Earnings Call Insights: Micron Technology (MU) Q1 2026
Management View
- Mark Murphy, Executive VP & CFO, stated that “we are doing all we can to increase bit supply now. And we were able to provide additional bits to do 20% bit shipment growth in our fiscal ’26. And we’re doing that through efforts within an existing footprint and just efficiencies in the fabs.” He emphasized that most revenue growth in the quarter was driven by price rather than volume, with further bit shipment growth expected in the second quarter.
- Sumit Sadana, Executive VP & Chief Business Officer, described an environment where “aggregate demand for both DRAM and NAND is substantially higher than the ability to supply to it, not just from a Micron perspective, but even at an aggregate industry level.” He noted the company is “working very hard to find the threshold level of supply for all of our customers to minimize the impact to their businesses due to lack of adequate supply.”
- Murphy reported that Micron’s SSD business “did clear” the $1 billion revenue mark in the first quarter of ’26, and expects “that growth to accelerate through the year.”
- Murphy stated, “on SSDs… as sort of the industry is able to get on top of the supply chain-related issues we expect. And given the demand in that business, we expect that growth to accelerate through the year.”
Outlook
- Murphy explained that operating expenses are guided to be “sort of flattish in the third quarter relative to the second, that will be up in the fourth quarter. And up and plus the additional week.”
- Murphy said, “we do expect that margin can go up from second quarter. It will go up on the basis of, we believe market conditions that should remain positive beyond ’26. We believe it’s possible based on our ability to deploy bits to premium products in which we’re best positioned.”
- Sadana emphasized that “the demand on us is so much higher than the supply, that even small increases in supply I’m not going to be able to make a dent in that demand. So we are more than sold out.”
Financial Results
- Murphy noted that “CapEx as a percent of sales in the first quarter was below 35% that we talked about. And then on the second quarter, basically, where our guide is to the — both on the revenue and the CapEx guidance we gave you, you could tell it’s in the mid-20s on CapEx as a percent of sales.”
- Murphy highlighted, “we had near 30% free cash flow margin in the first quarter, and we talked about free cash flow increasing through the year. We paid down debt, $2.7 billion of debt in the first quarter, bought back $300 million of shares and went to net cash, all in the quarter, and it was a record setting free cash flow in the first quarter.”
Q&A
- Aaron Rakers, Wells Fargo: Asked about bit shipment growth and OpEx trajectory. Murphy responded, “we were able to provide additional bits to do 20% bit shipment growth in our fiscal ’26… a quarter primarily driven by price as it relates to revenue growth.”
- Vijay Rakesh, Mizuho: Questioned allocation between conventional DRAM and HBM given profitability. Sadana said, “all segments are short in terms of what they need from us versus what we are able to supply. And we are also short on the HBM side, non-HBM side, all parts of the market.”
- Vivek Arya, BofA Securities: Asked about gross margin trajectory. Murphy stated, “we do expect that margin can go up from second quarter. It will go up on the basis of, we believe market conditions that should remain positive beyond ’26.”
- James Schneider, Goldman Sachs: Inquired about minimum allocation to legacy/embedded segments. Sadana replied, “we do have large share in automotive and industrial and several mission-critical applications. So we are making investments in our Manassas, Virginia fab in the U.S. to modernize it, bring 1-alpha technology, DRAM technology into that fab.”
- Joseph Moore, Morgan Stanley: Asked about cash priorities. Murphy answered, “the priority for our cash generation is always to reinvest in the business. So we’re going to make sure that we’re investing in this case the capacity we need to support the market and ensure that we’re getting clear line of sight to return on that.”
Sentiment Analysis
- Analysts expressed concerns about supply constraints, allocation between product segments, and gross margin sustainability, with questions focused on the ability to meet elevated demand and the flexibility of supply.
- Management maintained a confident tone during the call, consistently emphasizing strong demand, supply shortfall, and operational execution. Phrases such as “we are doing all we can,” “we are more than sold out,” and “we do expect that margin can go up” reflected sustained optimism.
- Compared to the previous quarter, the analyst tone remained probing but more focused on the persistence of supply-demand imbalances, while management’s tone shifted from highlighting record-setting performance to reiterating ongoing constraints and the strategic responses to those constraints.
Quarter-over-Quarter Comparison
- Guidance language evolved from projecting record revenue and EPS in the previous quarter to a current focus on continued gross margin expansion and operational efficiency as key levers for profitability.
- Strategic focus has shifted toward maximizing supply efficiency, accelerating node transitions, and prioritizing data center and AI-related segments, while preserving diversification.
- Key metrics discussed have moved from specific revenue and gross margin achievements to emphasizing free cash flow margin, debt paydown, and increasing CapEx as a percentage of sales.
- Analysts’ focus has intensified around supply limitations, allocation decisions, and capital allocation priorities, compared to prior interests in end-market performance and technology ramp details.
- Management’s confidence in continued demand outstripping supply has remained clear, though the repeated stress on “sold out” conditions and supply management marks a more tactical approach this quarter.
Risks and Concerns
- Management cited persistent industry-wide supply constraints affecting both HBM and non-HBM product lines, with “aggregate demand…substantially higher than the ability to supply to it.”
- The company is attempting to mitigate these risks by accelerating node transitions, increasing operational efficiency, and investing in manufacturing footprint expansions, notably in the U.S., Japan, Singapore, and India.
- Analysts raised concerns about the flexibility to reallocate production and the potential impact on legacy and embedded markets, with management acknowledging the complexity and long lead times required to shift supply between segments.
Final Takeaway
Management emphasized that Micron is operating in a market where demand for memory and storage far exceeds available supply across all segments, especially in data center and AI infrastructure. The company is focused on maximizing operational efficiency, accelerating technology transitions, and strategically investing in its global footprint to meet as much demand as possible. Free cash flow performance, disciplined capital allocation, and further margin expansion remain high priorities, while the persistent supply constraints are expected to continue driving favorable pricing and profitability dynamics through 2026 and beyond.