[Stock Chart] Micron: The Market is Measuring 'Years of Sustainability,' Not Profits — Why is the Stock Price in the Same Place as 3 Months Ago Despite Record Profits?
A company beats earnings expectations and raises guidance for the next quarter. If they do this twice in a row, the stock price should go up. That is the conventional way of thinking.
Micron (MU) reported earnings that beat expectations twice in a row, on June 24 and September 30. Earnings per share (adjusted) are set to increase from $25.11 in the June report to $38.15 in the company’s guidance for the next quarter. That is an increase of over 50%. However, the stock price is $1,063.96 as of October 5, compared to $1,048.51 on June 24.In just over three months, it is up 1.5%, sitting in almost the same place. Even in the week since the September 30 earnings report, it is down 0.1%.
I hold this stock (the background is described in the paid section).
Hello, this is ‘Market Compass.’ I have over 10 years of experience in US stock investing. I am not a financial expert. This ‘Stock Chart’ series is designed to provide material for those who own or are interested in a stock to make decisions, by measuring and recording the strengths, weaknesses, business robustness, and stock price position of one stock using the same yardstick each time.
Even though profits keep growing, the stock price does not move. I see the reason for this as the market is measuring Micron not by the ‘size of current profits’ but by ‘how many more years these profits will continue’. However, if that were the only reason, it would apply equally to other memory stocks. In this article, I will consider this question by looking at Micron’s position relative to its peers and the details of the long-term contracts it began signing earlier this year.
1. Why measure Micron now: One week after strong earnings, the stock price has returned to pre-earnings levels
After the September 30 earnings report, the stock price rose 3.0% on October 1, but fell 2.1% on the 2nd and 1.0% on the 5th, returning to almost the same level as the day before the earnings report. The trading volume on the day after the earnings report was 45.74 million shares, the highest in the past month. It rose on the day with the highest trading volume, and then gave up those gains in three trading days.
I wrote about the details of the earnings in my earnings analysis. Here, now that a week has passed since the earnings report and the stock price reaction has run its course, I will measure ‘how the stock market perceived the earnings.’ The next earnings report (for the September-November 2026 period) will be in mid-December, if it follows the previous year’s schedule.
2. Business Summary: Micron is currently shifting from a ‘company that sells based on market conditions’ to a ‘company that sells in advance’
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What they earn money from: They manufacture and sell memory (DRAM) and storage devices (NAND flash/SSD) that go into AI servers, smartphones, PCs, and automobiles. High-bandwidth memory (HBM) for AI is also a type of DRAM.
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Revenue composition (June-August 2026 period, $54.23 billion): DRAM accounts for 73% and NAND for 26%. By segment, the two data center-related divisions (Core Data Center 33%, Cloud Memory 30%) account for over 60%.
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Earnings momentum: Revenue is up 379% year-on-year and 31% quarter-on-quarter. It has hit a record high for six consecutive quarters.
To use an analogy, Micron is currently like a rice farmer experiencing a continuous bumper crop. Moreover, this farmer has begun signing contracts to sell more than one-third of their harvest for the next five years in advance at a minimum price. A normal farmer’s price is determined by the market after the harvest. I will continue to use this analogy.
I wrote about what kind of company Micron is in the June corporate dissection.
3. Micron’s unique strengths and weaknesses: Parts that cannot be explained by ‘AI demand’
There is a shortage of memory for AI. This story applies to SK Hynix and Samsung Electronics as well. When considering whether to hold Micron stock, that is not a deciding factor. Here, I will only write about things that would not hold true if you replaced the name with a competitor. There were two strengths and four weaknesses. Before that, I will list the long-term contracts, which were the focus of my earnings analysis, alongside those of its peers.
Check first: Long-term contracts are not Micron’s only weapon
Micron has signed 26 multi-year ‘strategic customer agreements’ with customers. According to company estimates, this accounts for over 35% of revenue through 2030. At the time of the previous quarter, there were 16 agreements (according to analyst remarks at the earnings briefing).
