Shares of the computer chipmaker Micron Technology Inc. were trading more than 16% higher in late trading Wednesday, after the company posted a surprise second-quarter profit and an outlook that vastly exceeded Wall Street analysts’ expectations.

The Street had anticipated a strong quarter from the company, but the strength of its results and its guidance blew analysts away. Today’s after-hours performance was one of the strongest in the company’s history, notably only the third time in the last 15 years that its stock has increased by more than 15% in a single day, with both of the previous two occasions coming in 2011.

The company reported a net profit of $793 million, swinging from a net loss of $2.3 billion in the year-ago period. Earnings before certain costs such as stock compensation came to 42 cents per share, up from a loss of $1.91 per share one year earlier, and well ahead of the consensus estimate, which called for a loss of 25 cents.

Revenue for the period rose 23% from a year earlier, to $5.82 billion, easily beating the Street’s target of $5.35 billion.

Micron President and Chief Executive Sanjay Mehrotra (pictured) hailed the company’s strong results, saying they are a testament to the team’s excellent execution on products, pricing and operations. “Our preeminent product portfolio positions us well to deliver a strong fiscal second half of 2024,” he added. “We believe Micron is one of the biggest beneficiaries in the semiconductor industry of the multi-year opportunity enabled by AI.”

Micron is a manufacturer of memory chips. It sells dynamic random-access memory chips, which are used in personal computers and data center servers, as well as flash memory drives that go into smaller devices such as USBs and smartphones, as well as solid-state drives found in modern laptops.

While Nvidia Corp. has grabbed most of the headlines for its graphics processing units, which power artificial intelligence workloads, Micron has also benefited from the industry’s growth, as its memory and storage are also required by AI systems.

It’s because of this that Micron is predicting more good things are on the way. For the third quarter of fiscal 2024, it said it’s looking for revenue of around $6.6 billion at the midpoint, well ahead of the Street’s consensus estimate of precisely $6 billion. The company is also looking for earnings of 17 cents per share at the midpoint, in excess of the Street’s call for earnings of just ine cents.

In a conference call with analysts, Mehrotra said the company has been boosted by “robust price increases” in its memory and storage products, which he put down to a tightening supply-demand landscape. He said the increased interest is being driven primarily by “strong AI server demand,” adding that this trend has resulted in “a positive ripple effect on pricing across all memory and storage end markets.”

Holger Mueller of Constellation Research Inc. said Micron’s swing from a loss to a profit exemplifies the roller-coaster nature of the chipmaking industry, with the company clearly on the way back up, thanks to the booming demand for AI hardware. “Clearly, Micron surprised investors with its strong revenue gain, showing that it stands to benefit from the rise of AI,” Mueller said. “But investors should be aware that Micron’s profit situation was sweetened by a tax provision benefit, and that its earnings forecast for the current quarter isn’t quite as rosy.”

Investors will have also noticed a vast improvement in Micron’s adjusted gross margin, which was logged at 20%, up from just 0.8% three months earlier and a negative 31.4% one year ago.

Photo: SiliconANGLE