Micron tops Q4 forecasts, guides Q1 revenue far above consensus

The guidance for the coming quarter is more significant than the period just ended, because it suggests that demand and pricing in memory are outrunning what the market had priced in. A revenue forecast for the first quarter that runs well ahead of consensus will likely maintain focus on chipmakers tied to data-centre spending. Asian memory manufacturers, whose shares often move with Micron's pricing views, are also under scrutiny. The one detail capable of tempering enthusiasm is the softer guided gross margin, so commentary on supply, pricing and capital expenditure will shape how the stock and the industry react.

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Micron exceeded expectations on every important measure and guided revenue sharply higher, with automotive and embedded the standout and only a slightly lower margin forecast as the single concern.

Summary:

• Adjusted Q4 revenue came in close to $54.2 billion, compared with expectations of about $51 billion.
• Adjusted EPS near $33.40 beat estimates of just under $32.
• Adjusted gross margin of 87% surpassed an expected 86.2%.
• Cloud Memory revenue of about $16.3 billion beat the $15.1 billion estimate by just over $1 billion, Mobile & Client sales of around $13.1 billion were only slightly ahead of the $13.0 billion forecast, and Automotive & Embedded revenue hit $6.8 billion, well above the expected $4.7 billion.
• First-quarter revenue is guided to $60 billion to $63 billion, with consensus at about $57 billion.
• First-quarter adjusted EPS is guided to approximately $37 to $39 (expected $35.40 to $36), and guided gross margin of about 86% trails the 87% expected.

Micron reported fourth-quarter figures that beat analyst estimates on revenue, earnings and margin, and provided a first-quarter outlook well ahead of the market view. Adjusted revenue reached about $54.2 billion, versus predictions of roughly $51 billion, and adjusted EPS of near $33.40 topped forecasts of a little under $32.

Profitability was also strong. Adjusted gross margin was 87%, a touch better than the 86.2% analysts anticipated, suggesting the revenue improvement did not come at the cost of pricing or cost discipline.

The breakdown across segments showed broad strength, with the biggest surprise outside the core memory business. Automotive and Embedded sales reached about $6.8 billion, well above the roughly $4.7 billion estimate, a gap of more than 40%. Cloud Memory revenue came to about $16.3 billion, beating the $15.1 billion forecast by just over $1 billion, while Mobile & Client sales of about $13.1 billion were only marginally ahead of the forecast $13.0 billion. That pattern suggests demand is broadening rather than depending on a single market, although a single quarter does not confirm a trend.

The guidance for the next quarter carried the most weight. Micron expects first-quarter revenue of $60 billion to $63 billion, with a midpoint of $61.5 billion, against consensus of about $57 billion. It guided adjusted EPS to roughly $37 to $39, also above the expected $35 to $36 range. Such guidance implies sequential revenue growth of more than 10% at the midpoint, a fast pace for a company of this size.

One detail runs counter to the otherwise upbeat tone. The guided first-quarter gross margin of around 86% sits below the 87% analysts had expected and is slightly beneath the 87% just reported. Though small, the shortfall means investors will look to management for an explanation, whether it relates to product mix, costs or pricing assumptions.

Focus now moves to the earnings call, where comments on supply, pricing and capital spending plans are likely to influence how the market views both the beat and the guidance.