Micron Technology Inc.’s outlook for the current quarter came in some way short of expectations, stoking fears about the near-term dynamics of the memory chip market and sending the company’s stock way down in extended trading late today.

The disappointing guidance came on the back of first-quarter financial results that were much more encouraging. The company reported earnings before certain costs such as stock compensation of $1.79 per share, beating Wall Street’s consensus estimate of $1.76 per share. Revenue for the period climbed 84% from a year earlier, to $8.7 billion, in line with the analyst forecast.

All told, Micron delivered a net profit for the quarter of $1.87 billion, a stark turnaround from the $1.23 billion loss it posted in the year-ago period.

Still, investors were much more concerned about Micron’s guidance for the coming quarter, which didn’t look nearly as good. The company is guiding for around $7.9 billion in sales, give or take $200 million, well short of the $8.9 billion analyst estimate.

In a conference call with analysts, Micron executives explained the outlook on a slower-than-expected personal computer upgrade cycle, as well as softness in the automotive and industrial chip markets.

“NAND industry market conditions are weak, weaker than we had expected,” Micron Chief Financial Officer Mark Murphy said on the call. He added that the company is also seeing weaker demand in PCs, smartphones and other consumer segments, resulting in significant inventory adjustments by its customers.

That explains why Micron is also forecasting earnings of just $1.33 to $1.53 per share for the second quarter, well below the $1.91 analyst view. In addition, the company is looking at a 38.5% adjusted gross margin, down a percentage point on a sequential basis.

Micron Chief Executive Sanjay Mehrotra (pictured) expressed confidence, saying that although consumer-focused markets are weak in the near term, the company sees growth returning in the second half of its fiscal year.

“We continue to gain share in the highest margin and strategically important parts of the market and are exceptionally well-positioned to leverage AI-driven growth to create substantial value for all stakeholders,” Mehrotra added.

Despite the CEO’s bullish longer-term outlook, investors were largely unimpressed. They bailed on the company, sending its stock down more than 14% in the after-hours session, adding to a 4% drop during regular trading hours.

Micron is a leader in the market for dynamic random-access memory chips, which are used in PCs and data center servers. It also sells flash memory chips, which are found in smartphones and solid-state drives. In addition, it has become a major player in the market for high-bandwidth memory, which is increasingly used in artificial intelligence servers.

Revenue from HBM sales more than doubled on a sequential basis in the quarter, Mehrotra noted. Moreover, he said gross margins relating to HBM products were “significantly accretive to both DRAM and overall company gross margins.”

The company believes sales in the overall market for HBM will exceed $30 billion in calendar year 2025, up from the $25 billion forecast it provided in September. Because of this, Micron anticipates it will see “multiple billions” of HBM revenue in fiscal 2025.

The growth in HBM chip sales meant that more than half of Micron’s revenue came from its data center segment, the first time it has done so.

The report had been highly anticipated because the stocks of rival companies in the chip sector have made big moves lately, fueled by Broadcom Inc.’s strong outlook last week. Investors are looking beyond Nvidia Corp., trying to find other chipmakers that might benefit from the AI trend, but doing so is proving to be a challenge. Micron’s problem is that, although it’s benefiting from AI, it’s much more exposed to other markets.

Despite today’s drop, Micron’s stock is up more than 21% in the year to date, ahead of the broader iShares Semiconductor exchange-traded fund, which has gained just 12% in the same period.

Photo: SiliconANGLE