0000723125-25-000046
SEC filingAI-driven demand fueled strong revenue growth and margin expansion in Q1 FY2026.
In Q1 FY2026, Micron delivered exceptional financial results driven by surging AI-related demand across data center and cloud markets. Total revenue reached $13.64 billion, a 57% increase year-over-year (YoY) and a 21% sequential increase from Q4 FY2025. The revenue growth was broad-based, with DRAM sales up 69% YoY and NAND sales up 22% YoY. DRAM ASPs rose in the mid-30% range YoY and approximately 20% sequentially, while DRAM bit shipments grew in the mid-20% range YoY but decreased modestly sequentially due to supply allocation shifts toward HBM and high-capacity modules. NAND bit shipments increased in the high-20% range YoY but were partially offset by a mid-single-digit percentage decline in ASPs.
Gross margin expanded dramatically to 56% from 38% in Q1 FY2025 and from 45% in Q4 FY2025, reflecting higher pricing, manufacturing cost reductions, and an improved product mix favoring high-margin data center solutions. Operating income rose to $6.14 billion, representing a 45% operating margin versus 25% a year ago. Net income of $5.24 billion yielded a 38% net margin. The effective tax rate increased to 13.7% from 13.2% in the prior year, primarily due to the implementation of Pillar Two in Singapore.
All business units posted robust YoY revenue growth. The Compute and Networking Business Unit (CMBU) doubled revenue to $5.28 billion (+100% YoY), driven by AI demand for HBM, high-capacity DIMMs, and low-power server DRAM. Its operating margin reached 55%, up from 40% a year ago. The Core Data Center Business Unit (CDBU) grew 4% to $2.38 billion, with higher data center DRAM ASPs and NAND bit shipments offset by lower NAND ASPs; operating margin improved to 37% from 38%. The Mobile and Consumer Business Unit (MCBU) surged 63% to $4.26 billion, benefiting from higher DRAM and NAND ASPs and bit shipments, with operating margin expanding to 47% from 15%. The Automotive and Embedded Business Unit (AEBU) rose 49% to $1.72 billion, driven by higher bit shipments and DRAM ASPs, though NAND ASPs declined; operating margin jumped to 36% from 7%.
Operating income growth was supported by manufacturing cost reductions across all segments, partially offset by higher R&D and SG&A expenses. R&D expenses increased 32% YoY to $1.17 billion due to higher development wafer volumes and compensation costs.
Management highlighted that AI-driven demand continues to outpace industry supply, driving favorable pricing and margins. Capital expenditures are expected to be approximately $20 billion in FY2026, weighted to the second half, as the company invests in new memory manufacturing capacity. Key projects include two leading-edge DRAM fabs in Idaho (first output mid-2027 and operational by end-2028), a planned site in New York (first fab groundbreaking in early 2026), and expansion of HBM advanced packaging in Singapore. These investments are supported by up to $6.4 billion in CHIPS Act grants and a 35% investment tax credit. Micron also noted that supply allocation decisions may impact certain customers and end markets in the near term. The company declared a quarterly dividend of $0.115 per share and has $2.51 billion remaining under its $10 billion share repurchase authorization. Overall, the MD&A conveys strong momentum and a bullish outlook driven by structural AI demand.
As of November 27, 2025, Micron held $9.731B in cash and cash equivalents, $587M in short-term investments, and $1.697B in long-term marketable investments, totaling $12.015B in cash and securities. Total debt stood at $11.756B (current $569M, long-term $11.187B), down from $14.577B at August 28, 2025, due to significant prepayments. Shareholders' equity increased to $58.806B from $54.165B, driven by net income of $5.240B. Inventory was $8.205B, slightly down from $8.355B. Receivables rose to $10.184B from $9.265B. Other current liabilities included $1.64B of consideration payable to customers (up from $1.19B).
Micron disclosed $1.13B in future finance lease obligations for gas supply arrangements (embedded leases) not yet commenced, with a weighted-average term of 15 years. Existing finance lease liabilities totaled $2.912B (including $569M current). Operating lease liabilities were $737M. Maturities of notes payable (excluding finance leases) show $700M due in 2029, $796M in 2030, and $7.4B thereafter. The company also has a $3.5B undrawn revolving credit facility maturing March 12, 2030.
In Q1 2026, Micron repurchased 1.3M shares for $300M under its $10B authorization ($7.49B used to date). Dividends of $0.115 per share were declared and paid ($132M total). The company aggressively reduced debt, prepaying $2.822B in principal (2028 Notes, 2029 B Notes, 2029 Term Loan A), incurring a $130M loss on debt prepayments. Capital expenditures were $5.389B (39.5% of revenue), funded partly by $878M in government incentives.
Micron reports four segments: CMBU ($5.284B revenue, $2.884B operating income, 54.6% margin), CDBU ($2.379B, $0.890B, 37.4%), MCBU ($4.255B, $2.017B, 47.4%), and AEBU ($1.720B, $0.627B, 36.5%). Revenue by technology: DRAM $10.812B, NAND $2.743B, Other $88M. One customer represented 17% of total revenue (primarily CMBU). Goodwill by segment: CMBU $654M, CDBU $109M, MCBU $284M, AEBU $103M.