Our Rule of 40 explainer carries a section called Where the Rule of 40 Does Not Apply. The worst case in its table is IREN at −884.0 for 2026 Q1 — a number nobody could mistake for a verdict on a business.
The site has never shown the other end. Micron's most recently filed quarter, ended 2026-05-28, computes to 388.
Both numbers come off the same formula, applied as documented, to companies the site tracks. One is printed in an explainer as a warning. The other has never appeared anywhere, because the quarter it comes from is not in our series yet.
One company, one product line, 117 points of gross margin
Micron's stored gross-margin series holds thirteen quarters. Its lowest point is its earliest:
| quarter ended | gross margin | where it comes from |
|---|---|---|
| 2023-03-02 | −32.66% | stored series, its minimum |
| 2026-02-26 | 74.41% | stored series, its maximum |
| 2026-05-28 | 84.56% | filed, not in our series |
Across the stored series alone that is a 107-point swing. Add the filed quarter and it is 117 points, on one company selling essentially one category of product.
A negative gross margin means selling below the cost of production. Eighty-four percent is a margin most software companies do not reach. Micron did both inside fourteen quarters — the thirteen the series holds plus the filed quarter after them — and nothing about the company's cost base or its products changed enough to explain it. The memory price cycle did.
The cost line barely moved, and the filing says why
The mechanism is two numbers. Sequentially, across the three quarters of FY2026 filed so far:
| quarter ended | revenue | cost of goods sold |
|---|---|---|
| 2025-11-27 | $13,643M | $5,997M |
| 2026-02-26 | $23,860M | $6,105M |
| 2026-05-28 | $41,456M | $6,400M |
Revenue rose 203.9%. Cost of goods sold rose 6.7%. Micron added $27.81B of quarterly revenue and $403M of quarterly cost, and gross profit went up 4.6 times.
The year-over-year version of this comparison is already published here — cost of goods up 10.5% against revenue up 4.46× — and that piece makes the argument that a commodity manufacturer cannot sell far more product without buying proportionally more to make it. This is the sequential span of the same line, which is steeper: three consecutive quarters, 6.7%.
And the filing does not leave the reason to inference. Micron's 10-Q for the quarter ended 2026-05-28 attributes it to price, not volume:
Sales of DRAM products increased 343%, primarily due to a low-260% range increase in average selling prices and a low-20% range increase in bit shipments.
Our consolidated gross margin percentage increased to 85% for the third quarter of 2026 from 74% for the second quarter of 2026 as a result of improvements in margins for both DRAM and NAND products. Margins improved primarily due to increases in average selling prices and also benefited from continued strong execution and favorable mix.
Bit shipments — the physical quantity that costs money to make — rose in the low-20% range year over year, and in the low single digits sequentially. Average selling prices did the rest. That is why the cost line is nearly flat: Micron is shipping roughly the same quantity of bits and charging several times more for them.
(Two similar-looking numbers should not be confused: the 203.9% above is Micron's quarterly revenue from FY2026 Q1 to Q3. The 10-Q separately reports first-nine-months revenue up 203% year over year. Different spans, near-identical figures.)
Where the 388 comes from, and why it is an artifact
On the house definition — year-over-year revenue growth plus free-cash-flow margin — the quarter ended 2026-05-28 gives:
- Revenue growth: $41,456M against $9,301M for the quarter ended 2025-05-29 = +345.7%
- Free cash flow: $17,562M, a margin of 42.4% of revenue
- 345.7 + 42.4 = 388.1
No 10-Q prints a quarterly free-cash-flow line. That $17,562M is derived by differencing filed year-to-date statements: nine-month operating cash flow $45,702M less six-month $20,314M gives $25,388M, and nine-month capex $19,602M less six-month $11,776M gives $7,826M.
The reason to trust that derivation is that it reproduces a number we already hold. Running the identical differencing on the prior quarter — six-month operating cash flow $20,314M less three-month $8,411M, and capex $11,776M less $5,389M — gives $5,516M, which is exactly the free-cash-flow value in our stored Micron data for the quarter ended 2026-02-26. The method is checked against the period the repo holds before being used on the period it does not.
Now the important part: 388 is not a score. It is not Micron being 388 anything. Nearly nine tenths of it is a single year-over-year growth term, and that term is measuring where in a price cycle the two sampled quarters happen to fall — the numerator quarter near the top, the denominator quarter ($9,301M, gross margin 37.72%) on the way up from the trough. Sample the same company from the other side and the same formula produces the mirror image.
That is the same failure as IREN's −884, with the sign reversed. The explainer already says the metric is built for "software companies with 70-80%+ gross margins" and that applying it to hardware is meaningless. It prints the low-side case. This is the high-side case, and it is arguably worse, because −884 looks obviously broken and 388 looks like a triumph.
What this is not
It is not a data defect. Both stored figures involved reconcile exactly against the filings: the 74.41% gross margin and the $5,516M of free cash flow are correct to the decimal and to the dollar. Micron's page is simply one quarter behind the filings — which is a condition we counted across the site yesterday, and Micron is one row of it rather than the subject.
And it is not an argument that Micron had a bad quarter. It plainly did not: net income was $28,243M on $41,456M of revenue, a 68% net margin for a memory manufacturer. The point is narrower and duller than either extreme — a composite that adds a growth rate to a margin cannot tell you which of those things you are looking at, and on a cyclical manufacturer the growth rate swamps everything else in both directions.
The honest use of the number is as a flag that the metric does not apply here, exactly as the explainer's table already does at the other end. What would make a Micron score meaningful is not a bigger number; it is a longer window than one year-over-year comparison, or the two halves read separately, which is what we have argued for elsewhere.
Micron figures for the quarters ended 2025-11-27, 2026-02-26, 2026-05-28 and 2025-05-29 are from SEC XBRL, CIK 0000723125, with revenue, cost of goods sold, gross profit and net income tagged directly for each quarterly context, and the filer's own GrossProfit tag reconciling against revenue less cost of goods in each. Operating cash flow and capital expenditure are derived by differencing the filed year-to-date cumulatives, validated as described above against the stored value for the quarter ended 2026-02-26. The MD&A quotations are from the 10-Q for the quarter ended 2026-05-28, accession 0000723125-26-000015. The −32.66% and 74.41% gross margins and the $5,516M free-cash-flow figure are from our stored Micron data; the −884.0 is from our own explainer. Fiscal quarter labels are Micron's own — its fiscal year ends in late August, so every figure here carries its period end. No price, valuation or share-move figure appears above, and no forward earnings date is cited.