When Micron (MU) reports its highly anticipated earnings on Wednesday, big gains across the board are widely expected, given the strength of the AI boom.
The Street is bracing for higher quarterly earnings and a sizable increase in guidance.
But JPMorgan analyst Harlan Sur thinks investors should be wary of a surprise from Micron executives in the form of a huge new capital return program. This often means a stock buyback or dividend increase.
“The most significant development we expect from print is SCA (strategic customer agreements) and capital return – we believe the market is underestimating the pace at which SCA coverage is growing, and our base case is that forward bit production coverage is now likely in the 35%+ range (compared to ~20%/~33% of DRAM/NAND volumes disclosed on the last call), with a strong potential that coverage is already there in the 50%+ range,” Sur wrote in a preview note.
“Additionally, the second anniversary of MU’s CHIPS Act final agreements on 12/9/26 represents a key structural inflection: after this date, management has committed to returning 100% of excess cash to shareholders (core vehicle repurchases), and we expect more clarity on the timing, cadence and initial sizing of the capital return program, in our view a substantial value unlocking lever that has not yet been fully integrated,” Sur added.
The fundamentals that underpin Micron’s business would explain any bold new capital return program.
The memory chip market has tightened significantly as demand for high-bandwidth memory (HBM) and advanced dynamic random access memory (DRAM) used in AI servers continues to outstrip supply.
Companies such as SK Hynix (SKHY), Samsung Electronics (005930.KS) and Micron have largely exhausted their premium AI memory capacity through much of 2026 as customers including Nvidia (NVDA), Microsoft (MSFT), Amazon (AMZN) and Meta (META) race to build AI infrastructure.
Specifically, Micron’s HBM3E and HBM4 are seeing high demand as they are essential hardware components alongside Nvidia (NVDA) and AMD AI graphics accelerators.
The shortage has driven up memory prices significantly and given suppliers greater pricing power after several years of industry weakness.
Experts expect memory supply to remain constrained through 2027, creating a favorable backdrop for the industry’s largest producers such as Micron and Sandisk (SNDK).
“Memory is a critical component to delivering AI models, and this is unlikely to change,” Micron super bull Gill Luria of DA Davidson wrote in a note Monday. “More memory means better models, more memory means faster inference, and more memory means longer context windows. A few weeks ago we were worried about demand for Meta waning, but that now seems unlikely. »
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