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) , which is the first of the major chipmakers to report quarterly earnings each season, is also seen as a bellwether for the semiconductor sector given that is 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, which have established Micron as one of just a few global companies that can compete in this fast-growing market.
Micron said it sees “multiple billions of dollars of revenue” from the sale of HBM chips in its new fiscal year.
Micron didn’t disclose revenue figures for its HBM chips, but reiterated that it delivered “several hundred million dollars” of sales in its 2024 financial year, which ended on August 29, and sees “multiple billions of dollars of revenue of HBM in fiscal year ’25.”
Micron’s solid HBM outlook
The group said it sees the total addressable market for HBM chips, which are also made by South Korea-based SK Hynix and Samsun Electronics, rising from $4 billion in 2023 to around $25 billion in 2025.
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 fourth quarter revenues of $7.75 billion, a tally that was nearly double the same period last year and just ahead of Street forecasts, and a bottom line of $1.18 per share.
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Looking into the current quarter, Micron said it sees revenues in the region of $8.7 billion, with $200 million margin of error, as well as earnings of around $1.74 per share. Profit margins, Micron said, would improve by 300 basis points to 39.5% thanks in part to a heavier mixed 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.”
Capex boost
BofA 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 [2025 fiscal year], 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 per 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, 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 CY 25/Rubin in CY 26,” he said. “In addition, we see improved PC/non-data center demand in CY 25 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 per share from $100, while Goldman Sachs analyst Toshiya Hari reiterated his $145 price target.
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Mizuho analyst Vijay Rakesh, however, lowered it to $135 from $145 per share while Susquehanna cut it to $165 per share from $175.
Micron said its 2025 capex spend would be “meaningfully higher” than in 2024, when it totaled $8.1 billion, pegging it “around the mid-30s percentage range of revenue based on our current CapEx 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 16.9% higher in premarket trading to indicate an opening bell price of $112.01 each.
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