Micron Technology's (NASDAQ:MU) Q2 Sales Top Estimates, Inventory Levels Improve

Petr Huřťák /
2024/06/26 4:06 pm EDT

Memory chips maker Micron (NYSE:MU) reported Q2 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 81.5% year on year to $6.81 billion. The company expects next quarter's revenue to be around $7.6 billion, in line with analysts' estimates. It made a non-GAAP profit of $0.62 per share, improving from its loss of $1.43 per share in the same quarter last year.

Is now the time to buy Micron Technology? Find out by accessing our full research report, it's free.

Micron Technology (MU) Q2 CY2024 Highlights:

  • Revenue: $6.81 billion vs analyst estimates of $6.67 billion (2% beat)
  • EPS (non-GAAP): $0.62 vs analyst estimates of $0.53 (17.3% beat)
  • Revenue Guidance for Q3 CY2024 is $7.6 billion at the midpoint, roughly in line with what analysts were expecting
  • Gross Margin (GAAP): 26.9%, up from -17.8% in the same quarter last year
  • Inventory Days Outstanding: 156, down from 162 in the previous quarter
  • Free Cash Flow of $425 million is up from -$165 million in the previous quarter
  • Market Capitalization: $156.3 billion

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 unimpressive, averaging 4.2% annually. But as you can see below, this was a strong quarter for the company, with revenue growing from $3.75 billion in the same quarter last year to $6.81 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 81.5% year-on-year revenue growth beat analysts' estimates by 2%. This marks 3 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 accelerate, guiding to 89.5% year-on-year growth next quarter. Wall Street expects the company to grow its revenue by 66.4% over the next 12 months.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.

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 156, which is 18 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.

Key Takeaways from Micron Technology's Q2 Results

We were impressed by Micron Technology's strong gross margin improvement this quarter. We were also excited its revenue and EPS outperformed Wall Street's estimates along with its revenue and EPS guidance for the full year. Zooming out, we think this was a great quarter that shareholders will appreciate. Investors were likely expecting more as the stock was bid up going into earnings, however, and the stock traded down 4.1% to $136.50 immediately after reporting.

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.