The Micron story

What drives the business

• Micron’s shift toward AI and cloud memory is visible in its Cloud Memory Business Unit, which serves large cloud customers and supplies high-bandwidth memory, or HBM, to data centers, with revenue rising to $13.52 billion in fiscal 2025 from $3.79 billion in fiscal 2024.
• Its other businesses span enterprise memory and data center storage, with Core Data Center revenue of $7.23 billion in fiscal 2025, alongside Mobile and Client revenue of $11.86 billion and Automotive and Embedded revenue of $4.75 billion.
• HBM stacks DRAM to deliver higher bandwidth with lower power consumption, and Micron reported high-volume HBM4 shipments for a lead customer’s platform in the quarter to May 2026.
• Approximately one-half of revenue came from its top ten customers in each of the three fiscal years through 2025, making customer qualification and production schedules important to manufacturing decisions.
• Historically, customers resisted long-term fixed-price commitments, but the Strategic Customer Agreements announced with the May 2026 results establish binding volume and pricing commitments that management believes will improve financial predictability.

What the price assumes

At $1053.98 per share, the reverse DCF assumes free cash flow after stock-based pay grows 19.6% a year for ten years, using a 10.2% discount rate.

That compares with a delivered annual rate of -35.6% over the last three fiscal years and the TenQ check’s bar of -15.8%, which moves that record halfway toward 4%.

Revenue grew 167.0% over the last twelve months and free cash flow reached $26.2 billion, but the price assumption requires sustained cash growth rather than only a sharp cyclical recovery.

Value MU on your own assumptions

What could change the story

• DRAM average prices increased approximately 140% in the first nine months of fiscal 2026 compared with the first nine months of fiscal 2025, leaving profits exposed to price volatility and competing capacity additions.
• Binding customer commitments can constrain supply allocation, while customer or Micron nonperformance could lead to contractual damages, disputes or litigation.
• Transitions to advanced manufacturing technology and new fabrication facilities create execution risks that could prevent Micron from meeting demand or maintaining coverage across its markets.
• Inventory of $8.6 billion at the end of the quarter to May 2026 exceeded quarterly cost of sales of $6.4 billion, making demand forecasting and production allocation important.
• Annual revenue growth of 6.7% over the last three years trails the TenQ sector benchmark of 11.4%, while a free cash flow yield of 2.2% falls below the check’s 3.0% bar.

What to watch next

• For the fourth quarter of fiscal 2026, Micron expects revenue of $50.0 billion plus or minus $1.0 billion and gross margin of approximately 86%, setting the next operating benchmarks.
• Updates on Strategic Customer Agreements, including fulfillment and supply allocation, will help show whether binding commitments are delivering the predictability management expects.
• HBM4 shipment progress and HBM4E qualification milestones will show how the product transition is advancing toward management’s expected volume production in calendar 2027.
• Operating cash flow, inventory and fabrication spending will show whether expansion remains supported by cash generation, following $25.39 billion in operating cash flow and $7.1 billion in net capital expenditures in the quarter to May 2026.

Sources

• Micron's earnings release, filed with the SEC
• Its latest 10-Q or 10-K, for the risk factors
• The MU stock report, for every figure and check