Micron is about to be more profitable than any U.S. company except Nvidia and Google
Micron Technology is projected to become the fifth-most profitable company in the S&P 500 this year, trailing only Nvidia, Alphabet, Microsoft, and Apple. Driven by surging demand for AI memory chips and significant price hikes, Micron's operating income has skyrocketed. Analysts note that hyperscalers are locking in long-term supply agreements to secure capacity, which may sustain high margins but limit future pricing growth. Despite a low forward P/E ratio, Micron remains a key beneficiary of the AI infrastructure boom.
By Philip van Doorn and Hannah Pedone
Big Tech companies are willing to pay astronomical prices for AI memory components, helping spark a dramatic turnaround in Micron's finances
Micron is now one of the most profitable companies in America.
Three years ago, Micron Technology was losing money. Now, it's one of the most profitable companies in the U.S.
That dramatic transformation reflects how essential memory chips have become to the artificial-intelligence wave. Micron (MU) and its few rivals can't make enough chips to satisfy the demand, and AI companies are willing to pay sky-high prices for what's available.
Morningstar's William Kerwin told MarketWatch recently that Micron's exponential revenue growth has been coming at nearly "pure profit" thanks to dramatic price hikes on memory products.
"Not enough memory fabs were constructed to handle the amount of memory demand" brought on by generative and agentic AI, added Stifel analyst Brian Chin. He noted that average selling prices for dynamic random-access memory have been up more than 60% sequentially in recent quarters.
Micron is on an unorthodox reporting cadence, so its published results don't line up with the traditional calendar. However, based on FactSet adjustments that standardize metrics to correspond with the calendar year, Micron is expected to be the fifth-most profitable company in the S&P 500 SPX this year on the basis of operating income - behind Nvidia (NVDA), Alphabet (GOOGL) (GOOG), Microsoft (MSFT) and Apple (AAPL).
What's more, next year's projections put Micron above every company except Nvidia and Alphabet.
Below are the 10 companies in the S&P 500 expected to show the highest operating profits in 2027, with adjustments made by FactSet to match the calendar year. (The operating-profit estimates are in billions.)
One quirk of the trend is that hyperscalers are directly and indirectly helping to drive Micron's operating income to such levels as their AI needs increase.
These companies "support most of the investments on the data-center supply chain, which in turn supports most of the investments and advancements in AI today," Itau BBA analyst Stephano Gabriel told MarketWatch.
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As AI spending eats into the free cash flow of cloud providers, Micron and other chip companies are turning into major free-cash-flow generators, Gabriel noted.
Micron's forward price-to-earnings multiple is only 9.2, which is especially low for a company projected to increase its operating profit by 54% during calendar 2027. That valuation is less than half of the weighted forward P/E of 20.2 for the S&P 500 and 22.8 for the index's information-technology sector XX:SP500.45.
See also: Micron's stock is still dirt cheap. Some analysts say that's about to change.
The table also includes projected changes in operating income over the next two years. Micron's growth pace is expected to slow to 10% in 2028. While booming memory demand is likely to persist into 2028, the company won't necessarily be benefiting from the level of rapid price increases that it's seen recently.
That's partly because of new strategic long-term customer agreements that, as Chin noted, showcase how Micron has "the leverage to lock in some future supply at price levels, which will allow margins to sustain above historical high levels for several years.
"Hyperscalers are willing to entertain these contracts because memory is vital [and] necessary to their data-center buildout plans and to arrest the rate of future cost increase[s] beyond what has already occurred," he told MarketWatch. But if hyperscalers are locking in some pricing now that's more pegged to current levels, that could limit the rate of pricing growth in 2028, according to Chin.
-Philip van Doorn -Hannah Pedone
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(END) Dow Jones Newswires
06-28-26 1000ET
