Micron Sees $100B HBM Market by 2028 Amid Ongoing Supply Constraints

Overview of Micron Technology's Q1 2026 Earnings Call

Micron Technology, Inc. (MU) delivered a strong performance in its first quarter of fiscal year 2026, with record-breaking results across multiple key metrics. The company's leadership emphasized a robust start to the year, highlighting significant growth in revenue, gross margin, and earnings per share (EPS). This performance was driven by strong demand for memory products, particularly in the DRAM and NAND markets, as well as the continued expansion of high-bandwidth memory (HBM) solutions.

Leadership Highlights and Strategic Focus

Sanjay Mehrotra, CEO, President, and Chairman of Micron, noted that the company achieved "an outstanding start to fiscal 2026," surpassing the upper end of its guidance. He highlighted several record achievements, including total company revenue, DRAM and NAND revenue, HBM, data center revenue, and each business unit. Mehrotra also announced that Micron has completed agreements on price and volume for its entire calendar 2026 HBM supply, including its industry-leading HBM4.

The CEO projected a 40% compound annual growth rate (CAGR) for the HBM total addressable market (TAM) through 2028, from $35 billion in 2025 to around $100 billion in 2028. This milestone is now expected to arrive two years earlier than previously anticipated.

Mehrotra emphasized the ongoing tight supply conditions in the market, stating that sustained and strong industry demand, along with supply constraints, are contributing to these conditions, which are expected to persist beyond calendar 2026.

Financial Performance and Outlook

Mark Murphy, Executive Vice President and CFO, reported strong financial results for the quarter, with revenue, gross margin, and EPS all exceeding the high end of guidance. The company recorded a quarterly record for free cash flow and reduced its debt, returning to a net cash position.

Micron anticipates substantial new records in revenue, gross margin, EPS, and free cash flow for both the second quarter and the full fiscal year 2026. Murphy guided that revenue is expected to be a record $18.7 billion, plus or minus $400 million. Gross margin is expected to be in the range of 68% plus or minus 100 basis points, and operating expenses are estimated at approximately $1.38 billion, plus or minus $20 million. Based on a share count of approximately 1.15 billion shares, EPS is expected to be a record $8.42 per share, plus or minus $0.20.

Micron plans to increase its fiscal 2026 capital expenditures (CapEx) to approximately $20 billion, up from a prior estimate of $18 billion. This increase is driven by investments in HBM and 1-gamma supply.

Key Financial Results

Total fiscal Q1 revenue reached $13.6 billion, marking a 21% sequential increase and a 57% year-over-year rise. This marks the third consecutive quarter of record revenue. DRAM revenue reached $10.8 billion, with a 20% sequential increase, while NAND revenue reached $2.7 billion, up 22% sequentially.

The consolidated gross margin was 56.8%, an increase of 11 percentage points sequentially. Murphy noted that fiscal Q1 free cash flow was a quarterly record, exceeding the prior record set in fiscal Q4 2018 by over 20%. Operating income for the quarter was $6.4 billion, and non-GAAP diluted EPS was $4.78, representing 58% sequential growth.

Q&A Insights and Analyst Questions

During the Q&A session, analysts raised several key questions about customer long-term agreements (LTAs), CapEx intensity, and supply constraints. Mehrotra mentioned that LTAs are multiyear contracts involving discussions with key customers, with specific commitments and stronger contract structures.

Murphy explained that capital intensity is dropping, with a substantial portion of the increased CapEx aimed at supporting DRAM and specifically HBM and the 1-gamma ramp. When asked about fab space constraints, Murphy noted that node transitions will be the principal source of supply growth in fiscal 2026.

Regarding gross margins during technology transitions, Murphy stated that cost execution has been strong, with good yields. However, some start-up costs from new fabs may have a small impact on margins.

Market Sentiment and Competitive Position

Analysts maintained a positive but probing tone, focusing on supply constraints, CapEx philosophy, and long-term contract specifics. Management remained confident and assertive during prepared remarks, highlighting record performance and strategic execution. During Q&A, they maintained confidence but occasionally deferred on specifics, especially regarding contract details and competitive positioning.

Mehrotra reiterated that Micron feels very good about its competitive position, emphasizing strong product specs and profitability. The company is operating in an exceptionally tight supply environment across DRAM and NAND, driven by accelerating AI adoption and data center expansion.

Risks and Future Outlook

Despite efforts, Mehrotra acknowledged disappointment in being unable to meet demand across all market segments. Ongoing supply constraints for both DRAM and NAND are expected to persist through and beyond 2026. Management cited risks related to cleanroom space build-out lead times and potential new tariffs, which are not included in guidance.

Analysts pressed management for more details on contract terms, CapEx allocation, and supply response to ongoing demand surges. Micron remains confident in its positioning to benefit from secular trends, despite supply limitations and heightened capital intensity.

Final Thoughts

With HBM TAM now expected to hit $100 billion by 2028—two years ahead of previous projections—and record financial performance in Q1, Micron is increasing CapEx and accelerating supply investments. The company continues to signal robust pricing, disciplined cost control, and differentiated technology leadership, reinforcing its strong market position.