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MU - F4Q25 - AI trouncing estimates
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MICRON TECHNOLOGY INC (MU)
🧠💾 Leading Memory & Storage Provider | AI Memory Revolution Leader
Q4 FY2025 Results | 50%+ Gross Margins Achieved, First Time Since 2017-2018
💰 Market Cap: $189.0B | 💵 CapEx Guide: $18B (FY26) | 🚀 50%+ Gross Margins Achieved
👨💼 CEO Sanjay Mehrotra | 🏭 Idaho Fab: H2 2027 | 🎯 HBM4 Performance Leadership
$166.48
📈 +$1.86 (+1.13%) Today
Current Price
Price Target Scenarios
18-Month Horizon (2026 Targets)
$275.00
Bull Case (+65%)
HBM4 Supercycle
DRAM Tightening
📊 Valuation Calculation:
• 2026E EPS: $13.75 × P/E: 20x = $275.00
🚀 Key Assumptions:
HBM4 performance leadership (>11Gbps, 2.8TB/s) • DRAM further tightening in 2026 • Data center >60% revenue mix • 1-gamma ramp accelerates • Long-term customer agreements
$200.00
Base Case (+20%)
Steady Execution
Market Share Gains
📊 Valuation Calculation:
• 2026E EPS: $10.00 × P/E: 20x = $200.00
⚖️ Key Assumptions:
HBM market share reaches DRAM parity • Consumer inventory normalization • NAND market stabilizes • Moderate memory cycle extension
$110.00
Bear Case (-34%)
Cycle Downturn
Supply Glut
📊 Valuation Calculation:
• 2026E EPS: $5.50 × P/E: 20x = $110.00
🔻 Key Assumptions:
Memory cycle turns sharply negative • AI demand growth stalls • China competition intensifies • Consumer demand remains weak • NAND oversupply persists
Bottom Line for Retail Investors
🏭
Supply Tightening
DRAM very tight with further tightening in 2026, inventory below targets
📈
Margin Recovery
50%+ gross margin achieved, first time since 2017-2018, data center >50% revenue
💰
HBM4 Leadership
HBM4 performance >11Gbps, 2.8TB/s bandwidth, higher share gains expected in 2026
⚠️
CapEx Surge
FY26 CapEx guidance $18B (vs $13.8B FY25), mostly DRAM construction/equipment
📈 Q4 FY2025 "Margin Recovery Milestone" Results
50%+ Gross Margins Achieved for First Time Since 2017-2018, DRAM Supply Tightening
💵
50%+
Q4 Gross Margin
First Time Since 2017-18
📈
$18B
FY26 CapEx Guide
vs $13.8B FY25
💰
$10B
HBM+LP+Hi-Cap DIMMs
FY25 Revenue
🏪
Mid-50%
Data Center Revenue Mix
vs ~33% Historical Peak
📞 Key Q4 FY2025 Earnings Call Insights
🚀
HBM4 Performance
>11Gbps pin speed, 2.8TB/s bandwidth - exceeding JEDEC specs significantly
🏗️
CapEx Surge
FY26 $18B vs FY25 $13.8B - vast majority for DRAM construction/equipment
🌍
Supply Tightening
DRAM very tight, further tightening in 2026, inventory below targets
🎯
1-Gamma Ramp
Achieved mature yields Q4, first revenue shipments, primary bit growth source FY26
📍 Strategic Theme: "Supply-Demand Inflection" - DRAM tightness driving pricing power across entire portfolio, not just data center
💰 Structural Shift: Data center mid-50% of revenue vs historical peak of ~33% for any segment, driven by AI transformation
🔮 Idaho Timeline: New fab wafer production starts H2 2027, long-term capacity response to tight supply
📊 Q4 FY2025 Performance & Key Metrics
| Metric | Q4 FY2025 | Performance |
|---|---|---|
| Gross Margin | 50%+ | First Time Since 2017-18 |
| DDR4 Mix | Low Single Digit % | Extended UOL Timeline |
| Data Center Mix | Mid-50% | vs ~33% Historical Peak |
| NAND Free Cash Flow | Positive | Second Consecutive Year |
HBM TAM 2025E$30B
Data Center Mix>50%
🎯 FY2026 Strategic Priorities & Key Developments
"We have completed a second year of positive free cash flow in NAND. Our decision to exit managed NAND will provide more supply availability for us to focus on the data center market." - CFO Mark Murphy. Company targeting long-term customer agreements amid supply tightness.
🚀 Why MU Bulls Are Right
🧠
HBM Leadership
Designed into NVIDIA Blackwell, HBM4 leadership through 2030, $100B+ TAM vision
📈
AI Infrastructure
Data center >50% of revenue, AI driving structural demand shift to high-performance memory
🌍
Technology Edge
1-beta/1-gamma nodes, EUV adoption, China competition limited to legacy products
💎
Supply Discipline
NAND capex cuts, wafer start reductions, tight leading-edge DRAM inventories
🐻 Why MU Bears Have Valid Concerns
📊
Cyclical Nature
Memory industry historically cyclical, current upturn may not be sustained
💸
Consumer Weakness
Q2 inventory adjustments, PC/smartphone demand soft, near-term headwinds persist
⚡
China Competition
Growing China DRAM/NAND supply, potential technology advancement over time
🎯
Execution Risk
HBM yield ramps, technology transitions, capital allocation amid cyclical uncertainty
This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.
