Memory shortage set to persist beyond 2027 as AI demand overwhelms supply: Micron
Key Points
- Micron has warned the memory chip shortage will persist beyond calendar 2027 as AI demand outpaces supply.
- Fiscal Q3 revenue hit a record $41.5bn, up 346pc year on year and 74pc on the quarter.
- Gross margin reached a record 84.9pc and earnings per share were $25.11.
- Data centre revenue exceeded $25bn, an annualised run rate above $100bn.
- Micron signed 16 long-term take-or-pay customer deals with remaining obligations of about $100bn.
- The deals cover roughly a fifth of DRAM and a third of NAND volume through 2030.
- Micron guided to record revenue of $50bn next quarter at about 86pc gross margin.
- The company plans to raise shareholder returns from 9 December as CHIPS Act curbs ease.
Micron Technology has warned that the worldwide shortage of memory chips will extend beyond 2027, as relentless demand from artificial intelligence continues to outstrip the industry’s capacity to supply.
In prepared remarks accompanying its fiscal third-quarter results, the US chipmaker said it now expects supply-demand conditions for both DRAM and NAND memory to remain tight beyond calendar 2027.
The company said it had no line of sight as to when supply would catch up with demand, even as industry output improves gradually in 2028.
Micron attributed the imbalance to structural constraints on supply growth. New capacity depends on large and complex “greenfield” factory projects that are slow to build, held back by long construction lead times, shortages of skilled trade workers, permitting and other regulations, and the need for upgraded energy infrastructure.
At the same time, demand is broadening beyond data centres into smartphones, high-end PCs, vehicles and robotics.
Record results
The warning accompanied a set of record results. Revenue for the quarter reached $41 billion, up 346pc on a year earlier and 74pc on the previous quarter, marking a fifth consecutive quarterly record and the largest sequential increase in the company’s history.
Data centre revenue alone exceeded $25 billion, an annualised run rate of more than $100 billion. Gross margin reached a record 84.9pc, and earnings per share came in at $25.11, more than double the prior quarter.
The chipmaker also detailed a shift in how it sells memory. Micron said it had signed 16 strategic customer agreements, long-term contracts that lock in volumes and pricing over terms typically running from 2026 to 2030.
Structured as take-or-pay deals, the agreements commit customers to buying set volumes, with the largest carrying both a floor and a ceiling on price.
The contracts represent roughly a fifth of Micron’s DRAM volume and a third of its NAND volume over the period, and carry remaining performance obligations of about $100 billion.
The company expects to receive cash deposits and related commitments of $22 billion under the deals signed so far.
Ben Barringer, Head of Technology research at Quilter Cheviot, said the agreements marked the most interesting development in the results.
He said the contracts effectively smoothed what had historically been a highly cyclical market, and that if the approach scaled it would support a more stable earnings profile and a higher valuation multiple.
He added that the combination of rising earnings, constrained supply and early signs of cycle smoothing left the shares looking cheap relative to the trajectory of earnings.
Capital spending is rising in response, with Micron guiding to around $10 billion in the current quarter and roughly $27 billion for the full fiscal year, though the company stressed a disciplined approach intended to avoid the overcapacity and price corrections that have followed past booms.
