rewrite this title MU Earnings Preview: Strong Q2 results in cards amid growing AI demand | AlphaStreet

Micron Technology, Inc. (NASDAQ: MU) is uniquely positioned to capitalize on the AI wave sweeping the tech industry, leveraging its high-bandwidth-memory products designed for massive data processing tasks. The company delivered record-high data center revenues in the most recent quarter, thanks to its broad product line tailored to meet the growing demand in this segment.

Micron’s stock trended upward throughout this week, partially recovering from the recent downturn. Currently hovering near the $100 mark, the stock price has grown about 18% so far this year. Interestingly, over the past seven quarters, the company has consistently reported revenues and bottom-line numbers that exceeded expectations. The relatively low price provides a unique opportunity to invest in this high-growth company with strong prospects.

Estimates

After entering FY25 on an upbeat note, the Idaho-headquartered memory chipmaker issued positive guidance for the second quarter, projecting revenues of $7.90 billion, which represents a 36% year-over-year increase. The management expects Q2 adjusted earnings per share to increase sharply to $1.43 from $0.40 last year. The guidance is almost in line with analysts’ consensus revenue and earnings estimates of $7.92 billion and $1.43 per share, respectively, for the February quarter. The earnings report is slated for release on Thursday, March 20, at 4:00 pm ET.

Revenues Surge

Micron reported revenues of $8.71 billion for the first quarter of 2025, sharply higher than the $4.73 billion revenue it generated in the corresponding period of 2024. A 46% growth in the Compute & Networking segment, which manages the production of DRAM and NAND memory chips and accounts for more than 50% of the total business, offset weakness in the other divisions by a wide margin.

From Micron’s Q1 2025 earnings call:

“We expect PC market units to grow in the mid-single-digit percentage range in calendar 2025, with growth weighted toward the second half of the calendar year. Turning to mobile. Smartphone unit volumes in calendar 2024 remain on track to grow in the mid-single-digit percentage range, and we expect low single-digit percentage growth in 2025, both consistent with our prior expectations. AI adoption continues to be a strong driver for mobile DRAM content growth, where we see the technology used in applications such as local search and contextually aware user interfaces increasing over time.”

Returns to Profit

On an adjusted basis, Q1 earnings were $1.79 per share, compared to a loss of $0.95 per share in the year-ago period. Unadjusted net income came in at $1.87 billion or $1.67 per share in Q1, vs. a loss of $1.23 billion or $1.12 per share in the prior-year quarter.

Micron’s stakeholders were disappointed after the company warned of a slump in gross margins this year as it sees a major chunk of demand coming from lower-margin businesses, though strong volumes could catalyze revenue growth. Another concern is the continuing softness in the demand for consumer products like PCs and smartphones.

On Friday, Micron’s stock opened higher and gained as much as 6% in the early hours of the session. The value has remained below the 12-month average of $107.82 since last month.