0000723125-26-000006
SEC filingAI-driven demand and constrained supply drove record revenue and gross margin expansion in Q2 2026.
Micron's second quarter of fiscal 2026 delivered exceptional results, with total revenue of $23.86 billion, a 75% sequential increase from $13.64 billion in Q1 2026 and a 196% surge from $8.05 billion in Q2 2025. The explosive growth was fueled by AI-driven demand that outpaced industry supply, leading to substantial improvements in average selling prices (ASPs) across both DRAM and NAND products. DRAM revenue rose 74% QoQ, driven by a mid-60% range ASP increase and mid-single-digit bit shipment growth, while NAND revenue climbed 82% QoQ on a high-70% range ASP increase and low-single-digit bit shipment growth. Year-over-year, DRAM revenue jumped 207% (mid-110% ASP increase, mid-40% bit shipment increase) and NAND revenue rose 169% (slightly more than 100% ASP increase, approximately 30% bit shipment increase).
Gross margin expanded dramatically to 74% in Q2 2026, up from 56% in Q1 2026 and 37% in Q2 2025, reflecting the powerful combination of higher ASPs, favorable product mix, and manufacturing cost reductions. Operating income reached $16.14 billion (68% margin) versus $6.14 billion (45% margin) in Q1 2026 and $1.77 billion (22% margin) in Q2 2025. Net income of $13.79 billion ($58% of revenue) compared to $5.24 billion in Q1 2026 and $1.58 billion in Q2 2025. The effective tax rate rose to 14.7% from 13.7% sequentially and 10.1% year-over-year, primarily due to the implementation of Pillar Two minimum tax rules in Singapore.
All four business units posted robust sequential revenue growth: CMBU (Compute and Networking) +47%, CDBU (Core Data Center) +139%, MCBU (Mobile and Consumer) +81%, and AEBU (Automotive and Embedded) +57%. The standout was CDBU, which benefited from both higher ASPs and increased bit shipments, reflecting strong data center demand. MCBU and AEBU saw revenue growth driven entirely by ASP improvements, as bit shipments declined sequentially. Operating margins improved across all segments, with MCBU achieving the highest at 76% (up from 47% in Q1 2026), followed by CDBU at 67%, CMBU at 66%, and AEBU at 62%. Year-over-year, all segments more than doubled revenue, with MCBU leading at +245%.
Management's outlook is highly constructive, citing AI-driven memory and storage growth outpacing industry supply. The company estimates capital expenditures for property, plant, and equipment, net of government incentives, to exceed $25 billion in fiscal 2026, reflecting aggressive capacity expansion plans. Key strategic investments include leading-edge DRAM fabs in Idaho (first wafer output projected mid-calendar 2027) and New York (first fab broke ground January 2026, supply in 2030+), as well as HBM advanced packaging facilities in Singapore and the U.S. The company also completed the acquisition of a wafer fab in Taiwan for $1.8 billion, with meaningful shipments expected from 2028. Liquidity remains strong with $16.63 billion in cash and marketable investments and $3.50 billion available under the revolving credit facility. The board authorized up to $10 billion in share repurchases, with $7.84 billion already executed through February 26, 2026.
Operating cash flow of $20.3B exceeded net income of $19.0B, indicating solid cash earnings quality. Non-cash charges (depreciation & amortization $4.5B, stock-based compensation $0.6B) contributed positively, while working capital changes were mixed: a large increase in receivables ($8.3B) was partially offset by higher payables and other liabilities ($4.5B net). Capex intensity remained high at $11.8B, representing 58% of CFO. Free cash flow (CFO minus capex) stood at $8.5B, comfortably covering capital returns of $1.5B (share repurchases $1.2B, dividends $0.3B). The comparison with the prior year shows a dramatic improvement in CFO from $7.2B, driven mainly by higher net income. Overall, the company generated strong operating cash flows despite significant working capital investment, maintaining a healthy FCF margin.