Micron (MU) Shares Jump 125% in Half a Year, Yet Analysts See It as Undervalued

TLDR

• Micron notched a record Q2 FY2026 revenue of $23.9 billion, up 196% year-over-year
• Q3 guidance calls for $33.5 billion in revenue and an 81% gross margin
• All HBM supply through 2026 is fully sold out, with production allocations already locked in for 2027
• MU trades at roughly 7–8x forward earnings, far lower than other semiconductor peer companies
• Wall Street maintains a Strong Buy consensus rating with an average price target of $543.20

(SeaPRwire) –   Micron is in the midst of the strongest business cycle in its company history, powered by demand for high-bandwidth memory (HBM) chips built for AI data centers. Recent financial results fully back this trend up.

Micron Technology, Inc., ticker MU

Fiscal Q2 revenue landed at $23.9 billion — up 196% year-over-year, and marking the largest sequential dollar growth in company history. This single quarter’s total even exceeded Micron’s full fiscal 2022 revenue of $15.5 billion.

DRAM revenue hit $18.8 billion, up 207% year-over-year. NAND revenue reached $5.0 billion, up 169% year-over-year. Gross margin came in at 75%, non-GAAP EPS hit $12.20, and free cash flow scored a new record of $6.9 billion.

Micron also paid down outstanding debt in the first half of FY2026, pushing its net cash position to $6.5 billion — the highest level in company history.

Guidance Points Even Higher

Q3 guidance is where the outlook gets particularly exciting. Company management is targeting $33.5 billion in revenue, a gross margin of around 81%, and non-GAAP EPS of $19.15.

That jump in margin — from 75% in Q2 to a projected 81% in Q3 — indicates that pricing power is still growing, rather than flattening out.

HBM is central to this positive momentum. It requires nearly three times the wafer capacity of standard DRAM, which is shifting available supply away from the broader memory market. As a result, DRAM prices reportedly surged 90–95% in calendar Q1 2026.

All of Micron’s HBM supply for 2026 is completely sold out. Allocations for 2027 are already finalized, and customer discussions for supply are already extending into 2028.

The company recently announced its first-ever five-year strategic customer contract — a break from the typical one-year agreements that have historically defined the memory sector. This level of long-term demand visibility softens the traditional cyclical narrative for the company somewhat.

Nvidia, Micron’s largest customer, has been a key driver of growing HBM demand. Micron’s fourth-generation HBM4 is already in high-volume production, and is shipping one quarter ahead of its original schedule.

Still Trading at a Discount

Despite these record-breaking results, MU trades at roughly 7–8x forward earnings. For comparison, Nvidia trades at around 24x forward earnings, Applied Materials trades near 33x, and the broader semiconductor sector averages roughly 27.5x trailing earnings.

For a company guiding to record-high margins and multi-billion dollar quarterly free cash flow, this valuation gap is hard to explain through core fundamentals alone. Analysts suggest the market is still valuing Micron as a cyclical commodity business, rather than a core structural player in AI infrastructure.

Bearish investors point to the capital expenditure cycle as a risk: Micron has committed $25 billion in capex, while Samsung has pledged $73 billion. That level of coordinated industry spending has triggered oversupply in the past, and some observers expect pricing pressure to return by 2027 or 2028.

Geopolitical risk is also a cited concern. China accounts for roughly 10% of Micron’s revenue, and U.S. export controls have already restricted certain chip sales to the market. Domestic Chinese competitors in DRAM and NAND continue to expand their production and capabilities.

Wall Street currently holds a Strong Buy consensus on MU — 25 Buy ratings, 3 Holds, and zero Sells across 28 covering analysts. The average 12-month price target is $543.20, implying around 19% upside from MU’s current trading price of $457.27.

The next key market milestone: the FY26 Q3 earnings call, where investors will be watching closely to see if gross margin guidance holds above the 81% mark.