Micron Q1 Preview: Is MU Stock a Buy Ahead of Earnings?

Micron Technology (MU) will release its first-quarter fiscal 2025 earnings after the close on Wednesday, Dec. 18. The company, known for its high-performance DRAM, NAND, and NOR memory and storage products, is expected to benefit from the strong ramp of its data center DRAM products and high-bandwidth memory (HBM). However, challenges persist in other segments, particularly from elevated DRAM inventory in the computer and smartphone markets.

Let’s take a closer look.

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Micron: Key Expectations for Q1

Micron has projected revenue of $8.7 billion for Q1, representing a remarkable 84% year-over-year increase. This growth reflects higher demand for DRAM, especially in the data center server segment, and improving pricing trends.

The company’s strong sales performance is also expected to drive improvements in profitability. Management anticipates a better product mix and stronger pricing will expand gross margins and, in turn, boost earnings.

Micron is guiding for adjusted earnings of $1.74 per share for the quarter, a significant turnaround compared to previous results. This reflects both sequential and year-over-year improvements.

Wall Street is slightly more conservative, expecting Micron to deliver earnings of $1.60 per share. Even so, this would mark a significant improvement from a reported loss in the same quarter last year.

That said, investors should note that Micron’s management might take a cautious approach when forecasting for Q2 due to typical seasonal challenges. This could limit any significant gains in MU stock after earnings are reported. In the previous quarter's conference call, Micron's management mentioned that Q2 is usually a slower period for the company, and the first quarter of the calendar year tends to be weaker for the industry as a whole.

Nonetheless, Micron could witness growing volumes for fiscal year 2025, particularly in the second half of the year. Demand is expected to broaden throughout the year, driven by data center servers and recovery in traditional sectors.

Is Micron Stock a Buy or Sell?

While Micron faces a short-term slowdown in some end markets, its long-term growth prospects remain strong. With several key growth drivers in play, including the rise of artificial intelligence (AI)-driven servers, next-generation PCs, and increasing memory requirements across smartphones and data centers, Micron is poised to deliver significant revenue growth and profitability in the coming years.

1. AI Servers: A Major Growth Catalyst for Micron

The demand for high-performance servers, particularly those supporting AI workloads, is set to increase significantly, with higher shipment volumes expected in 2025 and beyond. This growth is not limited to AI servers alone. Traditional servers will also see a boost due to a hardware refresh cycle, which is expected to further elevate Micron’s revenue potential.

Micron’s portfolio is well-positioned to capitalize on this transformation. The company’s offerings, including High-Bandwidth Memory (HBM), DDR5 and LPDDR5 DRAM, and advanced SSD solutions, are at the forefront of the data center revolution. As the adoption of HBM accelerates, Micron’s ramp-up in production and strong order backlog for 2025-2026 provides a solid foundation for revenue growth.

2. PC Market Recovery: Another Growth Driver

Although the PC market is currently dealing with inventory challenges, a rebound is expected soon, driven by several factors. The end of support for Windows 10, the upcoming rollout of Windows 12, and the rise of AI-enabled PCs will all contribute to increased demand for memory. Leading PC manufacturers are also raising memory requirements, which bodes well for Micron’s growth prospects.

Micron secured multiple design wins with major PC OEMs for its low-power compression memory modules. Additionally, Micron’s SSD products are tailored to meet the power-performance demands of AI workloads.

3. Smartphones: Rising Demand for AI Memory

The smartphone market is experiencing a surge in AI integration, driving up the demand for higher memory capacities in devices. Micron remains a preferred supplier for AI-enabled smartphones. Its second-generation LP5X DRAM and G8 NAND products are gaining traction with major customers, further solidifying Micron’s role in the AI smartphone market.

4. Automotive: A Consistent Growth Driver

The automotive sector is another steady growth engine for Micron, driven by the increasing demand for memory and storage in infotainment systems and advanced driver-assistance systems (ADAS). Micron’s solid portfolio of automotive-grade DRAM and NAND products positions it well to benefit from the resumption of growth in the second half of 2025 as auto customer inventories adjust to a new mix of vehicles, including electric vehicles (EV) and hybrid models.

Conclusion: A Strong Buy for Long-Term Investors

While Micron faces some short-term headwinds in certain end markets, the company’s long-term growth outlook remains strong. The increasing demand for AI servers, AI-driven PCs, and smartphones is driving higher memory content across all sectors, positioning Micron for significant revenue gains. Micron is set to maintain its competitive edge in the industry with its leadership in high-performance memory solutions, particularly in HBM, low-power DRAM, and NAND.

Wall Street analysts are optimistic about Micron’s future, maintaining a “Strong Buy” consensus rating ahead of its Q1 earnings release.

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