Micron will once again hit expectations by surge in demand for AI memory chips

Memory Chipmaker Micron Technology Inc. reported strong revenue and revenue for today's fourth quarter, and has since boosted inventory in long-term trading with guidance that far surpassed expectations.

The company reported revenue before certain expenses, including stock compensation of $3.03 per share, past its Wall Street target of $2.86, up from just $1.18 in the same period last year. Quarterly revenue reached $11.3 billion, up 46% from a year ago, with analyst consensus estimates exceeding $11.2 billion.

Last month, Micron took the extraordinary step of increasing its fourth quarter revenue and revenue guidance. Today's results exceeded the expectations raised recently. The strong number saw a surge in micron revenues, with net income rising to $3.2 billion from just $887 million in the same period last year.

Micron also provided solid guidance for the current quarter. It said it expects sales for the first quarter of 2026 to be around $12.5 billion at the midpoint of that range. We also see revenues of between $3.60 and $3.90 per share, well beyond the analyst's $3.05 target.

Micron's inventory rose by more than 1% outside of hours, gaining momentum that is almost twice as valuable as it was annually. The company is a memory and storage chip supplier and sells these critical components to both servers and personal computer manufacturers. The company has appeared as one of the big winners of the artificial intelligence boom as it surges in sales of high-bandwidth memory chips, essential for AI servers with graphics processing units.

In a conference call with analysts, Micron CEO Sanjay Mehrotra (pictured) said the company enjoys a unique position as the sole US-based manufacturer of HBM chips.

The company's cloud memory business unit, which accounts for AI memory chip sales, provided $4.544 billion in sales during the quarter, more than tripled the previous year. Mobile and client business units added an additional $3.76 billion in sales, up 18%, while automotive and embedded businesses increased 16% to $1.43 billion. The only disappointment was Micron's core data center unit, down 22% from the previous year to $1.57 billion.

“There's a strong momentum in 2026, a solid financial quarter demand outlook led by data centers, and it's the most competitive position in our history,” Mehrotra told analysts. “Over the next few years, we expect trillions of dollars to be invested in AI, and a significant portion will be spent on memory.”

In response to questions from analysts on the call, Mehrotra said that the supply of dynamic random access memory remains very tight due to increased demand from the AI ​​sector. He also reiterated that despite the increasing bandwidth and performance requirements of many, the company's next-generation HBM4 memory chips are still on track to support customers preparing their chip platform.

According to Mehrotra, the company recently shipped its first sample of the HBM4 to its customers, boasting industry-leading bandwidth of 2.8 terabytes per second, with “PIN speed” exceeding 11 Gigabits per second, referring to the data transfer rates each pin in the memory module can achieve. The executive acknowledged that HBM chips are becoming “more stricter,” but said it believes the company is in a good position for next-generation products and expects its value proposition to continue to grow.

Micron is in somewhat unknown territory as the AI ​​boom overturns traditional expectations of chipmakers. Businesses are usually characterized by dramatic fluctuations in market demand, inventory and prices, resulting in cyclical fluctuations in revenue and revenue growth.

However, investors hope that insatiable demand for memory chips from companies building AI data centers will offset weaknesses elsewhere in Micron's other segments, such as consumer-oriented chips. The past two years have grown steadily, which is already longer than most cycles, but if the investor suddenly stops, it will be very disappointing.

In a note to clients, TD Cowen analyst Krish Sankar said he expects memory chip prices to grow over the next three to four quarters. Usually this will bulge deep into the upcycling inventory, lower prices and begin a downward cycle, he said. But he doesn't believe it will happen yet.

“I think Micron stock will continue to perform out in the short term as the checks continue to support that momentum,” Sankar said.

Photo: Silicon Angle