Summary
Highlights
Micron, a major memory supplier, has seen phenomenal revenue growth, with overall revenue up 346% and data center revenue up 653% year-over-year. Despite this, Micron receives billions in taxpayer subsidies and continues to squeeze consumers. The company's consumer product operating margin increased from 15% to 86%, and they predict the memory shortage will persist beyond 2027 due to AI-driven demand and structural supply constraints. Valve confirms the cartel-like behavior of memory companies, where prices are set monthly with no room for negotiation. Micron has also locked in prices for 5 years with 16 major customers, further diminishing prospects for consumer price recovery.
In Q3 2026, Micron generated $41.46 billion in revenue, a 74% quarter-over-quarter and 346% year-over-year increase. Average selling prices for DRAM products surged by over 60% and NAND by over 80%. This has resulted in dramatic price increases for consumer products: 4TB NVMe SSDs rose by 18% in 3 months (200% since last October), and 32GB DDR5 5600 memory increased by 10-11% to consumers (400% since last October for some specific types). Micron's cloud memory business generated $13.7 billion (307% growth) and its core data center business made $11.5 billion (653% growth), both with gross margins in the high 80s.
Micron expects $50 billion in revenue next quarter with an 86% gross margin. They've secured 5-year strategic customer agreements (SCAs) with 16 large companies (including likely Nvidia and Apple) for 2026-2030, covering about half of their revenue. These 'take or pay' agreements guarantee supply for large customers and stable, historically high revenue for Micron. Smaller memory module makers, like GSkill, are struggling to acquire memory, sometimes taking out loans due to high replacement costs. This strategy ensures high margins for Micron, well above any past cycle, solidifying market control and stability in a traditionally cyclical industry.
Micron has become an investor in AI companies, including Anthropic, with a strategic agreement to drive memory and storage advancements, secure supply, and deploy Anthropic's Claude models internally. Micron, as the only US-based memory manufacturer, historically received preferential treatment, such as a 'get out of jail free card' during a DOJ DRAM cartel bust in the early 2000s. The memory shortage is projected to last beyond 2027, with new fabs coming online in Idaho (2027/2028), New York (2030), India, Taiwan, and Japan, but this new supply is likely already allocated to strategic customers.
Micron's decision to exit the Crucial consumer business allowed them to exceed $1 trillion market cap and secure revenue pipelines. The memory shortage means high-performance personal computing is becoming unaffordable. Consumers have few levers: voting in local elections to oppose data center development, which drives memory demand and prices, and minimizing AI product usage. While individual consumer choices may not directly impact Micron's strategy, local involvement in issues like data center construction offers a more direct, albeit small, avenue for influence.