Micron Shares Slip: Analysts Adjust Price Targets Following Record Quarter

Micron Technology’s stock (NASDAQ:MU) fell 3.78% Thursday, despite delivering a blowout quarterly report and guidance that smashed consensus estimates, as markets grappled with whether the memory chip maker’s extraordinary earnings power has already peaked.

The stock’s pullback came even as analysts rushed to raise price targets across the board, with new targets ranging from Goldman Sachs’s conservative $400 to Cantor Fitzgerald’s bullish $700.

The negative price action reflects a classic “sell the news” dynamic, with Micron shares having already surged more than 40% year-to-date heading into the earnings release. Markets appear to be questioning whether the company’s record margins and AI-driven demand can sustain their current trajectory, even as fundamentals continue to strengthen.

The disconnect between stellar results and share price movement underscores the complexity facing markets as they weigh extraordinary near-term earnings against concerns about cyclical peaks and valuation.

The Earnings Print

Micron reported fiscal second quarter adjusted earnings per share of $12.20, crushing the $9.19 consensus estimate, on revenue of $23.9 billion versus expectations of $20 billion. More striking was the company’s guidance for the current quarter: revenue of approximately $33.5 billion, gross margins near 81%, and adjusted EPS of roughly $19.15, a figure that came in 59% above the Street’s $12.03 estimate.

The exceptional performance was driven by robust pricing across both DRAM and NAND memory products, with artificial intelligence applications now consuming approximately 50% of total DRAM bit shipments. Data center demand showed particular strength, with cloud data center revenue surging 163% year-over-year and core data center growing 211%. The company also confirmed it has entered volume production of HBM4 memory for Nvidia’s Vera Rubin AI platform.

In a significant strategic development, Micron announced its first five-year customer agreement featuring firm purchase commitments, a move designed to stabilize market dynamics and provide greater revenue visibility. The company indicated it expects the current favourable memory cycle to persist into calendar year 2027 at the earliest.

Micron Price Targets Shift – The View From Wall Street

The earnings prompted a wave of target increases, with most major firms raising estimates substantially.

Barclays analyst Tom O’Malley told clients the guidance “fundamentally changed” his model, leading him to project over $100 in earnings per share for 2027 and raise his target to $675 from $450. JPMorgan’s Harlan Sur increased his target to $550 from $350, arguing that “AI-driven demand and structural supply tightness continue to drive pricing power beyond expectations” and that the company’s “fundamental setup will remain favorable through 2026 and into 2027.”

However, not all analysts shared the unbridled enthusiasm.

Goldman Sachs raised its target to just $400 from $360 while maintaining a Neutral rating, noting that “elevated expectations were already priced in” and predicting the stock would remain rangebound despite the strong results.

The debate centers on whether Micron’s gross margins, already guided to 81% for the current quarter, are approaching unsustainable peaks.

TD Cowen pushed back against this “peak GM theory,” arguing that margins could reach 90% later this year and that markets should focus on earnings durability rather than the exact timing of margin peaks. Deutsche Bank similarly called cycle peak fears “immature,” pointing to DRAM and NAND bit demand growing well above historical levels.

The magnitude of analyst revisions illustrates how dramatically the earnings outlook has shifted.

Morgan Stanley raised its fiscal 2026 revenue estimate from $86.08 billion to $110.49 billion and boosted its EPS forecast from $41.89 to $59.36. Bank of America increased its fiscal 2026, 2027, and 2028 EPS estimates by 70% to 100%, projecting calendar 2026 earnings of $69.88 per share and 2027 earnings of $76.50.

These revisions reflect not just a strong quarter but a fundamental reassessment of Micron’s earnings power in an AI-driven computing environment. Multiple analysts now model the company sustaining elevated profitability for multiple years rather than experiencing the sharp cyclical downturn that has historically characterized the memory industry.

Despite the bullish revisions, several analysts flagged potential headwinds.

Bank of America noted that spot memory prices have begun to stabilize and suggested gross margins may be near peak levels. Citi’s Atif Malik warned of potential rotation into semiconductor capital equipment stocks, given Micron’s plans for higher capital expenditures in fiscal 2027. Higher capex today could translate into increased supply and margin pressure down the road.

UBS acknowledged that newly signed long-term customer agreements, while providing stability, might temper near-term margin upside as they could include pricing caps in exchange for volume commitments. This trade-off between stability and maximum upside potential represents a shift in Micron’s business model that markets are still digesting.

Looking Ahead

The current debate boils down to duration versus amplitude. Morgan Stanley framed the key question as whether Micron’s elevated earnings will prove durable enough to justify current valuations, even if margins have peaked. The firm expressed confidence in the duration argument, noting it was “positive about that debate.”

KeyBanc highlighted that volume production of HBM4 for Nvidia’s next-generation AI systems provides tangible evidence of Micron’s integration into the AI infrastructure buildout, a structural demand driver that differs from historical memory cycles. The company’s balance sheet is also strengthening rapidly, with UBS estimating Micron will reach $160 in tangible book value per share and accumulate $90 billion in cash within a year.

The counterargument rests on memory’s historical cyclicality. Skeptics note that every upcycle has been called “different this time” until supply inevitably overshoots demand. With Micron and competitors planning significant capacity additions, the question is whether disciplined supply management and AI-driven demand can prevent the traditional boom-bust pattern.

Micron’s record quarter and exceptional guidance have reset Wall Street’s earnings expectations dramatically higher, yet markets remain cautious about whether peak profitability has arrived or whether the AI-driven memory supercycle can sustain elevated returns for years to come. For one of the outstanding performers over the past 12 months, where Micron’s share price remains more than 331% higher, it may take something significant to shift momentum. Wall St remains in support, and markets will likely chart a similar path, although time will tell.