Micron Technology (NASDAQ: MU) experienced a sharp 16% plunge on December 19, marking its worst trading day since March 2020.
The sell-off followed the release of disappointing guidance for its fiscal second quarter, which fell significantly below Wall Street expectations, overshadowing its otherwise robust first-quarter results of fiscal 2025.
The stock closed at $87.09, down nearly 45% from its all-time high in June, as concerns mounted over weaker demand for consumer-centric products such as personal computers and smartphones.
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This reflects broader challenges in the semiconductor industry, where the AI-driven data center segment shows promise, but traditional markets remain sluggish.
Disappointing second-quarter guidance
For the fiscal second quarter, Micron projected revenue between $7.7 billion and $8.1 billion, with adjusted EPS expected to fall between $1.33 and $1.53. These projections were significantly below Wall Street’s expectations of $8.98 billion in revenue and $1.91 in EPS, creating uncertainty among investors.
During the earnings call, CEO Sanjay Mehrotra attributed the soft outlook to several factors, including slower growth in NAND content for consumer devices, ongoing inventory adjustments, varied demand across end markets, and a temporary slowdown in near-term data center SSD purchases following rapid growth in recent quarters.
“ Our FQ2 outlook is impacted by inventory adjustments in consumer-oriented markets and of course, the typical seasonality that exists in CQ1 as well. We have also seen some moderation in purchases of data center SSDs after several quarters of rapid growth in that part of the market. So, that’s what is impacting our FQ2 outlook here.” – CEO Sanjay Mehrotra
Strong first-quarter results
Despite the disappointing guidance, Micron delivered an impressive performance in the fiscal first quarter. Revenue surged 84% year-over-year to $8.71 billion, fueled by robust demand in the data center segment.
Notably, data center revenue grew more than 400% year-over-year and 40% sequentially, accounting for over half of Micron’s total revenue for the first time.
In addition, the company posted record revenues in data center solid-state drives (SSDs) and achieved market share gains in both data center and overall SSDs.
Its high-bandwidth memory (HBM) chips, critical components for Nvidia’s (NASDAQ: NVDA) latest GPUs, exceeded expectations, with HBM revenue more than doubling sequentially.
Looking ahead, Micron remains optimistic about the HBM market. The company projects the total addressable market to grow from $16 billion in 2024 to $100 billion by 2030, with a fourfold increase expected by 2028.
However, while AI-related segments thrive, Micron faces significant challenges in traditional markets. Revenue from mobile phone chips declined 19% year-over-year, while global PC shipments fell 1.3% in Q3 2024, according to preliminary results by Gartner.
Analysts highlighted that weak demand for consumer electronics continues to weigh on the company’s outlook.
Analysts’ sentiment and valuation
Despite near-term challenges, analysts remain optimistic about Micron’s long-term prospects. While some analysts downgraded Micron stock, most remain positive about its future.
Firms such as JPMorgan, Cantor Fitzgerald, and TD Cowen maintained their “Buy” ratings on the stock, albeit with reduced price targets.
TD Cowen, for instance, reduced its price target for Micron to $125 from $135 but emphasized that the guidance is “not thesis-changing.” The firm views 2026 as a pivotal growth year for Micron and noted that the commentary on high-bandwidth memory aligned with its expectations.
Bank of America (NYSE: BAC), however, downgraded the stock to “Neutral,” citing the challenges in offsetting weak demand.
With high-bandwidth memory expected to play a significant role in shaping future market trends, Micron appears well-positioned to capitalize on these opportunities and solidify its market presence in the years ahead.
For long-term investors, the recent dip could offer a buying opportunity, albeit with the understanding that the semiconductor industry is inherently cyclical.
Featured image via Shutterstock
