Micron Technology Inc (NASDAQ:MU) shares soared more than 15% to a record high of around $1,208 Thursday as analysts cheered a wave of long-term strategic agreements reshaping the investment case for the memory chipmaker.
Bank of America reiterated its Buy rating and lifted its price target to $1,550 from $1,500, while Wedbush maintained its bullish stance, with both firms pointing to Micron's growing portfolio of strategic customer agreements (SCAs) as a defining development for the sector.
Micron reported fiscal third-quarter revenue of $41.5 billion, up 74% year-over-year and well above the Street's $35.9 billion estimate. Data center revenue hit an annualized run rate of approximately $100 billion.
Gross margin came in at 84.9%, topping consensus of 81.7%, while non-GAAP earnings per share of $25.11 doubled quarter-over-quarter and surpassed expectations of $20.86.
Fourth-quarter guidance was equally striking, with Micron projecting revenue of $50 billion against the Street's $43.6 billion estimate. Gross margin is expected to reach roughly 86%, with non-GAAP EPS guided to $31.
The headline story was not just the results but what lies ahead. Micron now has 16 SCAs in place, with 14 of those carrying cumulative minimum revenue commitments of approximately $100 billion over the remaining agreement terms. The deals include price floors and ceilings, are backed by cash deposits and financial commitments, and carry no termination provisions.
Bank of America noted the agreements currently represent about 20% of DRAM output and one-third of NAND sales, but Micron expects SCAs to eventually cover at least half of total company revenue, generating roughly $100 billion in remaining performance obligations.
"The agreements are guaranteed by cash deposits and financial commitments and do not contain provisions allowing for the termination of terms," Wedbush noted, underlining the structural shift this represents for a sector historically defined by cyclical boom and bust.
With free cash flow margins expected to approach 50-60%, both firms flagged a significant inflection in shareholder returns. Micron announced plans to return 100% of excess free cash flow to shareholders beginning in December, once CHIPS Act restrictions on certain uses of cash expire.
Bank of America said buyback activity is likely to step up materially, noting that even $32 billion in repurchases for fiscal 2027 would represent only about 25% of potential free cash flow generation. The firm sees shares implying a roughly 10% free cash flow yield at current levels.
Wedbush, meanwhile, described the quarter as a "drop the mic" moment for Micron and the broader memory trade, saying the results demonstrated that demand for NAND and DRAM continues to significantly exceed industry supply.
"With greater nervousness around the AI trade... this shows the memory and chip trade is well-intact and still in the early stages of playing out," Wedbush said, adding that it sees no cracks in AI demand on the hardware or software front.
The firm also flagged positive read-throughs for semiconductor capital equipment makers, noting Micron raised its 2026 capital expenditure forecast and signalled meaningfully higher spending in 2027.
