Micron Technology is set to report fiscal third-quarter results on Wednesday, with investors closely watching whether the memory chip maker can justify its extraordinary stock market rally and rich valuation amid growing concerns over the sustainability of the artificial intelligence (AI) boom.
The earnings announcement comes just a day after Micron shares plunged 13%, their biggest single-day decline in more than a year, as investors took profits across AI-linked semiconductor stocks. The stock, however, rebounded more than 4% in pre-market trading on Wednesday.
What Wall Street Expects
According to Bloomberg consensus estimates, Micron is expected to report revenue of about $35.6 billion, reflecting a staggering 285% jump from the year-ago period.
Analysts expect adjusted earnings per share (EPS) of $20.49, well above the company's guidance issued three months ago and sharply higher than $1.91 reported a year earlier.
Consensus estimates also point to adjusted gross margins of around 86.8%, while EBIT is expected at approximately $27.8 billion.
Guidance Could Be The Biggest Trigger
While the quarterly numbers are expected to be exceptionally strong, investors are likely to focus more on Micron's outlook for the current quarter.
Any signs of slowing sales growth, weaker profitability or softening memory prices could trigger another sharp correction in the stock, particularly after its massive run-up over the past year.
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Management's commentary on demand from hyperscale data centres, supply constraints and capacity expansion plans will also be key.
AI Has Rewritten The Memory Cycle
The current memory cycle is unlike previous booms. Historically, memory chip companies experienced sharp swings driven by demand for personal computers and smartphones. This cycle, however, has been fuelled by unprecedented investments in AI infrastructure and data centres.
After suffering one of the industry's worst downturns in 2023, when Micron posted four consecutive quarters of negative gross margins and took significant inventory write-downs, memory manufacturers remained cautious about expanding capacity.
That conservative approach has created a supply shortage just as demand for high-bandwidth memory (HBM) and other AI-related chips has surged.
With little new manufacturing capacity expected before next year, memory prices remain near record highs.
Should Investors Buy The Dip?
Despite Tuesday's sharp correction, Wall Street remains overwhelmingly bullish on Micron.
According to Bloomberg data, 50 analysts recommend buying the stock, while only five have a Hold rating. The consensus price target implies upside potential of roughly 12.3%.
Earlier this week, Bank of America raised its price target on Micron to $1,500 from $950 while reiterating its "Buy" rating.
The brokerage also increased its estimate for the global semiconductor industry's total addressable market in 2030 to $2.7 trillion from $2.3 trillion, citing stronger-than-expected growth in AI memory, data centres and improving demand from the automotive and industrial sectors.
A Stunning Rally Faces Its Biggest Test
Micron has been among the biggest beneficiaries of the AI investment boom. The stock has surged more than 722% over the past 12 months and is up over 268% so far this year, making it one of the best-performing semiconductor stocks globally.
The rally has also lifted other storage and memory companies such as SanDisk, Seagate Technology and Western Digital.
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