Micron's AI-fueled revenue forecast blows past estimates, backlog swells

Sept 30 : Micron Technology forecast quarterly revenue above estimates on Wednesday and said customers had increased commitments under its long-term supply agreements to $32 billion, signaling unabated demand for AI memory chips.

The company's stock has more than tripled so far this year, propelling it into the $1 trillion valuation club in May on optimism about its AI-driven growth prospects. Shares ticked up less than 1 per cent in extended trading on Wednesday.

The generative AI boom has made high-bandwidth memory essential for data centers, benefiting companies such as Micron, a key supplier to Nvidia, whose processors dominate computing workloads.

In his prepared remarks, CEO Sanjay Mehrotra announced that Micron's customers have significantly increased their financial commitments under long-term supply agreements, raising the total to $32 billion from the $22 billion reported in June, with the majority of them being in the form of cash deposits. The company expects memory and storage supply and demand conditions to be much tighter in fiscal 2027 and 2028 compared with 2026, the CEO said.

"Certainly memory is the chief constraint in AI, versus other areas that get talked about - whether that's logic, whether that's power for data centers," Micron President and Chief Operating Officer Manish Bhatia said in an interview. "The data center has become the largest market for memory and storage."

Micron has seen orders far exceed capacity, which in July led it to lift planned US investments to over $250 billion through 2035, as Amazon, Alphabet and other tech giants are set to spend more than $730 billion on AI infrastructure this year.

New capacity can come online "only so fast, whether that's because of diminishing returns from future technology transitions," Bhatia said. Micron is in the process of expanding its capacity in nearly all of its sites around the world, Bhatia said, including building new sites in Japan and the US. The company expects the first silicon wafer output in mid-2027 but Bhatia acknowledged that it takes a few quarters for the factories to ramp up and have a "meaningful impact on the market."

Finance chief Mark Murphy said Micron's remaining performance obligations — a key indicator of future contracted revenue — under those agreements had risen to about $150 billion, up from roughly $100 billion reported last quarter.

"We expect fiscal 2027 to be another record year, with sequential revenue growth each quarter," Murphy said.

The company expects first-quarter revenue of $61.5 billion, plus or minus $1.5 billion, compared with analysts' average estimate of $57.02 billion, according to data compiled by LSEG.

Adjusted profit is expected to be $38.15 per share in the first quarter, plus or minus $1, above estimates of $35.40.

Mehrotra also said that Micron has secured agreements for most of its 2027 high-bandwidth memory output and will increase fiscal 2027 capital spending above prior plans to add capacity.

The Boise, Idaho-based company competes with South Korean rivals Samsung Electronics and SK Hynix, which lead global high-bandwidth memory market share.

"Micron's complete blowout earnings and forecast should put the nail in the coffin of the ongoing doubters about the resiliency of the AI buildout," said Bob O'Donnell, chief analyst at TECHnalysis Research.

Fourth-quarter revenue more than quadrupled to $54.23 billion, beating estimates of $51.07 billion. Adjusted profit came in at $33.42 per share, exceeding estimates of $31.61.