Micron Earnings Soar, But Weak PC And Phone Demand Keep It Grounded

Muted PC and phone demand continues to weigh on memory chip pricing, prompting Bank of America Securities to maintain a Neutral rating on Micron Technology MU, even as the company posts blowout earnings and bullish guidance.

Analyst Vivek Arya maintained Micron Technology with a Neutral and raised the price target from $84 to $140 on Thursday.

Micron reported third-quarter revenue of $9.3 billion, up roughly 16%, topping the consensus estimate of $8.87 billion. The company reported third-quarter adjusted earnings of $1.91 per share, beating analyst estimates of $1.60 per share.

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Micron expects fourth-quarter revenue of $10.7 billion, plus or minus $300 million, versus estimates of $9.88 billion. The company anticipates fourth-quarter adjusted earnings of $2.50 per share, plus or minus 15 cents, versus estimates of $2.01 per share.

Micron Technology is the last remaining pure-play U.S.-based memory company and is the third-largest supplier of memory chips including Dynamic Random Access Memory (DRAM), Not AND (NAND). Micron’s chips support disruptive trends across artificial intelligence, 5G, machine learning, and autonomous vehicles, as per Arya.

The rerating reflected improved DRAM outlook and continued High Bandwidth Memory (HBM) ramp, Arya noted.

According to the analyst, Micron now expects the fiscal fourth-quarter gross margin to be 42.0%, above the fiscal third-quarter’s guided 36.5%, and the fiscal first-quarter gross margin could expand further.

Arya attributed the gross margin beat to a robust pricing environment and an improving product mix.

Importantly, management expects to exit fiscal 2025 with tight DRAM inventories, significantly reduced NAND inventories, and overall company inventory near the target 120-day level, per the analyst, a substantial sequential improvement.

On the AI side, Micron’s HBM opportunities continue to expand, now shipping HBM3e 12-high to 4 customers (Graphics Processing Unit (GPU) or Application-Specific Integrated Circuit (ASIC), and the 12-high will likely crossover 8-high by the fiscal fourth-quarter. At 20-25% share of the $35 billion calendar 2025 Total Addressable Market (TAM), Arya expects Micron HBM to reach $2.4-2.5 billion exiting the fiscal first quarter.

Overall, the analyst raised calendar 2025-27E sales by 4-6% and EPS by 13-23%. However, Arya reiterated Neutral as NAND pricing remains uncertain and startup cost headwinds to gross margins remain into calendar 2026, limiting visibility beyond the near term.

Arya projected fourth-quarter sales of $10.71 billion (prior $9.83 billion) and adjusted EPS of $2.50 (prior $1.82).

Price Action: MU stock is trading lower by 1.19% to $125.70 at last check Thursday.

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