completed with strong profitability. - Sanjay Mehrotra(CEO)

What is the status of 2026 HBM supply and pricing negotiations? - Harlan L. Sur (JPMorgan Chase & Co.)

2025Q3: We are seeing very strong demand for HBM and expect a very strong second half of the year with great execution. - Sanjay Mehrotra(CEO)

Contradiction Point 5

CapEx Growth Strategy

It highlights differences in the company's approach to capital expenditure spending, which directly impacts its ability to meet demand and maintain market share.

Why is Micron being conservative with CapEx growth despite favorable market conditions? - Christopher Muse (Cantor Fitzgerald & Co., Research Division)

2026Q1: The increase supports DRAM and HBM, particularly the 1-gamma node. Micron remains disciplined with CapEx growth aligning with bit demand and supply. - Mark Murphy(CFO)

Are gross margin improvements expected starting in fiscal Q4, and which segments would drive this? - Harlan Sur (JPMorgan Chase & Co, Research Division)

2025Q2: We currently expect capital expenditures in calendar 2025 to be in the range of $24 billion to $26 billion, reflecting an increase compared to 2024. - Mark Murphy(CFO)