Micron Technology’s Q4 Earnings Surprise: A Home Run Driven by AI
Micron Technology, Inc. (MU) defied analyst expectations with a stunning fiscal fourth-quarter 2024 earnings report, nearly doubling its year-over-year revenue thanks to a surge in demand fueled by the booming artificial intelligence (AI) sector. This remarkable performance comes as a surprise following recent analyst downgrades and lowered price targets, highlighting the unpredictable nature of the tech market and the significant impact of AI-driven growth. The strong results not only benefited Micron but also boosted other memory device makers, signaling a positive shift in the sector.
Key Takeaways: Micron’s AI-Powered Success
- Record-breaking revenue: Micron’s Q4 revenue soared to $7.75 billion, a 93.3% YoY increase, exceeding analyst estimates by over $100 million.
- AI-driven growth: The substantial revenue increase is primarily attributed to robust demand for data center DRAM products and high-bandwidth memory (HBM) chips, crucial components for AI applications.
- Positive future outlook: Micron raised its guidance for Q1 2025, projecting record revenue and significantly improved profitability, solidifying its positive outlook.
- MU stock performance: The strong earnings propelled MU stock, potentially forming a cup-and-handle pattern, suggesting further upward potential.
- Analyst upgrades and price targets: Despite previous downgrades, analysts are now increasingly bullish on Micron, with many raising their price targets significantly.
Micron’s AI-Fueled Revenue Surge
The market had anxiously awaited Micron’s demonstration of benefitting from the AI boom, a trend already evident in the stellar performance of companies like NVIDIA and Oracle. However, Micron’s previous earnings and guidance had been lackluster, leading to widespread analyst skepticism and concerns about the impact of slumping spot DRAM prices and inventory gluts within its non-AI segments (PCs and smartphones). These concerns fueled several downgrades, casting doubt on whether the AI market alone could offset the weaknesses in other areas.
Micron’s Q4 results decisively countered this negativity. The company reported earnings per share (EPS) of $1.18, exceeding consensus estimates by 7 cents. More impressively, revenue jumped 93.3% year-over-year (YoY) to $7.75 billion, considerably surpassing analyst projections. The non-GAAP gross margin also saw a substantial increase, rising to 36.5% from 28.1% sequentially. This impressive performance clearly demonstrates the significant impact of AI-driven demand on Micron’s bottom line.
The Dominance of Data Centers and HBM
The core driver of Micron’s success was the robust demand for its data center DRAM products and, particularly, its high-bandwidth memory (HBM) chips. These HBM chips are specifically designed for demanding AI applications such as computer vision, natural language processing (NLP), and machine learning. The demand was so strong that Micron’s HBM production is already booked through 2025. This high demand underscores the crucial role Micron plays in the rapidly expanding AI hardware market. The strategic acquisition of two Taiwan factories was designed to expand production to meet this high demand.
Micron’s CEO, Sanjay Mehrotra, expressed considerable optimism, stating, “We are entering fiscal 2025 with the best competitive positioning in Micron’s history. We forecast record revenue in fiscal Q1 and a substantial revenue record with significantly improved profitability in fiscal 2025.” This confident outlook reinforces the belief that Micron’s AI-driven growth trajectory is sustainable. The company also achieved record NAND revenue, exceeding $1 billion for the first time, largely driven by data center and SSD (solid-state drive) sales.
Upward Revision of Guidance and Stock Performance
Reflecting the strong Q4 performance and optimistic outlook, Micron significantly raised its guidance for the fiscal first quarter of 2025. The company anticipates EPS ranging from $1.66 to $1.82, surpassing the consensus estimate of $1.52. Similarly, projected revenue for Q1 2025 is between $8.50 billion and $8.90 billion, outpacing the $8.27 billion consensus forecast. Non-GAAP margin is projected to be approximately 39.5% +/- 1%. This significantly enhanced guidance demonstrates a strong degree of confidence in the company’s continued growth and profitability.
Micron EVP Manish Bhatia highlighted the continued growth of traditional servers but emphasized the explosive growth potential in AI servers. He projects robust demand for AI servers in 2025, driven by the continuous momentum in the AI sector. Micron’s strengthened position with its high-capacity HBM (128 gigabyte DIMMs) is a significant factor contributing this positive outlook, as these chips are used extensively in both training and inferencing tasks within enterprise and cloud AI servers.
Technical Analysis: MU Stock’s Potential
The strong earnings report has had a significant impact on MU stock, potentially creating a classic cup-and-handle pattern on its chart. This pattern, characterized by a period of consolidation followed by a breakout, can be a bullish indicator. The “cup” represents a period of consolidation after a price decline, while the “handle” is a subsequent minor pullback before a significant price increase. Micron appeared to have completed that pattern.
MU’s chart showed a cup formation with a lip line around $110.39, followed by a decline to a swing low of $84.91, coinciding with pre-earnings analyst downgrades. The stock then rallied to $96.18 before the earnings release, forming a divergence bottom on the daily RSI (Relative Strength Index). Post-earnings gap increased the stock to the $110.58 level.
The cup and handle formation suggests potential upside. The stock may use the $110.39 cup lip line as support, or it might pull back to form a handle before a potential breakout above that level. The RSI has risen to the 70-band, indicating overbought conditions. Fibonacci (Fib) pullback support levels are at $110.39, $104.48, $98.52, and $89.97, offering potential entry points for investors. The average consensus price target for MU is $146.04, with the highest analyst price target reaching $225.00. Analyst ratings lean very heavily in favor of MU (25 Buy, 1 Hold, 1 Sell).
Given the significant price gap after earnings, chasing the stock is risky. More conservative bullish investors may consider buying on pullbacks to various Fibonacci levels. Strategies like using cash-secured puts to capitalize on elevated premiums or employing a wheel strategy (combining covered calls with buying dips) can enhance returns while mitigating risk. Also one should not ignore the 0.41% annual dividend yield.
The article “Micron Stock Soars as AI Demand Fuels Big Q4 Earnings Beat” first appeared on MarketBeat.
