By Rishi Kant
(Reuters) – Micron Technology (UM) on Wednesday forecast quarterly revenue and profit below Wall Street estimates, sending stocks lower as weak demand for consumer-focused products, such as personal computers and smartphones, impacts the activity of the chip manufacturer.
Micron’s stock fell 14% in pre-market trading Thursday.
The market for dynamic random access memory (DRAM) chips, which account for the bulk of Micron’s revenue, remains sluggish due to weak consumer demand and persistent oversupply.
The company expects low-single-digit percentage growth for smartphones in 2025, in line with its prior expectations.
Demand for smartphones remained weak and their shipments are expected to increase in the second half of Micron’s fiscal year ending August 2025, CEO Sanjay Mehrotra said during the company’s conference call with investors.
Shares of the Boise, Idaho-based company were down 15% in extended trading. Before Wednesday’s after-hours plunge, stocks fell more than 30% from their June highs, pressured by sluggish consumer demand.
“The negative market reaction reflects legitimate concerns about a billion-dollar shortfall in revenue projections and weak near-term demand in traditional markets like computers, automotive and industrial markets ” said Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors.
At the same time, weak global PC demand continued to impact Micron’s profits. Worldwide PC shipments reached 62.9 million units in the third quarter of 2024, down 1.3% from a year earlier, according to research firm Gartner.
“While the AI data center portion of Micron’s business remains robust, it is clear that slower-than-expected sales in consumer PCs, smartphones and automotive have all an impact on the company’s prospects and it took the market by surprise,” Bob said. O’Donnell, President and Chief Analyst, TECHnalysis Research.
In the first quarter, the company reported revenue of $8.71 billion, up 84% and largely in line with analyst estimates, according to data compiled by LSEG.
Micron’s high-bandwidth memory (HBM) chips, a type of DRAM, have seen high demand due to their use in artificial intelligence. HBM’s revenue more than doubled sequentially, becoming a key driver for the company.
The company, one of only three HBM chip suppliers alongside South Korea’s SK Hynix and Samsung, is now focusing on increasing its production of HBM chips.
“Our offering is moving toward more products that the market needs,” CEO Mehrotra said on a call with analysts.