Micron Struggles to Meet Demand as Stock Soars

Micron Technology’s Strong Performance and Optimistic Outlook

Micron Technology's stock has been affected by the recent artificial-intelligence selloff, but the company's positive revenue guidance has brought a sense of optimism among investors. The memory-chip maker is projecting revenue of $18.7 billion for its second quarter, with a possible variation of $400 million. This forecast significantly exceeds the $14.3 billion analyst consensus from FactSet. Additionally, the company anticipates a gross margin of 67% for the current quarter.

CEO Sanjay Mehrotra believes that the business will continue to strengthen throughout fiscal 2026. Micron has benefited greatly from the AI boom, which has increased the demand for memory products. Due to the shortage of these products, prices have risen sharply, positively impacting Micron’s revenue and profitability.

The AI data-center expansion is driving more demand for memory and storage, and Mehrotra stated on the company’s earnings call that he expects "aggregate industry supply to remain substantially short of the demand for the foreseeable future." In the medium term, he added, Micron may only be able to meet half to two-thirds of the demand from several key customers due to the high demand for memory.

Shares of Micron rose 8% in Wednesday’s extended trading session. If the stock were to close in negative territory during Thursday’s regular session, it would be a concerning sign following such a strong forecast, according to Mizuho trading-desk analyst Jordan Klein.

Although Micron shares have increased by 168% this year, they fell for five consecutive sessions before Wednesday’s report, as investors became concerned about the health of the AI trade due to the financing needs of major players like Oracle and CoreWeave.

Strong Financial Results

On Wednesday, Micron reported fiscal first-quarter revenue of $13.64 billion, surpassing the $13 billion analyst consensus on FactSet. The company's adjusted earnings per share were $4.78, which also exceeded analysts’ expectations of $4.

Mehrotra highlighted “significant margin expansion at the company level and also in each of our business units.” According to Wedbush analyst Matt Bryson, memory-market conditions have improved in recent months, allowing Micron to benefit from higher average sales prices than previously anticipated. September and October saw steep gains in spot prices for dynamic random-access memory chips, and manufacturers raised prices “considerably for smaller customers.”

NAND chip manufacturers also benefited from higher prices, with more pronounced gains observed in October and November.

Future Prospects and Strategic Moves

During the earnings call, Mehrotra mentioned that Micron has finalized agreements on pricing and volumes for its entire supply of high-bandwidth memory for 2026, including its next-generation HBM4 chip. The company forecasts a $100 billion total addressable market for HBM in 2028, which is two years earlier than its previous outlook, as noted by Mehrotra.

HBM, a specialized type of DRAM, could soon be worth more than what the entire DRAM market was worth at the end of last year, according to the CEO. He also mentioned that the company is making progress in discussions with customers for multiyear contracts and is focused on maximizing production output. This includes ramping up technology nodes and investing in more clean room space to increase supply.