Chipmaker Micron Technology Inc. reported solid third-quarter financial results today, beating expectations on earnings and revenue, but its topline forecast for the current quarter was only in line with analyst’s projections, disappointing investors.

The company reported quarterly earnings before certain costs such as stock compensation of 62 cents per share, beating Wall Street’s consensus estimate of 48 cents by a wide margin. Revenue for the period jumped 44%, to $6.81 billion, above the Street’s target of $6.67 billion.

Those results meant a sharp turnaround for Micron’s bottom line. The company reported net income for the quarter of $332 million, compared with a loss of more than $1.9 billion in the year-ago quarter.

Despite the strong results, Micron’s stock was down more than 7% in after-hours trading on the back of its tepid guidance. For the fourth quarter, Micron officials said they’re looking at around $7.6 billion in revenue at the midpoint, with earnings of $1.08 per share. Wall Street had forecast sales of $7.59 billion and earnings of $1.02 per share.

The after-hours stock drop suggests investors were hoping for more upside given that Micron’s stock has been on the rampage lately. Prior to today, its shares had gained 67% in the year to date, and had risen 13% this month.

Those gains came because the company is widely expected to benefit from the enterprise demand for artificial intelligence infrastructure. Micron is one of only a handful of companies that sells the high-bandwidth memory chips that are essential for advanced AI models. Whereas Nvidia Corp.’s graphics processing units provide the actual processing power for AI systems, Micron’s dynamic random-access memory chips are just as essential, providing the memory and storage capacity those workloads need.

Officials said the company saw DRAM chip revenue increase by 13% sequentially, to $4.7 billion, in line with the Street’s consensus. Revenue from its NAND memory chips, which are used in smaller devices such as USBs and smartphones, was up 32% sequentially at $2.1 billion, beating the Street’s estimate of $1.9 billion.

Micron Chief Executive Sanjay Mehrotra (pictured) told investors that the company “drove robust price increases” during the quarter, adding that this “resulted in increased profitability across all our end markets.”

Holger Mueller of Constellation Research Inc. said Micron delivered respectable revenue growth, but its real improvement lay in its reduction of the cost of goods sold and its overall cost discipline, which helped to drive the $300 million-plus profit.

“Micron would have shown a stellar profit in excess of this, but tax provisions meant it could only deliver less than half what it made during the previous quarter, when its bottom line was boosted by tax benefits,” the analyst said. “But if Micron can deliver a strong fourth quarter it can finish the year with a profit, which would be a significant turnaround in just one full year. Demand for DRAM and flash memory is strong and growing, and that means it’s execution time for Sanjay Mehrotra and his team.”

For his part, Mehrotra told analysts that he’s confident the company will show significant growth in the next fiscal year. On a conference call, he explained that the company began expanding shipments of DRAM chips during the last quarter, resulting in more than $100 million in “margin-accretive revenue” with its most advanced chip, the HBM3E. “Come next fiscal year, annual high-bandwidth memory revenue could total multiple billions of dollars,” Mehrotra promised.

He added that the company sees lots of room for “upbeat pricing trends going forward,” thanks to booming demand from its data center customers. Those trends are also “causing tightness on our leading-edge nodes,” he said, which means that the company expects to see sustained pricing improvements throughout the remainder of the calendar year.

Although demand for personal computers and smartphones is only remaining steady, Mehrotra said he expects that this will pick up in 2025 with the launch of new generations of AI-enabled products. That’s in line with analyst’s predictions about the growing demand for so-called “AI PCs” that can process artificial intelligence workloads locally.

Mehrotra said this demand will “create a favorable setup that gives us confidence we can deliver a substantial revenue record in fiscal 2025, with significantly improved profitability.”

Photo: SiliconANGLE