All contracts are in a form where the customer promises a quantity to purchase and pays even if they do not take delivery. According to the company’s explanation at the briefing, three-quarters of the revenue expected from the contracts have price arrangements, and many of these are price ranges with a floor and a ceiling. The order backlog calculated based only on the floor price and the promised quantity is approximately $150 billion. Since it was approximately $5 billion at the end of the previous quarter (May 28), it has increased by about 30 times in one quarter (calculated by us from 10-Q and briefing figures). The funds provided by customers for the contracts amount to $32 billion, most of which is cash deposits. In the rice farmer analogy, they are receiving a portion of the payment for what they sold in advance at a minimum price as a down payment.
However, when compared with peers, this is not a move unique to Micron.
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Sandisk (NAND): At the August 5 earnings call, it was explained that over 50% of shipments for fiscal year 2027 and about two-thirds for fiscal year 2028 have already been contracted through 10 long-term agreements. Contracted revenue calculated at floor prices is at least $93.9 billion, with a backlog of $91.1 billion (including two agreements signed after the quarter), and $16.5 billion in customer guarantees. The mechanism of setting floors and caps for part of the pricing is the same as Micron’s.
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Samsung Electronics: It is reported that at an investor event in late September, about 70% of memory production capacity was secured through long-term contracts until 2031. This is said to include prepayments and floor prices (BigGo Finance, September 29).
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SK Hynix: It is reported that contracts have been switched from one year to three to five years, and that price caps have been removed in some contracts (July 2).
Since the metrics—revenue, shipment volume, and production capacity—are all different, they cannot be compared simply, but in terms of the percentage secured through long-term contracts, Micron is not in the lead. In my earnings analysis, I read the long-term contracts as ‘about one-third being decoupled from market conditions,’ but I should have considered that as the Micron version of the changes occurring across the entire memory industry. Using the analogy of American farmers, large neighboring farms are also all starting to sign forward-sale contracts with minimum prices.
Therefore, in this chart, I will not count long-term contracts as a strength. Instead, I will track how far Micron’s contracts expand using the instruments listed below.
Strength 1: 2nd place in SSDs for data centers, despite being 4th or 5th in NAND
The first is on the NAND side. Micron is 4th or 5th in the world in NAND shipment volume, but it is in 2nd place for SSDs for data centers and enterprises (analyst comment at the briefing). Revenue for data center SSDs in the June-August quarter was about $10 billion, more than 10 times the same period last year, accounting for two-thirds of NAND revenue. The company explains that its share in this field is expected to reach a record high for the fifth consecutive year. In a field where it cannot win on volume, it is focusing on the highest-priced applications. This combination is unique to Micron.
Strength 2: $68.3 billion in net cash and DRAM manufacturing in the U.S.
The second is finance and location. At the end of the June-August quarter, cash and investments were $73.5 billion, with $5.2 billion in debt, leaving $68.3 billion in net cash. The company’s rating was also upgraded this quarter. Furthermore, Micron is a company with plans to manufacture DRAM within the United States (Virginia, Idaho, New York). It is in a position to be easily chosen when customers want to diversify their supply sources by region.
Weakness 1: The growth is in price, and the company’s own production volume will not increase immediately
Here are the weaknesses. DRAM revenue for the June-August quarter was up 27% from the previous quarter, but the breakdown was a mid-single-digit increase in shipment volume and a high-teens increase in price. NAND also saw about a 10% increase in shipment volume, while the price was up about 30%. In other words, the current growth is mainly due to price increases.
While price increases being the center of growth is common among memory companies, there are also circumstances unique to Micron. The company explains that its own NAND supply growth in 2026 will be below the industry average, and DRAM will be in line with the industry. New factories will begin producing products in early 2027 for the Singapore HBM assembly plant and mid-2027 for the new Idaho plant. Full-scale volume increases will come several quarters after that. Until then, the premise for growth is that prices continue to rise.
