Micron signals strongly in earnings call: memory shortages will continue until 2028, AI long-term contracts reshape industry cycle narrative

BlockBeats news, on June 25, Micron revealed during its early morning earnings call that its strategic customer agreements increased from 1 in the previous quarter to 16, covering approximately 20% of DRAM shipments and about 1/3 of NAND shipments; among these, 14 agreements are calculated at the minimum contract price, with cumulative remaining revenue totaling about $100 billion. CEO Sanjay Mehrotra stated that these agreements will "fundamentally change" the business model. The key point of this news is that the market will reposition Micron from a highly cyclical memory stock to an AI infrastructure provider with much stronger revenue visibility.

Micron revealed during the call that industry tensions are expected to last beyond 2027, and even as supply gradually improves in 2028, there is still no indication of when supply will catch up with demand. Management attributed this to the large scale, complexity, and time-consuming nature of new wafer fab construction.

CFO Mark Murphy mentioned that DRAM revenue increased 343% year-on-year to $31.3 billion, and NAND revenue increased 361% year-on-year to $9.9 billion; DRAM prices rose in the low-60% range, and NAND prices in the mid-80% range. This explains why this quarterly financial report greatly exceeded market expectations, relying more on pricing power and supply-demand mismatch rather than just shipment volume.

The company expects capital expenditure this quarter to be around $10 billion, and about $27 billion for the entire FY2026; capital expenditure for a single quarter in FY2027 will be even higher than the FYQ4 level, with more than half allocated to cleanroom construction. However, the CFO also stated that free cash flow is expected to increase significantly again this quarter.