Micron's Results Tell Us the AI Trade Is Still Early

Gene Munster, Brian BakerJune 25, 2026

Micron’s Results Tell Us the AI Trade Is Still Early

Micron’s quarter was the latest datapoint that we are still early in the AI buildout, my sense is still in the second inning. Shares of MU traded up about 15% the day following earnings as August guidance came in materially ahead of Street expectations. Revenue in the May quarter grew about 370% y/y, and August guidance implies 340-350% y/y growth versus the Street at 285% underscoring the company is defying the law of large numbers. AI investors can rest well at night knowing Micron signed 16 strategic customer agreements (SCAs) in May, up from one last quarter, seven of which were large 5 year deals. This is important given it singles Micron customers believe the AI buildout has years to run.

Key Takeaways

Micron’s guide reset expectations higher.

The most underappreciated datapoint was SCAs, with 16 signed this quarter and five-year agreements increasing from one to seven.

Tight supply beyond 2027 strengthens the case that AI infrastructure growth remains underappreciated.

Results and Guidance Were Better Than Feared

For the May quarter, Micron revenue growth of about 370% exceeded the whisper calling for 360%. The Street was looking for an in-print number of 280% growth. Going into the quarter, I expected that if they hit the whisper, the stock would likely trade off. In the end, I was proved wrong with shares moving 15% higher on the strength of the August guide. Gross margins were also better, at an impressive 85% in the May quarter versus 81% expectations. That compares to gross margins over the past decade that has ranged between 30-60%.

For the August quarter, Micron guided revenue growth to 340-350% y/y versus the Street at 285%, which shows the company is defying the law of large numbers.

The SCA Step-Up Is the Signal

The most underappreciated data point on the MU earnings call was the number of SCAs with five-year lengths went from one last quarter to seven this quarter. That’s important because it tells us Micron’s customers think this buildout will last for at least five years and want visibility when it comes to pricing. If their biggest customers were having thoughts of slowing down the infrastructure build, they would not sign five year deals, opting instead to wait for pricing to drop meaningful in the years ahead, similar to historical pricing patterns. Also noteworthily is the pace of the additions, with all of the major customers singing up in one quarter suggesting that big tech is largely on the same page that we are still early in AI.

In total, Micron now has 16 signed SCAs, up from one last quarter, of which six new five-year customers joined. The other 9 customers are smaller, or have three-year contract lives, many of which are automotive which the company sees as “strategic”. Reading between the lines on automotive being “strategic” is a node to the optional of physical AI in the next decade.

Tight Supply Is Still the Bull Case

The other key change was management’s language on supply-demand equilibrium. Three months ago, Micron said supply would be tight through 2026. Now, the company believes supply will be tight beyond 2027, adding it can’t see when supply will catch demand.

That matters because investors view memory as a boom-and-bust business, and based on the supply comments, it looks like the earliest we could see a bust if 2028. My sense is 2028 will also be supply constrained.

These supply comments are also a positive for the broader AI infrastructure trade, including energy, optics, and cooling. My sense is hyperscaler capex grows 40-60% next year, compared to the Street at 22%, and around 80% this year.

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