Micron Technology’s Disappointing Forecast Sparks Share Price Plummet
Weak Consumer Demand Takes a Toll on Chipmaker’s Business
Micron Technology’s latest quarterly revenue and profit forecast fell short of Wall Street estimates, sending its shares tumbling. The chipmaker’s stock price dropped 14% in premarket trading on Thursday, with the company’s market value taking a significant hit.
Sluggish Demand for Consumer-Centric Products
The dynamic random-access memory (DRAM) chip market, which accounts for most of Micron’s revenue, remains sluggish due to weak consumer demand and an ongoing supply glut. The company expects low-single-digit percentage growth for smartphones in 2025, consistent with its prior expectations. However, demand for smartphones has remained weak, and shipments are likely to increase in the second half of Micron’s fiscal year ending August 2025.
CEO Sanjay Mehrotra Weighs In
During the company’s conference call with investors, CEO Sanjay Mehrotra attributed the weak demand to a slowdown in traditional markets like PCs, autos, and industrial markets. This sentiment was echoed by Michael Ashley Schulman, partner & chief investment officer at Running Point Capital Advisors, who noted that the market’s negative reaction reflects legitimate concerns about a $1 billion miss in revenue projections and near-term demand weakness.
Global PC Shipments Continue to Decline
According to research firm Gartner, global PC shipments reached 62.9 million units in the third quarter of 2024, marking a 1.3% decline from the previous year. This decline has significantly impacted Micron’s earnings.
AI Datacenter-Based Business Remains Robust
While Micron’s consumer-focused business is struggling, its AI datacenter-based portion remains robust. The company’s high-bandwidth memory (HBM) chips, a type of DRAMs, have experienced strong demand due to their use in artificial intelligence. Revenue from HBM more than doubled sequentially, becoming a key driver for the company.
Shifting Focus to High-Demand Products
Micron is now focusing on increasing its production of HBM chips to meet growing demand. CEO Mehrotra noted that the company’s supply mix is shifting toward more of the products that are needed in the marketplace.
Q2 Earnings Expectations
Excluding certain items, Micron expects to earn $1.43 per share, plus or minus 10 cents, for the second quarter, compared with analysts’ expectation of $1.91. The company expects to report second-quarter revenue of $7.90 billion, plus or minus $200 million, compared with analysts’ estimate of $8.98 billion.
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