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Micron Technology (NASDAQ:MU) Q3 Sales Beat Estimates, Stock Soars


Jabin Bastian /
2024/09/25 4:07 pm EDT

Memory chips maker Micron (NYSE:MU) reported Q3 CY2024 results exceeding the market’s revenue expectations, with sales up 93.3% year on year to $7.75 billion. On top of that, next quarter’s revenue guidance ($8.7 billion at the midpoint) was surprisingly good and 6% above what analysts were expecting. Its non-GAAP profit of $1.18 per share was also 5.9% above analysts’ consensus estimates.

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Micron Technology (MU) Q3 CY2024 Highlights:

  • Revenue: $7.75 billion vs analyst estimates of $7.65 billion (1.4% beat)
  • Adjusted Operating Income: $1.75 billion vs analyst estimates of $1.63 billion (7.1% beat)
  • EPS (non-GAAP): $1.18 vs analyst estimates of $1.11 (5.9% beat)
  • Revenue Guidance for Q4 CY2024 is $8.7 billion at the midpoint, above analyst estimates of $8.21 billion
  • EPS (non-GAAP) guidance for Q4 CY2024 is $1.74 at the midpoint, above analyst estimates of $1.54
  • Gross Margin (GAAP): 35.3%, up from -10.8% in the same quarter last year
  • Inventory Days Outstanding: 161, up from 156 in the previous quarter
  • Free Cash Flow was $323 million, up from -$1.21 billion in the same quarter last year
  • Market Capitalization: $104.2 billion

Company Overview

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 growth over the last three years has been unremarkable, averaging 8.9% annually. But as you can see below, this was a strong quarter for the company, with revenue growing from $4.01 billion in the same quarter last year to $7.75 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 fantastic quarter as its 93.3% year-on-year revenue growth beat analysts’ estimates by 1.4%. This marks 4 straight quarters of growth, implying that Micron Technology is in the middle of its cycle, as a typical upcycle generally lasts 8-10 quarters.

Micron Technology’s management team believes its revenue growth will continue, guiding to 84.1% year-on-year growth next quarter. Analysts expect the company to grow its revenue by 50.6% 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 161, which is 22 days above its five-year average, suggesting that the company’s inventory has grown to higher levels than we’ve seen in the past.

Key Takeaways from Micron Technology’s Q3 Results

This was a classic 'beat and raise' quarter from Micron. The company beat across, including revenue, operating profit, and EPS. Additionally, guidance for next quarter's revenue and EPS also exceeded expectations. A minor blemish was that its inventory levels increased. Zooming out, we think this was a very solid quarter. The stock traded up 9.2% to $104.70 immediately after reporting.

Micron Technology had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment.If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings.We cover that in our actionable full research report which you can read here, it’s free.