Thursday, May 26

Micron stock rises as continued data-center growth drives earnings, outlook beats


Micron Technology Inc. shares rose in the extended session Tuesday after the memory-chip maker’s quarterly results and outlook topped Wall Street expectations, driven by continued growth in data-center sales.

Micron
MU,
+2.74%
shares rose 5% after hours, following a 2.8% rise in the regular session to close at $82.05.

“Last year, data center became the largest market for memory and storage, eclipsing the mobile market,” said Sanjay Mehrotra, Micron’s chief executive, on the conference call with analysts. “Looking ahead, we expect data-center demand growth to outpace the broader memory and storage market over the next decade, fueled by secular drivers in cloud and healthy enterprise IT investment.”

Mehrotra said second-quarter data-center sales grew more than 60% year over year. Micron does not break out revenue amounts for data-center sales specifically, but sales from the company’s compute and network business unit rose 31% to $3.46 billion. In late December, Mehrotra said that quarterly data-center sales had grown 70% year-over-year.

Micron specializes in DRAM and NAND memory chips. DRAM, or dynamic random access memory, is the type of memory commonly used in PCs and servers, while NAND chips are the flash memory chips used in smaller devices like smartphones and USB drives. Like most semiconductors, memory chips have been in great demand during the COVID-19 pandemic, and prices have shot higher.

The Boise, Idaho-based chip maker expects adjusted third-quarter net income of $2.36 to $2.56 a share on revenue of $8.5 billion to $8.9 billion. Analysts had forecast $2.24 a share on revenue of $8.13 billion.

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“We expect calendar 2022 industry bit demand growth to be in the mid-to-high teens for DRAM and at approximately 30% for NAND,” Mehrotra said on the call. “We anticipate underlying demand in calendar 2022 to be led by data center, ongoing adoption of 5G smartphones and continued strength in automotive and industrial markets.”

For the fiscal second quarter, Micron reported net income of $2.27 billion, or $2 a share, compared with $603 million, or 53 cents a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were $2.14 a share, compared with 98 cents a share in the year-ago period.

Revenue rose to $7.77 billion from $6.24 billion in the year-ago quarter.

Analysts surveyed by FactSet had forecast adjusted earnings of $1.98 a share on revenue of $7.53 billion, based on Micron’s forecast of $1.85 to $2.05 a share on revenue of $7.3 billion to $7.7 billion.

Micron said DRAM sales made up 73% of revenue, or $5.63 billion, in the fiscal second quarter, for a 29% year-over-year gain, while NAND accounted for 25% of revenue, or $1.95 billion, up 19% year over year. Analysts on average had expected DRAM sales of $5.46 billion, and NAND sales of $1.9 billion, according to FactSet.

Over the past 12 months, Micron shares have slipped 5%, while the PHLX Semiconductor Index 
SOX,
+2.21%
has risen 19%, the S&P 500 index 
SPX,
+1.23%
has gained 17%, and the tech-heavy Nasdaq Composite Index 
COMP,
+1.84%
has risen 12%.

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