Reminiscence specialist Micron Expertise (NASDAQ: MU) is scheduled to report its fiscal third-quarter outcomes on Wednesday, June 24, after the market closes. And expectations heading into the report are about as excessive as they get. Shares have surged 244% in 2026, crossing a $1 trillion market capitalization alongside the way in which — a milestone solely two different reminiscence firms have reached.
That run has been powered by an artificial intelligence (AI) build-out that has turned reminiscence chips into one of the vital sought-after elements within the knowledge middle, and Micron into certainly one of its greatest beneficiaries. However a inventory that has climbed this far, this quick, leaves little room for a stumble.
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Put one other means, the stakes are excessive. And when the corporate stories later this month, a single quantity could inform traders extra about whether or not the story remains to be intact than some other line within the launch.
That quantity is gross margin.
Here is a more in-depth have a look at why this one metric carries a lot weight — and what to observe because the report approaches.
Picture supply: Getty Photos.
Why gross margin is the quantity that issues
When Micron final reported, in March, its outcomes have been staggering throughout the board. Fiscal second-quarter income (the interval ended Feb. 26, 2026) practically tripled 12 months over 12 months to $23.86 billion, marking an organization report. However the determine that greatest captured what’s occurring contained in the enterprise was gross margin, which expanded to about 75% from roughly 37% a 12 months earlier. That is a gigantic swing for a reminiscence firm, and it speaks on to pricing.
Reminiscence has traditionally been a brutal, commodity-like enterprise, with costs swinging sharply as provide and demand fall out and in of steadiness. What’s completely different now could be that AI demand has collided with tight business provide, sending costs greater and lifting margins together with them. Within the fiscal second quarter, Micron mentioned DRAM costs sequentially rose within the mid-60% vary, and NAND costs climbed within the high-70% vary.
For the fiscal third quarter, administration guided for gross margin to achieve about 81%. That may mark one more step up. And it explains why that is the make-or-break determine: income can develop on quantity alone, however a gross margin approaching 81% is a direct readout of how a lot pricing energy Micron nonetheless holds.
If that quantity is available in at or above steerage, it confirms the favorable pricing setting is holding. If it slips, it may sign that the perfect of the pricing cycle is already behind the corporate.
“We anticipate greater value, decrease price and favorable combine to all contribute to gross margin enlargement in Q3,” mentioned Micron chief monetary officer Mark Murphy within the firm’s fiscal second-quarter earnings name.
That’s the bar the report will probably be measured in opposition to.
The bull and bear instances
The bull case rests on provide that merely cannot sustain. Excessive-bandwidth reminiscence (HBM), a specialised sort of DRAM that sits alongside AI processors, has develop into the tightest a part of the chain — and Micron has mentioned its complete 2026 HBM provide is already bought out. That form of visibility is uncommon for a chipmaker, and it suggests pricing may keep agency effectively into subsequent 12 months. And administration has even gone additional, saying it expects provide and demand for each DRAM and NAND to stay tight past calendar 2026.
There’s additionally a structural argument. As AI fashions develop bigger and lean extra closely on reminiscence, the demand for Micron’s chips could show extra sturdy than in previous cycles.
“Within the AI period, reminiscence has develop into a strategic asset for our clients,” mentioned Micron CEO Sanjay Mehrotra when the corporate reported in March, pointing to the identical dynamic that has reshaped the enterprise.
The bear case is the one which has repeatedly plagued reminiscence shares: cyclicality. Micron has lived by painful downturns earlier than — most lately in 2023, when oversupply cratered costs and the corporate posted losses. And rivals Samsung and SK Hynix are notably racing to develop their very own HBM output, and Micron itself is projecting greater than $25 billion in capital spending this fiscal 12 months. Ought to that offer arrive quicker than AI demand can take in it, the identical pricing leverage now lifting margins may simply as simply work in reverse.
So, what ought to traders make of all this heading into June 24?
With shares buying and selling at a trailing price-to-earnings ratio within the mid-40s after their huge run, loads of excellent news is already baked in. I believe the neatest strategy is to maintain your eyes on that gross margin line somewhat than the headline income quantity. It could be the perfect sign of whether or not Micron’s pricing energy — and the thesis behind the inventory’s outstanding climb — remains to be intact.
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Daniel Sparks and his shoppers don’t have any place in any of the shares talked about. The Motley Idiot has positions in and recommends Micron Expertise. The Motley Idiot has a disclosure policy.
