Micron rockets to all time highs on surprise return to profitability
In its second fiscal quarter, Micron surpassed its guidance predictions, achieving revenue, gross margin, and earnings per share that were significantly higher than anticipated. The company successfully achieved profitability and a positive operating margin one quarter earlier than expected.
The period saw Micron initiate substantial price hikes due to a better equilibrium between supply and demand. This favorable shift in the market resulted from a combination of strong demand for AI servers, an overall healthier demand across various end markets, and industry-wide supply cutbacks.
The demand for AI servers has spurred rapid expansions in the use of High Bandwidth Memory (HBM), DDR5 (D5), and data center solid-state drives (SSDs), leading to a tighter supply for both DRAM and NAND components. Consequently, this has had a beneficial impact on pricing throughout the memory and storage market sectors.
Looking forward, it is anticipated that the prices for DRAM and NAND will continue to climb throughout the 2024 calendar year. Micron is projecting record revenues and a significant enhancement in profitability for the fiscal year 2025.
MU reported strong financial results for the second quarter of fiscal year 2024, with adjusted revenue of $5.82 billion, marking a significant increase of 58% year-over-year. This figure also exceeded the estimated revenue of $5.35 billion. The growth trend continued in the earnings per share (EPS) category as well, with MU reporting adjusted EPS of $0.42, compared to a loss per share of $1.91 in the same period last year. The estimated loss per share was $0.24, as the company returned to profitability one quarter earlier than expected.
The company's adjusted operating income showed remarkable improvement as well, with MU reporting $204 million in the second quarter, compared to a loss of $2.08 billion in the prior year's quarter. This exceeded the estimated operating loss of $238.4 million.
Additionally, Micron Technology Inc. witnessed significant growth in cash flow from operations, reaching $1.22 billion, compared to $343 million in the same period last year. However, it fell short of the estimated $2.14 billion.
Micron Technology Inc. attributed its return to profitability to the accelerating demand for artificial intelligence (AI) and the tightening supply situation. The company emphasized that its preeminent product portfolio positions it favorably for a strong second half of fiscal year 2024.
The company's adjusted operating expenses were reported at $959 million, showing a 4.7% increase from the previous year and slightly surpassing the estimated $950.2 million.
The company's focus on AI technology positions it favorably for future growth, supported by the prospects of AI-driven advancements across various industries. Micron Technology Inc. also provided upside guidance for the third quarter, projecting an EPS of $0.45, +/- $0.07, and revenues of $6.60 billion, +/- $200 million. The non-GAAP gross margin is expected to be 26.5%, +/- 1.5%. All these metrics outpaced expectations.
Looking ahead, Micron expects front-end cost reductions to align with long-term expectations, particularly in dynamic random-access memory (DRAM) and NAND, excluding the impact of high-bandwidth memory (HBM).
The company anticipates inventories for memory and storage in the data center to normalize in the first half of calendar year 2024. Micron also highlighted the multi-year growth phase being driven by AI and emphasized the transformative nature of this technology in various sectors.
In the data center segment, total industry server unit shipments are expected to grow by mid- to high-single digits in calendar year 2024, driven by the increasing demand for AI servers and a return to modest growth for traditional servers.
The progress made by Micron in its HBM3E product is noteworthy, particularly in terms of the lower power consumption compared to competitors' solutions. The company has already commenced volume production and shipment of its HBM3E product, with strong customer feedback. Micron aims to generate significant revenue from HBM in fiscal year 2024, with positive effects on its gross margins. Micron's HBM supply for calendar years 2024 and 2025 is already fully allocated, and the company expects to achieve HBM bit share equivalent to its overall DRAM bit share by calendar year 2025.
Micron has a positive outlook for various segments, including PC, smartphone, and automotive and industrial markets. They anticipate modest growth in PC unit volumes, along with increased AI PC units becoming a substantial portion of the total PC units in calendar year 2025.
In the smartphone segment, Micron expects low-to-mid single-digit growth in unit volumes in calendar year 2024. AI phones are projected to incorporate 50% to 100% more DRAM content compared to non-AI flagship phones.
Regarding market demand, Micron forecasted a low double-digit percentage growth for DRAM bit demand in calendar year 2023, while NAND bit demand growth is anticipated to reach the low-20s percentage range, both slightly higher than previous expectations.
For calendar year 2024, the company expects industry bit demand growth to be in line with the long-term CAGR for DRAM and the mid-teens for NAND. In terms of supply, Micron foresees industry supply for both DRAM and NAND to be below demand in calendar year 2024. The company's bit supply growth for fiscal year 2024 is expected to be lower than demand growth for both DRAM and NAND, and Micron aims to decrease its inventory days in fiscal year 2024.
Micron has revised its capital expenditure (CapEx) guidance to $7.5-8.0 billion, up from the previous range of $7.0-7.5 billion, indicating increased investment plans to support its growth strategies.
In conclusion, Micron Technology Inc. delivered robust financial results for the second quarter of fiscal year 2024, surpassing expectations with substantial revenue growth and improved profitability. The company's strong position in the AI-driven market, coupled with its innovative product portfolio, supports its optimistic outlook for the second half of fiscal year 2024. Micron is well-positioned to capitalize on the multi-year growth opportunity provided by AI technology, which is expected to drive transformation across various industries.