Micron Technology's Earnings Beat Expectations as AI Chip Boom Drives Q3 Revenue Near 8.5 Trillion Yen

Overview

Micron's third-quarter earnings report recently released showed strong performance, with all key financial metrics exceeding market expectations. Driven by the artificial intelligence chip boom, the company's revenue approached 850 billion yen, demonstrating robust demand in the storage market, particularly for AI-related products. Although the stock price saw a slight pullback in after-hours trading following the earnings release, analysts generally believe its long-term growth logic remains solid.

Financial Performance Significantly Exceeded Expectations

Micron achieved revenue of $54.2 billion (approximately 8.5 trillion yen) for the fiscal quarter ending in August, substantially higher than the expected $51.1 billion, representing a year-over-year increase of approximately four times. Earnings per share reached $33.42, surpassing the expected $31.61. Additionally, the company's gross margin stood at a high 87%, exceeding its own guidance of 86%.

Looking ahead to the upcoming fourth fiscal quarter, Micron forecasts revenue of $61.5 billion (approximately 9.7 trillion yen), far exceeding the market expectation of $57 billion. Earnings per share are expected to be $38.15, higher than the market forecast range of around $35. Gross margin is projected to maintain a high level of 86.25%.

Explosive Growth in Data Centers

Key information disclosed during the earnings call revealed that sales in the data center segment surged by approximately 11 times year-over-year. This was primarily driven by the rapid growth of HBM (High Bandwidth Memory) and data center-specific SSDs, with growth rates for both exceeding the company's overall average.

Notably, Micron is collaborating with NVIDIA to develop the industry's first "custom HBM" product. This initiative marks a further consolidation of its technical competitiveness in the AI storage sector. Furthermore, the number of long-term supply contracts increased from 17 to 26. These contracts cover approximately 35% of sales prior to 2030, with most featuring price floors and ceilings, helping to smooth future earnings volatility.

Investment Expansion and Shareholder Returns

Micron management stated that it expects revenue to grow every quarter in the fiscal year ending August 2027, with a gross margin of 86.25% representing the low point for that fiscal year. The recent slight decline in gross margin was mainly to increase employee compensation expenses. The company plans to reach its target cash reserve level by the end of the quarter in early December, after which it will return funds to shareholders through stock repurchases and other means.

Despite the impressive performance, the after-hours stock price fell slightly because the company announced it would further increase capital expenditure. Data shows that equipment investment will reach $25 billion (approximately 3.9 trillion yen) over the six-month period from September to February next year, approaching the $27.4 billion investment amount for the entire previous year.

The company anticipates that the supply-demand tension will further intensify between 2027 and 2028, leading it to choose a significant increase in investment to prepare for capacity expansion. Although this aggressive investment strategy has raised concerns about short-term cash flow in the market, it also lays a solid foundation for long-term growth.