Chip recovery is improving, Micron Tech's previous quarter's revenue exceeded expectations by nearly 16%, and this quarter's guidance is even stronger. After the market closed, the stock jumped more than 5% | Earnings Report

The latest guidance from Micron Tech, the American storage chip giant, is stronger than expected, bringing good news to the memory chip market and giving investors more confidence that the demand for chips driven by the AI boom will boost the company's performance.

After the financial report was released, Micron Tech's stock price fell more than 4.2% on Wednesday, but quickly rebounded after hours, with a post-market increase of more than 5% at one point. Investors expect the chip oversupply situation to end and are optimistic about the prospects of AI chips. Despite the decline on Wednesday, Micron Tech's stock price has risen nearly 60% since the beginning of this year.

First quarter revenue exceeds company's revised guidance, loss lower than analyst expectations and company's guidance

After the US stock market closed on Wednesday, December 20, Micron Tech announced that for the first quarter of the fiscal year 2024, ending on November 30, 2023, the company's revenue not only reversed the double-digit decline trend, but also exceeded expectations, while the loss was lower than expected.

• First quarter revenue was $4.73 billion, a year-on-year increase of 15.6%, higher than Micron Tech's revised guidance of $4.7 billion, and analyst expectations of a year-on-year increase of 11% to $4.54 billion. In the previous quarter, the fourth quarter, revenue decreased by 40% year-on-year.
• Non-GAAP adjusted operating loss for the first quarter was $955 million, a 20.9% decrease compared to the same period last year, and lower than the analyst's expected loss of $1.05 billion.
• Adjusted earnings per share (EPS) for the first quarter reported a loss of $0.95, also lower than the analyst's expected loss of $1.01 and Micron Tech's own guidance of $1.

The financial results show that in the just-ended quarter, Micron Tech's revenue growth was stronger than the company's own upwardly revised guidance.

Three weeks before the release of the financial report, Micron Tech announced an adjustment to its performance guidance at the end of last month, raising the revenue guidance for the first quarter by up to $500 million to $4.7 billion, and raising the operating expenses guidance by up to $105 million to $990 million. The adjusted guidance for loss per share was adjusted to approximately $1. The CEO of the company, Sanjay Mehrotra, stated at the time that the adjustment in operating expenses was mainly due to timing of research and asset sales.

Second quarter revenue exceeds expectations, with a maximum increase of nearly 50%, and EPS loss narrows by up to 80% compared to expectations

The semiconductor industry has faced headwinds in the past two years, and investors are hoping to see a turning point, otherwise the industry's situation will become even more challenging. Previously, the supply-demand balance and market pricing in the semiconductor market had improved, and it is expected that the situation of chip oversupply will come to an end. Moreover, due to the high-bandwidth storage chip demand brought by AI applications, some investors hope that Micron Tech can withstand the impact of the slow recovery in other end markets with its AI-related products.

Three months ago, when Micron Tech announced its fourth-quarter earnings report, it hinted that it would rely on AI products to drive profitability in the fiscal year 2024. However, at that time, it warned that the first-quarter earnings would not improve as analysts expected, disappointing these investors.

The earnings guidance for this week's Wednesday shows that Micron Tech's revenue in this quarter will grow more strongly on the basis of the previous quarter. It is expected that the revenue for the second quarter will be $5.3 billion, with a fluctuation range of $200 million, equivalent to a guidance range of $5.1 billion to $5.5 billion, a year-on-year growth of 38.2% to 49.1%, higher than analysts' expectations of $4.99 billion.

Micron Tech expects a adjusted EPS loss of $0.45 for the second quarter, with a fluctuation range of $0.07, equivalent to a loss of $0.38 to $0.52, a year-on-year narrowing of 72.8% to 80%, significantly lower than analysts' expectations of $0.76.

Memory chip prices will rise in the next two years, and high-bandwidth memory revenue for this fiscal year will reach hundreds of millions of dollars

When announcing its fourth-quarter earnings report at the end of September, Micron Tech stated that it will start producing high-profit AI chips using high-bandwidth memory from next year, and revealed that the capital expenditure for the fiscal year 2024 will be "slightly higher than" the level of the fiscal year 2023, and it is expected that the pricing and profitability of the company will improve in the fiscal year 2024.

At the release of this earnings report, Micron Tech stated that it is currently in the early stage of a multi-year growth phase driven by generative AI, and this technology will eventually change all aspects of enterprises and society. Data center infrastructure operators are shifting their budgets from traditional servers to more content-rich AI servers, so the demand for AI servers has been strong.

Micron Tech also stated that throughout the entire year of 2024, the company's pricing will continue to be strong, prices will continue to rise, driving the improvement of the company's financial performance. It is expected that the profitability will improve for the whole year of 2024, and it is also expected that the overall potential market size in 2025 will reach a record high.

Although memory prices have plummeted this year, Micron Tech CEO Mehrotra stated during the earnings conference call that memory prices will improve next year and further rise in 2025.

Micron Tech expects that in the first half of 2024, the chip supply in areas such as personal computers (PCs) and mobile devices will approach normal levels. In the fiscal year 2024, the revenue from high-bandwidth memory will reach "hundreds of millions" of dollars, and it will continue to grow in 2025. Micron Tech believes that 2024 will be a year of recovery, developing into a healthy supply and demand environment, while important new technologies such as HBM3E will experience strong growth.