The value of Micron Technology shares fell by about 12% on premarket trading on Thursday, December 19, as this chip manufacturer published disappointing earnings guidance for the second quarter of fiscal 2025, indicating sluggish consumer demand for personal computers and smartphones, despite strong sales growth of microcircuits used for the operation of artificial intelligence systems.
Last Wednesday, December 18, the mentioned company released its financial figures for the first quarter of fiscal 2025. The mentioned quarter ended on November 28. The chip manufacturer’s revenue for the specified period was fixed at $8.71 billion. For the previous fiscal quarter, the corresponding figure was $7.75 billion. Micron’s revenue for the first quarter of fiscal 2024 was fixed at $4.73 billion. In this case, there is a significant increase in the indicator.
Sanjay Mehrotra, president and chief executive officer of Micron, said the company delivered a record quarter. He also noted that the revenue of data centers for the first time amounted to more than 50% of the total revenue structure of the firm. According to him, consumer-oriented markets will be weaker in the near term, but Micron expects a return to growth in the second half of fiscal 2025.
The company’s operating cash flow for the first quarter of fiscal 2025 amounted to $3.24 billion. A similar figure a year ago was recorded at $1.4 billion. The company’s operating cash flow for the last quarter of fiscal 2024 amounted to $3.41 billion.
Micron expects its revenue for the second quarter of fiscal 2025 to be fixed at $7.9 billion, plus or minus $200 million. The company also forecasts adjusted earnings per share of $1.43, plus or minus 10 cents, for the mentioned period. According to LSEG, analysts expected Micron’s revenue for the second quarter of fiscal 2025 to reach $8.98 billion. They also predicted adjusted earnings per share of $1.91.
Since the beginning of the current year, the value of Micron shares has increased by 22%, trailing the Nasdaq’s 29% gain.
Sanjay Mehrotra stated that the company continues to gain share in the highest margin and strategically important parts of the market and is exceptionally well positioned to leverage AI-driven growth to create substantial value for all stakeholders.
Morningstar analyst William Kerwin expects Micron’s revenue from sales of flash memory chips in fiscal 2025 to show a significant decrease because the corresponding indicator is more dependent on shipments of personal computers and mobile phones.
Expectations that consumer demand for traditional personal computers would increase after the end of the coronavirus pandemic did not coincide with the reality, which turned out to be more pessimistic. Artificial intelligence-enabled computers have not yet become products characterized by mass popularity.
The transition to Windows 11 following Microsoft’s decision to end support for Windows 10 turned out to be more gradual compared to preliminary expectations, implying a higher degree of intensity of the corresponding process.
If the current losses on the premarket persist, Micron’s market capitalization may decrease by more than $14 billion, to about $102 billion.
The company’s revenue from high-bandwidth memory chips, a type of DRAM chip used to power advanced artificial intelligence systems, more than doubled year-on-year in the last fiscal quarter.
Piper Sandler analysts said that Micron’s history in the high-bandwidth memory microcircuits sector remains intact. They also noted that this company is positioning itself to capitalize on market expansion opportunities from investments in data centers in 2025.
Micron is one of three providers of high-bandwidth memory chips alongside SK Hynix and Samsung. The high level of consumer demand for microcircuits of the corresponding category since the beginning of the current year has been the driving force behind the upward dynamic of the company’s shares. Analysts quoted by the media expect that the mentioned importance of high-bandwidth memory chips will remain in the future.
According to data compiled by LSEG, at least 10 brokerage companies cut their price targets on the stock after Micron published its expectations regarding financial performance.
As we have reported earlier, Japan Provides Subsidies for Micron Plant.
