The night before Micron’s earnings report: Amidst major tremors in South Korean and US tech stocks, how can we hold onto the storage bull market?

On June 23rd, from the South Korean stock market to US stocks, global technology assets experienced a sharp cooling of sentiment. First, during the Asian trading session, the KOSPI index fell nearly 10% in a single day, with Samsung Electronics and SK Hynix both dropping over 12%, triggering a temporary market-wide trading halt. The sell-off sentiment quickly spread to US stocks in the evening, and AI and storage assets, which had performed most strongly over the past year, became the epicenter of the current pullback in global tech stocks.

Ironically, this sharp market fluctuation coincided with Micron Technology’s release of its fiscal 2026 third-quarter earnings report after the market close on June 24th, a rather delicate timing. On one hand, global AI storage stocks are collectively retreating, and the market is beginning to re-examine high valuations and crowded trades. On the other hand, Micron is about to deliver a report that is highly anticipated. The combination of these two factors makes the significance of this earnings report far exceed that of a single company’s quarterly performance, serving more as a concentrated stress test for the entire storage sector.

After all, the core logic that has driven the sustained rise of global storage stocks over the past period—the surge in HBM demand, price increases for DRAM and NAND, persistent supply tightness, and rapid growth in gross margins—all require new validation of confidence. The question thus becomes more direct: after stock prices and market expectations have been pushed to new highs, can Micron continue to deliver answers beyond imagination? In other words, an “in-line earnings report” may no longer be sufficient; what the market truly awaits is whether Micron can further revise its expectations upward and prove that the supply-demand gap in AI storage is far from over.

I. Why is this Micron earnings report so important?

Based on the data from the previous quarter, Micron’s fundamentals can hardly be described as merely “exceeding expectations.” In fiscal 2026’s second quarter, Micron’s revenue reached $23.86 billion, nearly tripling year-over-year. Non-GAAP gross margin rose to 74.9%, and non-GAAP earnings per share reached $12.20, both setting company records. More importantly, Micron’s guidance for the third quarter was aggressive: revenue was projected at $33.5 billion, with non-GAAP gross margin expected to be around 81%; non-GAAP earnings per share were projected at $19.15.

However, the capital market’s appetite has grown faster than the company’s guidance. The current consensus market expectation for Micron’s third-quarter revenue has already reached approximately $35.5 billion, exceeding the upper limit of the company’s previous guidance range. The gross margin expectation is around 81.6%, also implying that the market has already priced in another earnings beat. This constitutes the biggest contradiction for this earnings report: Micron’s performance not only needs to exceed the company’s guidance but even surpass a market expectation that is already very optimistic.

Therefore, this earnings report should not just be about whether revenue and EPS “Beat” expectations, but more importantly, whether the market is willing to continue revising profit forecasts for the coming quarters after the report is released. Frankly speaking, if the earnings report is just “normally good,” it might not be enough. But if the report is strong enough to further revise guidance, then yesterday’s decline might turn out to be a preemptive shakeout. After all, for a stock that has already risen significantly with high expectations, the most dangerous situation is often not poor performance, but performance that is not good enough to support a higher valuation. Micron is currently facing precisely such a pricing environment.

II. Can the storage bull market continue? Tonight, we need to look at three questions.

1. Is HBM still in short supply? Micron’s most core growth narrative remains HBM. As is well known, AI servers do not just need GPUs. With the continuous improvement in computing power, power consumption, and data throughput of individual AI accelerators, HBM has evolved from a standard complementary component to a critical element determining the performance of the entire AI system. Micron has already begun to advance the mass production and shipment of HBM4, using it for NVIDIA’s new generation Vera Rubin platform. The HBM capacity for 2026 is largely accounted for, so the market’s focus will gradually shift from “how much can be sold this year” to “how much can be secured for 2027.”

