Micron gives bullish forecast, even as pay raises crimp margins

Micron Technology Inc gave an upbeat forecast for the current quarter, fueled by the artificial intelligence (AI) building frenzy, though the chipmaker warned that rising compensation would weigh on profit margins.

Revenue will be about US$61.5 billion in the fiscal first quarter, which runs through November, the company said in a statement yesterday. Analysts estimated US$56.8 billion on average. Excluding some items, profit will be about US$38.15 a share, compared with a projection of US$36.02.

Micron, the largest US maker of memory chips, continues to post historically high gross margins. But the measure will tighten slightly in the current period due in part to increased worker pay.

“We made the decision to increase incentive compensation,” Micron chief financial officer Mark Murphy said during a conference call with analysts. “Incentive comp is the big driver to that gross margin outlook.”

Micron and rivals Samsung Electronics Co and SK Hynix Inc have been benefiting from the surging appetite for AI chips, which rely on memory technology made by the three firms. During a massive expansion of AI data centers, these so-called high-bandwidth memory (HBM) chips have seen prices soar. The demand also has led to shortages of memory for other products, like laptops and game consoles.

“Micron delivered record fiscal 2026 results, and we expect an even stronger fiscal 2027,” Micron chief executive officer Sanjay Mehrotra said in the statement. Memory enhances the “intelligence and the competitiveness of our customers’ platforms.”

The memory industry is famous for its boom-and-bust cycles, though the companies have sought to mitigate that problem by locking in more long-term contracts.

For now, Micron and its rivals continue to be overwhelmed by orders. Though the Boise, Idaho-based company is expanding its manufacturing capacity, prices are expected to remain high for the foreseeable future.

For the fiscal fourth quarter, which ended on Sept. 3, sales soared to US$54.2 billion. Earnings climbed to US$33.42 a share. Analysts on average had estimated US$51.5 billion in revenue and US$31.83 a share in profit.

The rise in prices — without a corresponding increase in costs — has buoyed Micron’s profit margins. The company said that its adjusted gross margin was 87 percent last quarter. Analysts had estimated 86.2 percent for that measure.

But Micron expects the figure to narrow to 86.3 percent in the current quarter, compared with an analyst projection of 86.7 percent.

“Investors will likely want to understand the impact of pricing on gross margin and the durability of earnings,” Melissa Otto, head of Visible Alpha Research at S&P Global, said in an email.

The company decided to boost compensation for all workers during the just-ended fiscal year, Micron president and chief operating officer Manish Bhatia said in an interview. The increases for workers in manufacturing were accounted for as part of inventory and affect results when that material ships. In this case, that means that the largest impact will hit margins in the current quarter, which is why that will be the low point for Micron gross margins, he said.

“On top of that, we have a higher incentive compensation plan for fiscal ’27 as well, but that will be spread across fiscal ’27,” he said.