Micron Technology shares surged in early Thursday trading, putting the stock on pace for its highest level in two months, after the chipmaker posted stronger-than-expected fourth quarter earnings and a robust outlook that added support to the broader AI investment theme.
Micron (MU) , the first of the major chipmakers to report quarterly earnings each season, is also seen as a bellwether for the semiconductor sector, given that its products are used in computers, smartphones and data centers around the world.
It's also establishing a key place in the market for so-called HBM, or high bandwidth memory, chips, which improve performance and reduce power consumption in AI systems.
Those chips, including a new HBM3E iteration, are now being built into Nvidia's (NVDA) H200 processors, as well as its newly developed Blackwell systems, have established Micron as one of just a few global companies that can compete in this fast-growing market.
Micron didn't disclose revenue figures for its HBM chips but reiterated that it delivered "several hundred million dollars" of sales in its fiscal 2024, which ended Aug. 29, and expects "multiple billions of dollars of revenue of HBM in fiscal year '25."
Micron's solid HBM outlook
The group said it saw the total addressable market for HBM chips, which are also made by South Korea's SK Hynix and Samsung Electronics, rising to around $25 billion in 2025 from $4 billion in 2023.
The solid HBM outlook helped offset stalled PC- and smartphone-chip sales, where prices have been hit by a broader market glut as well as a pullback in consumer-electronics spending.
Still, Micron was able to post a fourth-quarter bottom line of $1.18 a share, on revenue of $7.75 billion. The revenue line was double the figure for the year-earlier period and just ahead of Wall Street forecasts.
Related: Analysts overhaul Micron stock price targets amid post-earnings slump
Looking into the current quarter, Micron sees revenue in the region of $8.7 billion, with a $200 million margin of error, as well as earnings of around $1.74 a share. Profit margins, Micron said, would improve by 3 percentage points to 39.5% thanks in part to a heavier mix of higher-priced HBM sales.
"We are entering fiscal 2025 with the strongest competitive positioning in Micron's history," CEO Sanjay Mehrotra told analysts on a conference call late Wednesday. "As we move through the year, we expect a broadening of demand drivers, complementing strong demand in the data center.
"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," he added. "Micron is ramping production of the industry's most advanced technology nodes in both DRAM and NAND."
Capital-expenditure boost at Micron
Bank of America analyst Vivek Arya, who boosted his Micron price target by $15 to $125 per share in a note published Thursday, was impressed by the nature of Micron's better-than-expected update.
"Despite increasing macro (softer PC, phone demand) headwinds, Micron was able to deliver beat/raise results on the back of solid data center demand, including continued growth in its AI-levered high-bandwidth memory (HBM) sales," he said.
"Further, management reiterated their call for a record [fiscal 2025], raised the HBM market to $25 billion+ from $20 billion with strong pricing/share visibility," he added.
TD Cowen analyst Karl Ackerman also noted the PC and smartphone softness, but added that "the anticipated mid-cycle in memory between now and 2025 appears to be shallower than feared, supported by continued strength from datacenter customers."
Related: Analyst updates Micron stock price target after conference
Lifting his Micron price target by $20 to $135 a share, Ackerman added that 'we see stock momentum continuing with B100 qualification, 12H HBM ramp, and improved supply chain visibility in 2025 for PC/mobile as future catalysts."
CFRA analyst Angelo Zino, who held his $140 price target in place after last night's earnings report, noted the potential upside from Micron's tie-ins with Nvidia processors such as Blackwell and Rubin.
"We think investors continue to underestimate the content growth story on the DRAM server side, with line of sight for sharply higher HBM growth as Nvidia's Blackwell offering ramps in calendar year 2025/Rubin in calendar year 2026," he said.
"In addition, we see improved PC/nondata-center demand in calendar year 2025 that will see edge applications include more DRAM memory."
Other moves included Morgan Stanley analyst Joseph Moore, who raised his price target on Micron to $114 a share from $100, while Goldman Sachs analyst Toshiya Hari reiterated his $145 price target.
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Mizuho analyst Vijay Rakesh, however, lowered his target to $135 from $145 while Susquehanna cut it to $165 a share from $175.
Micron said its 2025 capital expenditures would be "meaningfully higher" than the $8.1 billion of 2024, pegging it "around the mid-30s percentage range of revenue based on our current [capital-spending] and revenue expectations."
At current forecasts that would translate to capex of $13.5 billion, a near 70% increase from fiscal 2024 levels.
Micron shares were last marked 13.5 higher at $108.76 each, having hit a two-month high of $114.80 earlier in the session.
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