During the earnings call, investors may focus on finding answers to several questions: Are the yield and ramp-up progress of HBM4 meeting expectations? Is Micron’s binding with core customers deepening? What is the status of capacity negotiations for 2027? Can subsequent products like HBM4E further narrow the gap with SK Hynix? If Micron can provide clearer long-term orders and capacity visibility, it will be easier for the market to interpret the current high prosperity of HBM as a structural growth cycle lasting several years, rather than a product cycle nearing its peak. Conversely, if management’s statements regarding demand and orders for 2027 are vague, the market may begin to question whether the most critical period of HBM tightness and pricing power has already been priced into the stock.

1. Is the ultra-high gross margin a new normal or the peak of a cycle? For Micron, profit elasticity comes not only from shipment volume but also from price and gross margin. It’s worth noting that Micron’s non-GAAP gross margin reached 74.9% last quarter, and the guidance for the third quarter is even higher, around 81%. This means that for every $100 in revenue, Micron expects to retain over $80 in gross profit. Such high gross margins are uncommon in past storage cycles. This is driven by the increased proportion of high-value products like HBM, comprehensive price increases for DRAM and NAND due to limited supply, and a continuous shift in product structure towards data centers.

It is important to note that HBM is not the only factor driving Micron’s profit margin increase. Micron’s management previously stated that the profitability of some non-HBM DRAM products is also very strong, even exceeding HBM at times. This indicates that the current storage rally is no longer limited to a single high-end niche product but is beginning to spread to the broader DRAM market. Therefore, the most important aspect of this earnings report is not just whether the gross margin can reach 81%, but how management describes the trend for the fourth quarter and beyond. If Micron continues to provide gross margin outlooks exceeding 80%, it implies that the supply-demand gap and price increase trend remain strong, and the market may continue to revise its earnings center upward. However, if the gross margin just meets the guidance, or if management becomes more conservative in its statements about future gross margins, the stock might experience a “Sell the News” event.

1. When will the gap in DRAM and NAND be filled by capacity expansion? Any storage bull market eventually returns to the same question: when will supply catch up with demand? The reason this rally has continued to exceed market expectations is twofold: first, the rapid growth in demand for HBM, server DRAM, and enterprise-grade SSDs from AI data centers; second, the inability of storage capacity to be released simultaneously in the short term. HBM, in particular, occupies more wafer and advanced packaging resources during its production. Manufacturers tilting capacity towards HBM also compresses the supply of traditional DRAM to some extent, thus driving up prices across the entire product line.

Micron previously stated that in the medium term, it can only meet about half to two-thirds of customer demand, and some new wafer fabs will not achieve meaningful output until later stages. This means that at least in the short term, new capacity will not be able to quickly fill the supply-demand gap. However, the market will also focus on the other side. Driven by high profits, Micron, Samsung, and SK Hynix are all increasing capital expenditures. Once the new capacity is released faster than AI demand growth, the storage industry could still return to its traditional cycle of price competition and inventory adjustments. Therefore, during this conference call, management’s statements on customer inventory, order visibility, long-term agreements, and the pace of new capacity deployment may be more important than quarterly shipment volumes. People will likely be more concerned about whether Micron can prove that demand growth will still outpace supply release for at least the next few quarters.

III. With 13% implied volatility in options, what is the market betting on?

Beyond the fundamentals, the options market has already provided another answer. Based on option quotes around the closing of June 22nd, the combined price of near-the-money Call and Put contracts expiring on June 26th was approximately $159. Relative to Micron’s stock price of about $1211 at the time, the implied earnings volatility in the options market was about 13%. This means that if you buy options now, you would theoretically need Micron’s stock to move more than 13% up or down after the earnings report to easily cover the premium cost. For investors holding the stock, this figure also implies that a double-digit gap after the earnings report is not unexpected.

