AI Hardware Buzz Continues As Micron Posts Strong Sales Outlook

(MENAFN- ValueWalk) The chipmaker now has the task of living up to its own expectations

Micron technology (NASDAQ:MU) stock gapped up 17% Thursday morning, easily powering its way above $110 after the firm posted strong quarterly results and guidance Wednesday afternoon.

Supported by the company's revenue growth, Micron's management emphasized the powerful demand for artificial intelligence (AI) enabled hardware.

Micron is a redoubtable contender among U.S.-based memory chip manufacturers. On Wednesday, the company released its financial results for the fourth quarter of fiscal 2024, which ended August 29.

Just as important as Micron's actual results are the company's forward revenue guidance. The market has sought assurance that Micron will continue to sell plenty of chips for AI-compatible desktop computers and servers - and as it turns out, the company's outlook kept investors in a cheerful mood.

If any critics had questions about Micron's ability to leverage the AI revolution into financial growth, the company answered those questions with its Q4-FY2024 report. Starting with the top line, Micron's revenue grew by an astounding 93% year over year to $7.75 billion, beating the analysts' consensus estimate of $7.65 billion.

Turning now to the bottom line, Micron reported adjusted (non-GAAP) earnings of $1.18 per share, marking a vast improvement over the company's adjusted loss of $1.07 per share in the year-earlier quarter. This result also beat Wall Street's call for earnings of $1.11 per share.

During a call with investors, Micron CEO Sanjay Mehrotra proudly cited“robust AI demand” when theorizing on what drove the firm's headline-grabbing 93% revenue growth, quelling skeptics' concerns about its standing among AI-hardware contenders.

“With the advent of AI, we are in the most exciting period that I have seen for memory and storage in my career,” Mehrotra added.

So far, so good - but what about the present and future? Encouragingly, Micron guided for current-quarter revenue of $8.7 billion plus or minus $200 million.

This would represent sequential growth over Micron's Q4-FY2024 revenue of $7.75 billion. Furthermore, the company's current-quarter sales outlook was higher than the analysts' consensus forecast of $8.3 billion.

In addition, Micron guided for current-quarter adjusted (non-GAAP) earnings of $1.74 per share plus or minus $0.08. This would signify substantial growth in comparison to Micron's fourth-quarter fiscal 2024 adjusted earnings of $1.18 per share.

Now, it's easy to see why the market reacted with such enthusiasm to Micron's quarterly results and forward guidance. Of course, there's no guarantee that Micron will live up to its sales outlook.

Nevertheless, investors derived comfort and assurance from Micron's optimistic guidance and Mehrotra's remarks about AI technology. Certainly, the post-earnings rally in Micron stock could be construed as a vote of confidence in the company.

Going forward, however, Micron now has the task of living up to its own stated expectations. For the current quarter, Micron hopes to enjoy significant sales and earnings growth.

That's easier said than done, and Micron could end up disappointing eager shareholders with the company's next quarterly report. For that reason, it's wise to exercise caution and maintain a reasonable position size if you intend to buy and hold Micron shares for the remainder of 2024.

MENAFN28092024005205011743ID1108724869