Detailed narrative
NAND Capacity Expansion Strategy
Micron is adding cleanroom space at an existing Singapore site, rather than a greenfield location, to support technology transitions and relocate NAND R&D closer to manufacturing. This expansion reflects confidence in robust market demand, particularly from AI servers, but the new capacity is not expected to provide a meaningful boost until the second half of 2028.
The company noted that cleanroom space across the industry, especially for NAND, is likely to remain a challenge in the medium term.
AI-Driven Demand for Memory
The company is experiencing very strong demand for NAND, primarily driven by AI servers that require high-capacity and high-performance SSDs. Micron's Gen6 SSD, compatible with NVIDIA systems, is seeing tremendous, unmet demand. Similarly, DRAM usage in AI systems, including HBM, DDR5, and LPDDR, continues to grow, driven by the need for more memory capacity and bandwidth for reasoning capabilities and longer context windows in AI applications.
This trend makes memory a strategic asset in the AI era.
DRAM Supply Outlook and Pricing
Micron expects tight DRAM supply conditions to persist beyond 2026, as escalating demand from AI and other market segments continues to outpace supply. New DRAM fabs in Idaho and Tongluo are not anticipated to significantly impact revenue shipments until FY28.
The company noted that both DRAM and NAND pricing increased strongly in Q2, with NAND seeing even greater gains, and expects pricing to remain the largest factor in Q3.
CapEx and Operating Expense Projections
Micron has increased its FY26 CapEx outlook to over $25 billion, primarily for DRAM and HBM additions, including significant construction costs (mid-to-high single-digit billions). For FY27, an incremental $10 billion in construction costs is projected, with equipment spend also increasing.
OpEx is expected to rise to approximately $1.6 billion in Q4 FY26, reaching a run rate of around $1.7 billion in FY27, driven by R&D investments and an extra week in Q4.
HBM vs. Non-HBM Allocation and Margins
While HBM pricing, set in late calendar '25 for 2026 shipments, provides stability and robust profitability, non-HBM DRAM margins (including those outside the data center) have also become exceptionally strong. Micron views HBM and non-HBM allocations as strategic, aiming to provide customers with balanced product sets necessary for building AI systems, rather than making tactical shifts based solely on short-term pricing fluctuations.
Long-Term Demand and Cleanroom Constraints
Micron has not updated its long-term bit growth numbers but acknowledges that current demand significantly exceeds prior forecasts, indicating a supply-limited market. The company is engaged in multi-year agreements with customers to assess longer-term demand, which continues to escalate with new vectors like robotics.
Cleanroom constraints are expected to affect major DRAM players through 2027, with meaningful improvements not seen until 2028, making it unclear when supply will fully catch up📎 with demand.