# How Micron makes money

CXProWealth Business Lens · Micron (MU) · FY2026

Read from the 10-K for the period 2025-08-29 to 2026-09-03, filed 2026-10-09 with the SEC (accession 0000723125-26-000023): https://www.sec.gov/Archives/edgar/data/723125/000072312526000023/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $133.2B (+256.3% on the year)
- Operating income: $99.3B (operating margin 74.6%)
- Net income: $85.0B (net margin 63.8%)
- Gross margin: 80.7%
- Free cash flow: $59.0B (44.3% of revenue)
- Cash conversion (operating cash flow / net income): 1.06x
- Capital expenditure: 23.1% of revenue

## Where the money goes (FY2026)

- Dram → Revenue: $100.7B
- Nand → Revenue: $31.8B
- Other (primarily NOR) → Revenue: $724.0M
- Revenue → Cost of goods sold: $25.7B
- Revenue → Gross margin: $107.5B
- Gross margin → Research and development: $5.7B
- Gross margin → Selling, general, and administrative: $1.9B
- Gross margin → Other operating (income) expense, net: $567.0M
- Gross margin → Operating income: $99.3B
- Operating income → Interest expense: $106.0M
- Operating income → Other non-operating income (expense), net: $647.0M
- Operating income → Income before income taxes and equity in net income (loss) of equity method investees: $98.6B
- Interest income → Income before income taxes and equity in net income (loss) of equity method investees: $1.1B
- Income before income taxes and equity in net income (loss) of equity method investees → Income tax (provision) benefit: $14.8B
- Income before income taxes and equity in net income (loss) of equity method investees → Net income: $84.9B
- Equity in net income (loss) of equity method investees → Net income: $59.0M

## Where the revenue comes from

### Products and services (Revenue - Revenue by Technology (Details))

| Member | Value | Share |
|---|---:|---:|
| Dram | $100.7B | 75.6% |
| Nand | $31.8B | 23.9% |
| Other (primarily NOR) | $724.0M | 0.5% |

The members sum to total revenue.

### Segments (Segment and Other Information - Results by Segment (Details))

| Member | Value | Share |
|---|---:|---:|
| Cmbu | $43.1B | 32.3% |
| Cdbu | $37.6B | 28.2% |
| Mcbu | $36.6B | 27.5% |
| Aebu | $15.9B | 11.9% |
| All other | $24.0M | 0.0% |

The members sum to total revenue.

### Regions (Geographic Information - Revenue (Details))

| Member | Value | Share |
|---|---:|---:|
| Other Asia Pacific | $5.8B | 4.3% |
| Europe | $1.7B | 1.3% |
| Other | $729.0M | 0.5% |

The members do not sum to total revenue.

### ConsolidationItems (Segment and Other Information - Results by Segment (Details))

| Member | Value | Share |
|---|---:|---:|
| Operating segments | $43.1B | 32.3% |
| Unallocated | $0 | 0.0% |

The members do not sum to total revenue.

## Income statement, as filed

| Line | FY2026 | Of revenue |
|---|---:|---:|
| Revenue | $133.2B | 100% |
| Cost of goods sold | $25.7B | 19.3% |
| **Gross margin** | $107.5B | 80.7% |
| Research and development | $5.7B | 4.2% |
| Selling, general, and administrative | $1.9B | 1.5% |
| Other operating (income) expense, net | (-$567.0M) | 0.4% |
| **Operating income** | $99.3B | 74.6% |
| Interest income | $1.1B | 0.8% |
| Interest expense | ($106.0M) | 0.1% |
| Other non-operating income (expense), net | -$647.0M | 0.5% |
| **Income before income taxes and equity in net income (loss) of equity method investees** | $99.7B | 74.8% |
| Income tax (provision) benefit | ($14.8B) | 11.1% |
| Equity in net income (loss) of equity method investees | $59.0M | 0.0% |
| **Net income** | $85.0B | 63.8% |
| Other comprehensive income (loss), net of tax | -$41.0M | 0.0% |
| **Total comprehensive income** | $84.9B | 63.8% |
| Basic (in dollars per share) | $75 | 0.0% |
| Diluted (in dollars per share) | $74 | 0.0% |
| Basic (in shares) | 1,127,000,000 |  |
| Diluted (in shares) | 1,143,000,000 |  |

