Micron Technology Stock Analysis After Record Q2 FY2026—Why Did the Stock Drop?

Micron Technology, Inc. (Nasdaq: MU) delivered what can only be described as a "blockbuster" second quarter for fiscal 2026. CEO Sanjay Mehrotra characterized memory as a "strategic asset" in the AI era, a sentiment backed by a 196% Y/Y increase and 75% Q/Q growth in revenue. Yet despite record-breaking financial performance and an aggressive outlook, the stock has declined roughly 12% since the March 18 earnings release.

Micron Technology stock AI analysis chart

A Record Quarter

Micron reported revenue of $23.86 billion, nearly tripling year-over-year and up sharply from $13.64 billion in the prior quarter. Profitability expanded even more dramatically:

Gross margin surged to 74.4%, versus 36.8% a year ago
Operating income reached $16.14 billion, with margins approaching 67.6%
Non-GAAP diluted EPS came in at $12.20, a massive step-up from $1.56 last year
Operating cash flow hit $11.9 billion, with adjusted free cash flow at $6.9 billion
Net Capex FQ2-26: $5.0 billion
Buybacks FQ2-26: $350 million
Dividend of $0.15 per share will be paid on April 15th
$20.2 billion in liquidity at end of FQ2-26

This level of margin expansion reflects a powerful combination of pricing strength, constrained supply, and AI-driven demand.

A deeper look into the numbers reveals that this performance was not just driven by volume growth but overwhelmingly by pricing power across both DRAM and NAND.

DRAM, which accounts for 79% of total revenue, generated $18.8 billion, up 207% year-over-year and 74% quarter-over-quarter. Bit shipments only increased in the mid-single digits QoQ, but ASPs surged in the mid-60% range QoQ.

NAND contributed $5.0 billion (21% of total revenue), with revenue rising 169% YoY and 82% QoQ. Similar to DRAM, shipment growth was modest (low single digits QoQ), but ASPs jumped in the high-70% range QoQ.

The AI Engines are Roaring

The growth is broad-based across all business units, but the "Core Data Center" and "Cloud Memory" segments are the clear stars. Core Data Center Business Unit revenue surged 139% sequentially, fueled by higher pricing and bit shipments. Cloud Memory Business Unit revenue was up 47% sequentially, driven by an increase in prices and favorable mix.

Micron is aggressively expanding its footprint to meet this demand, projecting fiscal 2026 capex to exceed $25 billion. Key milestones include:

The Tongluo Acquisition: Closing early to support shipments by 2028.
U.S. Expansion: Groundbreaking in Idaho and New York.
Next-Gen HBM: Advanced packaging in Singapore on track for 2027.

The company also projects the fiscal 2027 capex to step up meaningfully to support HBM- and DRAM-related investments.

Strong Outlook

Micron’s Q3 FY2026 guidance reinforces this momentum:

Revenue: $33.5 billion ± $750 million
Gross margin: Approximately 81%
GAAP diluted EPS: $18.90 ± $0.40
Non-GAAP diluted EPS: $19.15 ± $0.40
project capex of approximately $7 billion while delivering significantly higher free cash flow on stronger operating cash flow

This projected quarterly revenue alone exceeds the full year revenue for every year in the company’s history through fiscal 2024. The company explicitly noted that potential trade or geopolitical impacts are not included in guidance—leaving uncertainty in an already sensitive global semiconductor landscape.

Technical Outlook: The Path Forward

From a technical perspective, the immediate hurdle for MU stock is the resistance at $442. If the stock can reclaim and sustain this level, it clears the path for a move toward the $472 goal, effectively erasing the post-earnings losses and retesting all-time highs.

Conversely, if the stock fails to overcome $442, technical gravity may pull it toward its first major support at $376. A breach of this level would be a signal of weakness, potentially leading the stock to seek further support down at $338.