Micron's Q1 Results Say "AI Bubble Is Far From Bursting"

Fears of an artificial intelligence bubble may linger.

However, Micron’s (NASDAQ: MU) recent earnings results suggest the rally is far from over.

The company delivered standout fiscal Q1 performance, driven by explosive demand in NAND and DRAM markets, a persistent shortage of HBM supplies, and rising costs underpinned by the AI buildout.

These results led to solid forward guidance, which is likely to be cautious, and a strengthening sentiment trend, driving the stock price higher. 

Analysts Lift Price Targets on Persistent AI and Datacenter Growth

The analyst response was as robust as any spawned by the AI boom.

MarketBeat tracked widespread price target increases, extending the trend that had been in place already ahead of the release. 

Analysts, including Needham, Stifel, Mizuho, and UBS, raised their price targets, with all at or above $300, citing ongoing demand for HBM and other products to support datacenter, cloud, and AI growth.

Needham conspicuously increased its earnings and revenue targets for the subsequent two years, stating HBM shortages will linger.

As it stands, Micron is rated a consensus Buy by 37 analysts.

The consensus price target, which forecasts 10% upside relative to the pre-release closing price, is trending in a bullish direction, having increased by 17% overnight following the release. The high-end analyst targets suggest that as much as 60% upside could lie ahead.

Micron’s Q1 Reflects AI GPU Demand Surge

Micron had a game-changing quarter in Q1, with DRAM underpinning a 56% year-over-year (YOY) and a 20% sequential increase in revenue. It’s worth noting that Micron’s fiscal year differs from the calendar year, with Q1 covering the September–November period—capturing early-year momentum in AI and data center demand.

The top line outperformed the consensus estimates by nearly 600 basis points, with record results in all segments. NAND grew by 22%, DRAM, which includes data center and HBM, by almost 100%, and trends are expected to strengthen as the year progresses. Other end markets, including Mobile and Automotive/Client, were also strong, growing by 60% and 48% respectively. 

Margin news is also impressive. The company widened its gross and operating margins by at least 1,700 basis points, driving significant strengths in earnings. Critical details include a nearly 3X increase in operating and net income, and record free cash flow. The free cash flow approached $4 billion in the quarter, approximately 20% better than the previous peak. 

Guidance is why this stock will continue to move higher, eventually reaching and surpassing $300. The Q2 forecast of $18.3 billion in revenue is $4 billion, or 2700 basis points, above the consensus projection, well ahead of the highest forecasts, and includes another significant gross margin improvement. 

Micron Builds Value for Investors: Capital Return Increase Ahead

Micron’s balance sheet reflects its Q1 strengths and the value proposition for investors. The Q1 activity resulted in steady cash levels, increased assets, and reduced debt and liabilities on a year-to-date basis. Equity, the measure of shareholder value, increased by 8% and is likely to continue growing rapidly in the coming quarters. 

Debt is also expected to be reduced in the upcoming quarters, improving free cash flow and the capital return outlook. Micron isn’t a high-yielding stock, nor does it buy back shares aggressively, but the token amounts are reliable and safe for 2026 and are likely to increase over time. Regarding leverage and balance sheet health, Micron is a fortress, with liabilities at less than 0.5X equity and long-term debt at 1.15X cash. 

Price action following the release is promising. The market for MU increased more than 10% in after-hours trading, tickling an all-time high. Assuming the market follows through on this move, MU will hit a fresh all-time high before year’s end and could continue advancing in 2026. The technical signal is solid, indicating a Bullish Flag pattern worth $120, suggesting this market will reach $360 in 2026. 

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