MU

Micron ($MU) Q2 Revenue Guidance Hits $18.7B, But CEO Sold $50M...Is Memory Super Cycle Peaking?

01/16/2026 00:13

Micron Technology ($MU) delivered market-crushing Q1 FY2026 results on December 17, reporting revenue of $13.64 billion, up 56% year-over-year, with EPS of $4.78 beating analyst estimates of $3.96. More importantly, Q2 guidance projects revenue of $18.7 billion, gross margin of 68%, and EPS of $8.42, implying explosive 37% sequential growth. This signals that AI data center memory demand is exceeding even the most optimistic forecasts. Micron is the only U.S.-based memory semiconductor manufacturer, producing DRAM and NAND flash memory. While competitors include SK Hynix and Samsung Electronics from South Korea and Taiwan's TSMC, Micron stands as the primary beneficiary of the U.S. CHIPS Act with $6.165 billion in finalized subsidies. The company is investing $125 billion in New York and Idaho fabs and recently announced a $9.6 billion HBM plant in Hiroshima, Japan. Investors need to focus immediately on the structural shift in the memory chip market. AI-driven data center expansion is creating explosive memory demand with shortages expected through 2027. Samsung raised server DDR5 memory prices by up to 60% in November 2025, while SK Hynix announced that all 2026 DRAM, HBM, and NAND production is already sold out. CEO Sanjay Mehrotra projects the HBM market will grow 30% annually through 2030. This pricing power will flow directly to Micron's future quarters. However, insider selling warrants careful scrutiny. CEO Sanjay Mehrotra sold approximately $50 million worth of shares between October and November 2025 at $200-240 per share, well below the current price of $336.63. Other executives have also been selling consistently since June 2024. Filings show most transactions occurred through GRAT trusts or family trusts, suggesting planned tax and estate management rather than panic selling. Some sales included recently acquired ESPP shares. While this appears to be structured selling, the CEO's large sales before the recent rally deserve attention. Yet fundamentals and valuation remain compelling. Micron's forward PE of 10.47x sits well below tech sector averages, with a PEG ratio of 0.58 indicating undervaluation relative to growth. Q1 operating cash flow hit a record $8.41 billion with free cash flow of $3.9 billion. Gross margin is expanding from 56.8% to a projected 68% in Q2, reflecting higher-margin HBM product mix. Investors should consider three scenarios. The bull case assumes the memory super cycle extends through 2027 with Micron rapidly gaining HBM market share, potentially driving the stock above $400. The base case sees current trends continuing through 2026 with strong results, supporting a $350-380 target. The risk scenario involves escalating U.S.-China trade tensions cutting China exports or memory prices peaking earlier than expected, potentially pulling the stock back to $250-280. Short-term (1-6 months), the stock likely trends higher. If Q2 results in March 2026 show another guidance raise, shares could rally further. SK Hynix announced Q4 2026 HBM4 production start, with Micron expected to follow at a similar timeline, providing additional upside catalyst. However, near-term volatility is likely. Trump administration announcements on China semiconductor export restrictions have repeatedly jolted the stock, as seen in August 2025 when the Commerce Department revoked equipment import authorizations for SK Hynix and Samsung's China facilities. Long-term (6+ months), the structural growth story remains intact. AI data center expansion should continue for 3-5 years, with Nvidia CEO Jensen Huang emphasizing "very strong" Blackwell chip demand and memory supplier collaboration. Micron's strategic decision to exit consumer memory (Crucial brand) and focus on high-margin AI/data center markets is positive. However, long-term investors must remember memory's cyclical nature. Past boom periods have ended in supply gluts and price crashes. When new production lines ramp in 2027-2028, supply may exceed demand. In conclusion, Micron sits at the center of a memory super cycle with strong earnings growth expected through 2026. While shares have already gained 226% year-to-date, forward valuation remains reasonable. Insider selling is a caution flag but appears largely planned, with fundamentals strengthening significantly since those sales. Short-term momentum likely continues through Q2 earnings, but mid-to-long-term investors should prepare for valuation pressure and memory cycle peak concerns. Conservative investors might consider partial profit-taking with re-entry on pullbacks, while aggressive investors could hold through H1 2026 while closely monitoring memory pricing and trade policy developments.