S&P Global Ratings has raised Micron Technology Inc. to an investment-grade BBB rating from BBB- and assigned a positive outlook, citing larger scale and faster growth tied to demand for artificial intelligence products. The ratings firm said AI-driven sales have materially lifted Micron’s EBITDA and cash generation and have prompted an upward revision to long-term compounded revenue growth assumptions.
Capital spending and cash flow dynamics
S&P noted that investment activity constrained Micron’s free cash flow in fiscal 2025, which ended in August 2025. Net capital expenditure consumed roughly 80% of cash flow from operations in that year, a level that the agency said should ease in 2026. The firm projects the net capex-to-cash-flow ratio will decline to about 50% as higher pricing drives stronger cash flow from operations.
The ratings commentary placed recent spending in historical context, observing that from 2014 through 2024 Micron also devoted about 80% of operational cash flow to net capital expenditure while delivering compounded revenue growth of approximately 4% across that period.
Product mix and pricing assumptions
S&P estimated that high bandwidth memory - HBM - accounted for roughly 15% of Micron’s total revenue in fiscal 2025. More broadly, premium product lines, including HBM and select segments of DRAM and NAND, represented about 35% of revenue in that year.
The ratings agency emphasized that continued robust pricing in nonpremium memory products will be necessary for S&P’s base-case forecast to materialize in 2026. S&P highlighted constrained industry capacity along with AI-driven demand that also supports NAND pricing as factors that should help maintain a favorable supply-demand balance.
Balance sheet and liquidity outlook
Micron’s S&P-adjusted net leverage stands at about 0x, comfortably below the agency’s upgrade threshold of 1x. S&P expects the company to accumulate more than $10 billion in cash in fiscal 2026, noting that share repurchases will be limited by restrictions under the U.S. CHIPS and Science Act.
Recent operating performance and near-term guidance
The company reported first-quarter revenue of $13.6 billion, up 57% year over year and 21% sequentially. Management-adjusted gross margins reached 56.8%, an increase of 1,110 basis points from the prior quarter.
Micron provided second-quarter guidance that implies revenue rising about 37% sequentially at the midpoint, with gross margins in a 67% to 69% range. Management indicated that for some key customers the company is fulfilling only half to two-thirds of demand and that supply constraints are expected to persist beyond 2026.
On product execution, Micron said it is in high-volume production of HBM4, with customer shipments ramping in the first calendar quarter ahead of schedule, and that its HBM supply is fully sold out for calendar 2026.
Bottom line
S&P’s upgrade reflects the ratings agency’s view that AI-driven pricing and product mix improvements have materially strengthened Micron’s earnings and cash profile, moderating leverage and supporting the prospect of a substantial cash build in fiscal 2026 even as recent capital intensity has limited free cash flow.