Micron's Bull Run Isn't Over

Micron's (NASDAQ:MU) fourth-quarter numbers are in, and the memory chip superstar delivered another blockbuster report.

Results again exceeded high expectations as revenue jumped 379% to $54.2 billion, ahead of the consensus at $51.5 billion. On the bottom line, adjusted net income soared more than ten times to $38.4 billion, with adjusted earnings per share climbing from $3.03 to $33.42, topping estimates at $31.82 billion.

Wall Street largely shrugged off the move, and that's not surprising. Micron stock is up more than 500% over the last year, and those gains bake in the skyrocketing profits that the company has delivered in fiscal 2026.

After surging through the spring, the stock has now been mostly flat for the last few months. The trillion-dollar question now facing Micron is how long this booming cycle will last. Driven by a shortage of memory due to AI compute demand, Micron and peers like Samsung, SK Hynix, and Sandisk have seen unprecedented profits as prices have surged.

However, memory prices are historically cyclical, and new supply will come online over the next three to five years, meaning Micron's eye-popping operating margin above 80% won't last forever. Management guided gross margins to fall slightly on a sequential basis in the first quarter, meaning that its profit margins may have finally peaked. Mathematically, they can't go much higher.

Still, to the question of how long the cycle will last, Micron provided more evidence that should reassure investors.

Image source: Micron.

Why Micron can still go higher

Coming into the report, Micron had indicated that most of its high bandwidth memory (HBM) is already sold out in fiscal 2027, and that supply-demand conditions would remain tight, indicating that prices would continue to be elevated.

However, the company updated that forecast in the fourth-quarter earnings report for fiscal 2028, saying that it expected "memory and storage supply-demand conditions to be much tighter in fiscal 2027 and 2028 than they were in 2026."

That's a change from its last earnings report, which specified calendar 2027, but did not specifically call out 2028. Management said that industry demand had strengthened since its last earnings call, and that forecast indicates that profits should be significantly higher for at least the next two years than they were in fiscal 2026, a year in which the company made $86.8 billion in net income.

Based on its last four quarters, Micron trades at 15 times earnings. Forward estimates are likely to go higher from here and currently call for $171.90 in EPS next year and $189.62 for fiscal 2028, giving the stock a forward P/E of less than 7.

Additionally, Micron's new strategic customer agreements (SCAs), which lock customers into five-year agreements, will cushion the downside of the cycle. The company now has more than 35% of its revenue through 2030 committed through SCAs, with most of that pricing locked in.

Looking further out, long-term demand for memory is robust as physical AI takes shape, leading to greater production in robotics, including self-driving cars and autonomous robots.

The long-term picture still looks bright

Micron is betting on this future with a new $100 billion facility in upstate New York, and two new advanced manufacturing facilities at its Idaho HQ. From these investments and others, the company's production capacity is expected to triple over the next decade, and it will shift production to HBM, which carries a higher price point than traditional DRAM chips.

While the market sets the price for chips, Micron is positioning itself to capitalize on ongoing AI-related demand as the technology advances and memory demand continues to grow.

Finally, Micron's low valuation sets it up for significant share buybacks once restrictions related to the CHIPS Act expire on Dec. 9.

Even after another blowout quarter, the market's hesitancy to bid the stock higher is understandable given the cyclical history. However, Micron is making the right moves to capitalize on the boom through long-term contracts, capital investments, and likely share buybacks, and that should push the stock higher over the coming quarters.

Jeremy Bowman has positions in Micron Technology. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.