Written by Arsheeya Bajwa and Harshita Mary Varghese
(Reuters) – Memory chip maker Micron Technology on Wednesday leveraged a surge in artificial intelligence adoption to forecast better-than-expected third-quarter sales and post a surprise quarterly profit.
The company’s stock price soared more than 16% in extended trading, adding to its gain of more than 60% in the past 12 months. Micron’s stock price was recently around $110, and Thursday’s closing price at that level would be an all-time high.
The positive report and forecast highlight the surging demand for high-end memory chips and other advanced semiconductors as big tech companies race to deploy generative AI.
Micron’s high-bandwidth memory (HBM) chips, used to develop complex AI applications, will be sold out in 2024, with most of the supply for 2025 already allocated, CEO Sanjay said.・Mr. Mehrotra said.
Nvidia, a front-runner in AI chips, has also selected Micron for its latest HBM 3E chip in its next-generation H200 graphics processing unit (GPU). South Korean competitor SK Hynix is so far the only supplier of HBM chips to Nvidia.
Sumit Sadhana, Micron’s chief business officer, also told Reuters that the company has won new customers for HBM products that it has not yet announced.
The adjusted earnings per share announced Wednesday was Micron’s first profit after five consecutive quarters of losses, according to LSEG.
Analysts expect the company’s share of the lucrative HBM market to grow throughout the year.
Micron offers flash memory chips serving the data storage market and dynamic random access memory (DRAM) made for data centers, personal computers, smartphones and other computing devices.
“Micron’s impressive earnings and forecasts suggest that GenAI momentum is fueling a significant era of growth for DRAM and, most importantly, HBM suppliers,” said Technalysis Research Principal Analyst. Bob O’Donnell said.
The company’s results, announced ahead of other chipmakers, are closely watched as a gauge of demand for different types of chips and end markets. The positive outlook sent peer Western Digital shares up 4.6% in after-hours trading.
Mehrotra reiterated that HBM’s revenue is expected to add to Micron’s gross profit in the third quarter, and that the company is on track to generate hundreds of millions of dollars in revenue from advanced chips in fiscal 2024. Although it is a small percentage of total sales, it is steadily increasing. .
Micron expects adjusted gross profit margin for the third quarter to be 26.5%, plus or minus 1.5%, compared to market expectations of 20.8%.
Revenue for the quarter is expected to be $6.6 billion plus or minus $200 million, significantly higher than expectations of $6.03 billion, according to LSEG data.
The company posted adjusted earnings of 42 cents per share in the second quarter, compared to expectations for a loss of 25 cents.
Mehrotra also said that Micron’s bit supply growth in fiscal 2024 will still be lower than demand growth for both DRAM and NAND.
Prices across memory and storage end markets are improving as well, Mehrotra said, adding that the company expects DRAM and NAND price levels to rise further throughout 2024.
Memory chip prices are on a recovery trend after pandemic-induced panic buying ultimately led to a glut, hitting their lowest levels in years.
Micron reported second-quarter revenue of $5.82 billion, compared to an expected $5.35 billion.
(Reporting by Arsheeya Bajwa and Harshita Mary Varghese in Bengaluru; Editing by Devika Syamnath)
