Micron Earnings: We Raise Our Valuation as HBM Highlights a Blowout Quarter

Key Morningstar Metrics for Micron Technology

• Fair Value Estimate: $115
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of Micron Technology’s Earnings

Micron Technology’s MU May-quarter results handily beat management guidance for growth and profitability. Revenue rose 37% year over year to $9.3 billion, inclusive of 50% sequential growth for high-bandwidth memory. August-quarter guidance implies continuing strong growth.

Why it matters: Micron’s impressive results and guidance came well above our model. Artificial intelligence is benefitting Micron on multiple fronts, with strong demand from AI chipmakers for its HBM and rising DRAM content in smartphones and PCs. Strong demand is keeping pricing robust, too.

• HBM revenue rose by more than 50% sequentially for the second straight quarter, and we estimate nearly $2 billion in HBM revenue in the quarter (implying 20% of total firm revenue). We believe Micron is on track for its goal of 20% HBM market share exiting fiscal 2025.
• HBM offers higher pricing and better profitability than Micron’s traditional DRAM, so we see strong AI demand boosting both growth and profitability over the medium term.

The bottom line: We raise our fair value estimate for no-moat Micron to $115, from $100, after raising our HBM and total DRAM growth estimates over the next five years. Shares still look overvalued to us—in our view, they don’t reflect the long-term cyclicality we expect from Micron’s results.

• We expect a tremendous cyclical upswing over the next two to three years, but we don’t think AI is eliminating cyclicality for Micron. While demand looks strong, a misalignment of supply with demand in the long term can lead to a cyclical downswing, as investors saw in 2023.
• We now expect $6 billion in HBM revenue for Micron in fiscal 2025 (ending in August,) rising toward $30 billion by the end of the decade. Our forecast implies HBM quickly becoming Micron’s most meaningful driver in the next three years.