Micron FQ4 EPS Expected to Surge 940% to $31.43 Amid Memory Demand

Micron Technology Inc. (NASDAQ: MU) prepares for its fiscal fourth-quarter earnings release on Sept. 30, facing expectations of a nearly tenfold increase in profits. Wall Street consensus projects adjusted earnings per share of $31.43, a dramatic rise from the $3.03 reported in the same period last year. This trajectory marks a 940% year-over-year expansion in profitability for the memory chipmaker.

Despite this accelerated earnings growth, Micron remains the most undervalued large-cap tech stock in the United States. At a share price of approximately $1,060, the company trades at a forward price-to-earnings ratio of 7.3x based on estimated next-twelve-month earnings of $144.94 per share. As noted by Benzinga, this multiple is the lowest among constituents of the Technology Select Sector SPDR Fund (NYSE: XLK), highlighting a significant disconnect between current pricing and reported financial performance.

Margins Expand Driven by AI Memory Demand

The surge in profitability stems from structural demand for high-bandwidth memory (HBM) used in artificial intelligence servers. Micron, along with only two other global producers, supplies this critical component. In the previous fiscal quarter, revenue reached $41.46 billion, up from $9.30 billion a year earlier, while adjusted EPS of $25.11 exceeded consensus estimates. The company guided for fiscal Q4 revenue of $50 billion and an adjusted EPS midpoint of $31.00.

Operating efficiency has improved sharply due to supply constraints. Micron’s gross margin is guided to approximately 86% for the current quarter, more than doubling from the 39% recorded a year ago. This margin expansion reflects the premium pricing available when production capacity cannot keep pace with the rapid growth in AI infrastructure requirements. The company expects full fiscal year earnings of roughly $73.44 per share, nearly nine times the prior year’s total.

Valuation Reflects Historical Cyclical Commodity Risks

Investors maintain low valuation multiples due to the historical volatility of the memory sector. DRAM and NAND flash chips have traditionally behaved like commodities, with prices fluctuating based on supply and demand dynamics. Past cycles have shown that high prices incentivize new capacity, leading to oversupply and subsequent price collapses that turn profits into losses within a few quarters. Consequently, the market prices Micron as a cyclical producer rather than a stable technology firm.

Strategic Contracts Aim to Stabilize Revenue

Management is attempting to alter this perception through long-term commercial arrangements. In June, Micron disclosed 16 strategic customer agreements, including multi-year contracts with fixed prices or defined price floors and ceilings. The remaining obligations under these signed agreements total approximately $100 billion. By locking in revenue streams, the company aims to make earnings more durable and predictable, potentially justifying a higher valuation multiple if the market accepts that the cyclical nature of memory chips is changing.