Micron reports:
- EPS of $25.11 vs $20.6 estimate
- Sees 4Q at $31 vs $25.50 estimate
For some perspective, this was a $40 stock a year ago and is now making 75% of that in a quarter. Their margins are +85% as they've absolutely put the screws to the market on pricing as AI hyperscalers plow all the money they can into the build out.
Micron shares have essentially wiped out today's decline and are up 4% after hours.
Micron said it expects tight conditions to persist beyond calendar 2027 due to AI demand. They also said they're looking to make long-term deals with customers on pricing.
“Micron is investing at record levels in technology, products and supply to address our customers’ rapidly growing demand. We believe our multi-year Strategic Customer Agreements will significantly enhance the durability and predictability of Micron’s strong financial performance," said Sanjay Mehrotra, Chairman, President and CEO of Micron Technology.
He also said they currently do not have a line of sight to when memory supply will be able to catch up to demand.
Update, shares now up to $1148. The high this week was $1213 and that would imply a nearly 20% rally from here. It's been volatile but I don't see any reason to question the amount of AI capex spending in these results and comments.
The company is clearly a beneficiary of rapacious price gouging but that's capitalism and it's not like they're holding back supply. There's been unprecedented demand for their product and that's business. Reported revenue has quadrupled in the past year and that's almost all gone to the bottom line.
If you take the Q4 fiscal guidance of $31 and annualize it, that's $124 in EPS and it puts the shares at only 10x. The problem is that eventually supply will catch up to demand and memory prices will do what they always do in that situation: crater. When that's coming the earnings and pricing leverage will collapse.
That's why the company is looking to put in long-term agreements for memory but if you were a customer would you want to lock in at today's prices or anywhere near them?
