By Dan Gallagher
Good times never seem to last in the memory chip business. Which explains why Micron's blowout quarterly results have investors asking if things are as good as they can get.
Micron's fiscal second-quarter results posted late Wednesday were a blowout by any measure. Revenue nearly tripled year over year to $23.9 billion, while adjusted operating earnings of $16.5 billion beat Wall Street's consensus estimate by 33%. Even stronger revenue growth was projected for the current quarter ending in May, when Micron also expects to make 81 cents in gross profits for every dollar of revenue.
A gross margin at that level is nearly unheard of for a company engaged in the expensive business of manufacturing semiconductors. It would be Micron's highest ever, according to data from S&P Global Market Intelligence. But the memory industry's past down cycles-and the simple fact that gross margins can't exceed 100%-have many investors worried that Micron's profitability is at or near its peak. The stock, which has surged more than 300% over the last 12 months, slipped Thursday morning.
Artificial intelligence is the one important difference between past cycles and now. Systems for training and running AI models require very large amounts of memory, propelling demand well past what the industry can currently supply.
Analysts think the shortage will last quite a while, given the time it takes to build new chip manufacturing facilities. Chris Caso of Wolfe Research estimates that the industry needs six new large-scale facilities just to support demand for systems from Nvidia and Google alone. "As such, we don't see an end to supply shortages through 2027, which keeps us bullish despite this historic run," Caso wrote in a report Thursday.
Major memory buyers are going to new lengths to lock in their supply. Micron announced its first five-year supply agreement on Wednesday-a notable shift from the one-year deals that have been more commonplace in the industry. The customer was not named, nor other details shared. But such deals indicate that memory is now less a commodity and more of a strategic asset, which may help tame the industry's notorious volatility.
This analysis comes from the Journal's Heard on the Street team. Subscribe to their free afternoon newsletter here, and the AI & Business Newsletter here.
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(END) Dow Jones Newswires
March 19, 2026 11:00 ET (15:00 GMT)
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