The market is too pessimistic about how long unusually high memory profits can last. Customer commitments and slow factory expansion support another year of strong earnings, although falling prices would make the downside substantial.
Key points
- 75%+ of FY27 shipments are committed, supporting near-term demand visibility.
- $300 billion FY28 revenue is my forecast, with no further broad price surge required.
- $1,373.08 in twelve months supports a buy, not a strong buy.
The call
The market is too pessimistic about profit durability. At my chosen earnings multiple, today's price requires roughly $240 billion of FY28 revenue if gross margin stays at 87%. That revenue hurdle is below the annual pace implied by the next quarter's guidance.
High memory profits extend beyond AI accelerator chipsMicron September 30, 2026 release; segment gross margins, excluding unallocated corporate costs.
I expect the shortage to outlast the next year. My FY27 revenue forecast is $275 billion, followed by modest growth as shipments and premium products expand. Customer commitments support demand, while much of the accelerated factory construction adds production space only in 2028 or later. Contracts protect volumes better than profits.
Valuation
| Driver | My estimate |
|---|
| FY28 revenue | $300 billion |
| FY28 gross margin, sales less manufacturing costs | 87% |
| FY28 operating expenses | $12 billion |
| FY28 diluted earnings per share | $183.08 |
| Twelve-month earnings multiple | 7.5 times |
| Twelve-month target | $1,373.08 |
Earnings include share-based pay, $3 billion net interest income, a 15% tax rate and 1.17 billion diluted shares. The low multiple respects cyclical profits and higher financing costs, rather than assuming permanent scarcity. A combined demand-and-margin downturn produces about $751 per share, making this a buy rather than a strong buy.
The target depends on memory profit margins staying highOur FY28 estimates: $300B revenue, $12B operating costs, 15% tax, 1.17B shares; 7.5 times earnings.
Risks
- Contract protection disappoints: watch realized selling prices and renewed agreements, because pricing ceilings can limit gains and minimum prices remain undisclosed.
- Customers retreat: watch declining mobile shipments and delayed data centers; higher borrowing costs could turn scarcity into excess supply.
- Earnings outrun collections: watch receivables against revenue and cash after factory spending; FY26 customer deposits were financing, not operating cash.
What would change my mind
Two consecutive FY27 quarters below $60 billion revenue and 80% gross margin would show that demand or pricing is breaking sooner than I expect.
