Micron Technology (MU) Q3 FY26 earnings call: guidance and Q&A

Clarification on the $100 billion cumulative revenue at floor price vs. 40% of revenue under SCAs, and how much revenue per year is guaranteed at a floor price.

Sanjay explained that the $100 billion RPO is a minimum at the floor price, which is an accounting measure, and actual revenue is expected to be much higher. He reiterated that 20% of DRAM and 30% of NAND volume (about 25% of total revenue) is covered by SCAs so far. Mark added that the RPO is a minimally contractually enforceable amount and will change each quarter.

“RPO at the floor price is to be reported as an accounting measure, but we fully expect that the revenue will be much higher than that.”

asked by Timothy Arcuri · answered by Sanjay Mehrotra

How much of Q4 FY26 revenue will flow under an SCA and when will the full run rate of SCA coverage be achieved?

Mark explained that the Q3 Q will show $5 billion RPO with $1.8 billion for the next 12 months (smaller automotive agreements). The K will disclose $100 billion RPO for 14 of 16 agreements, with an associated next 12 months figure. He emphasized that RPO is a minimum and will fluctuate quarterly.

“for those that closed within Q3, you'll see an RPO of $5 billion -- over $5 billion, and you'll see the next 12 months associated with that of about $1.8 billion.”

asked by Timothy Arcuri · answered by Mark Murphy

What is the purpose of the $22 billion in cash deposits and financial commitments, if not a prepayment, and how do they relate to the take-or-pay agreements?

Mark clarified that the $18 billion in cash deposits are not prepayments but separate commitments demonstrating customer commitment to the binding take-or-pay agreements. The cash is held by Micron during the agreement term and returned in the latter half. It provides visibility for Micron's investments and supply assurance for customers.

“It's a separate commitment by the customers and a reflection of the fact that we have a binding agreement, and these are take-or-pay agreements. And we hold the cash, and it's a reflection of our shared commitment to perform under these agreements.”

asked by Joseph Moore · answered by Mark Murphy

Are the cash deposits fungible for CapEx, and how will they impact capital return decisions after the CHIPS Act end date (Dec 14, 2026), given they eventually need to be returned?

Mark stated the cash is unrestricted. He noted that Micron will maintain adequate liquidity for operations and investments, including large capital projects and R&D. He reiterated that deposits will be returned in the latter half of the agreements and that the company will hold liquidity to satisfy investments.

“C.J., it's unrestricted.”

asked by Christopher Muse · answered by Mark Murphy

How is Micron thinking about HBM market share and total revenues into CY26, and can HBM margins bridge closer to DDR5 margins by CY27?

Sanjay stated Micron strategically targets HBM market share close to its overall DRAM share to balance non-HBM supply. He noted HBM4 revenue already exceeded $1 billion. He declined to comment on specific pricing for next year but emphasized HBM's strong leadership position, higher per-bit price than non-HBM, and strong ROI.

“HBM market share, we strategically are choosing it to be close to our DRAM share.”

asked by Christopher Muse · answered by Sanjay Mehrotra

How many of the 16 SCAs are data center-related, and does the $100 billion RPO align with large/medium vs. small customers? What does a typical data center SCA look like?

Sanjay confirmed large customers include data center, and SCAs span data center, consumer, and automotive. He reiterated that large agreements generally have price bands with CQ2 ceiling prices and floor prices well above past peak margins, providing visibility and financial commitments.

“So our large customers include data center, and the large and medium customers that you mentioned, and of course, including our smaller customers, they go across data center, consumer and automotive markets.”

asked by Vivek Arya · answered by Sanjay Mehrotra

Will the 86% gross margin hang out for a while, is there a ceiling, and should investors model normalized gross margins in the mid-70s for 2027-2028, given the SCAs?

Mark declined to provide guidance beyond Q4 but noted that incremental price yields less gross margin expansion. He highlighted the tight market beyond 2027, memory's strategic value, and the benefits of deploying bits to high-performance applications and SCAs. He also mentioned future volume from new fabs starting mid-2027 will bring operating leverage despite initial start-up costs.

“Yes. So Vivek, we're not providing guidance beyond the fourth quarter. But we are at margin levels that -- as we've talked about before, incremental price yields less in gross margin expansion.”

asked by Vivek Arya · answered by Mark Murphy

If floor pricing is above prior peak gross margins (low 60s%), what is the implied price range per gigabyte for server DRAM (e.g., $10-$12/GB floor vs. $20s/GB current)?

Sanjay declined to get into specific pricing discussions but reiterated that gross margins at the floor would be 'well beyond' past peak margins. He emphasized that SCAs provide visibility, strength, and durability of demand, accelerating financial performance.

“So Krish, we're not going to get into specific pricing discussions, but I just want to note again, that I said, that the gross margins at the floor will be well beyond the peaks that we experienced -- the highs that we experienced in the past cycle, so well beyond those, right?”

asked by Sreekrishnan Sankarnarayanan · answered by Sanjay Mehrotra