Micron's 84.9% gross margin tops Nvidia and Meta

Micron posted an 84.9% gross margin in its fiscal third quarter, up from 74.9% the prior period and 39% a year ago. That figure tops every major U.S. tech company, including Meta's 81.9% and Nvidia's 75%, according to the company's earnings release. CFO Mark Murphy said on the call that the margin "more than doubled from a year ago and was a new company record."

Revenue hit $41.46 billion, more than $20 billion above the prior record set last quarter. Net income was $28.24 billion. The stock, already up 700% in the past year, climbed another 14% after hours. That revenue surge continued a trend AlphaScala covered earlier.

The driver is a memory shortage that gives Micron pricing power no one in the chip industry has seen. Nvidia and AMD need Micron's high-bandwidth memory for their AI processors. Apple also faces higher memory costs. CEO Tim Cook told the Wall Street Journal the situation is "unsustainable" and that the iPhone maker will have to lift prices.

Micron is locking in those gains through multiyear contracts called strategic customer agreements, with price floors that guarantee high margins. CEO Sanjay Mehrotra said the floor prices are set "well above our peak quarterly margins in any past cycle."

Mehdi Hosseini, an analyst at Susquehanna, said customers have no choice but to pay a premium. "The memory wall is playing out," he told CNBC.

For the current quarter, Micron guided gross margin to roughly 86%. Murphy said the company expects "the market to remain tight beyond 2027."