Key Takeaways
- Q2 results showed revenue reaching $23.9B with EPS of $12.20, crushing consensus by 21% and 36% respectively
- Forward guidance for May quarter projects $33.5B in revenue and $19.15 EPS, exceeding analyst expectations by 42% and 70%
- Q3 gross margin forecast at 81% â surpassing even Nvidia’s 75% margin
- Wall Street firms including Citi and UBS lifted price targets to $510, with Cantor Fitzgerald projecting $700
- Shares tumbled approximately 4% in after-hours trading despite exceptional results, driven by capex worries and margin peak speculation
When a company delivers what many consider its best quarterly performance ever and the stock retreats, it’s worth examining what’s really happening beneath the surface.
The semiconductor memory manufacturer unveiled fiscal Q2 figures showing revenue of $23.9 billion â representing a stunning 196% year-over-year surge and a 75% quarter-over-quarter leap. Adjusted earnings per share reached $12.20, marking a remarkable 682% climb compared to the prior year’s corresponding period.
These figures substantially exceeded analyst projections, with revenue topping estimates by 21% and earnings surpassing forecasts by 36%.
Chief Executive Sanjay Mehrotra highlighted that every segmentâincluding DRAM, NAND, HBM, and all business divisionsâachieved record-breaking revenue levels. The ongoing expansion of AI data center infrastructure continues to fuel unprecedented demand for high-bandwidth memory solutions and storage products.
Yet despite this remarkable performance, Micron shares declined roughly 4% during extended trading hours following the announcement.
Investor concerns centered on two primary factors. The company increased its capital expenditure projections for fiscal 2027. Additionally, market participants expressed worry that gross profit margins might be approaching their cyclical peakâdespite the extraordinary 81% margin figure representing impressive performance for any hardware company.
The stock had already climbed an impressive 354% over the preceding twelve months leading into the earnings release, suggesting some degree of profit-taking was inevitable.
Wall Street’s Response
Citi’s semiconductor analyst Atif Malik maintained his Buy recommendation while increasing his price objective to $510 from the previous $430 target, highlighting the stronger-than-anticipated margin performance. He outlined the central investment question as whether MU can continue its upward trajectory alongside DRAM pricingâsupported by AI-driven demand and constrained fabrication capacity expansionâor whether pricing pressure emerges following the robust first-quarter performance.
Malik noted that the elevated capital expenditure outlook might trigger near-term investor rotation into semiconductor equipment manufacturers.
UBS analyst Timothy Arcuri similarly elevated his target to $510 from $475 while maintaining a Buy stance. His assessment took a more cautious tone, observing that with gross margins now exceeding 80%, significant additional upside from future beat-and-raise quarters may already be incorporated into the current valuation.
UBS also emphasized new extended customer contracts that Micron recently secured, including one five-year agreementâexceeding UBS’s duration expectations. The firm interprets these commitments as evidence that customers increasingly view memory products as strategically essential.
Numerous other Wall Street firms issued upgrades in response. Cantor Fitzgerald established a $700 price target. Rosenblatt advanced its projection to $600. Wolfe Research increased its outlook to $550.
Forward Projections and Current Valuation
The May quarter guidance emerged as the most significant aspect of the announcement. The company forecasted revenue of $33.5 billion with EPS of $19.15âexceeding consensus estimates by 42% and 70% respectively.
Gross margin projections came in at approximately 81%, climbing from 38% in Q3 of fiscal 2025 and 75% in Q2 of fiscal 2026.
Based on forward price-to-earnings metrics, MU currently trades at merely 8xâunusually low for a company experiencing this growth trajectory. However, certain analysts interpret a single-digit forward multiple on a cyclical semiconductor stock as a potential red flag rather than an attractive entry point, since the market frequently prices in cyclical peaks well before they materialize.
UBS maintains the historical perspective that Micron typically reaches its valuation peak roughly nine months before margin peaks occur.
As of the latest trading session, MU was changing hands at $443.52 before retreating to $395.14.
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