Micron Shares Fall 8.9% on China Worries Despite Profit Beat (NASDAQ:MU)

Micron ended Tuesday at $820.53, down 8.9%, with trading volume near 58 million shares. The Philadelphia Semiconductor Index lost 4.5%, reflecting sector-wide weakness. Investor anxiety increased as CXMT’s listing and reports of local lithography advancements in China fueled fears. Worries also mounted around AI infrastructure funding and whether capital expenditures can be maintained. Micron trailed the sector index by around four percentage points, indicating the market is factoring in memory competition risks specific to the company. Investors

Micron is currently trading at $820.53, which is 34.6% under its 52-week peak of $1,255. In Tuesday’s session, its decline for July came to about 29.5%. The company’s trailing P/E stands near 18.6, based on reported EPS of $44.17. While this valuation appears moderate, memory sector profits can decrease abruptly. Margin sustainability is more critical to valuation than recent performance. Google

Management forecasts revenue of $50.0 billion, plus or minus $1.0 billion. The midpoint points to 20.6% sequential growth over fiscal third-quarter revenue. Non-GAAP EPS guidance stands at $31.00, with gross margin anticipated at close to 86%. This follows a record quarter with revenue of $41.46 billion and adjusted EPS of $25.11. Micron did not factor in potential trade or geopolitical impacts in this guidance. Micron Technology

During the fiscal third quarter, DRAM prices advanced by a rate in the low-60% range compared to the previous quarter. In the same timeframe, NAND prices climbed in the mid-80% range. Bit shipments grew by a low-single digit percentage for DRAM and a mid-single digit percentage for NAND. Management anticipates that price growth will ease significantly in fiscal Q4. This guidance does not indicate a projected decline.

Micron projects ongoing tightness in DRAM and NAND markets past 2027. The company anticipates industry DRAM bit shipments will increase by a low-to-mid-20% range in calendar 2026. NAND bit shipments are forecast to grow approximately 20% during that year. Gradual improvements in supply are expected in 2028, although management does not specify when supply will fully catch up. This outlook reflects company guidance and does not guarantee demand will remain strong.

Data-center revenue surpassed $25 billion, indicating an annual run rate of over $100 billion. Cloud Memory revenue jumped 78% from the previous quarter to reach $13.8 billion. Core Data Center revenue saw a twofold increase sequentially, hitting $11.5 billion. Micron has shipped in excess of $1 billion in HBM4. However, overall DRAM and NAND pricing remained the primary drivers for the quarter.

Micron has entered into 16 strategic deals spanning data center, consumer, and automotive sectors. Most of these contracts extend until 2030 and rely on take-or-pay commitments for volumes. The agreements account for approximately 20% of DRAM and one-third of NAND output. Fourteen of these carry minimum remaining revenue totaling about $100 billion. Micron anticipates $22 billion in deposits and associated financial guarantees. While the structure aims to lessen volatility, certain pricing remains influenced by the market.

CXMT ranks as the world’s fourth-biggest memory chip maker. If completed, its proposed fabs could produce over 600,000 wafers each month. The company’s HBM technology is still about two generations behind the top competitors. CXMT is raising prices rather than saturating the market with low-cost supply. The main risk appears to be longer-term, but the impact depends on capacity growth and uncertainties from export restrictions. Reuters

Operating cash flow for the fiscal third quarter was $25.4 billion, while adjusted free cash flow was $18.3 billion. Cash holdings and investments amounted to $30.2 billion, compared to $5.7 billion in debt. Capital expenditures for the fiscal fourth quarter are expected to reach nearly $10 billion, which will bring annual capex close to $27 billion. In fiscal 2027, quarterly capex is set to surpass this figure. The balance sheet remains robust, though risks persist around construction execution.

Microsoft and Meta are set to release results on Wednesday, with Amazon reporting on Thursday. Their AI-capex announcements could impact expectations for data-center memory usage. Micron does not have any scheduled event before the KeyBanc forum on August 10. Investors are tracking whether the chip index steadies after a 4.5% fall on Tuesday. Trading in the near term is likely to be highly responsive to news. Microsoft