Strong chip demand helps Micron crush earnings & revenue forecasts

Strong chip demand helps Micron crush earnings & revenue forecasts

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Computer chipmaker Micron Technology Inc. made gains in late trading today after posting second quarter revenue and profit that topped Wall Street’s expectations, following that with a higher outlook too.

The company reported a net income of $2.26 billion, with earnings before certain costs such as stock compensation coming to $2.14 per share. Revenue for the period rose 26% to $7.8 billion. That was better than expected, with Wall Street looking for earnings of just $1.98 per share on sales of $7.53 billion.

Micron’s stock was up 4% in after-hours trading, following a gain of almost 3% in the regular session.

Micron Chief Executive Sanjay Mehrotra (pictured) said the company’s “excellent” results exceeded the high end of the company’s guidance on both revenue and margin and were a reflection of its “strong execution”.

“We’re leading the industry in technology across DRAM and NAND, and our product portfolio momentum is accelerating,” Mehrotra said. “With outstanding first half results, Micron is on track to deliver record revenue and robust profitability in fiscal 2022.”

Micron specializes in two kinds of computer chip, namely dynamic random-access memory, which is used in personal computers and servers, and NAND flash memory chips for smaller devices such as smartphones and USB drives, for example. Both products have been in great demand since the onset of the COVID-19 pandemic, and prices have jumped much higher.

That has led to a healthy boost in Micron’s gross profit margin, which came in at 47.8%, up from 32.9% in the same period one year earlier. The margin is an important metric that reveals what a business made after paying for the direct cost of doing business, which can include labor, materials and other direct production costs.

In contrast to fears raised last year that we might see a slowdown in demand for DRAM and NAND, Micron today offered a forecast that suggests buyer’s appetites for its products will in fact, likely increase. Micron said it expects demand for DRAM to rise by the “mid to high teens” while demand for NAND products will rise by around 30%. The company insisted there is a “healthy supply-demand balance” for both types of product.

The company also revealed that it expects its cost reductions to outpace the rest of the chip industry this year, thanks to the “exceptionally well executed ramp of our world class 1-alpha DRAM and 176-layer NAND nodes.” That’s a change from an earlier prediction from three months ago, when Micron said its cost reductions will only be “competitive” with the rest of the industry.

Clearly, Micron is in a confident mood and that was reflected in its guidance. For the third quarter, it said it sees earnings per share of between $2.36 and $2.56, with sales expected to land between $8.5 billion to $8.9 billion. Wall Street had earlier offered a forecast of just $2.24 per share in earnings and $8.13 billion in sales.

Micron added that its gross profit margin should fall somewhere in a range of 47% to 49%.

Photo: SiliconANGLE

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