Micron Put Ceilings on Its Own Boom: 26 Contracts Cap a Third of Revenue

The call says no end in sight; the contracts carry ceilings

On the September 30 call, CEO Sanjay Mehrotra said industry demand had strengthened since June, that memory supply and demand would be "much tighter in fiscal 2027 and 2028" than in 2026, and that Micron has "no line of sight↗" on when supply catches up ¹². The same call disclosed the hedge: 26 strategic customer agreements, up from 16 in June, carrying $32 billion of commitments, mostly cash deposits, covering more than 35% of revenue through 2030 and stretching into 2031 ²³⁴. CFO Mark Murphy put remaining performance obligations at about $150 billion↗ for the framework agreements ², which cover three-quarters of estimated SCA revenue ³.

Most of the agreements carry both price floors and ceilings↗; the rest are priced on market conditions ¹³. The levels are not disclosed, but the structure is: if spot DRAM runs past those frameworks, roughly a third of revenue through 2030 stays at the ceiling, and the open-ended shortage priced into $1,200 targets never lands on that share of the book ³⁴.

A record quarter the market would not reprice

The quarter underneath was a record: $54.23 billion of revenue, up 379% year over year, $37.7 billion of net income, an 87% gross margin ³⁵. Guidance of $61.5 billion for the fiscal first quarter↗ stands against the $57 billion analysts expected, on LSEG numbers ⁵. The stock settled around flat after the call ⁴ on a run of about 1,100% since the start of 2025 ⁶.

The margin line is flattening just below 87%

Gross margin has climbed from 18.5% in early 2024 to 87%, and the first guided step is down, at 86.25% ⁸¹¹. Murphy tied the dip to about $1 billion of incentive pay and start-up costs and called the quarter the margin floor for fiscal 2027 ². Morningstar cut its fair value estimate to $700 from $850↗ anyway, modeling a pricing peak in early 2028, supply doubling by 2028 and a downturn from 2029 as depreciation lands on the new fabs ⁶.

The spending behind that view is committed: roughly $11.5 billion this quarter, about $25 billion in the fiscal first half ², more than $50 billion expected across fiscal 2027 ³. Operating cash flow of $43.97 billion and free cash flow of $33.2 billion↗ in the quarter cover it for now ⁸, and buyback restrictions ease December 9 ².

The bulls still price an open-ended shortage

Morgan Stanley holds $1,200 and Wells Fargo $1,400, trimmed from $1,525, with more than 20 Buy or Strong Buy ratings ³. Executives at Micron and Samsung both say the shortage runs through at least 2028↗ ⁷. The contracts say something narrower: most of the committed book trades inside a band, floor to ceiling, out to 2031 ¹⁴.

The customers bought insurance

The 26 signers hold price floors and guaranteed supply ¹⁸. The bill lands downstream: Samsung's mobile unit faces a loss above KRW 1 trillion↗ on memory costs ⁹, and Apple's iPhone 18 Pro opened $100 higher than its predecessor ¹. Watch whether spot DRAM clears the undisclosed ceilings, and what the December capital-returns move says about how management reads its own cycle ⁴. Twenty-six customers bought insurance against the memory cycle; shareholders at six times forward earnings are writing it ⁴¹⁰.