## History

| Period | Revenue | Operating income | Net income | Operating cash flow | Capital expenditure | Free cash flow |
|---|---:|---:|---:|---:|---:|---:|
| FY2009 | $4.8B | -$1.7B | -$1.9B | $1.2B | $488.0M | $718.0M |
| FY2010 | $8.5B | $1.6B | $1.9B | $3.1B | $616.0M | $2.5B |
| FY2011 | $8.8B | $761.0M | $167.0M | $2.5B | $2.6B | -$66.0M |
| FY2012 | $8.2B | -$612.0M | -$1.0B | $2.1B | $1.7B | $415.0M |
| FY2013 | $9.1B | $236.0M | $1.2B | $1.8B | $1.4B | $369.0M |
| FY2014 | $16.4B | $3.1B | $3.0B | $5.7B | $3.1B | $2.6B |
| FY2015 | $16.2B | $3.0B | $2.9B | $5.2B | $4.0B | $1.2B |
| FY2016 | $12.4B | $168.0M | -$276.0M | $3.2B | $5.8B | -$2.6B |
| FY2017 | $20.3B | $5.9B | $5.1B | $8.2B | $4.7B | $3.4B |
| FY2018 | $30.4B | $15.0B | $14.1B | $17.4B | $8.9B | $8.5B |
| FY2019 | $23.4B | $7.4B | $6.3B | $13.2B | $9.8B | $3.4B |
| FY2020 | $21.4B | $3.0B | $2.7B | $8.3B | $8.2B | $83.0M |
| FY2021 | $27.7B | $6.3B | $5.9B | $12.5B | $10.0B | $2.4B |
| FY2022 | $30.8B | $9.7B | $8.7B | $15.2B | $12.1B | $3.1B |
| FY2023 | $15.5B | -$5.7B | -$5.8B | $1.6B | $7.7B | -$6.1B |
| FY2024 | $25.1B | $1.3B | $778.0M | $8.5B | $8.4B | $121.0M |
| FY2025 | $37.4B | $9.8B | $8.5B | $17.5B | $15.9B | $1.7B |
| FY2026 | $133.2B | $99.3B | $85.0B | $89.7B | $30.7B | $59.0B |

Latest trend (the newest full year against the year before; a reading, not a forecast):

- Revenue: +256.3% (year before +48.9%): accelerating
- Operating income: +916.8% (year before +649.2%): accelerating
- Net income: +895.1% (year before +997.6%): slowing
- Free cash flow: +3,435.0% (year before +1,278.5%): accelerating

## Operating figures stated in the filing

- Employees: 61,000 employees (as of 2026-09-03). "As of September 3, 2026, we had approximately 61,000 employees located primarily in Asia, North America, and Europe." (Item 1. BUSINESS)
- DRAM average selling price change vs prior year: 180.0% (as of 2026-09-03). "Sales of DRAM products increased 252% primarily due to an approximate 180% increase in average selling prices and a mid-20% range increase in bit shipments." (Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- NAND average selling price change vs prior year: 200.0% (as of 2026-09-03). "Sales of NAND products increased 274% primarily due to an approximate 200% increase in average selling prices and a mid-20% range increase in bit shipments." (Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- Patents granted (cumulative): 62,000 patents (as of 2026-09-03). "As of September 3, 2026, we have been granted over 62,000 patents" (Item 1. BUSINESS)
- Active U.S. patents: 15,500 patents (as of 2026-09-03). "we owned approximately 15,500 active U.S. patents and 8,000 active foreign patents" (Item 1. BUSINESS)
- Active foreign patents: 8,000 patents (as of 2026-09-03). "we owned approximately 15,500 active U.S. patents and 8,000 active foreign patents" (Item 1. BUSINESS)

## Key insights

### Revenue rose 256%, cost of goods sold only 14%

Selling prices, not volume, lifted revenue to $133.2B while production cost barely moved, so gross margin reached 80.7% of revenue against 39.8% a year earlier.

