The Short Version
Micron reported earnings on Wednesday night and the numbers are hard to believe.
The company sold $54.23 billion worth of chips in three months. In the same stretch last year it sold $11.32 billion. That's almost five times as much, at a company that has been around since the late 1970s.
Profit is the wilder number. Micron kept $37.7 billion as net income, up from $3.2 billion a year earlier. That works out to roughly $400 million of profit a day.
And this was a quarter Wall Street already expected to be great. Analysts had pencilled in $51.07 billion in sales, and Micron still beat that by more than $3 billion.
Who Is Micron Anyway
Micron makes memory chips. That's the part of a phone, a laptop or a server that holds data while the machine is working on it.
For most of its life this was a rough business to be in. One memory chip is a lot like another, so the handful of companies that make them compete on price. A good couple of years would end in a glut, and then everybody lost money.
Then AI came along. An AI chip needs a huge amount of memory and it needs to reach that memory fast. The fix is called high-bandwidth memory, or HBM, which is a stack of memory chips parked right next to the processor.
Only three companies can make HBM in large amounts, and Micron is the only big American one. Orders are running way ahead of what they can produce. When that happens the seller gets to name the price.
You can see it in the margins. Micron expects to keep about 86 cents of every sales dollar after the cost of making the chips. That's the kind of number you expect from a software company, and Micron runs factories.
Its data center and cloud businesses together brought in about $34.3 billion this quarter. A year ago they brought in $6.1 billion.
Why You Should Care If You Don't Own the Stock
Start with what it says about AI spending. Micron's biggest buyers are the companies building AI data centers, and they're still buying.
Micron now has $150 billion of signed contracts for chips it hasn't delivered yet. Three months ago that number was $100 billion. Nobody signs up for another $50 billion of something they plan to cut back on.
It also reaches your retirement account, whether you picked the stock or not. Micron is worth about $1.2 trillion now, so if you own an S&P 500 index fund you own a slice of it. Within the past year the stock was as low as about $180. This week it's above $1,000.
And it might be why your next laptop costs more. The rush to make AI memory has left less of the ordinary kind to go around, and Reuters reports that prices are up across the wider chip market. Ordinary memory is what goes in phones and laptops, so some of that cost can land on you.
The Part Worth Worrying About
Memory has always been a boom-and-bust business. High prices push every chipmaker to build more factories, and a few years later there's too much supply and prices fall hard. Micron lost billions of dollars in its 2023 fiscal year, which wasn't long ago.
Then there's who is betting against it. Michael Burry, the investor from The Big Short, has bought put options on Micron, along with Nvidia and Palantir. A put option pays off if the stock falls.
He could be wrong, and the company is clearly doing well today. His bet is that these prices can't last.
The stock's reaction says something too. Micron beat on sales, on profit and on its forecast, and the shares rose only a few percent on Thursday. They're still below their 52-week high of $1,255. When great news gets a small reaction, most of the good news was already in the price.
What to Keep an Eye On
The first thing is Micron's next report, which should land around December. The company told investors to expect about $61.5 billion in sales this quarter, and analysts had been thinking $57 billion. If it gets there, that's another record.
The second is memory prices, because this whole story runs on them staying high. If ordinary memory starts getting cheaper, that's the early sign that supply is catching up.
The third is big tech. Microsoft, Google, Amazon and Meta are the ones paying for all this. When they report earnings, listen for whether they keep raising their data center budgets.
For now, Micron says most of the HBM it can make in 2027 is already spoken for. That makes next year look locked in. 2028 is the open question.
Sources
- Sharecast: Micron Technology Q4 revenues almost quadruple
- Reuters via Investing.com: Micron forecasts quarterly revenue above estimates
- IBTimes UK: Micron fiscal Q4 revenue more than quadruples
- The Motley Fool: Micron's revenue more than quadrupled
This is commentary, not investment advice.