2026 06 24 Earnings MU Q3 Fy2026

Summary

Micron's fiscal Q3 2026 (quarter ended late-May, reported 2026-06-24) was a record blowout: $41.5B revenue (+74% sequential, +346% YoY), 84.9% gross margin (beat the ~81% guide), $25.11 non-GAAP EPS, $18.3B free cash flow; shares jumped ~14.6%. The load-bearing causal claim for the hbm-supply-bottleneck / cowos-packaging-capacity-crunch thesis: management says HBM3E and HBM4 are "fully booked through calendar 2027" with demand extending into 2028, the company has "no line of sight on when supply will be able to meet demand," and it has converted that scarcity into 16 multi-year, take-or-pay Strategic Customer Agreements (SCAs) — ~$100B cumulative RPO, $22B in customer deposits/commitments, five-year terms with floor/ceiling price bands — that management argues structurally breaks the historic memory boom-bust cycle. Q4 guide: $50B ± $1B revenue, ~86% gross margin, $31 ± $1 EPS, FCF >$30B. FY2026 capex raised to ~$27B; FY2027 capex stepping above the mid-$40B range.

Source note. Reconstructed from the published Q3 FY2026 call transcript (Investing.com host, cross-corroborated with Benzinga's full transcript and Micron's IR press release / prepared remarks). Management phrases shown in quotes are as carried by the transcript host; the surrounding attribution is faithful to the call. Treated as management's stated mechanism — a primary-source claim with an interest behind it — to be corroborated like any other source; the analyst Q&A below is the built-in counter-weight.

Transcript

Sanjay Mehrotra (Chairman, President & CEO): Record results across the board. Data center demand for high-bandwidth memory remains the dominant driver. AI server build-out continues to pull memory content per system structurally higher, and our HBM franchise is sold out far into the future.

Sumit Sadana (Chief Business Officer): "HBM3E and HBM4 are fully booked through calendar 2027, with demand extending into 2028" and beyond. "The demand continues to be well above our supply" — customer requests substantially exceed our capacity across HBM variants. We do "not see when the supply is going to be able to meet demand," and we are not offering a projection for when supply and demand reach equilibrium. HBM4 is ramping at roughly twice the pace of HBM3E.

Sumit Sadana (Chief Business Officer): On the Strategic Customer Agreements — we have signed 16 SCAs to date. They currently cover approximately 20% of our DRAM bits and ~33% of our NAND bits, and we are targeting agreements reaching roughly 50% of total company revenue. These are primarily five-year agreements with annual volume commitments. They are take-or-pay — customers cannot cancel. Pricing works within a "price band" with a ceiling and a floor, renegotiated quarterly within those bands based on market conditions, with premiums for higher-performance products (HBM4 over HBM3E, DDR6 over DDR5). We now hold $22 billion in combined cash deposits and financial commitments (~$18B cash deposits alone); deposits are returned back-end-loaded over the term and serve as the remedy if a customer fails to meet its take-or-pay obligation.

Mark Murphy (CFO): The HBM TAM is now "easily crossing $100 billion in 2027," pulled forward from our prior 2028 expectation, underscoring sustained structural undersupply. Data center revenue reached $25 billion in the quarter, with enterprise SSD at $5 billion (about 20% of data center). Q3 free cash flow was a record; the last two quarters of cash generation roughly equal the company's entire historical cumulative total. We expect Q4 free cash flow to exceed $30 billion. FY2026 capex is raised to approximately $27 billion; FY2027 capex is expected above the mid-$40 billion range (>50% increase, majority tied to construction that does not produce bits until 2028), with startup costs of $100–200M per quarter in FY2027. We are increasing capital returns — a 30% dividend increase announced, with buybacks the principal mechanism, ramping after the second anniversary of the CHIPS agreement.

Q&A

Ben Reitzes (Melius Research): Is a ~10% annual share buyback sustainable at a ~$1.2 trillion market cap given the ~$30B Q4 FCF run-rate? Mark Murphy (CFO): Repurchases remain our primary return mechanism; the rate and pace are determined by multiple factors and step up after the CHIPS anniversary. We are not committing to a fixed buyback rate.

Harlan Sur (JPMorgan): Are HBM3E and HBM4 fully booked for calendar 2027? Sumit Sadana (CBO): Yes — demand for both extends beyond 2027 into 2028 under the SCAs, and customer requests consistently exceed our supply capacity.

Thomas O'Malley (Barclays): What are the SCA cancellation terms and financial remedies? Sumit Sadana (CBO): The SCAs are non-cancelable, take-or-pay. The upfront deposits ($22B aggregate, ~$18B cash) serve as the contingency if a customer underlifts; there is no buyout clause.

Melissa Weathers (Deutsche Bank): Trajectory for SO-DIMM and LPDRAM adoption in the data center? Sumit Sadana (CBO): We expect LPDRAM to grow as a percentage of data center DRAM; Micron is the leader in the SO-DIMM form factor, and RAS challenges are being addressed through differentiation.

James Schneider (Goldman Sachs): Will FY2027 capex reach $55–60 billion? Mark Murphy (CFO): "Not going to give a CapEx number," but roughly ~$10B in Q4 with a step-up thereafter; discipline maintained; the majority of the FY2027 increase is construction that does not produce bits until 2028.

Aaron Rakers (Wells Fargo): Does NAND get included in the SCAs, and how do you view competition from Chinese suppliers (CXMT, YMTC)? Sumit Sadana (CBO): The SCAs include both DRAM and NAND; NAND is constrained but DRAM is far more critical. Chinese competitors primarily serve their domestic market; we emphasize our IP portfolio (~65,000 patents) and first-to-market track record on the highest-performing, most complex products.