Micron Technology(US:MU) Ge Long Hui·2025-12-27 06:17Core Viewpoint - Micron's FY26 Q1 financial report shows impressive results, with revenue of $13.64 billion, significantly exceeding the guidance range of $12.2-12.8 billion and market expectations by nearly $700 million. Adjusted EPS reached $4.78, far surpassing the market expectation of $3.95 [1][3][6] Group 1: Performance Breakdown - Revenue and Profit: Micron's FY26 Q1 performance exceeded expectations across the board, with revenue of $13.64 billion, a year-on-year increase of 57% and a quarter-on-quarter increase of 21%, marking the highest growth rate in nearly five years [3][6] - Adjusted EPS of $4.78 significantly exceeded the market expectation of $3.95, showing a substantial jump from the previous quarter. Non-GAAP gross margin soared to 56.8%, up 17.3 percentage points year-on-year and 11.1 percentage points quarter-on-quarter, far exceeding the guidance of 50.5%-52.5% [6][7] - Operating cash flow reached $8.41 billion, well above the expected $5.94 billion, while adjusted free cash flow hit a record $3.91 billion, with a free cash flow margin close to 30% [6] Group 2: Product Structure - DRAM remains the main revenue driver, generating $10.8 billion, accounting for 79% of total revenue, with a quarter-on-quarter growth of 20%. Average Selling Price (ASP) surged approximately 20%, reflecting the scarcity of supply [7] - NAND business generated $2.7 billion, representing 20% of total revenue, with a quarter-on-quarter growth of 22%. ASP also saw mid-single-digit growth, indicating a "volume and price increase" trend [7] - HBM, crucial for AI servers, has seen its production capacity sold out for 2026, with expectations for HBM4 to enter mass production in CY26Q2, further enhancing profitability. The HBM market is projected to grow from $35 billion in 2025 to $100 billion by 2028, with a compound annual growth rate of about 40% [7][8] Group 3: AI Storage Demand - The demand for storage driven by AI is not a short-term trend but signals a new five-year cycle. The current recovery is fundamentally different from previous cycles, focusing on enterprise-level AI capital expenditures rather than consumer demand [9][10] - AI data centers are driving a "voracious demand" for storage, leading to price increases across all product categories, with HBM prices soaring by 500% and DDR4 prices rising over 50% [10] Group 4: Supply Constraints - The storage industry faces significant supply constraints, with expected DRAM and NAND shipment growth limited to about 20% year-on-year, falling short of demand growth [12] - The production adjustment cycle for storage wafer fabs exceeds five months, making it difficult to respond quickly to market demand changes, exacerbating supply-demand imbalances [12] Group 5: Future Outlook - Micron's optimistic FY26 Q2 guidance suggests adjusted revenue of $18.3-19.1 billion, significantly above the market expectation of $14.38 billion, indicating strong resilience in AI storage demand [15] - The ability to release capacity and achieve technological advancements will be critical for growth, with the successful mass production of DRAM's 1-gamma node and NAND's 232-layer node directly impacting supply and profitability [16][17] - The balance of supply and demand, along with price trends, will be crucial in determining the sustainability of the recovery, with potential risks from geopolitical factors affecting the semiconductor supply chain [18]