Key Takeaways:
Micron's record 85% gross margin and 7x forward earnings make it a more compelling AI hardware bet than Apple at 32x earnings.
Micron Technology's 85% gross margin on $41.5 billion in quarterly revenue — more than quadruple a year earlier — exposes a structural shift in AI hardware economics that leaves Apple's 47% margin and 32x multiple looking stretched by comparison.
"These results reflect the strategic value of memory in the AI era," Chief Executive Officer Sanjay Mehrotra said, pointing to multi-year strategic customer agreements that lock in pricing through 2030.
Micron's non-GAAP earnings per share hit $25.11, up from a fraction of that a year ago, as data center revenue surged to $25 billion. The company guided fiscal fourth-quarter revenue to about $50 billion and adjusted EPS of roughly $31, implying gross margin approaching 86%. Apple, by contrast, posted $111.2 billion in March-quarter revenue — up 17% — but pushed through price increases of 15% to 54% on MacBooks and iPads to protect margins from memory cost inflation.
The divergence matters because Micron trades at 7 times forward earnings against consensus estimates of $149.64 per share for fiscal 2027, while Apple commands 32 times earnings with slower growth. The question is whether Micron's capital spending — a projected $40 billion annual run rate by fiscal 2027 — will consume the cash flow that record margins are generating.
The comparison cuts to the heart of the AI hardware trade. Micron is one of only three companies worldwide producing high-bandwidth memory at scale, and demand from hyperscalers has far outpaced supply. The company has signed 16 strategic customer agreements covering about 20% of DRAM volume and a third of NAND output, with $22 billion in customer deposits and $100 billion in remaining performance obligations. Those contracts, structured as take-or-pay agreements with fixed price floors, transform Micron from a cyclical commodity supplier into something closer to an infrastructure toll collector.
Apple sits on the other side of that equation. The iPhone maker's $57 billion in March-quarter iPhone revenue and record $31 billion in services revenue demonstrate resilience, but the company is absorbing memory cost inflation rather than dictating terms. Its 15% to 54% price hikes on MacBooks and iPads signal that component costs are squeezing even the world's most valuable company.
Micron's capital intensity is the central risk. Net capital expenditure reached $7.1 billion in the fiscal third quarter, with management targeting $10 billion in the current period. The full-year fiscal 2026 budget stands at $27 billion, and the trajectory points to a $40 billion annual run rate by fiscal 2027 as the company builds new fabs in Idaho, New York, and Taiwan. That spending is necessary to maintain its position in HBM4 and next-generation DRAM, but it consumes a significant portion of the record operating income.
Chief Executive Officer Mehrotra sold 94,078 shares into the rally, a signal that even insiders recognize the tension between peak earnings and peak capital demands.
For investors weighing the two stocks, the math favors Micron on a growth-adjusted basis. Consensus estimates project Micron's earnings will more than double to $149.64 per share by fiscal 2027, while Apple's growth is expected in the low to mid-teens. Even if Micron's earnings contract by half in a downturn — a realistic scenario given memory's history — the stock at 7 times earnings offers a wider margin of safety than Apple at 32 times. The risk is timing: Micron's $40 billion capex cycle means free cash flow may lag reported earnings for several quarters, testing investor patience before the payoff arrives.
This article is for informational purposes only and does not constitute investment advice.
