Micron Technology (MU +15.40%), one of the world's top producers of memory chips, is a cyclical stock which follows its market's boom-and-bust cycles. Its last bust occurred in 2023 as the PC market's post-pandemic sales flatlined, the 5G upgrade cycle cooled down, and more companies prioritized their purchases of artificial intelligence (AI)-oriented graphics processing units (GPUs) over memory chips.
But over the past two years, a new growth cycle kicked off as the PC market stabilized, smartphone sales rose again, and more companies upgraded their solid-state drives (SSDs) and high-bandwidth memory (HBM) chips to support the latest generative AI applications. That's why Micron's stock rallied more than 80% over the past 12 months, while the S&P 500 rose less than 20%.
But will it continue to outperform the market over the next year?
Image source: Getty Images.
How does Micron stand out in its crowded market?
Micron mainly sells DRAM and NAND memory chips. It controlled 22% of the global DRAM market in the second quarter of 2025, according to CFM, putting it in third place behind Samsung Electronics (33.5%) and SK Hynix (38.2%). Micron also held 13.3% of the global NAND market in Q2, according to TrendForce, putting it in fourth place behind Kioxia (13.5%), SK Group (21.1%), and Samsung (32.9%).
It might seem like Micron is the underdog in both markets, but it produces denser and more power-efficient DRAM and NAND chips than its larger competitors. Its focus on performance gives it an edge in the high-performance AI, high-performance computing (HPC), cloud, and data center markets, but it has a narrower moat in the commoditized PC and smartphone markets, which prioritize low prices over high performance.
NASDAQ: MU
Key Data Points
What happened to Micron over the past year?
In fiscal 2023 (which ended in August 2023), Micron's revenue plunged 49%, and the company turned unprofitable. The overproduction of chips during the memory market's previous growth cycle (2020 to 2022) backfired, and the market was flooded with cheap chips.
But in fiscal 2024, its revenue rose 62%, and it turned profitable again. Its core markets stabilized; it benefited from the rapid expansion of the AI market; and it manufactured its chips more efficiently with its newer nodes. These include its extreme ultraviolet (EUV) production of DRAM chips and its ninth-generation (G9) node for its NAND chips. In fiscal 2025, its revenue grew 49% as its net profit surged elevenfold.
Micron's adjusted gross and operating margins consistently expanded over the past year as it sold more high-margin HBM chips to the data center market (which accounted for 56% of its top line in fiscal 2025). It also secured fresh subsidies from the CHIPS Act as it streamlined its other operating expenses.
|
Metric |
Q4 2024 |
Q1 2025 |
Q2 2025 |
Q3 2025 |
Q4 2025 |
|---|---|---|---|---|---|
|
Revenue Growth (YOY) |
93% |
84% |
38% |
37% |
46% |
|
Adjusted Gross Margin |
36.5% |
39.5% |
37.9% |
39% |
45.7% |
|
Adjusted Operating Margin |
22.5% |
27.5% |
24.9% |
26.8% |
35% |
Data source: Micron. YOY = Year-over-year.
What does Micron expect to happen in fiscal 2026?
For fiscal 2026's Q1, Micron expects its revenue to grow by a midpoint of 43.5% year over year as its adjusted gross margin expands to 50.5% to 52.5%. For the full year, analysts expect its revenue and adjusted earnings per share (EPS) to increase 42% and 99%, respectively.
Micron expects customer inventory levels to stay "healthy" across all of its end markets through the rest of calendar 2025. For calendar 2026, it anticipates "further DRAM supply tightness in the industry and continued strengthening in NAND market conditions." Most of that growth should be driven by the AI tailwinds for the HBM and SSD markets.
Robust revenue growth should offset an expected increase in Micron's capital expenditures (capex) in fiscal 2026 (from $13.8 billion in fiscal 2025) as it ramps up the production of its latest 1γ (1-Gamma) DRAM chips. As it transitions more of its chips to the 1γ node, its current 1β (1-beta) node will support its ongoing production of HBM chips.
Where will Micron's stock be in a year?
But in fiscal 2027, analysts expect Micron's revenue and adjusted EPS to only grow 9% and 10%, respectively, as its growth cycle cools down. However, we should take those estimates with a grain of salt because those analysts notoriously underestimated Nvidia and Broadcom before their AI tailwinds kicked in.
I'm not saying Micron will break free of its boom-and-bust cycles and replicate Nvidia and Broadcom's AI-driven gains, but its current growth cycle might last a lot longer than its previous ones as the cloud and AI markets expand. If that happens, Micron's stock could still be deeply undervalued at 12 times forward earnings.
If Micron matches analysts' estimates for the next two years and trades at 15 times forward earnings by the start of fiscal 2027 (September 2027), then its stock could rise nearly 50% and beat the S&P 500 over the next 12 months. So if you expect its focus on high-performance memory chips to pay off as the AI market grows, it's still worth buying today.
