AI demand ignites a "rush for orders"? Micron's earnings report preview: customers scramble for 2027 capacity, profits expected to double

Micron Technology will announce its first fiscal quarter results after the U.S. stock market closes on Wednesday. Against the backdrop of surging demand for memory chips driven by the artificial intelligence wave, Wall Street generally expects explosive growth in its revenue and profits. Although the stock has nearly tripled this year, it has recently experienced a high-level pullback ahead of the earnings report, and the market is closely watching whether this report can become a key catalyst for the stock price to regain upward momentum.

According to TipRanks on the 17th, Rosenblatt Securities analyst Kevin Cassidy pointed out that the supply and demand dynamics in the memory chip market are undergoing a fundamental shift. Customers, including PC and smartphone manufacturers, are not only placing orders for the current quarter but have also begun to panic and "scramble" to secure DRAM and NAND flash capacity locked in until the 2026 calendar year or even 2027. This rush for orders highlights downstream market concerns about supply shortages and is expected to significantly boost Micron's average selling price (ASP) and overall profit margins.

Driven by this optimistic outlook, several investment banks have raised Micron's target price ahead of the earnings report. Needham analyst Quinn Bolton and Wedbush analyst Matt Bryson both raised their target prices to $300, citing sustained strong demand for high-value products such as high bandwidth memory (HBM) driven by data center construction. According to market consensus compiled by Visible Alpha, analysts expect Micron's first fiscal quarter revenue to grow approximately 48% year-over-year to a record $12.93 billion, with adjusted earnings per share (EPS) expected to be $3.96, doubling from the same period last year.

Despite strong fundamentals, market sentiment has recently turned cautious. Micron's stock price fell back to around $232 after reaching a historical high of about $264.75 last week, indicating that some profit-taking is occurring ahead of the earnings report. According to Investopedia on the 17th, options market pricing shows that traders expect Micron's stock price to fluctuate by as much as 9% after the earnings report is released, which means the stock price could potentially break through the previous high to above $258 or further retreat to around $217.

Supply-Demand Imbalance Strengthens Pricing Power

Wall Street analysts believe that Micron is benefiting from a dual tailwind of rising memory chip prices and tight supply. Needham analyst Quinn Bolton noted in a client report that as the memory market continues to tighten, demand may exceed supply throughout the 2026 calendar year. This supply-demand imbalance not only drives up the pricing of DRAM and NAND chips but also prompts analysts to significantly raise their revenue and earnings per share expectations for Micron for the fiscal years 2026 and 2027.

Bolton emphasized that demand in the data center market remains strong, primarily driven by increased capital expenditures from hyperscale cloud service providers and new cloud investments. These data centers consume a large amount of Micron's high-value products, including HBM, LPDDR5, high-capacity DIMMs, and enterprise-grade SSDs The optimization of this product structure provides strong support for the company's average selling price (ASP) and gross margin.

Rosenblatt analyst Kevin Cassidy's model assumes that Micron's ASP will increase by 9% quarter-over-quarter and notes that this forecast may still be conservative due to the differing timing of contract negotiations.

Strategic Shift: Divesting Consumer Business, Focusing on High-Profit Areas

To more effectively respond to the surge in demand driven by AI, Micron is undergoing a significant strategic adjustment. The company announced on December 3 that it plans to exit its Crucial consumer business. Micron will continue to ship Crucial consumer products through sales channels until the end of the second fiscal quarter in February, after which it will fully focus on enterprise and commercial business.

Micron's Chief Business Officer Sumit Sadana stated in a press release that the AI-driven growth in data centers has led to a surge in demand for storage and memory. The difficult decision to exit the Crucial consumer business aims to improve supply conditions to support its larger strategic customers in faster-growing market segments.

Rosenblatt analyst Kevin Cassidy believes that this move highlights management's emphasis on the "high-value end market," and investors will closely monitor management's comments on the progress of capacity ramp-up, particularly how to convert existing capacity into "sellable output" targeting high-profit cloud and data center products.

Valuation and Market Outlook

Despite the significant increase in stock price this year, analysts generally believe that Micron's valuation remains reasonable. Kevin Cassidy points out that Micron's forward price-to-earnings (P/E) ratio remains around 12 times, similar to the level at the beginning of the year. He believes that as AI applications increase demand for storage and allow for product differentiation, Micron is structurally becoming stronger, thus recommending holding the stock. Among the analysts tracked by Visible Alpha, currently, 9 have given a "buy" rating, while 2 have given a "hold" rating.

The market also holds high expectations for the upcoming earnings guidance. Analyst models surveyed by FactSet indicate that for the current quarter (second fiscal quarter), Micron's revenue is expected to reach $14.33 billion, a year-over-year increase of 78%, with earnings per share expected to be $4.78, an increase of 206%. Rosenblatt expects that even though February is typically a seasonal low period, under the backdrop of OEM manufacturers eager to secure long-term supply, Micron's guidance is likely to exceed market consensus once again