The News: Micron Technology Inc. shares surged in the extended session Monday after the memory-chip maker forecast an outlook and reported earnings that topped Wall Street estimates as data-center sales proved to the company’s strongest growth sector.
Micron MU, +4.52% shares rallied 7% after hours, following a 1.2% decline in the regular session to close at $82.03.
The Boise, Idaho-based chip maker expects adjusted second-quarter net income of $1.85 to $2.05 a share on revenue of $7.3 billion to $7.7 billion. Analysts had forecast $1.84 a share on revenue of $7.29 billion.
Analyst Take: 2021 has brought semiconductors to light in a way that no one would have expected. While I have been saying for years that Semiconductors would eat the world, even my predictions didn’t insinuate the chaos that this year’s shortages have brought to light.
The shortage has left tech executives, supply chain leaders, and global media to ponder questions about when there would be relief. With materials, substrates, assembly, and finished products all in short supply, even President Biden and his leadership were forced to develop a plan to prevent this type of supply chain shortage from happening again.
While any plans to rectify shortages short-term appear to be more long-term horizon (building fabs). All eyes have been placed squarely on our leading semiconductor makers, from Intel to Qualcomm to NVIDIA to Micron, to name a few, to determine what lies ahead. CEO’s have primarily been evasive in their answers about when the shortage would subside. Still, the answers tended to vary from a year from now (late 2022) to as far out as 2024 with the culprits to the shortage being the long runway to up production and the expected sustained demand that put us in this position in the first place.
Why such a long build-up to talk about Micron? Well, the Micron numbers were good, but the enthusiasm that saw Micron shoot up more than $12.00 a share after a somewhat tame low double-digit growth in 2021 was quite simple. The company didn’t only outperform expectations but painted a bullish picture about its future and the overall availability of chips in the near future–something the market has been longing to hear for most of 2021.
Without overstating the improvement of conditions, Micron’s CEO, Sanjay Mehrotra, came out with clear guidance that the shortage is easing, which would mean increased demand and revenue for its core DRAM and NAND memory products. Furthermore, Mehrotra shared that the company’s bets on Cloud and Datacenter are gaining steam with 70% YoY growth, indicating a solid recovery in enterprise IT spend.
As I see it, memory technologies such as those offered by Micron are a clear leading indicator of increasing demand for compute, networking, and other peripheral technologies like edge computing, IoT, connected vehicles, and much more. Micron being able to confidently exude strength to the market is another indicator of strength in the technology ecosystem and continued demand. While the earnings were good, the outlook was terrific, serving as a clear indicator that 2022 technology investments are on a sustained path, and the tech industry can expect another year of robust growth pending any wild shifts in macroeconomic conditions, which are, of course, always possible.
Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
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Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio