Micron posts record profit as AI memory demand fuels explosive growth
Investing.com -- Memory-chip maker Micron Technology crushed Wall Street expectations in its fiscal third quarter and issued significantly stronger-than-expected guidance for the current quarter, sending shares up about 17% in pre-market trading as investors cheered continued AI-driven demand for memory chips.
"[We’re] running out of superlatives to describe performance," Raymond James analyst Melissa Fairbanks wrote in a client note after lifting the price target to $1,500 per share.
The chipmaker forecast fiscal fourth-quarter revenue of $49 billion to $51 billion, well above the analyst consensus of $43.24 billion. It also projected earnings per share of $30.00 to $32.00, compared with Wall Street expectations of $25.31.
Micron pushed back against concerns that last quarter marked the peak for margins, forecasting a gross margin of 86% for the upcoming quarter, well above the 81.9% consensus estimate.
The memory chip maker has benefited from constrained supply among a limited number of vendors. Data center demand continues to grow, pushing up prices for memory components used across consumer electronics including smartphones and laptops. Micron’s technology serves as a critical component in chips produced by NVIDIA Corporation (NASDAQ: NVDA) and Alphabet(NASDAQ: GOOGL), as well as the servers that contain those processors.
The results reinforced "our constructive view on memory’s role in AI and the increasing supply-side discipline supporting a more durable cycle," BofA analyst Vivek Arya said.
On the company’s post-earnings conference call, management indicated that memory supply constraints show little sign of stopping.
"We expect tight conditions to persist beyond calendar 2027 as a result of AI-driven demand across all segments coupled with structural supply constraints," said Sanjay Mehrotra, Chairman, President, and CEO of Micron Technology.
"This is a significant positive for the AI trade, and evidence that the demand could outpace supply into late CY28 or even CY29," Deepwater Asset Management’s Gene Munster noted on social media following the comments.
The demand of its AI manufacturing capacity has led the stock to surge more than 700% over the past year helping it to surpass the $1 trillion in market capitalization mark.
"Demand was never the question, durability was. This report pushes that risk further out, with strategic agreements and HBM ramp locking in visibility beyond just the next pricing cycle. AI demand is showing up in revenue, but HBM pricing power is what’s driving margins and that’s what’s resetting the earnings profile higher," said Jake Behan, Head of Capital Markets at Direxion.
For the quarter ended May 28, Micron reported adjusted earnings of $25.11 per share, beating analyst estimates of $20.49. Revenue rose to a record $41.46 billion, topping the consensus forecast of $35.69 billion and up from $9.30 billion a year earlier.
“Micron’s record fiscal Q3 financial results and even stronger outlook for Q4 reflect the strategic value of memory in the AI era,” said Mehrotra.
“Micron is investing at record levels in technology, products and supply to address our customers’ rapidly growing demand. We believe our multi-year Strategic Customer Agreements will significantly enhance the durability and predictability of Micron’s strong financial performance," Mehrotra added.
The company also highlighted continued momentum across its AI-focused product portfolio, including high-volume shipments of HBM4 memory for a lead customer platform, progress on next-generation HBM4E products, and expanded production of advanced SSD and LPDDR5X memory solutions.
Micron also said it invested $7.1 billion in capital expenditures during the quarter and generated adjusted free cash flow of $18.3 billion. The board declared a quarterly dividend of $0.15 per share, payable on July 21.
“Tech investors will be in a very positive mood and breathe a sigh of relief with the tech stalwart Micron flexing its muscles with its stellar earnings report,” Wedbush analysts observed. According to Wedbush, the results “show the memory and chip trade is well-intact and still in the early stages of playing out.”