The filing attributes the DRAM revenue increase of 252.3% mainly to an approximate 180% rise in average selling prices, and the NAND increase of 273.8% mainly to an approximate 200% rise. Bit shipments grew far less than prices for both. Cost of goods sold was $25.7B against $22.5B a year earlier, so almost all of the added revenue became gross margin, which rose 622.8% to $107.5B. _(from the filing)_
The filing explains why the cost line stayed put: 'A significant portion of our manufacturing costs are fixed and do not vary proportionally with changes in production output.' It credits the margin gain mainly to higher average selling prices, with a smaller benefit from favorable mix and manufacturing cost reductions. _(from the filing)_
The same mechanism ran in reverse in the downturn year of the eight-year history: revenue fell to $15.54B from $30.76B the year before, while cost of goods sold was $16.96B against $16.86B, leaving a gross loss of $1.42B. _(from the filing)_
Analysis: because cost barely moves with price, Micron's profit is largely a reading of memory prices. This year's 74.6% operating margin says more about the balance of supply and demand across the industry than about a change in what each wafer costs to make. _(analysis)_

### The fourth quarter earned 44% of the year's operating income

Fourth-quarter revenue of $54.2B was 40.7% of the year's total, and quarterly gross margin rose from $7.65B in the first quarter to $47.0B.

Quarter by quarter, revenue went from $13.6B to $23.9B, $41.5B and $54.2B, while cost of goods sold moved from $6.0B to $6.11B, $6.4B and $7.18B. Operating income went from $6.14B in the first quarter to $43.8B in the fourth, 80.7% of that quarter's revenue, against 32.3% in the fourth quarter a year earlier. _(from the filing)_
The fourth quarter is not reported on its own: it is computed as the full year less the first three quarters. The filing also notes that this fiscal year contained one more week than the prior one, which adds slightly to the annual comparison. _(from the filing)_
Analysis: the annual totals average a year that began with $6.14B of operating income on $13.6B of revenue and ended with $43.8B on $54.2B. A comparison of annual figures shows the average; the quarterly path shows how far prices had moved by the end of the period, and how much of the year's profit sits in its last months. _(analysis)_

### Capital spending used 34% of operating cash, down from 90%

Capital spending nearly doubled to $30.7B, yet it absorbed 34.2% of the $89.7B operating cash flow; a year earlier it took $15.9B of $17.5B.

Operating cash flow was $89.7B against $17.5B a year earlier, and capital expenditure $30.7B against $15.9B. Free cash flow was $59.0B, 44.3% of revenue, against $1.67B, or 4.5% of revenue, the year before. _(from the filing)_
Across the eight-year history, capital spending usually took most of the cash the business produced: between 74.2% and 99.0% of operating cash flow in every earlier year except the downturn year, when it exceeded operating cash flow and free cash flow was negative $6.12B. _(from the filing)_
The filing notes that part of this year's operating cash came from working capital: higher taxes payable, including noncurrent taxes tied to the Pillar Two minimum tax, and more consideration payable to customers for pricing adjustments, partly offset by a large rise in receivables. Customer deposits under the strategic agreements are reported in financing, not operating, cash flow. _(from the filing)_
Analysis: the filing guides capital spending higher next fiscal year as fabs in Idaho, New York, Taiwan, Singapore and Japan are built. This year's low share reflects how far cash outran spending at peak prices; in thinner years, similar spending plans used nearly all of the operating cash. _(analysis)_

### Phone and PC memory earned the widest margin, not cloud

Mobile and Client lost bits to the data center units, yet its operating income was 79.8% of revenue, above the Cloud Memory unit's 72.5%.

Operating income as a share of each unit's revenue: Mobile and Client 79.8% ($29.2B on $36.6B), Core Data Center 78.6% ($29.5B on $37.6B), Cloud Memory 72.5% ($31.2B on $43.1B) and Automotive and Embedded 70.6% ($11.2B on $15.9B). _(from the filing)_
The filing says Mobile and Client revenue rose mainly on higher average selling prices, 'partially offset by lower bit shipments as MCBU product supply was redirected to other business units.' For every unit it attributes the operating income increase primarily to higher selling prices, and for the other three units also to higher bit shipments. _(from the filing)_
Analysis: in a shortage, price rises reach every market a supplier serves, including the ones that receive fewer bits. The narrow spread, 70.6% to 79.8%, suggests this year's profit came from an industry-wide shortage more than from a premium confined to AI products. Unit results are before unallocated items, so they do not add up to consolidated operating income. _(analysis)_

