Earnings and Guidance Exceed Expectations, Yet Micron's Stock Falls: Are Market Expectations Too High?

TradingKey - On Wednesday, September 24th, Micron's stock dropped 2.8% and continued to fall pre-market on Thursday, despite reporting earnings and guidance that surpassed expectations. Why did Micron's stock decline after such positive results?

On Tuesday, Micron announced its fiscal Q4 2025 results, marking its seventh consecutive quarter of profitability with $11.3 billion in revenue, beating market expectations and setting a quarterly record. Further, Micron provided guidance for the next fiscal quarter, with revenue, EPS, and gross margin all exceeding Wall Street's forecasts.

MarketWatch suggested that investors might be concerned about potential weakening in future demand, especially given the significant rise in stock price prior to the earnings report.

A Surge of Nearly 100% This Year, 40% in Just a Month

In the month leading up to the earnings release, Micron's stock increased by nearly 40%. The stock price reflects market confidence in a company's future, and the surge implies Micron needs to meet ever-growing expectations.

TD Cowen analysts noted investor concerns that this earnings beat might repeat history—back in April 2021, Micron's stock peaked during an upcycle. TD Cowen explained that when the momentum driving the stock price decreases, the price can peak, followed by weaker demand and EPS downgrades, leading to a prolonged period of underperformance.

However, TD Cowen believes fears of Micron's stock peaking are premature, given the greater return potential of Micron's flagship DRAM products compared to risks. Additionally, they remain optimistic about growth in the PC and smartphone markets.

Nvidia's Demand for HBM4 Speed to Reach 10GB/s: Can Micron Stay Ahead?

The competition for High Bandwidth Memory (HBM) technology has moved to the sixth generation, HBM4. Nvidia plans to debut this chip in its next-generation graphics architecture, Vera Rubin, next year.

Micron claims its newly launched HBM4 product outperforms competitors in performance and efficiency. Samples have been delivered to clients, with bandwidth exceeding 2.8TB/s and pin speeds breaking 11GB/s, leading the industry. Additionally, Micron announced a collaboration with TSMC to launch the next-generation HBM4E.

This technological breakthrough in HBM is one of Micron's most profitable products in Q4, driving record revenues and becoming a core growth driver. Micron's HBM customer base has expanded to six, with nearly all 2026 HBM capacity pre-booked.

Cantor Fitzgerald analysts indicated that expectations of sustained tight HBM supply could drive up average selling prices and margins, predicting the HBM market to reach $50 billion by 2026, with Micron capturing 25% market share.

Despite this, concerns linger as Micron's 2026 HBM supply agreements remain unsettled. Analysts pointed out that until pricing and shipment volumes for HBM3E and HBM4 are clarified, investor concerns will persist.

Micron closed at $161.71 on Wednesday, with Wall Street analysts setting a target price of $210-$220, suggesting at least a 30% upside for Micron's stock. However, Mizuho analyst Jordan Klein cautioned that bulls might take profits before a peak. He interprets Wednesday's decline as a signal that the market might see only a 15-20% upside, falling short of Wall Street's expectations.