Micron’s earnings report “blew past expectations,” but why did the stock plunge?

Micron’s capital expenditures far exceed expectations, and stellar revenue guidance can’t mask investor concerns. According to WallStreetCN, on Wednesday, March 18, Micron released its quarterly report, projecting third quarter revenue of approximately $33.5 billion and earnings per share of about $19.15, both vastly surpassing analysts’ forecasts. However, the company simultaneously disclosed that this fiscal year’s capital expenditures will exceed $25 billion, and forecasted that in fiscal year 2027, expenditures would increase by over $10 billion on top of that, both exceeding market expectations. Following the report, Micron’s stock price fell as much as 6% in after-hours trading. Analysts believe that the post-earnings stock correction mainly reflects the market’s renewed evaluation of the sustainability of profits given the combination of high valuation and high capital expenditures. Prior to this, Micron had already risen 62% this year, ranking as the best-performing stock in the Philadelphia Semiconductor Index. Performance far exceeds expectations, but capital expenditures even more so Micron expects capital expenditures for fiscal year 2026 ending in August to exceed $25 billion, while analysts’ prior average estimate was $22.4 billion. The company also disclosed that capital expenditures in fiscal year 2027 will rise by over $10 billion. CEO Sanjay Mehrotra said in a conference call: We expect capital expenditures in fiscal year 2027 to increase significantly. In contrast, the company’s performance itself is indeed impressive. Third quarter revenue guidance is about $33.5 billion, compared to analysts’ prior average estimate of $23.7 billion; earnings per share guidance about $19.15, while analysts expected $11.29—both metrics exceeded expectations by more than 40%. The just-ended second quarter (ending February 26) was also strong, with revenue nearly tripling to $23.9 billion and earnings per share at $12.20, both higher than analysts’ average expectations of $19.7 billion and $9. HBM4 mass production progress and dependence on Nvidia are key variables In the new generation competition for AI memory, Micron is actively advancing mass production of the new generation high-bandwidth memory, HBM4. Last month, CFO Mark Murphy stated in an investor communication that the company had achieved large-scale mass production of HBM4, boosting the stock price significantly. However, a key uncertainty remains: To what extent will Nvidia rely on Micron’s supply of HBM4? Nvidia dominates the AI accelerator chip market, and its procurement decision for its new Vera Rubin product line will directly impact Micron’s share in the HBM market. If Nvidia chooses competitors for this product line, it will materially impact Micron. Against this backdrop, Micron’s stock has surged 62% this year, making it the best-performing component in the Philadelphia Semiconductor Index. (A chart: Top three component stocks in the Philadelphia Semiconductor Index year-to-date) AI storage demand drives price hikes, high-bandwidth memory becomes the core battleground Micron’s performance boom is rooted in the global wave of AI computing power investments, which has caused a shortage of memory chips. High-bandwidth memory (HBM), a necessary data transfer component for training and running AI models, has seen a spike in demand, prompting memory manufacturers including Micron to shift more capacity to higher-margin HBM orders, which in turn has intensified the shortage of regular memory chips and pushed up overall prices. The global memory chip market is highly concentrated, dominated by only Micron, Samsung Electronics, and SK Hynix. Analysts expect robust demand to persist for several years. SK Group Chairman Chey Tae-won stated this week that due to structural bottlenecks in semiconductor manufacturing, the global memory shortage may last another four to five years. According to International Data Corporation (IDC), smartphone shipments will shrink by 13% this year due to the memory crisis. Risk Disclosure and Disclaimer The market is risky; investors should be cautious. This article does not constitute individual investment advice and does not take into account specific investment objectives, financial situations, or needs of particular users. Users should consider whether any opinions, views, or conclusions in this article suit their specific circumstances. Invest at your own risk.