Micron (MU) shares dropped by about 7% during intra-day trading on Thursday despite reporting better-than-expected third-quarter results. The memory and storage company reported adjusted earnings per share at 62 cents versus the expected 48 cents and revenue at $6.81 billion versus the expected $6.67 billion. However, the revenue forecast for the next quarter matched analysts' expectations, which concerned investors. Micron anticipates adjusted earnings per share of $1.08 on $7.6 billion revenue, which is in line with analysts' estimates.
Investors had high expectations for the company's earnings because its stock has already more than doubled in the past year due to the AI boom. Micron's advanced memory is crucial for AI GPUs like Nvidia’s, driving demand for AI technologies such as OpenAI’s ChatGPT. Additionally, Micron reported a net income of $332 million compared to a net loss of $1.9 billion in the same quarter last year showing incredible improvements.
In a news release, CEO Sanjay Mehrotra emphasized the company's strong AI business in contrast with the sluggish smartphone and PC markets. He said, “Robust AI demand and strong execution enabled Micron to drive 17% sequential revenue growth, exceeding our guidance range in fiscal Q3.” Mehrotra also noted that Micron’s AI-related memory is sold out through 2025 and anticipates continued price increases throughout 2024 due to robust AI-driven demand, positioning Micron to benefit significantly from the multiyear AI growth opportunity.
Micron's earnings report also had significant implications for other companies in the market. Shares of semiconductor equipment vendors rose on Thursday after Micron announced plans to increase capital spending for the next fiscal year. Companies like Applied Materials (AMAT) and Lam Research (LRCX) experienced large gains at the start of the trading day. Sadjay Mehrotra said, “We expect to increase our capital spending materially next year, with capex around mid-30s percentage range of revenue for fiscal 2025.” Patrick Seitz, Investors Business Daily author, reported, “Applied Materials and Lam Research get a larger share of revenue from memory-chip producers than their peers in the semiconductor equipment market.”
Micron’s stock drop also affected other top semiconductor and AI stocks. During Bloomberg Markets: The Close, host Romaine Bostick commented on Micron's impact, stating, “Western Digital down about 3% here; also, some of the bigger chip makers, like Super Micro and Broadcom, basically all your AI favorites, and Nvidia, all lower in after-hours trade.” These stock movements highlight the interconnectedness of various companies. They serve as a stark reminder that investors must be aware of companies reporting earnings, even if they are not directly held in their portfolios.
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