Micron's record capex meets a memory cycle that may be turning

By Sophie Lindqvist

Micron Technology raised fiscal 2026 capital expenditure to $30.712 billion, nearly double the $15.857 billion spent a year earlier, while fourth-quarter non-GAAP gross margin reached a record 87.0%.

Micron makes DRAM, NAND and high-bandwidth memory, the stacked chips that feed AI accelerators. Fiscal 2026 revenue reached $133.188 billion, up 256.33%. Fourth-quarter gross margin reached 87.0%, against 45.7% a year earlier.

The stock trades at $733.15. A 28.74% one-month fall shows investors already doubt AI memory pricing can stay at record levels. Shares sit about 41.6% below the 52-week high of $1,254.61.

Has Micron escaped commodity pricing?

Bulls argue that multi-year Strategic Customer Agreements turned a commodity business into a contracted one. The contracts now span every business unit.

Yet about three-quarters of agreement revenue sits inside pricing models. Most of those models carry ceiling limits that cap upside. Committed shipments therefore do not remove the ceiling on price.

More than 75% of fiscal 2027 shipments are committed, according to President Manish Bhatia. Bhatia said: "We really don't have line of sight to when supply and demand balance."

HBM4E, co-designed with NVIDIA, targets volume production in calendar 2027.

The shares trade at about 4 times forward earnings and 9 times trailing earnings. The PEG ratio stands at 0.16. Fiscal 2027 EPS estimates average $176.5017. Over 30 days, those estimates carried 29 upward revisions against 2 downward revisions.

First-quarter guidance calls for $61.5 billion in revenue. Non-GAAP EPS guidance is $38.15. Gross margin guidance is 86.25%.

What does record capex reveal about the cycle?

Capex reached $30.712 billion in fiscal 2026, up from $15.857 billion. Micron has seen this spending cycle before. Its record investment meets a hard historical warning: fiscal 2022 net income of $8.687 billion became a fiscal 2023 loss of $5.833 billion, showing how quickly memory margins can reverse.

Mobile and client bits declined sequentially while pricing carried revenue. CFO Mark Murphy said price increases would eventually moderate. That caution matters more than the contracts. A single-digit multiple on peak earnings remains the classic cyclical trap.

Can contracts cushion the next downturn?

Agreements now span every business unit, which the analysis says cushions any downturn. Murphy still expects margin expansion after the first quarter from "continued price increases, albeit at a more moderate pace."

The next two reports provide a clean test. Gross margin holding above the 86.25% guide would strengthen the bull case. A quarterly decline would confirm the drop.

What do analysts expect from the shares?

Analysts average a $1,561.91 target for shares trading at $733.15, implying about 113% upside. The ratings cover 49 analysts:

• Strong Buy: 9
• Buy: 36
• Hold: 3
• Strong Sell: 1

Targets rest on pricing assumptions that can change quickly. Over one month, Micron fell 28.74% while the S&P 500 slipped 3.33%. Over one year, Micron gained 208.51% against 12.17% for the index. Its beta is 2.398.

What breaks the bullish thesis?

Supply pressure likely builds through 2027 as Micron's Idaho fab delivers first wafers in mid-calendar 2027. Samsung and SK Hynix will also open clean rooms.

Fiscal 2028 EPS estimates range from $136.00 to $335.50. That spread shows how uncertain the out-years remain. Past cycle troughs produced earnings far below current levels.

The thesis breaks if new agreements lock higher floors and margins keep expanding through fiscal 2027.

Record margins, record capex and a CFO preparing investors for slower price gains form the setup of a memory top. The next two margin prints will show whether committed shipments can absorb new wafer capacity before pricing cools.