### Competitive edge

- **Each new process node fits more bits per wafer** Research of $5.65B, 4.2% of revenue, funds the process nodes that lower cost per bit; most fourth-quarter DRAM bits came from the newest node.
- **Multi-year take-or-pay contracts with price floors** New strategic agreements bind customers to volumes over several years, with prices mostly held inside bands and secured by cash deposits and letters of credit.
- **HBM built in-house, from base die to packaging** Micron designs and makes both the base logic die and the memory dies of its newest HBM, which the filing credits for its performance and power position.

### What to watch

- **The same price cycle has produced operating losses** Three years earlier, revenue fell to $15.54B from $30.76B on an almost unchanged cost base, giving a $5.75B operating loss and negative free cash flow.
- **Over half of revenue came from ten customers** Over half of revenue came from the top ten customers and most from data centers, so a slower AI build-out would reach results directly.
- **Most DRAM output comes from fabs in Taiwan** A majority of DRAM output came from Taiwan, China bars some buyers from Micron products, and US export rules limit sales to certain customers.

## Operating income by segment

- Cmbu: $31.2B (31.4% of operating income)
- Cdbu: $29.5B (29.7% of operating income)
- Mcbu: $29.2B (29.4% of operating income)
- Aebu: $11.2B (11.3% of operating income)
- All other: $2.0M (0.0% of operating income)

## Investor view

**Price did the work: DRAM selling prices rose about 180% while Micron's cost of goods sold barely moved**

### How it makes money

Micron designs memory chips, makes most of them in its own fabs, and sells them by the bit. DRAM, the fast working memory in servers, phones and PCs, brought in $100.7B of $133.2B in revenue, 75.6% of the total. NAND, the flash storage inside SSDs and phones, added $31.8B, or 23.9%. NOR and other products were $724M. Products ship as components, modules, SSDs, managed NAND, multi-chip packages and wafers, mostly through the company's own sales force. _(from the filing)_
Revenue is reported by who buys rather than by chip type. The Cloud Memory unit, which sells to large hyperscale cloud companies and supplies HBM to every data center customer, was the largest at $43.1B. The Core Data Center unit, data center SSDs plus server memory for OEM and NeoCloud customers, was $37.6B. Mobile and Client was $36.6B and Automotive and Embedded $15.9B. Operating margins across the four ranged from 70.6% to 79.8% of unit revenue. _(from the filing)_
The cost base is mostly fixed. The filing says 'a significant portion of our manufacturing costs are fixed and do not vary proportionally with changes in production output.' Fabs run around the clock, and cost per bit falls mainly through new process generations that fit more bits on each wafer. So a change in selling price passes almost straight through: cost of goods sold was $25.7B against $22.5B a year earlier, while gross margin went from $14.9B to $107.5B. _(from the filing)_
How it sells is changing. Some contracts are short-term, but the company now also signs multi-year strategic agreements 'structured as take-or-pay agreements', with binding volumes, pricing mostly 'subject to minimum and maximum bands', and customer cash deposits and letters of credit as security. About half of revenue in each of the last three years came from the top ten customers. _(from the filing)_

