Micron Earnings Boosted by Data Center Sales and DRAM Shipments for the Cloud.

Memory chip maker Micron reported better than expected earnings after the close Monday boosted by data-center sales growing over 70% year over year from cloud demand and the resurgence of enterprise IT investment. Strong DRAM bit shipments for the cloud, graphics, PC and notebook, 5G and automotive markets continued.

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Micron Technology, Inc. NASDAQ: MU Reported Earnings After Close Monday

$2.16 Beat $2.10 EPS Forecast and $7.69 Beat $7.68 billion forecast in revenue

Earnings

  • Q1 2022 results after the bell; conference call at 4:30 p.m. ET
  • Net income of $2.31 billion, or $2.04 a share versus $803 million, or 71 cents a share, in the year-ago period.
  • Adjusted earnings, which exclude stock-based compensation expenses and other items, were $2.16 a share, compared with 78 cents a share in the year-ago period. Projected EPS was $2.10
  • Revenue rose to $7.69 billion from $5.77 billion in the year-ago quarter. Projected revenue: $7.68 billion

Market Reaction Micron Technology Inc NASDAQ: MU $87.60 ▲ $5.57 (▲ 6.79%) After Hours 

Micron Earnings Highlights

  • Micron compute and networking segment rose 34% to $3.41 billion in the first quarter,
  • Mehrotra said data-center sales “grew more than 70% year over year as a result of continued cloud demand and the resurgence of enterprise IT investment.”
  • $3.27 billion capital expenditures in the first quarter and expects $11 billion to $12 billion in capex spending in fiscal 2022.
  • DRAM sales made up 73% of revenue, or $5.59 billion, in the fiscal first quarter, for a 38% year-over-year gain
  • NAND sales made up 24% of revenue, or $1.89 billion, up 19% year over year.
  • Analysts on average had expected DRAM sales of $5.54 billion, and NAND sales of $2 billion, according to FactSet.

Outlook

Micron expects adjusted second-quarter net income of $1.85 to $2.05 a share on revenue of $7.3 billion to $7.7 billion. Analysts had forecast $1.84 a share on revenue of $7.29 billion.

“Data center is the largest market for memory and storage and we expect it to outpace the broader memory and storage market over the next decade,” said Sanjay Mehrotra, Micron’s chief executive, on the conference call with analysts.

“So, as the supply-chain shortages ease during the course of 2022, that will be a tailwind for demand for us for memory and storage products,” Mehrotra said. “We expect calendar-year 22 to be a strong year for data-center demand.”

Micron expects DRAM demand to rise in the low 20% range and in the high 30% range in 2021. For 2022, the company expects DRAM demand to rise in the mid-to-high teens, and NAND demand to rise about 30%.

Positives

Remote-working and online-learning trend amid the coronavirus crisis stoked demand for cloud storage and usage of online and e-commerce services globally, compelling data-center operators to enhance their capacities in order to accommodate the demand spike for cloud services. All these factors are likely to have aided Micron’s top line during the quarter under review.

A solid uptick in the DRAM bit shipments for the cloud, graphics, PC and notebook, 5G and automotive markets is anticipated to have been a positive during the quarter to be reported.

Cryptocurrency-related demand. Bitcoin prices have risen 5 fold trippled in the past year, Bitcoin coin has bounced from $3,000 to $67,000 in just over a year. This should garner some positive guidance numbers in that area.

Negatives

Micron’s heavy dependence on China is a headwind due to the ongoing trade war between the United States and China. Restrictions on exports to Huawei might have hurt top-line growth of the memory chip maker.

A higher mix of lower-margin NAND, coupled with low memory prices and minimal decline in manufacturing costs, is expected to have strained margins.

Higher prequalification and labor expenses are likely to have negatively impacted Micron’s bottom-line performance.

AMD has adapted from China being the prime revenue driver for the company, accounting for over 50% of its topline in the past. While it does not make semiconductors in China, numerous assembling and packaging works take place in the country. $MU was forced to shift at least a part of its Chinese operations to assembly plants in Singapore. Micron results were driven by strong demand for its DRAM and NAND chips across markets

About Micron

Micron Technology is a world leader in innovative memory solutions that transform how the world uses Information. Through their global brands, Micron, Crucial and Ballistix they offer the industry’s broadest portfolio, and are the only company that manufactures today’s major memory and storage technologies: DRAM, NAND, NOR, and 3D XPoint™ memory

Micron specializes in DRAM and NAND memory chips. DRAM, or dynamic random access memory, is the type of memory commonly used in PCs and servers, while NAND chips are the flash memory chips used in smaller devices like smartphones and USB drives. Like most semiconductors, memory chips have been in great demand during the COVID-19 pandemic, and prices have shot higher.

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