Going into Micron's (MU) Q4 earnings on Wednesday, analysts weren't too concerned about demand for the company's memory and storage.

After all, data center builders are buying up chips so fast that Micron and rivals SK Hynix (SKHY) and Samsung (005930.KS) can't keep up.

But Wall Street watchers did have their eyes on the company's gross margins, which have continued to climb throughout the AI explosion.

"Can gross margins stay up at the rates that they are, or do we need to see some normalization so it doesn't feel like, you know, price gouging in a moment?" Creative Strategies CEO and principal analyst Ben Bajarin said to Yahoo Finance ahead of Micron's earnings announcement (video above).

During the company's earnings call, Micron CFO Mark Murphy explained that he anticipates Q1 gross margins will set a new floor and that they'll climb higher from there.

Micron stock fell 2% in morning trading on Thursday.

Analysts have also been on the lookout for more information about Micron's strategic customer agreements (SCAs), long-term arrangements that lock in the lowest possible price for memory and storage chips.

According to Murphy, Micron's Q1 margins will take a ding due to increased fiscal 2026 financial compensation related to manufacturing. The company absorbed most of that increase in Q4, but the impact will be felt in Q1.

As a result, he told analysts, Micron anticipates gross margins will climb beyond Q1 on the back of more moderate price increases.

Micron stock is up around 280% this year as of Tuesday's close.

SCAs are meant to serve as a hedge against a downturn in future memory sales. Outside the AI boom, the memory and storage industry traditionally experiences boom-and-bust cycles. SCAs are designed to protect against a quick decline in sales while providing the company with a clearer understanding of future revenue.

According to CEO Sanjay Mehrotra, Micron has signed 26 SCAs, which the company estimates will account for over 35% of its revenue through 2030.

Internal AI tools helped analyze interview transcripts and draft this story. Editors reviewed, edited, and fact-checked this post before publication.

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