### What shifted

Revenue rose 256.3% to $133.2B from $37.4B, and price explains most of it. The filing attributes the DRAM increase of 252.3% mainly to 'an approximate 180% increase in average selling prices', and the NAND increase of 273.8% mainly to an approximate 200% rise in selling prices. Bit shipments grew far more slowly than prices for both. The filing's reason: 'AI-driven memory and storage demand growth is outpacing industry supply.' _(from the filing)_
Margins rose to levels the eight-year history does not show. Gross margin was 80.7% of revenue against 39.8% a year earlier, and operating margin 74.6% against 26.1%. Research and development rose 48.8% to $5.65B, yet fell to 4.2% of revenue from 10.2%. Selling, general and administrative costs rose 61.6% to $1.95B, which the filing ties mainly to higher employee and variable compensation and to community investments. _(from the filing)_
The year accelerated quarter by quarter. Revenue went from $13.6B in the first quarter to $54.2B in the fourth, while cost of goods sold rose only from $6.0B to $7.18B. Gross margin went from $7.65B in the first quarter to $47.0B in the fourth, 86.8% of that quarter's revenue. The fourth quarter is computed as the full year less the first three quarters, and this fiscal year had one more week than the prior one, which flatters the annual comparison slightly. _(from the filing)_
Supply moved toward data centers. The Cloud Memory unit was 32.3% of revenue and Core Data Center 28.2%. Mobile and Client still grew to $36.6B, but on price: the filing says its bit shipments fell 'as MCBU product supply was redirected to other business units.' The company also announced an exit from its Crucial consumer brand, keeping component sales to channel partners. _(from the filing)_
More of the profit went to tax and more of the cash went back into fabs. Income tax was $14.76B, 14.8% of pre-tax income against 11.6% a year earlier; the filing ties the rise to the global minimum tax rules (Pillar Two) taking effect in Singapore. Capital spending rose to $30.7B from $15.9B, and free cash flow was $59.0B, 44.3% of revenue, against $1.67B a year earlier. _(from the filing)_

### Risks in the filing

Price swings come first in the company's own list. Over the past five fiscal years, it says, annual DRAM and NAND price changes ranged from a rise of about 200% to a steep decline, and in some prior periods selling prices fell below manufacturing cost. It warns that 'as we and others increase supply, average selling prices may decline, particularly if demand growth slows or declines.' _(from the filing)_
Revenue is concentrated. Over half came from the top ten customers, and the data center end market accounted for most of the total. The company says data center build-outs depend on energy, water, capital and component supply at its customers, and that a delay there, or a top customer cutting orders, could hurt results. It adds that sustained high prices may lead customers to redesign products with less memory. _(from the filing)_
Geography and government. A majority of DRAM output came from fabs in Taiwan, and the company names political or economic actions there as a risk. China's cybersecurity regulator has barred critical information infrastructure operators from buying Micron products, US export rules restrict sales to some customers, and competitors such as CXMT and YMTC receive state support that the filing links to possible oversupply. _(from the filing)_
Expansion and its conditions. New fabs are multi-year, capital-heavy projects that depend on scarce construction labor and equipment, in some cases from a single supplier, as with photolithography tools. Government grants and tax credits, including under the CHIPS Act, carry milestones and can be reduced or clawed back. Underused fabs raise cost per bit, because so much of the cost is fixed. _(from the filing)_
Of these, the price risk is the one the numbers already display in full. The annual history includes a downturn year with a gross loss and negative free cash flow, three years before this year's margins, on a cost base that moved far less than revenue in either direction. The concentration and expansion risks are forward-looking: nothing in this year's figures shows them yet. _(analysis)_

## Founder view: mechanisms

### Fixed costs turn price into profit

A fab costs roughly the same to run whether its output sells cheaply or dearly. Once the plant, equipment and staff are paid for, almost every extra dollar of selling price lands as profit, and every dollar of price lost comes straight out of it. Micron's year is an extreme case: largely the same factories, running largely the same wafers, sold their output for far more. _(analysis)_

### Lower cost per bit each generation

Memory makers compete on how many bits fit on a wafer. Each new process generation fits more, so the same fab and roughly the same wafer cost yield more product. The filing describes research aimed at exactly that, alongside higher-value products such as HBM and data center SSDs built on the newest nodes, which is how the cost line stayed nearly flat while output grew. _(analysis)_

### Send scarce supply where it earns most

When demand outruns supply, choosing who gets the product becomes a profit lever. Micron moved bits away from phones and PCs toward data center customers and stepped out of its retail consumer brand. The filing describes supply allocation decisions that may affect certain customers and end markets. _(analysis)_

### Trade price upside for committed volume

In a shortage, customers will pay for certainty. Micron's strategic agreements give buyers assured supply and price visibility; in return the company gets binding multi-year volumes, prices held between a floor and a ceiling, and cash deposits or letters of credit. It gives up some upside at the peak to soften the next trough. _(analysis)_

## Member research

Signed-in members read, on the page: what Micron's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Micron 10-K for the period to 2026-09-03: https://www.sec.gov/Archives/edgar/data/723125/000072312526000023/ (2026-10-09)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02 · as of 2026-11-02