Buy Micron Technology (MU) Stock for AI Growth After Record Quarterly Sales?
Reporting strong results for its fiscal third quarter on Wednesday evening, Micron Technology
MU is at the top of an expansive list of companies that are experiencing AI-driven growth thanks to high demand for semiconductor memory solutions.
Along with other major players in the semiconductor and memory chip space, such as Marvell Technology
MRVL and Qualcomm
QCOM, Micron is benefiting from the growing demand for high-performance computing components for AI, data centers, and mobile devices.
Micron's Record Quarterly Sales
Seeing sales of AI-related products more than double, Micron's Q3 sales came in at a quarterly record $9.3 billion. This was a 37% increase from Q3 sales of $6.81 billion in the comparative quarter and comfortably exceeded estimates of $8.83 billion by 5.27%.
Micron's high-bandwidth memory (HBM) business stood out, with sales of $1.5 billion marking nearly 50% sequential growth, fueled by demand for AI computing applications. HBM sales helped drive record DRAM (Dynamic Random-Access Memory) revenue of $7.1 billion, as Data Center-specific revenue more than doubled from the surge in memory demand for AI workloads.
Micron's Q3 EPS & Other Quarterly Highlights
On the bottom line, Micron's Q3 earnings skyrocketed 208% to $1.91 per share ($2.18 billion) from EPS of $0.62 a year ago and crushed expectations of $1.59 a share by 20%.
Improved pricing and product mix were the main drivers, with Micron vanquishing a 39% gross margin, compared to 28% in the prior year quarter. Other noteworthy highlights included a six-year peak in free cash flow at $1.95 billion.
Micron's Positive Guidance
Supported by AI momentum, Micron CEO Sanjay Mehrotra stated the company is on track to deliver record revenue for the full fiscal year. Notably, Micron expects Q4 sales to be $10.7 billion (+/-$300 million), which came in above the current Zacks Consensus of $9.9 billion. Even better, Micron's forecast for Q4 EPS of $2.50 (+/- 15 cents) was well above expectations of $2.02.
Bottom Line
There was a lot to like about Micron's strong Q3 results, and there could very well be more upside for MU shares, which are up nearly +50% this year. However, following such an extensive year-to-date rally, Micron stock currently lands a Zacks Rank #3 (Hold). To that point, more upside will largely depend on what will hopefully be a positive trend of earnings estimate revisions (EPS) in the coming weeks, given Micron's AI growth and reassuring guidance.
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