Micron's customers have committed $22 billion in deposits under its first 16 take-or-pay supply agreements, and CEO Sanjay Mehrotra says data centers still want about 50% more memory than the company can commit to shipping. The deals lock in roughly $100 billion in minimum revenue while supply stays tight into 2027, and Nvidia's earnings this week could confirm how far the squeeze reaches.
Micron Technology's customers have put up $22 billion in deposits and related commitments under the company's first 16 take-or-pay supply agreements. CEO Sanjay Mehrotra says data center customers want about 50% more supply than Micron can commit to delivering.
Contracts lock in $100 billion of revenue
Fourteen of the first 16 agreements add up to roughly $100 billion in contracted minimum revenue over terms that mostly run five years, from calendar 2026 through late 2030, while automotive deals typically last three years. Mehrotra told CNBC's Jim Cramer: "All our customers across our end markets will buy everything that we make." Micron's fiscal third-quarter revenue more than quadrupled year over year to $41.5 billion, with net income at $28.2 billion versus $1.9 billion a year earlier.
Price floors guard against a downturn
The largest contracts set a price ceiling near where memory traded in the second quarter of calendar 2026, plus a price floor for the full term. Even at the floor, Micron says these deals would produce gross margins well above its peak quarterly margins in any past cycle. That claim carries weight because in fiscal 2023, Micron's revenue fell by about half, to $15.5 billion. The company lost $5.8 billion that year. This cycle, gross margin hit 84.6% in the fiscal third quarter, up from 74.4% the prior quarter and 37.7% a year earlier, and guidance points to about 86% this quarter.
Even so, the 16 signed agreements cover only about 20% of Micron's DRAM volume and around a third of its NAND volume over the period, leaving most of the business exposed to the open market for now.
Supply stays tight into 2027
Mehrotra expects 2027 to be even tighter than this year. Micron's first Boise fab is not expected to produce wafers until mid-calendar 2027, with a second Boise plant following in late 2028 and its New York site arriving later still.
Nvidia's earnings could confirm the squeeze
Nvidia reports earnings on Aug. 26, and Apple CEO Tim Cook, Amazon CEO Andy Jassy, and SpaceX CEO Elon Musk have all flagged rising memory costs during this earnings season. SK Hynix has established itself as a leading supplier of the high-bandwidth memory stacks Nvidia integrates into its accelerators, alongside Micron and Sandisk. Nvidia shares fell 2.26% to $209.87 as investors positioned ahead of the report.
Strong data center growth from Nvidia would confirm the same demand that pushed Micron's customers to sign contracts worth $100 billion in minimum revenue.
Sources: The Motley Fool, The Motley Fool
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