memory specialist Micron technology(NASDAQ:MU) It is scheduled to report its fiscal third-quarter results on Wednesday, June 24, after the market closes. And expectations for the report are as high as they can be. Stocks are up 244% in 2026, surpassing $1 trillion market capitalization along the way, a milestone that only two other memory companies have reached.
That race has been fueled by an artificial intelligence (AI) construct that has made memory chips one of the most sought-after components in the data center, and Micron one of its biggest beneficiaries. But a stock that has risen so far and so fast leaves little room for a stumble.
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In other words, the stakes are high. And when the company reports later this month, a single number may tell investors more about whether the story is still intact than any other line in the statement.
that number is gross margin.
Here’s a closer look at why this metric carries so much weight and what to watch for as the report approaches.
Image source: Getty Images.
Why gross margin is the number that matters
When Micron last reported in March, its results were stunning across the board. Revenue for the fiscal second quarter (the period ending February 26, 2026) nearly tripled year over year to $23.86 billion, marking a record for the company. But the number that best captured what’s happening within the business was gross margin, which expanded to about 75% from about 37% a year earlier. This is a huge change for a memory company and directly affects prices.
Historically, memory has been a brutal business, similar to that of commodities, in which prices swing wildly as supply and demand fall and become unbalanced. What’s different now is that AI demand has collided with the industry’s tight supply, driving up prices and raising margins along with them. In the fiscal second quarter, Micron said DRAM prices increased sequentially in the mid-60% range and NAND prices increased in the high 70% range.
For the fiscal third quarter, management expected gross margin to reach around 81%. This would mark another step. And it explains why this is the decisive number: Revenue may grow on volume alone, but a gross margin close to 81% is a direct reading of how much pricing power Micron still has.
If that figure matches or exceeds guidance, it confirms that the favorable pricing environment remains. If it falls, it could indicate that the best of the pricing cycle is behind us for the company.
“We expect higher pricing, lower cost and favorable mix to contribute to gross margin expansion in the third quarter,” Micron Chief Financial Officer Mark Murphy said on the company’s fiscal second-quarter earnings conference call.
That is the yardstick by which the report will be measured.
The bullish and bearish cases
The bullish argument is based on supply that simply cannot keep up. High-bandwidth memory (HBM), a specialized type of DRAM found alongside AI processors, has become the tightest part of the chain, and Micron has said its entire 2026 supply of HBM is already sold out. That kind of visibility is rare for a chipmaker and suggests prices could remain firm well into next year. And management has even gone further, saying it expects supply and demand for both DRAM and NAND to remain tight beyond 2026.
There is also a structural argument. As AI models grow and become more memory-based, demand for Micron chips may prove more durable than in previous cycles.
“In the age of AI, memory has become a strategic asset for our customers,” Micron CEO Sanjay Mehrotra said when the company reported in March, pointing to the same dynamic that has reshaped the business.
The bearish case is the one that has repeatedly affected memory stocks: the cyclical nature. Micron has experienced painful crises before, most recently in 2023, when oversupply sent prices tumbling and the company posted losses. and rivals Samsung and SK Hynix In particular, they are racing to expand their own HBM production, with Micron itself projecting more than $25 billion in capital spending this fiscal year. If that supply comes faster than AI demand can absorb it, the same pricing leverage that now drives up margins could easily work in reverse.
So what should investors make of all this heading into June 24?
With the stock trading at a price-to-earnings ratio of around 40 after its huge run, there’s already plenty of good news. I think the smarter approach is to keep your eye on that gross margin line instead of the headline revenue number. It may be the best sign of whether Micron’s pricing power – and the thesis behind the stock’s remarkable rise – remains intact.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool positions and recommends Micron Technology. The Motley Fool has a disclosure policy.
Micron reports earnings on June 24. Here is the number that can make or break actions. was originally published by The Motley Fool
