Micron almost quadruples its revenue thanks to AI’s insatiable demand for memory chips

Memory chipmaker Micron Technology Inc. predictably delivered another blowout quarter in its latest financial results, with no sign of a slowdown in the demand for artificial intelligence infrastructure.

The company reported fiscal fourth-quarter earnings before certain costs such as stock compensation of $33.42 per share, coasting past Wall Street’s target of $31.61 per share. Revenue for the period rocketed by a staggering 379%, to $54.23 billion, well ahead of the $51.07 billion analyst estimate. That helped Micron’s net income for the quarter jump to $37.7 billion, up from just $3.2 billion one year earlier.

Chairman and Chief Executive Sanjay Mehrotra (pictured) said the results set new quarterly and full-year records for a company that has emerged as one of the biggest beneficiaries of the AI boom. He added that the company expects to do even better in the coming fiscal year.

“AI is becoming super intelligence, and memory enhances this intelligence and the competitiveness of our customer’s platforms,” Mehrotra said. “We are increasing our investments in technology, products and manufacturing to help drive SI forward with our customers and our strategic customer agreements provide added confidence in the durability of Micron’s financial performance.”

Mehrotra wasn’t joking when he said he expects the company to do even better in the future. For the first quarter, the company offered a hugely optimistic forecast, saying it anticipates earnings of $38.15 per share on sales of $61.5 billion at the midpoint of its range. In contrast, Wall Street is looking for earnings of just $35.40 per share on revenue of $57 billion.

Micron’s stock barely moved in after-hours trading, no doubt because most investors had already anticipated it would post stellar results. In any case, the company’s shares have gained more than 500% in the last 12 months as it has been selling all of the memory chips it can manufacture, often months before it’s able to get those products into the hands of customers. The AI industry’s demand for memory has created a global supply crunch that has sent prices sky high, leading to rising prices for all kinds of consumer electronics, including Apple Inc.’s MacBooks and iPads and Microsoft Corp.’s Xbox games consoles.

Micron presently has the “magical elixir” of both unprecedented pricing power and margins that seasoned growth investors always look to capitalize on, said Zacks Investment Research analyst Andrew Rocco. “Micron’s gross margins of 87% demonstrate immense pricing power and dwarf any past cycle,” he said. “Additionally, revenue visibility is crystal clear thanks to its hoard of locked-in long-term contracts. Meanwhile, AI spending is accelerating. With two frontier models going public in the coming months, new capital raised is likely to go straight to spending on products like Micron’s.”

The muted reaction to today’s report shouldn’t come as a surprise, Rocco said. “Micron’s character as a stock is to make gains in the weeks following earnings, not necessarily the day after,” he added. “In fact, although the stock has soared over the past year, its performance immediately following earnings has been mixed.”

Micron is the only company in the U.S. that’s able to supply chip and server makers with high-bandwidth memory or HBM products, which provide the dynamic random-access memory needed for AI workloads to retain context and function properly. It’s currently building two new manufacturing facilities in the U.S. that are expected to cost more than $250 billion. The largest, in Clay, New York, broke ground in January, and a smaller facility in Boise, Idaho, is expected to come online next year.

During the quarter, the company’s DRAM revenue rose 343% to $39.8 billion, accounting for almost three-quarters of its total sales.

On a conference call with analysts, Mehrotra said in response to a question that the company has a “strong roadmap for future HBM products,” before adding that it’s currently working with Nvidia Corp. on what will be the world’s “first custom HBM implementation.” .

Micron’s main competitors in the memory industry are the South Korean chip giants SK hynix Inc. and Samsung Electronics Co. Ltd. Although those rivals actually command a larger market share in the HBM segment, Micron’s market capitalization has still grown to more than $1.2 trillion.

Mehrotra said the company gave increased salaries and/or bonuses to every one of its employees in the last fiscal year, averting a threatened strike by workers at a major factory in Taiwan. Employees there had been demanding higher compensation, after seeing their counterparts at SK hynix and Samsung negotiate bonuses of more than $500,000 in some cases.

Photo: SiliconANGLE