Can MU Stock Sustain Gains on AI Tailwinds?

2025-09-24

Sustaining gains looks achievable if Micron delivers Q1 revenue near $12.5 billion, keeps non‑GAAP gross margin around 51.5%, and converts AI server demand into steady HBM and DRAM shipments, with execution on supply ramps and pricing discipline the main near‑term tests.

Earnings Snapshot

Micron's fiscal Q4 revenue reached $11.32 billion, up from $9.30 billion in Q3 and $7.75 billion a year earlier, reflecting stronger pricing and mix tied to AI‑linked demand in data centres and adjacent markets.

Non‑GAAP EPS came in at $3.03 versus $1.91 in Q3 and $1.18 in Q4 last year, while GAAP EPS was $2.83, exceeding estimates and highlighting operating leverage.

Non‑GAAP gross margin improved to 45.7% from 39% in Q3, supported by utilisation and richer content per system. Operating cash flow was $5.73 billion for Q4, and full‑year revenue reached a record $37.38 billion as the company exited fiscal 2025 with momentum into fiscal 2026. [1]

Key Numbers Table

Here are Micron's headline figures and the current‑quarter guide in one place to anchor the discussion around delivery risk and upside.

Metric	Value	Window
Revenue	$11.32B	Q4 FY2025
GAAP EPS	$2.83	Q4 FY2025
Non-GAAP EPS	$3.03	Q4 FY2025
Non-GAAP Gross Margin	45.7%	Q4 FY2025
Operating Cash Flow	$5.73B	Q4 FY2025
Cash and Investments	$11.94B	End FY2025
Net Capex	$4.93B Q4; $13.80B FY	Q4 and FY2025
Dividend Declared	$0.115 per share	Pay 21 Oct 2025
Q1 Revenue Guide	$12.5B ± $0.3B	Q1 FY2026
Q1 Non-GAAP GM Guide	51.5% ± 1.0%	Q1 FY2026
Q1 Non-GAAP EPS Guide	$3.75 ± $0.15	Q1 FY2026

Guidance And AI Tailwinds

“In fiscal Q4, our HBM revenue grew to nearly $2 billion, implying an annualised run rate of nearly $8 billion, driven by the ramp of our industry‑leading HBM3E products,” said CEO Sanjay Mehrotra. [2]

Management guided Q1 FY2026 revenue to $12.5 billion plus or minus $300 million, above typical expectations and tied to AI server demand for HBM and advanced DRAM. The non‑GAAP gross margin guide of 51.5% plus or minus 1% implies further mix and pricing support as supply remains tight in critical nodes and packaging.

Non‑GAAP EPS is guided to $3.75 plus or minus $0.15, which would extend profit growth if utilisation and content per rack hold up through the quarter. Coverage across news outlets underscored that AI hardware demand sits at the core of the upside outlook and the market's focus on sustainable delivery rather than a one‑off beat.

Segment And Margin Mix

This breakdown shows where Micron is earning its margins and how the mix into AI servers underpins the consolidated profile across end markets. A broader base in Cloud, Mobile and Client, and Auto and Embedded can smooth quarter‑to‑quarter swings if any single customer segment digests inventory.

Segment	Revenue	Gross Margin
Cloud Memory	$4.543B	59%
Core Data Centre	$1.577B	41%
Mobile and Client	$3.760B	36%
Automotive and Embedded	$1.434B	31%

What Could Go Wrong

Sustaining share‑price gains requires on‑time supply ramps, stable pricing, and clean execution against guidance while avoiding bottlenecks in packaging and test.

The points below summarise the key near‑term risks to the setup.

HBM and advanced DRAM supply slippage could cap shipments and pressure mix if customers stagger builds or pivot allocations.
Faster‑than‑expected supply normalisation across peers may soften pricing and squeeze the gross margin above 50%.
Hyperscaler or enterprise capex delays would shift order timing and utilisation, affecting near‑term earnings cadence.
A rotation back to lower‑content PC and mobile units could dilute blended margins if AI builds pause for digestion.
Macro uncertainty in IT budgets and inventory policy changes could weigh on the conversion of backlog to revenue.

Guidance Bridge

This guide‑to‑actual bridge highlights the operational thresholds that will shape sentiment through the quarter.

Item	Q4 Actual	Q1 Guide	Read-Through
Revenue	$11.32B	$12.2B–$12.8B	Sustained AI pull-through if tracking near the upper bound
Non-GAAP GM	45.7%	50.5%–52.5%	Pricing and mix must support >50% margins
Non-GAAP EPS	$3.03	$3.60–$3.90	Operating leverage needs clean execution

Levels And Catalysts To Watch

These levels and near‑term events frame the short‑term setup and what could shift the market's view on guidance credibility.

Operational Level	Why It Matters	Scenario If Missed Or Beaten
Revenue ≥ $12.5B	Confirms AI demand and supply execution	Miss raises debate on cadence and allocations
GM ≥ 51% non-GAAP	Validates pricing, mix, and utilisation	Shortfall flags pricing or mix headwinds
EPS ≥ $3.75 non-GAAP	Signals' leverage is intact	Miss suggests higher costs or softer mix

Catalysts are likely to cluster around demand signals, competitor commentary, and macro prints that influence spending plans and component availability. [3]

Peer updates on HBM and DRAM supply and pricing can reset expectations for margins and share gains through calendar 2026.
Hyperscaler capex plans and accelerator roadmaps influence content per rack and the timing of AI server builds.
Macro data that steers enterprise budgets can alter the pace at which backlog converts to revenue.

Policy And Industry Context

News coverage linked the upbeat guide to broad AI hardware demand, including memory content alongside leading accelerators, reinforcing the industry backdrop for the next few quarters.

Regional reporting mirrored this view, noting that revenue guidance exceeded expectations on AI demand into Q1, with Micron positioned as the only U.S.‑based memory manufacturer.

Bottom Line

Micron can likely sustain gains on AI tailwinds if it delivers Q1 revenue near $12.5 billion, maintains non‑GAAP gross margins above 50%, and executes cleanly on HBM and advanced DRAM supply to convert demand into shipments through fiscal 2026.

The share‑price path will continue to track delivery against guidance, margin quality, and signs that data centre demand remains durable as the cycle tightens.

Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment, or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person.