Micron forecasts blowout earnings on booming AI market, shares rise 7.8%

By Stephen Nellis and Juby Babu

Dec 17 (Reuters) – Micron Technology forecast second-quarter adjusted profit at nearly double what Wall Street analysts expected on Wednesday, buoyed by soaring prices for memory chips spurred by tight supplies and booming demand from artificial intelligence data centers.   

Shares of the Boise, Idaho-based company were up 7.8% in extended trading after the forecast.

Micron said it expected adjusted profit of $8.42 per share, plus or minus 20 cents, versus analyst estimates of $4.78 per share, according to LSEG data.

In a conference call with investors, Micron CEO Sanjay Mehrotra said he expects memory markets to remain tight past 2026 and that in the medium term, Micron expects to meet only half to two-thirds of demand from several key customers. He said the company is negotiating multiyear contracts with key customers and will increase its 2026 capital expenditure plans to $20 billion from an earlier $18 billion estimate.

Micron’s chips are fundamental components in everything from data center servers and personal computers to smartphones and vehicles. But it is also one of only three major suppliers, along with South Korea’s SK Hynix and Samsung Electronics, of what are known as high-bandwidth memory (HBM) chips, essential for training and deploying generative AI models.

“AI-related demand remains the biggest driver for Micron,” said Summit Insights analyst Kinngai Chan. “It not only drives better margin for the company, but also helps non-AI product margins as it prioritizes its supply towards AI-related demand.”

The company is seeing strong demand from data centers, fueled by increased spending by large-scale cloud service providers that offer hardware and cloud capacity as services. 

Micron has been adjusting its production facilities to focus on demand from AI data centers. Earlier this month, the company said it would dissolve its business of selling memory chips directly to consumers via the “Crucial” brand name.

“Micron has strategically repositioned its production capacity for the AI sector,” eMarketer analyst Jacob Bourne said in a statement. “As AI demand continues to soar and along with it key components, Micron will be among the winners that can supply those components, which include memory chips.”

The company projected revenue for the current quarter at $18.70 billion, plus or minus $400 million, compared with analysts’ average estimate of $14.20 billion, according to data compiled by LSEG.

For the just-ended fiscal first quarter, Micron said it had sales and adjusted profit of $13.64 billion and $4.78 per share, compared with analyst estimates of $12.85 billion and $3.95 per share, according to LSEG data.

(Reporting by Juby Babu in Mexico City and Stephen Nellis in San Francisco; Editing by Shinjini Ganguli and Matthew Lewis)