Micron's Locked-In Demand Means It's Not Too Late to Buy MU

Micron Technology (MU) has been one of the best-performing stocks over the past year, surging roughly 382% while the S&P 500 gained just 16%. Many investors understandably feel like they've missed the boat. But the company's latest earnings call revealed a detail that could mean the rally is far from over.

On the Sept. 30, 2026 earnings call, CEO Sanjay Mehrotra highlighted 26 long-term agreements with customers that cover more than a third of Micron's revenue through 2030. These are 'take-or-pay' contracts, meaning customers are obligated to pay whether or not they actually take delivery of the chips. This structure gives Micron remarkable predictability in its future cash flows.

Even more impressive, a large portion of Micron's high bandwidth memory (HBM) -- the specialized fast memory that feeds data to AI chips -- is already sold out for 2027. And Mehrotra noted that next year's volume is commanding prices 'much higher than 2026 prices.' This pricing power is a direct result of the AI boom and tight memory supply.

The visibility is already showing up in guidance. Micron expects revenue of about $61.5 billion in its current fiscal quarter, up from $54 billion in the previous quarter, with a staggering 86% gross profit margin. Management projects fiscal 2027 to be another record year, with revenue growing every quarter.

Memory has historically been a boom-and-bust business, and Micron is spending heavily to add capacity. However, Mehrotra expects supply-demand conditions to be even tighter through 2028 than they were in 2026, suggesting the current upcycle has plenty of legs.

The take-or-pay agreements fundamentally change the risk profile of Micron's business. In the past, memory makers were at the mercy of volatile spot prices and demand swings. Now, with a third of revenue locked in through 2030, Micron has a much more stable foundation. This should lead to more predictable earnings and potentially a higher valuation multiple over time.

The sold-out HBM capacity for 2027 at higher prices is a clear signal that demand from AI data centers remains insatiable. HBM is a critical component in AI accelerators from Nvidia and AMD, and Micron is one of only a few suppliers globally. This scarcity value gives Micron significant pricing power.

Despite these positives, the stock trades at just over 5 times Wall Street's fiscal 2027 earnings estimates. Analysts expect earnings per share to more than double to $176 in fiscal 2027 and rise another 17% to $206 in fiscal 2028. A 5x forward P/E is remarkably low for a company with such strong growth and visibility. If the market begins to appreciate the durability of Micron's earnings, the stock could re-rate higher.

Of course, risks remain. The memory industry is cyclical, and Micron's heavy capex could eventually lead to oversupply. But management's expectation of tighter conditions through 2028 suggests that any downturn is likely years away. For investors with a long-term horizon and tolerance for volatility, the risk-reward looks attractive.