In other words, the options market is not pricing in small fluctuations but a very significant earnings reaction. More importantly, the high implied volatility itself reflects the current market divergence: some funds believe that AI storage is still in the early stages of undersupply, while other funds worry that the stock price has already priced in too much future growth. Based on the post-earnings developments, MSX Research believes that roughly three scenarios are possible:

Scenario 1: Earnings exceed expectations, and guidance is further revised upward. This is the most ideal outcome. If Micron’s revenue, EPS, and gross margin all exceed current market expectations, and it provides strong guidance for the fourth quarter, while continuing to emphasize the smooth ramp-up of HBM4, increased order visibility for 2027, and strong prices for DRAM and NAND, then the logic of the storage bull market will be further confirmed. In this case, Micron’s rise could also reignite the entire storage industry chain, including SanDisk, Western Digital, Samsung, SK Hynix, as well as some semiconductor equipment and AI server-related stocks. However, even if the earnings report is strong enough, one should be mindful of profit-taking by high-position funds. As mentioned above, the options market has already priced in significant volatility, and a sharp rise after hours does not mean a unilateral upward trend on the second trading day.

Scenario 2: Earnings are good, but guidance is not better. This may be the most cautious scenario for this earnings report. Micron could very well deliver a record-breaking performance, but if the data merely fulfills previous guidance, or if the fourth-quarter gross margin and revenue outlook are not further revised upward, the market may still choose to sell. This is not because Micron’s fundamentals have suddenly deteriorated, but because the market has already priced in “exceeding expectations.” Ultimately, for high-priced, highly crowded stocks, meeting expectations sometimes equates to falling short of expectations. The recent sharp fluctuations in the South Korean market also reinforce this risk. On June 22nd, South Korean regulators publicly reflected on the rapid approval of leveraged ETFs for Samsung and SK Hynix. One day later, the KOSPI index plunged nearly 10%, and both storage giants fell by more than 12%. This pullback may not necessarily mean a reversal of long-term demand for AI storage, but it serves as a reminder to the market that when high valuations, leveraged funds, and crowded trades are concentrated on the same theme, any information below expectations can be quickly amplified. Therefore, the decline in South Korean storage stocks is more like a stress test before Micron’s earnings report: if Micron is strong enough, it can stabilize market confidence; if Micron is just “normally good,” the pullback in the South Korean market could be interpreted as a signal that the entire storage trade is starting to cool down.

Scenario 3: Gross margin or forward guidance falls short of expectations. If Micron shows significant underperformance compared to market expectations in HBM4 progress, gross margin, product prices, or fourth-quarter guidance, the stock price may face greater pressure. The reason is that Micron’s current stock price incorporates at least three layers of expectations: the first layer is the long-term storage demand driven by AI computing power expansion; the second layer is the price increase cycle driven by tight supply and demand for DRAM and NAND; the third layer is Micron’s continued increase in market share and profitability in the high-end HBM market. If any of these layers show signs of loosening, the market may simultaneously lower future earnings forecasts and valuation multiples. In such a case, the impact would not be limited to Micron alone but could spread to the entire storage and AI hardware chain.

Conclusion: Based on the information available, Micron’s long-term logic has not been broken. AI servers continue to consume more HBM and DRAM, demand for data center SSDs is growing, and the traditional NAND market is also recovering. New capacity is unlikely to be released rapidly in the short term, and supply constraints continue to provide storage manufacturers with strong pricing power. However, strong fundamentals do not mean that stock prices are risk-free. When revenue, profit margins, and stock prices have continuously set new records, the market’s standards for evaluating Micron will also change: in the past, it was enough to prove that the industry was recovering; now, it needs to prove that this period of high prosperity can not only continue but also be stronger than investors have already imagined.

Therefore, the real suspense of this earnings report is not whether Micron can deliver another good performance, but whether it can continue to raise market expectations for the future. In a nutshell, what Micron needs to prove is no longer that the storage bull market is still ongoing, but that the end of this bull market is still further away than the market is currently pricing in.

[MSX Mytone]