UBS: Micron Could Repurchase Over 40% of Shares by 2028

What happened

UBS issued an analysis forecasting that Micron could repurchase more than 40% of its outstanding shares by 2028. This projection follows exceptional financial performance, with third-quarter fiscal 2026 revenue reaching $41.45 billion (up 388% year-over-year) and net income of $28.24 billion (up 1,400%). Data center revenue alone hit $11.52 billion, growing 653% from the prior year. Despite these results, the stock has declined approximately 29% over the past month, bringing the forward P/E ratio down to just 5.5 from around 15 at the end of 2025. The pullback appears driven by broader AI sector volatility and profit-taking rather than deteriorating fundamentals.

Why it matters

The UBS forecast signals exceptional cash generation capability and management confidence in long-term value creation through capital returns. A 40%+ share buyback would substantially increase existing shareholders' ownership stakes and earnings per share, particularly meaningful given the current low valuation. The projection reflects sustained profitability from AI memory demand, which management expects to continue driving record results. CEO Sanjay Mehrotra emphasized that fiscal Q3 results 'reflect the strategic value of memory in the AI era,' with guidance calling for Q4 revenue between $49 billion and $51 billion and EPS between $29.73 and $31.73. Bank of America analyst Vivek Arya noted that even Chinese AI models using lower-quality GPUs may require more memory chips, not fewer, potentially expanding Micron's addressable market.

Bigger picture

Industry signals reinforce optimism about memory demand durability. ASML, the sole manufacturer of extreme ultraviolet lithography systems critical for advanced chip production, raised full-year guidance to between 43 billion euros and 45 billion euros (up from prior guidance of 36-40 billion euros) and plans to increase Low-NA EUV capacity by 30% in 2027 with consideration for another 30% expansion in 2028. ASML CEO Christophe Fouquet stated that 'ongoing AI-related investments and continued progress in AI technologies are driving demand for advanced logic and memory chips.' Separately, Taiwan Semiconductor Manufacturing Company announced price increases of up to 10% (and potentially 20% for some products) in 2027, signaling strong pricing power across the chip manufacturing ecosystem. Real-world demand indicators also emerged when China's Moonshot AI announced its Kimi AI chatbot could no longer accept new customers due to compute capacity constraints, illustrating the gap between AI demand and available infrastructure.

What to watch

Monitor Micron's Q4 fiscal 2026 results (expected in August) against management's guidance range to assess whether the 388% revenue growth trajectory continues. Watch for formal announcements of buyback programs or increases to existing authorization that would validate UBS's projection. Track ASML's shipment timing in late 2027/early 2028, which Wedbush Securities believes will drive increased memory output. Observe pricing trends in both DRAM and NAND markets, particularly whether Micron can follow TSMC's lead in raising prices amid strong demand. Finally, assess whether broader AI sector sentiment stabilizes or whether concerns about demand sustainability and market oversupply continue to pressure memory stock valuations despite strong operational performance.