Micron Plans to Put Its Excess Cash Into Buybacks. Here's How Much of the Stock That Could Retire.

Micron Technology (NASDAQ:MU) is making cash much faster than it's spending it. The memory chipmaker's non-GAAP (adjusted) free cash flow was $62.3 billion for its fiscal year that ended Sept. 3 -- up from $3.7 billion in fiscal 2025. But the company spent just $650 million of it buying back its own shares.

Alongside its fiscal fourth-quarter results on Wednesday, Sept. 30, Micron said it plans to increase capital return starting Dec. 9. Over time, it intends to give all its excess cash back to shareholders.

Shares trade near $1,065 as I write, giving the company a market cap of about $1.2 trillion. How much of Micron could a buyback that large retire?

Image source: Micron.

A cash pile that keeps growing

Showing how fast the cash is coming in, Micron's adjusted free cash flow (cash from operations minus net capital spending) was $33.2 billion in the fiscal fourth quarter, the final three months of the year. This compares to $18.3 billion in fiscal Q3 and just $803 million in the year-ago quarter. Revenue climbed 379% year over year to $54.2 billion, and net income surged almost 12-fold to $37.7 billion. In other words, the fourth quarter alone brought in over half of the year's free cash flow -- an impressive acceleration even for this memory boom.

Most of the cash still sits on the balance sheet. Micron finished the year with $73.5 billion in cash and investments against $5.2 billion in debt, leaving net cash of $68.3 billion.

Capital return, meanwhile, hardly registered. The $650 million buyback came to around 1% of the year's free cash flow.

And Micron spent more (about $1.1 billion) withholding shares from employees' stock awards to pay their taxes. Even with both, the diluted share count climbed around 1.4% year over year in the fourth quarter. And as of May 28, just $2.16 billion was left on the company's current repurchase authorization.

Why wait until December?

The timing seems linked to Micron's federal CHIPS Act funding. The company's latest quarterly filing says its buyback authorization is subject to restrictions under its CHIPS Act direct funding agreements. And chief financial officer Mark Murphy pegged the bigger return to Dec. 9, 2026, the second anniversary of the signing of those agreements.

"Over time, we expect to return 100% of our excess cash to shareholders," Murphy said in his prepared remarks for the earnings call.

Later in the call, Murphy said Micron expects to be near its target cash level by the end of this fiscal quarter. He added that the excess would go back to shareholders mainly through buybacks, and that the company expects to seek a bigger authorization soon.

Notably, management hasn't said what that target cash level is.

The cash could retire around 5% of the stock a year

Because management hasn't defined "excess cash," I'll use fiscal 2026's adjusted free cash flow as a stand-in, assuming Micron's cash already sits near the level it wants to hold.

At around $1,065 a share, $62.3 billion would buy back about 58 million shares in one year. That comes to around 5% of the roughly 1.13 billion shares Micron had outstanding in June.

I'd be more careful adding the $68.3 billion of net cash on top of that. Around $12.7 billion of Micron's cash is customer deposits linked to its long-term supply agreements, and the company expects to return that money to customers over time.

Free cash flow also faces a bigger spending plan. Micron expects around $25 billion of capital expenditures in just the first half of fiscal 2027, near the $27.4 billion of net capital spending in all of fiscal 2026. Still, Murphy said fiscal Q1 free cash flow should be much higher than the fourth quarter's $33.2 billion.

Of course, the price Micron pays matters, too. With the stock at about 14 times earnings, based on fiscal 2026 results, every dollar spent on shares buys about 7 cents of last year's profit. That price is arguably appealing if memory prices hold, but it might look expensive if fiscal 2026 ends up being a peak.

In the end, retiring roughly 5% of the share count a year would probably give earnings per share a steady boost. But that depends on memory prices staying near today's levels, and the higher spending doesn't begin until December. For now, I'd count the buyback as another point in Micron's favor and wait to see the share count drop.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.