Micron Technology Shares Decline Despite Strong Quarterly Results

Micron Technology shares decline despite strong quarterly results.

Micron Technology shares decline despite the company reporting strong financial results for the fiscal third quarter, ending in May, with revenue of $6.8 billion, up 82%. This figure exceeded both the midpoint of the company’s guidance range of $6.6 billion and the Wall Street consensus of $6.67 billion tracked by FactSet. Adjusted profit for the quarter was 62 cents per share, surpassing both the company’s target of 45 cents and the Street consensus of 48 cents. Under generally accepted accounting principles (GAAP), the company earned 30 cents per share, above the company’s forecast of 17 cents. Gross margin on an adjusted basis was 28.1%, above guidance of 26.5%.

Revenue Guidance and Market Reaction

Despite these impressive results, Wall Street’s expectations seemed to surpass reality. Revenue guidance for the company’s August quarter matched estimates, leading investors to hope for more. Consequently, shares dropped 7.2% in after-hours trading.

For the quarter ending in August, Micron projected revenue of $7.6 billion at the midpoint of its guidance range, slightly above consensus at $7.59 billion. It expects an adjusted profit of $1.08 per share, surpassing the Street’s estimate of $1.02. Wall Street anticipates full-year fiscal 2024 revenue of $24.8 million, with profits of 98 cents per share.

Micron’s strong revenue and profit projections signal robust growth, surpassing Wall Street expectations for fiscal 2024, according to WSJ Subscription Offers.

CEO’s Perspective and Market Demand

Micron CEO Sanjay Mehrotra credited robust AI demand and strong execution for driving 17% sequential revenue growth, exceeding our guidance range in fiscal Q3. Mehrotra expressed excitement about expanding AI-driven opportunities ahead, positioning us well to achieve a substantial revenue record in fiscal 2025.

Micron’s growth is fueled by PC and smartphone demand, reduced automotive and industrial inventory, and AI-related surges. During their earnings call, Micron highlighted a 50% sequential revenue rise in data center demand, powered by AI. Short-term PC and smartphone demand remains stable, but AI-driven data center demand is tightening supply and raising prices.

Business Officer’s Insights and Future Outlook

In an interview with Barron’s, Micron chief business officer Sumit Sadana highlighted that the share of the company’s business from data center applications hit an all-time high in the quarter. The contribution from data centers is expected to increase further in 2025. Sadana added that Micron believes that aside from Nvidia, the company has more AI exposure than any other chip manufacturer.

Micron anticipates ongoing benefits from increasing demand for memory-intensive AI servers. Additionally, AI-capable PCs and smartphones are expected to further drive growth. Looking ahead to 2025, Micron sees strong demand for AI PCs and smartphones, alongside continued AI expansion in data centers. This outlook provides confidence in achieving substantial revenue growth in FY ’25. Improved profitability is also anticipated, supported by Micron’s shift towards higher-margin products.

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Impact of AI and Future Projections

Micron noted that PC and smartphone customers have built up additional memory inventory due to rising prices, anticipated growth in AI PCs and smartphones, and expectations of tight supply as a growing portion of both NAND and DRAM chips go to increasing data-center demand. Sadana mentioned that PC and smartphone customers fear a “crowding out effect” as Micron’s mix shifts to AI.

Micron also mentioned that demand for solid-state drives is growing from cloud customers. This growth is driven primarily by AI training and inference infrastructure. Additionally, there is the start of a recovery in traditional compute and storage infrastructure demand. The company sees bit demand growth in the mid-teens this year for both DRAM and NAND. For the August 2025 fiscal year, consensus estimates revenue of $37.3 billion, up 50%, with a profit of $9.01 per share.

Capital Spending and Future Developments

The company expects about $8 billion in capital spending in fiscal 2024. Outlays will “materially” increase in fiscal 2025. Spending will rise to about the mid-30s as a percentage of revenue. CapEx spending reached $3 billion in the May quarter, with average quarterly spending expected to be significantly higher in fiscal 2025.

This higher spending reflects the company’s construction of new fabs in both Idaho and upstate New York. Micron said the new Idaho fab won’t significantly add to supply until fiscal 2027, and the New York fab won’t be a substantial contributor until fiscal 2028 or later.

Stock Performance and Analyst Ratings

Ahead of the report, Micron shares were up 66% this year and 117% over the past 12 months. The stock closed at $142 on Wednesday. Analysts had increased estimates and price targets heading into the quarter. DRAM pricing has been rising, driven in particular by strong demand for high-bandwidth memory used in AI servers. Micron said it has sold out of HBM for both this year and for 2025.

On another note, Sadana said that Micron was able to mitigate most of the impact on its business from the recent earthquake in Taiwan. He declined to quantify the impact on results. Wolfe Research analyst Chris Caso reiterated his Outperform rating on Micron shares and raised his target price to $200 from $150. He increased his earnings estimates, citing “stronger industry conditions and optimism regarding HBM.” Caso sees a scenario where Micron eventually hits a profit of $20 per share, with demand for HBM driving up prices for conventional DRAM.

“The plausibility of that scenario is what keeps us bullish on MU’s stock despite its recent run,” Caso wrote.

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