By Rishi Kant
(Reuters) - Micron Technology (NASDAQ:MU) forecast quarterly revenue and profit below Wall Street estimates on Wednesday, sending shares lower as weak demand for consumer-centric products such as personal computers and smartphones impacts the chipmaker's business.
The market for dynamic random-access memory (DRAM) chips, which account for most of Micron's revenue, remains sluggish because of weak consumer demand and an ongoing supply glut.
The company expects low-single-digit percentage growth for smartphones in 2025, consistent with its prior expectations.
Demand for smartphones has remained weak and shipments for them are likely to increase in the second half of Micron's fiscal year ending August 2025, CEO Sanjay Mehrotra said in the company's conference call with investors.
The Boise, Idaho-based company's stock was down 15% in extended trading. Ahead of Wednesday's after-hours slump, shares dropped more than 30% from their record highs in June, pressured by lackluster consumer demand.
"The market's negative reaction reflects legitimate concerns about a $1 billion miss in revenue projections and near-term demand weakness in traditional markets like PCs, autos and industrial markets," said Michael Ashley Schulman, partner & chief investment officer at Running Point Capital Advisors.
Meanwhile, sluggish global demand for PCs continued to impact Micron's earnings. Global PC shipments reached 62.9 million units in the third quarter of 2024, marking a 1.3% decline from the previous year, according to research firm Gartner (NYSE:IT).
"While the AI datacenter-based portion of Micron's business remains robust, it's clear that slower-than-expected sales in consumer-focused PCs, smartphones and automotive are all impacting the company's outlook and that caught the market off-guard," said Bob 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 analysts' estimate, according to data compiled by LSEG.
Micron's high-bandwidth memory (HBM) chips, a type of DRAMs, have experienced strong demand due to their use in artificial intelligence. Revenue from HBM more than doubled sequentially, becoming a key driver for the company.
The company, one of only three providers of HBM chips alongside South Korea's SK Hynix and Samsung (KS:005930), is now focusing on increasing its production of HBM chips.
"Our supply is mix is shifting toward more of the products that are needed in the marketplace," CEO Mehrotra said in a call with analysts.
Excluding certain items, Micron expects to earn $1.43 per share, plus or minus 10 cents, for the second quarter, compared with analysts' expectation of $1.91.
In the first quarter, the company reported earnings of $1.79 per share, surpassing estimates by 4 cents.
It expects to report second-quarter revenue of $7.90 billion, plus or minus $200 million, compared with analysts' estimate of $8.98 billion.