Micron shares fall 5% after disappointing sales forecast

Micron shares fall 5% after disappointing sales forecast

Shares of Micron Technology (MU, Financial) fell 5% in Wednesday’s extended session after the company’s quarterly revenue and profit forecast came in below Wall Street estimates. The chipmaker’s dramatic failure was blamed on sluggish consumer-focused product demand for personal computers and smartphones, as well as oversupply in the dynamic random access memory (DRAM) market, which generates the bulk of its revenue.

Micron shares fall 5% after disappointing sales forecast
Micron shares fall 5% after disappointing sales forecast

Sanjay Mehrotra, CEO, said in an investor call that smartphone shipments are expected to grow moderately in fiscal 2025, with improvements in the second half of the year. However, demand for PCs and other consumer goods is weak, putting pressure on earnings. Gartner reported that global PC shipments fell 1.3% year-over-year to 62.9 million units in the third quarter of 2024.

For its part, Micron, also in line with estimates, reported first-quarter revenue of $8.71 billion, up 84% year over year on a consolidated basis. Demand for high-bandwidth memory (HBM) chips, which are crucial for artificial intelligence, has increased sequentially, while the company’s traditional markets such as PCs, smartphones and the automotive sector still cloud its prospects.

Analysts said a $1 billion drop in sales was a critical market issue. “But while the AI ​​data center portion of the business remained robust, sales in consumer markets were slower than expected, surprising the market,” said Bob O’Donnell, president of TECHnalysis Research.

The three global HBM chip suppliers are increasing their production in the hope of benefiting from AI-driven opportunities.

This article first appeared on GuruFocus.

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