Micron Technology Inc. (NASDAQ:MU) CEO Sanjay Mehrotra says record employee incentive compensation is weighing on the chipmaker’s margin outlook, even as memory demand remains so strong that Micron says it cannot fulfill all customer orders.
Speaking with CNBC’s Jim Cramer Thursday, Mehrotra said Micron rewarded employees “in a record fashion” following its record quarter. He added bonuses paid to factory workers for the fourth quarter show up as production costs in the current quarter, which “does impact our gross margin.”
Micron reported an adjusted gross margin of 87% in its fiscal fourth quarter and guided to approximately 86.25% for fiscal Q1, a decline of 75 basis points.
CFO Mark Murphy was more explicit on Micron’s earnings call Wednesday, calling incentive compensation “the big driver” of the fiscal Q1 gross-margin outlook.
Murphy said incentive compensation, manufacturing startup costs and other items together account for roughly $1 billion of additional fiscal Q1 costs. Micron expects the quarter to mark its gross-margin floor for fiscal 2027.
AI Demand Isn’t the Problem
More than 75% of Micron’s expected 2027 output is already committed, Benzinga reported Thursday, while customer discussions are increasingly shifting toward 2028.
“We cannot fulfill the demand of our customers,” Mehrotra told CNBC.
Micron now has 26 strategic customer agreements, with some extending into 2031. Fourth-quarter revenue reached $54.23 billion, up 379% year over year.
Prediction market traders see little chance of a severe AI-industry downturn before year-end. Polymarket puts the chance of the AI bubble bursting by Dec. 31 at about 9%, with more than $2.4 million wagered on the year-end contract.
Taiwan Workers Vote on Strike
Micron’s record payouts have not settled a growing pay dispute in Taiwan. Micron is a U.S. company headquartered in Boise, Idaho, but Taiwan is a major manufacturing base for its memory business.
Workers at the company’s Taoyuan operation began a six-day strike authorization vote Thursday after two rounds of mediation failed to produce a permanent profit-sharing deal. The union wants 15% of Micron’s operating profit distributed through quarterly employee bonuses.
Micron has already offered Taiwan employees fiscal 2026 rewards worth 35 to 68 months of pay, but union leaders have argued that a one-time payout does not address their demand for a long-term system.
The vote runs through Oct. 6. If approved, it would give the union the right to call a strike, rather than triggering an immediate walkout.
Micron shares are up nearly 300% year to date.
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