Micron Tech beats revenue estimates on AI chip demand; shares fall after run-up

FILE PHOTO: A smartphone with a displayed Micron logo is placed on a computer motherboard in this illustration taken March 6, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

By Harshita Mary Varghese and Max A. Cherney

(Reuters) -Micron Technology beat estimates for third-quarter revenue on Wednesday driven by strong demand for its memory chips, but its current-quarter forecast disappointed investors who were upbeat about the chipmaker's performance in the AI boom.

Shares of the Idaho-based firm fell 7.2% in extended trading after it forecast fourth-quarter revenue largely in line with expectations. The stock had risen 13% this month, ahead of earnings, on investor optimism that Micron would benefit from AI-driven demand.

"Micron's largely inline forecast may have been good enough two or three months ago, but is not enough to meet current lofty hopes, especially after a 67% year-to-date rally in its share price," said Michael Schulman, chief investment officer at Running Point Capital.

The price move after hours is largely due to a weaker forecast than expected, said Ben Bajarin, analyst at Creative Strategies.

The company forecast revenue of $7.6 billion, plus or minus $200 million, for the current quarter, compared with an estimate of $7.6 billion, according to LSEG data.

Micron is one of the few providers of high-bandwidth memory chips used in the most advanced AI systems, allowing it to cash in on surging demand for the semiconductors.

The company's results usually set the tone for earnings in the chip sector, as Micron acts as an indicator of demand for various types of chips and end-markets.

"We are very optimistic because after Nvidia, Micron has a bigger exposure to AI growth than perhaps any other semiconductor company," Micron Chief Business Officer Sumit Sadana said in an interview.

The company said its HBM chips were "sold out" for the 2024 and 2025 calendar years. The chips are used in the AI processors designed by Wall Street darling Nvidia.

Micron reported revenue of $6.81 billion for the third quarter, compared with an estimate of $6.67 billion, according to LSEG data.

After Micron's earnings, shares of Nvidia dropped 1.4%, Advanced Micro Devices were down 0.7%, and Intel slipped 0.4%.

(Reporting by Harshita Mary Varghese in Bengaluru and Max A. Cherney in San Francisco; Editing by Pooja Desai and David Gregorio)