Micron's SCA Model at FQ4: 26 Take-or-Pay Deals, $150B RPO, $12.7B Customer Deposits — and 75% of 2027 Output Already Committed
Micron's fiscal Q4 2026 (quarter ended Aug 31, reported Sept 30) is the fullest expression yet of the SCA business-model transformation this note tracks — and it contains both the bull case for a tamed memory cycle and the tells of a late-cycle peak.
The transformation deepened. SCAs grew from 16 to 26 in one quarter, with remaining performance obligations of ~$150 billion, customer financial commitments of $32 billion ("the vast majority of which are cash deposits"), and agreements now extending into 2031. CEO Sanjay Mehrotra: "To date, we have signed 26 SCAs, which we currently estimate to be over 35% of our revenue through 20301... Any new discussions on SCAs where pricing is involved are negotiated with higher pricing based on prevailing market conditions and outlook" (prepared remarks). CFO Mark Murphy added the cycle-breaking claim: "even at floor prices, we expect margins meaningfully above any prior cycle peak margins," and that more than 75% of Micron's 2027 output is already committed, with customer conversations now centered on 2028.
The quarter itself: revenue $54.23B (+379% YoY, +31% QoQ, sixth consecutive record), DRAM $39.8B (73% of revenue; FY26 DRAM surpassed $100B), NAND $14.1B with data center SSD at ~$10B (10x YoY), gross margin 87%, non-GAAP EPS $33.42, FY26 EPS $75.52 (+811%). FQ1 2027 guide: revenue $61.5B ± $1.5B, gross margin 86.25%, EPS $38.15 — all well above consensus ($57.0B / $35.14) (TheStreet recap). Customer cash deposits received in FQ4 were $12.3B, with $12.7B on the balance sheet at quarter-end (below the ~$18B some projected; deposits are unrestricted and returned in the latter half of each agreement's term). Cash and investments hit $73.5B, net cash $68.3B, and capital return begins Dec 9, 2026 with intent to return 100% of excess cash.
But the capex tell is now official. Micron guided 1H FY27 capex to ~$25B with 2H higher, skewed to construction — "most of which is to help accelerate clean room space availability in late calendar 2028 and beyond" — while claiming "no line of sight to when supply and demand will return to balance." Building greenfield cleanrooms into 2028-29 while asserting permanent shortage is precisely the everyone-adds-at-once pattern documented in The AI Memory Capacity Expansion Race: Citi Sees 2027 Capex Surging 46.5% to $80.4B — the Classic "Everyone Adds at Once" Tell, Offset by a 2028-29 Supply Lag — Micron is now the third leg of it, justified by SCA visibility.
The tells inside the print: (1) server content growth is being trimmed — "a modestly lower rate of content growth than prior expectations, amid tight memory supply" — and management fielded a direct question about "one large customer de-speccing HBM" (see Rubin Ultra's 192GB Fallback: the Biggest HBM Buyer Is Rationing Itself — While Spot HBM Trades at 4-5x Contract); (2) days of inventory rose 9 days sequentially to 129 (partly bonus comp capitalized into inventory); (3) the FQ1 margin guide (86.25%) is below FQ4's 87%; (4) labor is a rising claim on the margin: the Taiwan strike-rights vote (concludes Oct 6, board proposals due Oct 8) seeks 15% of operating profit quarterly — ~$6.6B on FQ4's $43.8B alone (Hundred East), against Samsung's ~12% and SK Hynix's uncapped 10% precedents (see Micron Taiwan Labor Dispute: Record Bonus Rejected, Union Demands Permanent 15% of Operating Profit — Strike Vote Pending).
Valuation says the market doesn't believe the "structural" story either: at $1,074.89 (Oct 4 close) Micron trades at 14.45x P/E and 0.16 PEG with RSI(14) at 75 — a peak-margin multiple on peak margins, i.e., the market is pricing a cycle, not a permanent regime (MU market view, Oct 5, 2026). The SCA model may genuinely dampen the downside (take-or-pay volumes, floor prices, $32B customer cash); whether it dampens the overshoot — everyone building into permanent-shortage narratives — is the open question (see CoreWeave Explores Chip Derivatives to Hedge Against Hardware Price Collapse for the buyer-side hedge).
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An instance of Memory manufacturers have successfully broken the industry's historic boom-and-bust cycle. — Take-or-pay SCAs backed by $32B in customer cash commitments and 75% of 2027 output already pre-sold are converting memory from a commodity cycle into a contracted, pre-funded model. ↩︎