Micron Earnings: Rocketing AI Demand

Here's our initial take on Micron's (NASDAQ: MU) financial report.

AI Demand Drives Revenue and Profit Surge

The third quarter of fiscal 2025 was a bonanza for memory chip manufacturer Micron. Revenue rose 37% year over year, and adjusted EPS more than tripled, thanks largely to soaring demand for data center memory chips. Revenue from high-bandwidth memory, which is used in AI accelerators, grew by 50% from the previous quarter, while overall data center revenue more than doubled year over year.

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Micron is currently ramping production of its HBM3E 12H product, and it expects its HBM market share to reach similar levels as its overall DRAM market share in the second half of the calendar year. The company is now shipping HBM to four customers at high volume, and it's delivered samples of its next-generation HBM4 chips to multiple customers as it prepares to ramp production in 2026.

Overall DRAM revenue rose 51% year over year to $7.1 billion, with bit shipments up 20% from the prior quarter and average selling prices down slightly. NAND revenue edged up by 4% year over year to $2.2 billion, with a mid-20s-percentage jump in bit shipments and a high-single-digit-percentage drop in average selling prices.

For the fourth quarter of fiscal 2025, Micron expects to produce revenue between $10.4 billion and $11.0 billion, an adjusted gross margin of roughly 42%, and adjusted earnings per share between $2.35 and $2.65.

Immediate Market Reaction

Shares of Micron were up about 4% in after-hours trading on Wednesday following a strong earnings report. Micron easily beat analyst expectations for revenue and earnings, and its guidance was optimistic as well. AI-related revenue growth was impressive, and with HBM4 set to ramp next year, that part of Micron's business should continue to boom.

What to Watch

Micron is successfully catching up in the HBM market, with its market share approaching its overall DRAM market share. Overall pricing declines for Micron's DRAM and NAND chips paint a mixed picture, with strong pricing for HBM and server chips likely being offset by weaker pricing in other end markets. Micron noted that customer inventory levels are generally healthy, and recent reports suggest that DRAM prices have been rising, partly due to tariff-related stockpiling. The hangover from that stockpiling could sting Micron later this year, although strong demand from the AI industry could more than offset any weakness.

Helpful Resources

• Full earnings report
• Investor relations page

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.