Micron will report its fiscal fourth-quarter 2026 results for the quarter ending in August on September 30. In its latest research report, JPMorgan maintained its Overweight rating on Micron and set a price target of $1,540, implying significant upside from the September 25 stock price of $1,082.28.

On the surface, the logic remains simple: memory prices are still rising.

But what this research report really aims to convey is that the market's focus on Micron is shifting. Short-term earnings beats are only the first layer. More importantly, the supply-demand tightness in HBM, DRAM, and NAND may last longer than the market previously expected, while Micron is improving the certainty of future earnings through long-term supply agreements and capital return mechanisms.

This means Micron may be gradually evolving from a typical "memory cyclical stock" into a business model with a higher profit floor and more stable cash flow.

DRAM and NAND prices continue to rise, earnings beat still supported

JPMorgan expects DRAM average selling prices (ASP) to rise more than 20% quarter-over-quarter this quarter, and NAND ASPs may also rise about 20%.

At the same time, the ramp-up of HBM4 12-high mass production is still accelerating. As of last quarter, Micron had already shipped more than $1 billion of related products, with its ramp-up speed about twice that of HBM3E 12-high.

The shift in product mix toward high-end HBM is also continuing to push gross margins higher.

JPMorgan believes Micron's gross margin this quarter could exceed the company's previous guidance of about 86%, driven mainly by three factors: memory price increases exceeding prior expectations, a higher HBM4 mix, and operating leverage from revenue growing faster than expenses.

Therefore, even though management had previously signaled that "price increases will slow markedly," JPMorgan does not believe this means demand is weakening.

On the contrary, it prefers to interpret this shift as a deliberate effort to control the pace of price hikes: with supply remaining tight, Micron is not pushing short-term prices to the extreme, but instead aims to lock in customer relationships and future demand through long-term agreements.

What truly needs to be watched is no longer just "how much prices rose this quarter," but rather: how much longer this memory pricing upcycle can last.

The HBM supply-demand gap may persist until 2028

This is one of the most important judgments in the entire research report. One recent market concern about HBM is that adjustments to certain product specifications could free up capacity, ease supply tightness, and push future prices lower. But JPMorgan's estimates show that even after fully accounting for this impact, HBM will remain in a state of supply shortage.

Its model projects the HBM supply-demand gap at approximately -20% in 2026, about -19% in 2027, and still -16% in 2028. By 2028, the cumulative shortage could even widen to about 23 weeks of supply.

This means that entering 2027–2028, HBM prices still have a basis for further upside, rather than quickly entering a phase of oversupply.

AI remains the core demand variable behind this.

Micron has already raised its 2027 HBM market size forecast to "comfortably exceed $100 billion." JPMorgan's global team is even more aggressive, projecting the HBM market will reach about $160 billion in 2027 and further rise to $282 billion in 2028.

If this trend continues, what Micron faces is no longer just the cyclical demand of traditional DRAM/NAND, but structural incremental demand driven by AI infrastructure.

More important than price increases is that Micron is starting to "lock in" future revenue

Compared with short-term price changes, JPMorgan places greater emphasis on another metric: SCA (Supply Commitment Agreement).

In the previous quarter, Micron disclosed that it had signed 16 SCAs, covering about 20% of DRAM shipments and about 33% of NAND shipments.

Among them, 14 agreements correspond to a total minimum purchase commitment (RPO) of approximately $100 billion, with customers also providing about $22 billion in cash and cash-like commitments, including approximately $18 billion in cash deposits.

Since then, Micron's management has stated that the company has signed more SCAs.

Based on this progress, JPMorgan estimates that SCA coverage of DRAM and NAND bit production may have risen to over 35%, with the possibility of reaching over 50%.

The significance for Micron is not just "more orders."

The biggest problem in the traditional memory industry is that profitability is highly correlated with spot price fluctuations. Once supply exceeds demand, prices fall rapidly, and revenue and profit quickly decline as well.

But long-term supply agreements are changing this.

As more and more capacity is locked in advance through SCAs, Micron's visibility into sales volume, pricing, and cash flow for future quarters and even years will improve. More importantly, based on the floor pricing in these agreements, even at floor pricing, Micron's future gross margins are expected to remain significantly above the peak levels of past cycles.

The research report notes that Micron's historical gross margin peak was approximately 62%, and the profit floor established by the current SCA framework may be significantly higher than that level. This could be the key to the market re-evaluating Micron's valuation.

In the past, investors were accustomed to applying a significant discount to Micron's earnings when memory prices were at highs, because prices would always eventually enter a downcycle. But if long-term agreements can truly raise the profit floor, then Micron's earnings volatility may be lower than in past cycles.

AI Data Centers Are Reshaping Micron's Revenue Structure

The changes brought by AI have also begun to directly reflect in the revenue structure. JPMorgan expects Micron's data center business revenue to continue hitting new highs, significantly exceeding the scale of over $100 billion in annualized revenue already achieved last quarter. Among this, data center SSD revenue, after doubling quarter-over-quarter last quarter, is expected to exceed $5 billion again this quarter.

At the same time, the rapid ramp-up of HBM4 12-high is continuing to drive the product mix toward high-value memory.

This means that AI's impact on Micron is not just about increasing shipment volumes, but simultaneously changing three variables: higher ASP, higher gross margins, and more stable long-term orders.

For a company traditionally highly dependent on the commodity memory price cycle, these three factors combined are more important than a simple "price increase."

After December, Buybacks Could Become the Next Main Theme

In addition to memory price increases and HBM, JPMorgan also specifically highlighted one date: December 9, 2026. That day marks the two-year anniversary of Micron signing its final agreement under the U.S. CHIPS Act.

Under the relevant commitments, Micron will thereafter gradually return 100% of excess cash to shareholders, with stock buybacks becoming the primary method and dividend growth serving as a supplement.

This matters because Micron's free cash flow is currently growing rapidly. JPMorgan estimates that for the quarter ending in August alone, Micron's free cash flow could exceed $24 billion, up more than 30% from approximately $18.3 billion in the previous quarter.

If its forecasts hold, Micron's cumulative free cash flow over the six quarters from now through the end of 2027 could even approach $200 billion. Therefore, the market's focus may no longer be on whether Micron "will buy back stock," but rather: how large the buyback will be and how quickly it will begin.

If earnings remain elevated while long-term agreements improve cash flow certainty, capital returns could become a new valuation catalyst alongside HBM and memory price increases.

Should Micron Still Be Treated as a Traditional Cyclical Stock?

JPMorgan currently maintains an Overweight rating on Micron with a December 2027 price target of $1,540. Its valuation is based on FY2028 estimated EPS of $154, applying a P/E multiple of approximately 10x. But more noteworthy than the price target itself is the shift in the valuation framework behind it.

In the past, when the market looked at Micron, there was often only one core question: when will memory prices peak.

Now, more variables need to be considered simultaneously: structural demand for HBM remains strong, supply growth for DRAM and NAND is constrained; long-term supply agreements are locking up an increasingly larger proportion of capacity; and Micron is about to enter a phase of large-scale cash returns to shareholders.

This means the real question that needs to be answered next has become: if memory price increases last longer, the profit floor is raised by long-term agreements, and cash flow begins to fund large-scale buybacks, should Micron still continue to be treated as the kind of highly volatile cyclical stock it was in the past?

This may be more worthy of market attention than whether the next earnings report "beats expectations."

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia