Micron Technology, Inc. (NASDAQ:MU) shares soared 16.7% in premarket trading Thursday, reaching $1,224.01, as investors reacted to the company's securing of approximately $100 billion in minimum-price customer contracts and $22 billion in projected deposits and commitments. The surge, if sustained, would add nearly $198 billion to Micron's market capitalization, based on 1.13 billion shares outstanding.
Shift to Long-Term Contracts
The market's response signals a fundamental shift in how investors value Micron. Rather than focusing solely on spot DRAM and NAND prices, the market is now pricing in the company's multi-year supply agreements, price floors, and the potential for sustained tightness in the memory market. These contracts provide Micron with revenue visibility and reduce exposure to cyclical price swings.
Micron's CFO, Mark Murphy, noted that the $22 billion in deposits and financial commitments include $18 billion in cash deposits, which will be recorded in financing cash flow and will not affect free cash flow. That $18 billion figure is nearly equivalent to Micron's record adjusted free cash flow of $18.3 billion in the fiscal third quarter.
Strong Earnings and Outlook
Micron reported fiscal third-quarter revenue of $41.46 billion, a significant increase from $23.86 billion in the previous quarter and $9.30 billion a year earlier. Non-GAAP earnings came in at $25.11 per share. For the fiscal fourth quarter, the company projects revenue of approximately $50 billion (plus or minus $1 billion) and non-GAAP EPS of around $31 (plus or minus $1).
DRAM revenue accounted for $31.3 billion, or about 76% of total revenue, with bit shipments up only low single digits but prices surging in the low-60% range. NAND revenue reached $9.9 billion, with bit shipments climbing mid-single digits and prices rising by the mid-80% range.
Supply Constraints and AI Demand
CEO Sanjay Mehrotra emphasized the "strategic value of memory in the AI era," noting that supply is expected to remain tight as demand continues to outpace it, a dynamic he forecasts will persist "beyond calendar 2027." The company's results and outlook have broader market implications, with Nasdaq 100 E-minis rising 2.06% following upbeat forecasts from Micron and Qualcomm (NASDAQ:QCOM).
Industry analysts offered mixed views. Daniel Newman, CEO of Futurum Group, stated that "the size and scale of the AI build out has been underestimated." However, Jake Behan, head of capital markets at Direxion, countered that "the bull case is built on tightness."
Risks and Analyst Targets
Despite the positive sentiment, Micron's outlook includes some caution. CFO Murphy indicated that the fiscal fourth-quarter margin guidance assumes a "meaningful moderation" in price increases. The company also plans capital expenditures of about $10 billion in the fiscal fourth quarter and approximately $27 billion for fiscal 2026. For fiscal 2027, management expects quarterly capex to exceed the fiscal fourth-quarter level.
Analyst price targets remain divergent, ranging from $900 to $1,750 over the next 12 months. J.P. Morgan's Harlan Sur maintained a buy rating and $1,540 target on June 25, while Goldman Sachs' James Schneider held a hold rating with a $900 target a day earlier.
