Technology · Semiconductors
Micron Technology (MU)
Micron is the memory maker: gross margin went from -9.1% in FY2023 to 80.7% in FY2026, a 53-week year, so the mid-cycle margin is the one to model.
Selborne Research · · Company Profile
Educational analysis. This profile is not investment advice or a recommendation to buy or sell any security, and it is not personalised.
Snapshot
- FY2026 Revenue
- $133.2B (+256%)
- Gross Margin
- 80.7% (FY2026)
- Operating Margin
- 74.6% (FY2026)
- FY2023 Gross Margin
- -9.1%
- DRAM Share of Revenue
- 75.6% (FY2026)
- Capex / Revenue
- 23.1% (FY2026)
- Inventory Days
- 147 (FY2026)
- Free Cash Flow
- $59.0B (FY2026)
Business Overview
Micron Technology is a memory maker whose margins swing with the bit-price cycle. FY2026 (year to 3 September 2026) was a 53-week year. Revenue was $133.2B, up 256% from $37.4B. Gross margin was 80.7% and operating margin 74.6%. R&D was 4.2% of revenue, capex 23.1% and stock-based compensation 1.0%. Free cash flow was $59.0B.
DRAM was 75.6% of FY2026 revenue. Gross margin was -9.1% in FY2023 (a gross loss of $1.4B on $15.5B of revenue). Inventory days were 147; cash conversion cycle was 185 days. The swing from -9.1% to 80.7% gross margin across three fiscal years is the widest margin move in the semiconductor set.
How the Numbers Read
FY2026's 256% revenue growth and 80.7% gross margin are peak-cycle memory economics. The 53-week year adds a small calendar boost to the growth rate; it does not explain the order of magnitude. FY2023's -9.1% gross margin is the trough. Neither year is a mid-cycle run-rate.
Capex at 23.1% of revenue keeps adding bit supply even in a boom, and that supply can feed the next oversupply. Inventory at 147 days into a peak year can become a problem when prices turn. DRAM at 75.6% of revenue concentrates results in one memory category. The memory pricing cycle guide and the peak-versus-mid-cycle guide are built around this swing.
How the Model Values This Kind of Company
A memory maker is valued on bits shipped along a demand path. Price per bit equals a trend price that falls with cost per bit, adjusted by a sensitivity to the cumulative bit balance (demand growth less supply growth). Gross margin is an output that swings from losses to peaks; a floor can hold the trough margin so revenue cannot go negative.
Capex as a share of revenue and depreciation life are explicit, and stock pay is charged. Terminal value uses mid-cycle free cash flow averaged across the cycle, never the final peak year. Inventory days rise when the cycle turns down. A reverse DCF on a fictional company shows what mid-cycle operating margin a typed price requires.
What to Watch in the Financials
Gross margin versus FY2023. 80.7% against -9.1%. Distance from the trough (and from a mid-cycle average) is the cycle position.
Revenue growth on a 53-week year. +256% in FY2026. Compare on a per-week or next-year 52-week basis when reading the rate.
Capex as a share of revenue. 23.1%. Sustained spend at peak prices adds the supply that later pressures price.
Inventory days. 147. Rising days into a price turn raise write-down risk.
Key Risks
Peak-margin illusion. Treating 80.7% gross margin as normal overstates mid-cycle cash flow against the FY2023 trough of -9.1%.
Bit oversupply. Capex at 23.1% of revenue in a boom can seed the next price collapse.
DRAM concentration. 75.6% of revenue in DRAM concentrates both the upswing and the downturn.
Inventory into the turn. 147 days of inventory leaves stock to clear if customers destock when prices fall.
A chip DCF carries the industry cycle through ten explicit years, then strikes the terminal value on what the business earns in a normal year, because the latest margin may sit at a peak or a trough.
- 17 sections, from the business models and the industry cycle to capital intensity, memory, inventory, equipment orders, stock pay and a reverse DCF
- 44 pages
- a chip designer, a foundry, a memory maker and an equipment maker, all fictional
- 4 worked valuations
- listed chip companies on filed margins, capital intensity, inventory days and stock pay, each with its fiscal year
- 6-company screen
The Excel model is the primer's through-cycle DCF live across 13 sheets: a chip designer, a foundry, a memory maker and an equipment maker, all fictional, plus a column for a company of your own in any of five business-model modes. Each mode turns the industry cycle into revenue its own way: units and selling prices, capacity times utilisation times revenue per wafer, bit demand against bit supply, orders and installed-base services, or wafer starts for a materials supplier. Depreciation sits in cost of goods for fab owners, capacity arrives two years after the capex that pays for it, and the terminal value is struck on mid-cycle cash flow. A reverse DCF reads the margin and the growth a price requires, and the sensitivity grids re-run the model in every cell.
See what's in the Semiconductors Sector Primer →£25 PDF · £59 with the Excel model · £159 for all three Technology industries
Learn the Concepts
Understand the valuation frameworks and metrics used in this analysis.
Days of Inventory by Chip Company
Ranked days of inventory for six chip filers from year-end balances, with DSO, DPO and fiscal year. Business model explains most of the spread.
Peak vs Mid-Cycle Margins for Chip Companies
A terminal year at peak margin overstates value. Filed margin swings and a worked mid-cycle example on a fictional chip company.
The Memory Pricing Cycle
DRAM and NAND are priced on bit supply against bit demand, so margins swing furthest. Micron filings show the trough and the peak.
Capex to Revenue by Chip Company
Ranked capex as a share of revenue for six chip filers. Business model sets the order from foundry and IDM down to fabless and equipment.