Micron Technology earnings preview: Welcoming the AI-driven growth cycle and market outlook analysis
Micron Technology (stock code: MU) is about to release its earnings report on June 26, 2024. Due to Micron's customers aggressively destocking in previous quarters, the company is entering a new cyclical growth phase, with high market expectations for revenue growth and margin expansion. Due to previous supply chain shortages and subsequent excess issues, customers are adjusting inventory to more reasonable levels. With optimized inventory levels, purchasing volumes are expected to increase significantly in the second half of 2024, further boosted by the expansion of AI factories in fiscal year 2025.
Over the past 90 days, analysts have raised Micron's EPS estimates 26 times and lowered them only once, reflecting strong market optimism about Micron's prospects. Micron's management is also optimistic about growth in the second half of fiscal 2024 and expects even more significant growth in fiscal 2025 as the company accelerates the construction of regional AI factories. The growth in data center infrastructure, particularly AI servers accelerated by H100 GPUs, will drive a substantial increase in DRAM sales. Although traditional server business may boost NAND sales by the end of 2024, short-term growth should primarily be driven by AI infrastructure investments.
At the Goldman Sachs Global Semiconductor Conference on May 30, Micron executive Sanjay Mehrotra outlined the company's roadmap for fiscal 2024 and 2025. He mentioned that capital expenditures are expected to reach $750 to $800 million in fiscal 2024 as the company invests in next-generation memory chips and HBM chipset. HBM3E chips are in strong demand due to their storage advantages in data centers, with a projected compound annual growth rate of 50% in the coming years. Additionally, Micron is ramping up production of these chips, with HBM revenue expected to reach hundreds of millions in fiscal 2024 and grow to billions in fiscal 2025.
In the automotive sector, HBM chips are widely used in vehicle-assisted driving functions. Micron recently announced a full suite of automotive-grade solutions for Qualcomm's automotive platform, including LPDDR5X memory chips, UFS 3.1, Xccela flash, and quad-channel peripheral interface NOR flash, which will be integrated into Snapdragon Automotive solutions and modules.
For the smartphone and AI PC markets, growth is expected to remain steady during fiscal 2024 due to constrained consumer spending. Micron recently announced LPDDR5X memory chips for the Lenovo ThinkPad P1 Gen 7 workstation, which offers significant advantages in power efficiency and space savings. Additionally, Micron has begun providing customer samples of next-generation GDDR7 graphics memory chips, which offer notable improvements in performance and energy efficiency.
In terms of financial forecasts, DRAM is expected to grow in Q4 2024 as customers reduce inventory. Entering fiscal 2025, NAND will also see growth due to the refresh cycle of general-purpose computing servers. With HBM3E increasing its share of total sales and the company launching next-generation HBM4E, margins are expected to expand further.
Looking ahead to Micron's upcycle, the company will achieve significant margin expansion by selling higher-spec chips, and cash flow will increase substantially. Although MU's stock price has risen 67% year-to-date, there is still considerable upside potential as the company enters the next cyclical upswing in memory and storage chips.
$Micron Tech(MU.US)
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