Micron's stock falls after earnings as revenue forecast fails to pack big upside

By Emily Bary

High-bandwidth memory revenue next fiscal year could be 'multiple billions of dollars'

Micron Technology Inc. beat revenue expectations in the latest quarter and logged a sizable profit beat on Wednesday, but its top-line forecast for the current quarter was merely in line with the consensus view at the midpoint.

Investors may have wanted to see more upside given the recent move higher in Micron shares (MU) and optimistic views from analysts. The shares are up 67% so far this year, though they fell 8% in Wednesday's after-hours action.

The company made a sharp turnaround on its bottom line, reporting fiscal third-quarter net income of $332 million, or 30 cents a share, whereas it posted a net loss of $1.9 billion, or $1.73 a share, in the year-earlier period.

Read: Nvidia is one of the 'three horsemen of AI.' Here are the others.

On an adjusted basis, Micron earned 62 cents a share, while analysts tracked by FactSet were expecting 48 cents a share.

Micron's revenue rose to $6.81 billion from $5.82 billion in the fiscal second quarter, and from $3.75 billion in the year-earlier period, whereas the FactSet consensus was for $6.67 billion.

The company saw a 13% sequential bump in revenue from dynamic random-access memory, or DRAM, to $4.7 billion, in line with the consensus view. Revenue from NAND memory was up 32% sequentially to $2.1 billion, above the FactSet consensus, which was for $1.9 billion.

"In data center, rapidly growing AI (artificial intelligence) demand enabled us to grow our revenue by over 50% on a sequential basis," Chief Executive Sanjay Mehrotra said in prepared remarks posted ahead of the earnings call.

He noted that the company "drove robust price increases," and that "improved pricing, combined with our strengthening product mix, resulted in increased profitability across all our end markets."

The company began ramping high-bandwidth memory shipments in the fiscal third quarter, posting more than $100 million in margin-accretive revenue from its HBM3E product during the period. Come next fiscal year, annual high-bandwidth memory revenue could total "multiple billions of dollars," Mehrotra said.

Micron sees the potential for upbeat pricing trends going forward, thanks in large part to booming data-center demand. That's "causing tightness on our leading-edge nodes," according to the prepared remarks, such that Micron projects sustained pricing improvements for the balance of this calendar year - even though demand for personal computers and smartphones is "only steady."

The company's forecast calls for $7.60 billion in revenue at the midpoint along with $1.08 in adjusted earnings per share at the midpoint. Analysts had been looking for $7.59 billion and $1.02 a share, respectively.

"As we look ahead to 2025, demand for AI PCs and AI smartphones and continued growth of AI in the data center create a favorable setup that gives us confidence that we can deliver a substantial revenue record in fiscal 2025, with significantly improved profitability underpinned by our ongoing portfolio shift to higher-margin products," Micron said in its prepared remarks.

See also: Micron's stock could wield 40% upside - even though earnings may not be a driver

-Emily Bary

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06-26-24 2017ET

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