Micron Technology's bullish outlook for the new fiscal year, combined with its strong fiscal fourth-quarter earnings, has significantly shifted negative sentiment leading into its late-Wednesday earnings release. This optimism is primarily fueled by robust demand for artificial intelligence, especially in the data center segment.
Executives indicated that they now foresee the market for high-bandwidth memory (HBM) products surpassing $25 billion by the 2025 calendar year, a remarkable leap from an addressable market of $4 billion in 2023 and well above their previous guidance of $20 billion for the upcoming year. They predict that HBM will represent approximately 6% of the overall industry dynamic random access memory bits in 2025, an increase from just 1.5% in 2023. The strong demand for HBM has notably spurred interest in the company’s data center portfolio, as explained by Brian Chin, an equity research analyst at Stifel, during a conversation with MT Newswires.
This growth in demand has more than compensated for concerns regarding weaknesses in consumer segments, particularly in PCs and smartphones, which are currently facing high inventory levels – a trend that appears set to persist. Chin expressed, "One of the fear factors in the cycle was that HBM will move into oversupply next year.
They gave no indication they have concern or there is any change in expecting a ramp up in business next year. There's a lot of comfort in that." Following these developments, Micron's shares surged by 15% in Thursday afternoon trading. Joseph Moore, an analyst from Morgan Stanley, shared in a note that he is not apprehensive about the potential for HBM oversupply, calling the industry a "design win business, not a gross margin inflated by shortage." However, he also diverged from optimistic perspectives regarding non-data center supply and demand dynamics. Moore noted, "The dynamics of excess inventory everywhere -- PC and smartphone original equipment manufacturers, memory producers, and even some of our cloud contacts amid very strong demand -- are OK until they aren't.
We witnessed this dynamic in 2021, when everyone overlooked climbing inventories across every market until it suddenly became a pricing issue. Although we aren't witnessing any oversupply influence on pricing at the moment, it seems perilous to disregard it." On the financial front, Micron’s strong operational outlook contributes to a positive forecast, projecting gross margin expansion and low double-digit revenue growth sequentially for the first quarter of fiscal 2025.
This growth is forecasted even as the consumer segment is expected to diligently manage its inventories. Matt Bryson, an analyst at Wedbush, opined in a note to clients, "Overall memory dynamics are likely to improve significantly post the first quarter of calendar 2025 following the normalization of inventories at client device OEMs." Micron disclosed fiscal fourth-quarter non-GAAP earnings of $1.18 per share late Wednesday, a significant turnaround from a loss of $1.07 per share in the prior year and exceeding the Capital IQ consensus of $1.11 per share.
The revenue for the quarter was reported at $7.75 billion, markedly up from $4.01 billion in the same period last year, and surpassing the consensus estimate of $7.65 billion. Micron's Chief Financial Officer, Mark Murphy, articulated during the earnings conference call, "We are exiting the fiscal year with excellent momentum, having expanded our industry-leading product portfolio, executed well on pricing, and improved our financial performance significantly from the start of the year.".