Skip to main content

Micron Earnings Preview: Data Center Sales In Focus As PC Demand Wanes

Analysts are looking for data center sales to offset flat PC demand in Micron's second quarter earnings, which will come after the close of trading Tuesday.

Updated at 11:19 am EST

Micron Technology  (MU)  shares edged higher Tuesday ahead of the chipmaker's second quarter earnings after the closing bell, with investors looking to data center demand to offset weakness in handset and PC markets.

Analysts are looking for a bottom line of $1.97 per share for the group's fiscal second quarter, which ended in early March, more than double the 98 cents per share it earned over the same period last year. Revenues are forecast to rise 20.5% to $7.52 billion.

Micron's own forecast, issued in late December, sees revenues in the region of $7.5 billion, plus or minus $200 million, earnings of $1.95 per share, plus or minus 10 cents, and a gross margin of 46%, plus or minus 100 basis points. 

Micron, which makes chips across an array of sectors, including PCs, mobile phones, data centers and autos, may have benefited from the Covid-linked shutdown of a Samsung Electronics' memory chip manufacturing facility in Xi'an, China, earlier this year, with the benefit showing up in the second quarter earnings report.

Looking into the second half of its fiscal year, however, handset-linked sales could slow as demand wanes and supply chains remain uncertain, while data center sales continue to advance. 

The group's NAND flash memory chips are sold to the data storage market, while its DRAM semiconductors -- the bulk of its overall sales -- are used in PCs, handsets and data centers.

Micron said late December that PC unit sales in 2022 would likely come in flat to 2021 levels, but a better mix of sales linked to companies investing in hybrid work environments would increase their average DRAM and NAND content.

"We believe the data center market remains strong and ought to offset that weakness; especially given the higher bit growth in that market, ~1.6x in traditional data centers, not to mention the far higher 2-3x DRAM content, when we start taking into account the AI-based servers, which we expect to be strong through the year," said BMO Capital Markets analyst Ambrish Srivastava, who carries an 'outperform' rating with a $115 price target on the stock. 

"Moreover, our conversations in the channel suggest a continuing expectation for measured bit supply growth," he added. "We are also not hearing of any significant pockets of inventory building up in the manufacturing pipeline."  

Micron shares were marked 0.25% higher in early Tuesday trading to change hands at $80.05 each, a move that would still leave the stock down 13.5% for the year, compared to an 8.25% decline for the Nasdaq Composite benchmark.

Micron will host its second quarter earnings call at 4:30 pm Eastern time.