Weakness 2: Long-term contracts have not only floors but also caps
This is the flip side of the long-term contracts seen in the previous section. The quarterly report (10-Q) filed in June states that the price cap for the largest contracts is at roughly the same level as the ‘market price for April-June 2026’ for existing products. However, in July-September, DRAM prices rose by another high-teens percentage. As market prices continue to rise, the portion sold under contract falls short of the market price. An American farmer who sold ahead with a minimum price cannot capture the upside if a bumper crop drives up rice prices. It is a contract that reduces the worry of a decline but also reduces the share when prices rise. SK Hynix is reported to have removed caps on some contracts, and in terms of the share during a price-increase phase, Micron’s contract structure looks more conservative than its peers.
Weakness 3: AI-oriented HBM still has thinner margins than regular DRAM
At the briefing, gross margins by segment were also shown. The Cloud Memory segment for major cloud providers was 83%, unchanged from the previous quarter. The company explained that the effect of price increases was offset by the increased ratio of HBM, which has thinner margins. The other two segments (Core Data Center, Mobile and Client) were 90%. The company explains that it has contracted 2027 HBM at significantly higher prices, and the margin gap with regular DRAM will narrow. For Micron, which is not the leading company in HBM, these are still the numbers of a company playing catch-up.
Weakness 4: Labor negotiations are ongoing at the Taiwan production base
Taiwan is a major production base for Micron’s DRAM and HBM. According to reports, the Taoyuan labor union demanded a permanent mechanism to allocate 15% of operating profit to bonuses, negotiations broke down on September 21, and they are proceeding to a strike vote. Mediation with the Taichung union is scheduled for October 22 (Yahoo Finance, October 1, citing Investing.com reports). No mention of this matter was confirmed at the earnings briefing.
Instruments: Look at these numbers first in the next earnings report
I will keep the strengths and weaknesses as numbers (instruments) that can be tracked every earnings report. The values and the dividing lines for what is strong or weak are written in the paid section.
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Gauge 1: Revenue coverage ratio of long-term contracts
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Gauge 2: Remaining Performance Obligations (RPO)
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Gauge 3: Customer funding and deposits
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Gauge 4: Adjusted gross margin and outlook for the next quarter
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Gauge 5: Gross margin of the Cloud Memory segment (a figure to look at instead of HBM profit margins)
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Gauge 6: Breakdown of price and shipment volume
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Gauge 7: Days of inventory
Strength: Contracts with price floors expand toward the company’s goal of approximately 50% of revenue, narrowing the gap with peers. Weakness: Price increases stop before the new factory’s volume comes out. I believe the turning point when looking at Micron stock lies in these two factors, rather than the overall health of the AI market.
4. What changed in the earnings report: All 5 axes are S. What changed is the ‘volume of contracts’
In the earnings report on September 30, revenue exceeded expectations by 6.2%, earnings per share by 5.7%, and the outlook for the next quarter also exceeded expectations for both revenue and profit by approximately 8%. In my earnings analysis, I focused on the disclosure of long-term contracts and wrote that ‘it has not escaped the cyclical nature, but about one-third has been decoupled from market conditions.’ As seen in Section 3, this change is occurring across the entire memory industry.
When re-measured with the chart’s yardstick, the business evaluation is all 5 axes are S, and the overall evaluation is S. I have changed the evaluation of the valuation axis from my earnings analysis. The reasons are written in the paid section.
In other words, as far as measuring by performance yardsticks, I cannot find any weaknesses in Micron. Yet, the stock price has not moved. What that discrepancy means is the main topic from here on.
The paid section from here on covers the following:
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Current values of the 7 gauges and the dividing line between strong and weak
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What the ‘discrepancy’—where the forward P/E ratio is at its lowest in three years but the price-to-sales ratio is at its median of 1.7x—is pricing in
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The current position of the stock price (3 fixed indicators) and a label representing the current state
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Guidelines for how those who hold and those who do not hold should approach it, and 6 conditions for changing one’s perspective
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Scenarios dividing how the state might change into 5 paths, and a checklist of news that will emerge before the earnings report
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The background of the author’s holding of Micron and current actions
The paid section that follows is a summary of the author’s personal analysis and views. It is not investment advice and does not recommend or solicit the purchase or sale of any specific stock. Please make final trading decisions at your own responsibility.