Micron Technology (NASDAQ:MU) Posts Better-Than-Expected Sales In Q1, Guides For Strong Sales Next Quarter

Jabin Bastian /
2023/12/20 4:15 pm EST

Memory chips maker Micron (NYSE:MU) beat analysts' expectations in Q1 FY2024, with revenue up 15.7% year on year to $4.73 billion. Guidance for next quarter's revenue was also optimistic at $5.3 billion at the midpoint, 4.9% above analysts' estimates. It made a non-GAAP loss of $0.95 per share, down from its loss of $0.04 per share in the same quarter last year.

Key Takeaways from Micron Technology's Q1 Results

Revenue and EPS beat. Revenue guidance for next quarter was comfortably ahead of expectations. Lastly, inventory levels shrunk and CEO commentary in the release was optimistic. “We expect our business fundamentals to improve throughout 2024, with record industry TAM projected for calendar 2025. Our industry-leading High Bandwidth Memory for data center AI applications illustrates the strength of our technology and product roadmaps, and we are well positioned to capitalize on the immense opportunities artificial intelligence is fueling across end markets.” Zooming out, this was a solid quarter. The stock is up 3.8% after reporting and currently trades at $81.68 per share.

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Micron Technology (MU) Q1 FY2024 Highlights:

  • Market Capitalization: $90.69 billion
  • Revenue: $4.73 billion vs analyst estimates of $4.63 billion (2% beat)
  • EPS (non-GAAP): -$0.95 vs analyst estimates of -$1.01
  • Revenue Guidance for Q2 2024 is $5.3 billion at the midpoint, above analyst estimates of $5.05 billion
  • Free Cash Flow was -$333 million compared to -$758 million in the previous quarter
  • Inventory Days Outstanding: 158, down from 172 in the previous quarter
  • Gross Margin (GAAP): -0.7%, down from 21.9% in the same quarter last year

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.

Memory Semiconductors

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 has been declining over the last three years, dropping by 1.8% on average per year. As you can see below, this was a weaker quarter for the company, with revenue growing from $4.09 billion in the same quarter last year to $4.73 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

Micron Technology had a decent quarter as its revenue grew 15.7% year on year, topping analysts' estimates by 2%. Micron Technology's growth flipped from negative to positive this quarter, news that will likely be well-received by shareholders.

Although Micron Technology returned to positive revenue growth this quarter, its management team expects revenue to decline 30.3% next quarter. On the other hand, Wall Street expects the favorable trend to continue, projecting 53.3% revenue growth over the next 12 months.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity 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 DIO came in at 158, which is 22 days above its five-year average. These numbers suggest that despite the recent decrease, the company's inventory levels are higher than what we've seen in the past.

So should you invest in Micron Technology right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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