Micron Technology (MU), a leading memory chip manufacturer and key partner to Nvidia (NVDA), issued a disappointing revenue outlook for its fiscal second quarter, triggering a significant drop in its stock price during after-hours trading on Wednesday. The company projected revenue between $7.7 billion and $8.1 billion, falling considerably short of the $8.93 billion consensus estimate from analysts surveyed by Visible Alpha. Micron also anticipated diluted earnings per share (EPS) in the range of $1.16 to $1.36, below market expectations.
This weaker-than-expected guidance contrasts sharply with Micron’s strong performance in its fiscal first quarter, which ended November 28. The company reported a profit of $1.87 billion, or $1.67 per share, a substantial improvement from a $1.23 billion loss in the same period last year. Revenue surged 84% to a record $8.71 billion, slightly below analyst predictions but exceeding the midpoint of the company’s prior guidance.
CEO Sanjay Mehrotra attributed the subdued outlook to current weakness in consumer-oriented markets. However, he expressed optimism about a return to growth in the second half of the fiscal year. Despite this positive long-term view, investors reacted negatively to the short-term projection, sending Micron’s shares down over 13% in extended trading. This decline followed a nearly 22% year-to-date gain leading up to Wednesday’s close.
:max_bytes(150000):strip_icc()/GettyImages-1480433425-f7c20d86883b4661a9a46649f615526b.jpg)
The semiconductor industry, known for its cyclical nature, is currently facing headwinds from softening demand in several key sectors, including personal computers and smartphones. Micron’s outlook suggests that these challenges may persist for longer than previously anticipated. The company’s reliance on memory chip sales, a particularly volatile segment of the market, makes it especially susceptible to fluctuations in demand.
While Micron anticipates a rebound in the latter half of the fiscal year, the current market sentiment reflects concerns about the near-term outlook for the company and potentially the broader chip sector. The contrast between the robust first-quarter results and the disappointing second-quarter guidance underscores the challenges and uncertainties inherent in this dynamic industry.
Micron’s less optimistic forecast could signal broader weakness within the technology sector, particularly for companies heavily reliant on consumer spending. The company’s performance in the coming quarters will be closely watched as a potential indicator of the overall health of the tech industry and the broader economy.
