Micron’s (MU) strong Q4 report and bullish guidance fire up the chip industry

Shares of Micron Technology Inc. (NASDAQ: MU) rallied this week after the memory chipmaker reported positive fourth-quarter results and issued bullish guidance, gaining as much as 15% soon after the announcement. Major chip stocks followed suit and made strong gains, underscoring the prospects of AI computing.

Micron’s stock got a much-needed boost, at a time when it was struggling to regain lost momentum. It has been in a downward spiral after peaking in June this year. If the company’s optimistic guidance is any indication, MU has more room for growth.  

Broad-based Growth

The Boise-headquartered tech firm swung to profit in the fourth quarter from a loss last year, as revenues nearly doubled year-over-year to $7.75 billion. Revenues of the Compute & Networking business and Storage business, which together account for about 60% of the total, more than doubled annually in Q4.

Net income came in at $887 million or $0.79 per share in the August quarter, marking a significant improvement from the prior-year period when the company incurred a loss of $1.43 billion or $1.31 per share. Excluding special items, earnings were $1.18 per share, compared to a loss of $1.07 per share a year earlier. Both earnings and the topline beat estimates, as they have done in each of the trailing five quarters.

AI Power

The impressive performance is driven mainly by the recent surge in AI spending, resulting in a shift in customer orders towards Micron’s industry-leading products like high-bandwidth memory chips and AI-supported data center DRAM solutions. While ramping its production capacity to fill the demand-supply gap, the company is also seeing an increase in new contracts.

Construction of a new assembly and test facility is progressing in India, while expansion is underway in the Xi’an facility in China. According to the Micron leadership, the AI boom is not limited to data center – there will be high demand in areas like smartphone and PC in fiscal 2025 as they migrate to AI technology. It is estimated that Micron is headed for a record year, in terms of revenue and profitability. AI and data center will continue to be the key growth drivers.

Those factors put Micron in an advantageous position as far as pricing is concerned and the company is optimistic about its future margin performance. Its dominance in high-bandwidth chips should help the company sustain growth momentum and navigate cyclical volatility.   

Guidance

Encouraged by the strong Q4 outcome and new AI-based revenue stream, the company provided better-than-expected first-quarter guidance. The management is looking for earnings of around $1.74 per share for Q1 on estimated revenues of approximately $8.70 billion. It sees operating expenses of $1.21 billion for the first quarter and an adjusted gross margin of around 39.5%.

Micron’s CEO Sanjay Mehrotra said, “As we move through calendar 2025, we expect a broadening of demand drivers, complementing strong demand in the data center. We are making investments to support AI-driven demand and our manufacturing network is well-positioned to execute on these opportunities. We look forward to delivering a substantial revenue record with significantly improved profitability in fiscal 2025, beginning with our guidance for record quarterly revenue in fiscal Q1.”

Micron’s shares traded up an impressive 13% on Thursday afternoon, after opening the session sharply higher. They have grown about 27% so far this year.