Micron’s FQ4 Beat Is All Pricing: UBS Sees DRAM Shortage Running Into 2027
TREE NEWS reports: UBS has reiterated a Buy rating on Micron Technology with a $1,625 price target, implying roughly 48% upside from the September 22 close of $1,096. In its FQ4:26 preview, analyst Timothy Arcuri framed the debate as having shifted from whether the cycle has peaked to how long the upcycle can run — and the bank’s answer is at least through 2027.
The Numbers Behind the Beat
UBS models FQ4 revenue of $52.4 billion, slightly above the top end of guidance, with gross margin of 87.6%, about 160 basis points above the guide. The FQ1 guide is seen at $58–59 billion, with gross margin up another ~100bps sequentially. Critically, the beat is almost entirely price-driven:
- DRAM: $39.7B revenue; bit shipments +3% QoQ, ASPs +23% QoQ
- DDR: ~$36.2B; bits +2%, ASPs +24%, tracking industry contract prices up ~26%
- HBM: $3.5B; bits +9%, ASPs +10%
- NAND: $12.7B; bits +4%, ASPs +23%, in line with ~23% contract price gains
Supply Stays Tight, and NAND’s Peak Gets Pushed Out
UBS’s channel work shows DRAM fulfillment rates still around 60%, with server DDR bit demand up roughly 80% and server-plus-storage SSD bit demand potentially more than doubling. The bank now expects DRAM to remain undersupplied at least through Q2 2028. On NAND, UBS believes pricing peaks in Q3–Q4 2027, partly because YMTC is shifting roughly 30,000 wafers per year of capacity toward DRAM rather than NAND — a reallocation that lengthens the NAND pricing cycle rather than ending it.
Gross margin is forecast to peak around 91% in Q4 2027–Q1 2028, with calendar 2026–2028 margins of 85.6%, 90.2% and 89.5%. UBS also downplays CXMT fears: the Chinese supplier’s DRAM bit share is seen rising only from ~7% in 2025 to ~9% in 2027, constrained by installation pace, yields and technology gaps.
HBM4 and the Nvidia Spec Shuffle
UBS trimmed Micron’s calendar 2027 HBM bit shipments to ~11.72 billion Gb after Nvidia’s Rubin Ultra spec changes — the first VR300 variant uses 384GB HBM4 per GPU, with later versions moving to 512GB HBM4E in Q3 2027, below the previously assumed 768GB. Tight supply can be offset by spreading across more racks, and memory vendors are re-widening HBM/DDR price premiums; Micron’s calendar 2027 HBM blended ASP is expected up ~76% year over year.
The Buyback Catalyst
The CHIPS Act restriction on share repurchases expires December 9, 2026. UBS expects buybacks to begin in FQ2:27 (February 2027) at roughly $20 billion per quarter, ramping to $40–50 billion, though Micron may not pre-announce details on this call. UBS models F2027 capex of ~$51 billion and calendar 2027–2028 revenue of $282.2 billion and $376.8 billion, with EPS of $212, $277 and $219 for 2027–2029 — above consensus in the out-years. The $1,625 target applies ~8x NTM P/E to calendar 2029 EPS of ~$219, discounted back to 2028 at a ~12.2% cost of equity.
The setup is straightforward: pricing power is doing the work, supply discipline is holding, and a capital-return catalyst lands in December. The risk is that long-term contracts start capping upside — which is precisely why investors are now watching demand durability rather than the next print.
