Micron Technology (NASDAQ:MU) Misses Q4 Analysts' Revenue Estimates

Adam Hejl /
2022/09/29 4:15 pm EDT

Memory chips maker Micron (NYSE:MU) fell short of analyst expectations in Q4 FY2022 quarter, with revenue down 19.7% year on year to $6.64 billion. Guidance for the next quarter also missed analyst expectations with revenues guided to $4.25 billion at the midpoint, or 25.2% below analyst estimates. Micron Technology made a GAAP profit of $1.49 billion, down on its profit of $2.72 billion, in the same quarter last year.

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Micron Technology (MU) Q4 FY2022 Highlights:

  • Revenue: $6.64 billion vs analyst estimates of $6.77 billion (1.95% miss)
  • EPS (non-GAAP): $1.45 vs analyst estimates of $1.37 (5.82% beat)
  • Revenue guidance for Q1 2023 is $4.25 billion at the midpoint, below analyst estimates of $5.68 billion
  • Free cash flow of $196 million, down 85% from previous quarter
  • Inventory Days Outstanding: 151, up from 111 previous quarter
  • Gross Margin (GAAP): 39.4%, down from 47.8% same quarter last year

“In fiscal 2022, Micron generated record revenue of $30.8 billion and delivered our sixth consecutive year of positive free cash flow, allowing us to return a record $2.9 billion to our shareholders,” said Micron Technology President and CEO Sanjay Mehrotra.

Founded in the basement of a Boise, Idaho dental office in 1978, Micron (NYSE:MU) is a leading provider of memory chips used in thousands of devices across mobile, data centers, industrial, consumer, and automotive markets.

The rapid growth in data generation and the need to support increases in processing power for everything from consumer devices to data center servers are driving the demand for memory chips. From the content delivery networks and edge computing to the cloud, data storage is a key component underpinning the global technology architecture. On top of that, secular growth drivers like machine learning and the boom in media-rich digital content are further accelerating the need for storage. Like all semiconductor segments, memory makers are highly cyclical, driven by supply and demand imbalances and exposure to consumer product cycles.

Sales Growth

Micron Technology's revenue growth over the last three years has been unremarkable, averaging 12.9% annually. Last year the quarterly revenue declined from $8.27 billion to $6.64 billion. Semiconductors are a cyclical industry and long-term investors should be prepared for periods of high growth, followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

Micron Technology Total Revenue

It was a difficult quarter for Micron Technology, with revenue declining by 19.8%, missing analyst estimates by 1.96%. Micron Technology's growth turned to declines this quarter, signaling that the current downcycle is deepening.

Revenue growth went from positive to negative this quarter, and Micron Technology expects it to stay negative next quarter with an estimated decline of 44.8% YoY, and analysts think the declines will continue, with next twelve months estimated at 20.3% declines.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise the company may have to downsize production.

Micron Technology Inventory Days Outstanding

This quarter, Micron Technology’s inventory days came in at 151, 35 days above the five year average, suggesting that that inventory has grown to higher levels than what we used to see in the past.

Key Takeaways from Micron Technology's Q4 Results

With a market capitalization of $56.2 billion, more than $9.33 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

It was less good to see that the revenue growth was quite weak and the revenue guidance for the next quarter missed analysts' expectations. Overall, it seems to us that this was a complicated quarter for Micron Technology. The company is flat on the results and currently trades at $49.9 per share.

Micron Technology may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.