Micron Surges on AI-Driven Memory Boom, Raises Guidance as HBM and DRAM Demand Soar

Micron Technology delivered a beat-and-raise quarter that calmed nerves and re-energized bulls, topping already-elevated expectations amid a historic AI-driven memory cycle. Revenue hit a record $9.3 billion in Q3, powered by strength in high-bandwidth memory (HBM) and data center DRAM, while adjusted EPS of $1.91 easily cleared consensus estimates of $1.60. The company’s outlook for Q4 was just as impressive, with midpoint revenue guidance of $10.7 billion and adjusted EPS guidance of $2.50—well ahead of Wall Street’s $2.01 figure. Shares surged approximately 5% in after-hours trading as investors embraced a confident management tone, robust product execution, and signs that pricing and demand momentum remain firmly intact.

Ask Aime: Is Micron Technology's AI-driven memory cycle a sign of the stock market's future strength? Could its Q4 outlook lead to a bullish market shift?

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For the fiscal third quarter, Micron posted $9.3 billion in revenue, up 15% sequentially and 37% year-over-year. DRAM led the charge, delivering $7.1 billion in revenue (76% of the total), up 15% sequentially and 51% from the prior year. Bit shipments rose over 20%, but average selling prices (ASPs) declined in the low-single-digit percentage range due to a mix shift toward more consumer-oriented products. NAND revenue came in at $2.2 billion, up 16% sequentially, with bit shipments up in the mid-20% range, although ASPs fell in the high-single-digit percentage range. Overall gross margin reached 39%, up 110 basis points from the prior quarter, helped by pricing improvements in both DRAM and NAND.

Segment performance was broadly strong. The Compute and Networking Business Unit delivered a record $5.1 billion in revenue, led by nearly 50% sequential growth in HBM, alongside rising demand for high-capacity DIMMs and LP server DRAM. The Storage Business Unit generated $1.5 billion, up 4% sequentially, while Mobile posted a striking 45% sequential gain to $1.6 billion amid DRAM content growth and lower inventory at OEMs. The Embedded segment grew 20% to $1.2 billion, with healthy demand from industrial and consumer end markets. Data center revenue more than doubled year over year and hit a record for the fourth straight quarter, with Micron securing design wins across GPU and ASIC platforms and expanding its HBM customer base to four major players.

Micron’s HBM franchise was a key driver. HBM3E shipments ramped significantly, and the company expects crossover with legacy product in Q4. Notably, Micron’s HBM3E 36GB 12-high has been designed into AMD’s MI355X platform, with volume shipments to continue expanding. Looking ahead, HBM4 is sampling with multiple customers and expected to enter volume production in 2026. The product promises more than 2.0 TB/s bandwidth and 20% lower power consumption—specs clearly targeting the AI inference market. Management emphasized that Micron remains the only volume producer of LP DRAM in data centers, and it retains sole-source status with many key hyperscaler and server OEM accounts.

Gross margins benefited from stronger pricing and mix, particularly in DRAM. Operating income totaled $2.5 billion, yielding a 26.8% operating margin, and free cash flow came in at $1.9 billion—Micron’s best quarterly figure in over six years. CapEx was $2.7 billion, in line with plans to invest ~$14 billion for fiscal 2025, with the majority going to support HBM ramp and long-term capacity additions. The company also held a record $12.2 billion in cash and investments, with total liquidity of $15.7 billion. No share repurchases were made in the quarter, but a dividend of $0.115 per share will be paid on July 22.

The fiscal Q4 outlook was the real show-stopper. Micron expects revenue of $10.7 billion (±$300 million), gross margin of 42% (±1 point), and adjusted EPS of $2.50 (±$0.15), all well above consensus. Operating expenses are guided to $1.2 billion, with the increase driven by R&D investments in future DRAM nodes and HBM. Management noted that potential new tariffs are not factored into the forecast, but said it had observed some customer pull-ins likely related to tariff hedging. Either way, inventory levels are tight, with DRAM expected to exit fiscal 2025 near target levels, and NAND significantly reduced.

Micron sees continued strength across its major end markets. PC shipments are expected to grow in the low-single digits in CY25, with tailwinds from AI-enabled PCs and the Windows 11 upgrade cycle. In mobile, AI-driven DRAM content expansion is supporting growth, with 12GB+ phones becoming more common. Micron is ramping LP5X DRAM on the 1-gamma node and G9 UFS4 NAND, both targeting high-end smartphones. Automotive and industrial also showed strong sequential growth, supported by ADAS feature expansion and factory automation demand.

On a broader market level, Micron forecasts CY25 DRAM bit demand to grow in the high teens and NAND in the low double digits, while its own bit supply growth will be below the market for non-HBM DRAM and NAND. Management reiterated that recent end-of-life (EOL) notices for D4 and LP4 DRAM products are creating shortages, with Micron now allocating limited inventory to priority customers. These products, made on 1-alpha nodes, are being phased out in favor of newer generations like D5, LP5, and HBM. Over the medium term, Micron expects bit demand CAGR of mid-teens for both DRAM and NAND.

Looking forward, Micron is scaling its U.S. manufacturing footprint aggressively. The ID1 fab in Idaho will begin DRAM wafer output in 2H27, and a second Idaho fab (ID2) is planned to go live before the first New York fab. The company is also modernizing its Virginia facility and developing advanced packaging capabilities to support long-term HBM growth. Micron estimates total U.S. investments will top $200 billion over 20+ years, including $150 billion for manufacturing and $50 billion for R&D.

In sum, Micron is firing on all cylinders. The Q3 beat and Q4 raise affirm its leading position in high-performance memory and storage—especially in the AI wave. While conservative by nature, management’s guidance implies confidence in both demand and pricing, while its technology leadership in HBM and DRAM provides a moat as competitors scramble to catch up. With momentum across end markets and strong financial execution, Micron appears well positioned to deliver on its goal of record revenue and robust profitability for fiscal 2025.