# MU How the company works

> How Micron Technology (MU) works, in its own words from its annual report for fiscal 2026: how it makes money, what it sells, unit economics, competitive position, cost inputs, and the anatomy of the extremes: what has to break for the result to land far from the forecast, either way.

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## How the company works

What it sells, how it makes money, and the anatomy of the extremes: what has to break for the result to land far from the forecast, either way. In Micron Technology's own words, from its annual report for fiscal 2026.

Micron makes memory chips, DRAM and NAND, in its own factories and sells them by the bit to data centers, phone and PC makers, and carmakers.

#### How it makes money

A commodity made at the leading edge. Micron runs its own fabs in Taiwan, Singapore, Japan, the United States, Malaysia, China and India, 24 hours a day, and earns the gap between the price of a bit and the cost of making it, so profit swings with memory prices. Fiscal 2026 showed the top of the cycle: revenue $133.2B against $37.4B a year earlier, operating income $101.2B, driven "primarily due to increases in average selling prices". DRAM was $100.68B of revenue and NAND $31.79B.

#### What it sells

| Business unit, fiscal 2026 | Revenue | Operating margin |
| --- | --- | --- |
| Cloud Memory HBM, DDR5 and low-power DRAM for hyperscale clouds and AI servers | $43.09B | 72% |
| Core Data Center data center SSDs and NAND, DRAM for enterprise and NeoCloud servers | $37.59B | 79% |
| Mobile and Client LPDDR for smartphones, DRAM and SSDs for PCs | $36.60B | 80% |
| Automotive and Embedded memory for cars, industrial and consumer devices | $15.89B | 71% |

Revenue and operating income as a percentage of revenue by business unit, as Micron reports them. Half of revenue comes from the top ten customers.

#### Unit economics

Cost per bit falls with each process node (the 1γ DRAM node is the first with EUV lithography) and price per bit is set by the market, so margins run from loss to 80% across a cycle. Capital spending was $30.7B in fiscal 2026 and research $10B is planned for a new Micron Research Labs over the next decade. 61,000 employees. New this cycle: take-or-pay agreements with binding volumes and price bands, $134B of remaining performance obligations backed by $13B of customer deposits, recognized within the next five years.

#### Competitive position

One of three makers of leading-edge DRAM, against Samsung and SK hynix, and one of the makers of NAND against those two, Kioxia and Sandisk, with China's CXMT and YMTC backed by the state. Micron's edge is process technology and HBM: HBM3E 12-high was the majority of its HBM shipments, HBM4 is in volume production, and HBM4E ramps in calendar 2027. China's Cyberspace Administration has barred critical infrastructure operators there from buying Micron products since May 2023.

#### Biggest cost inputs

Fabs and the equipment in them, the largest cost; silicon wafers, chemicals, gases, photoresists, substrates and reticle blanks, some from single or sole sources; rare earth elements, minerals and metals of which China is the predominant producer; electricity, gas and water in volume; labor; and government incentives (the CHIPS Act) that offset fab construction.

#### Anatomy of a large **upside**

- **AI makes memory the bottleneck and keeps prices high.** AI servers "require significantly increasing quantities of DRAM, including HBM, and NAND"; HBM4 and 256GB DDR5 modules sell at a premium; the take-or-pay contracts and $134B of commitments hold volume and price bands through 2031.
- **On-device AI lifts content per phone, PC and car.** AI PCs and personal workstations use 128GB or more of DRAM; flagship phones take 1γ LPDDR5X and LPDDR6; cars add memory with every level of driver assistance, so every unit sold carries more Micron.
- **The US fabs come online with incentives.** New capacity in the United States, backed by CHIPS grants and tax credits, lands on a tight market and Micron Research Labs keeps the process lead at the 1δ node and beyond.

#### Anatomy of a large **downside**

- **The memory cycle turns.** Competitors "may increase capital expenditures resulting in future increases in worldwide supply"; if demand does not keep up, "average selling prices for our products could decline materially", and an 80% operating margin business becomes a loss, as it has before.
- **China's memory makers scale up.** CXMT and YMTC, with state support, add DRAM and NAND supply; Micron is already barred from China's critical infrastructure buyers, and tariffs and rare earth export limits raise its own costs.
- **The AI build-out pauses.** The data center units are 60% of revenue and the customer base is concentrated; a digestion year in cloud spending cuts bit demand while $30.7B of yearly capital spending has already been committed.

Written from Micron's annual report for fiscal 2026, in its words and numbers. The extremes are the long view, what has to break for the result to land far from the forecast; the quarter's own cases, each model's, are on the quarter forecast.