As one of the key suppliers of memory and storage technology that is key to AI processing and functionality, Micron Technology could not be in a better position as the market for accelerated computing processors–especially the GPUs of Micron customer Nvidia–continues to explode.
Yet, the company’s impressive revenue growth and solid outlook just is not enough for Wall Street curmudgeons. After surging more than 50% in the previous six months, partly as a ripple effect of Nvidia’s own rapid stock rise, Micron’s share price dipped more than 6% on Thursday, the day after the company reported beat quarterly earnings expectations.
Micron on Wednesday reported $6.81 billion in revenue for its fiscal third quarter, a figure that was well above analyst expectations of around $6.67 billion. The company also trounced expectations on the earnings-per-share (EPS) front, recording 62 cents adjusted EPS, sharply higher than the anticipated 51 cents EPS.
Micron also issued a solid outlook for the fiscal fourth quarter, forecasting $7.6 billion in revenue and about $1.08 in adjusted EPS, figures that appeared to be almost identical to consensus estimates for the current quarter. Yet, Wall Street apparently wanted to be wowed with a more ambitious forecast, and might also be concerned about ongoing supply.
On the company’s fiscal third quarter earnings call, Micron CEO Sanjay Mehrotra, like many chip sector leaders, said his company sees a multi-year AI demand cycle ahead of it. He suggested that supply tightness had eased in the third quarter, but also that customers, perhaps concerned about potential future supply-and-demand fluctuations and inventory, are ordering ahead of schedule for next year. That also could drive price increases for NAND and DRAM memory solutions.
He continued “Most data center customer inventories have normalized, and demand from customers continues to strengthen. PC and smartphone customers have built additional inventories due to the rising price trajectory, the anticipated growth in AI PCs and AI smartphones, as well as the expectation of tight supply as an increasing portion of DRAM and NAND output is dedicated to meeting growing data center demand. Due to expectations for continued leading-edge node tightness, we are seeing increased interest from many customers across market segments to secure 2025 long-term agreements ahead of their typical schedule.”
Mehrotra, added, “In data center, industry server unit shipments are expected to grow in the mid-to-high single digits in calendar year 2024, driven by strong growth for AI servers and a return to modest growth for traditional servers.”