Earnings report "skyrocketed," but why did Micron's stock fall sharply?

Micron Capital Expenditures Far Exceed Expectations, Bright Revenue Guidance Cannot Mask Investor Concerns

According to Wall Street Journal, on Wednesday, March 18, Micron released its quarterly report, expecting third-quarter revenue of approximately $33.5 billion and earnings per share of about $19.15, both significantly surpassing analyst expectations.

However, the company also disclosed that capital expenditures for the current fiscal year will exceed $25 billion, with projections for FY2027 increasing by over $10 billion on top of that, both surpassing market expectations. Following the announcement, Micron’s stock price fell by as much as 6% in after-hours trading.

Analysts believe that the stock price correction after this earnings report mainly reflects the market’s reassessment of the sustainability of profits under the high valuation and high capital expenditure combination. Prior to this, Micron has already risen 62% this year, making it the best-performing stock in the Philadelphia Semiconductor Index.

Performance Far Surpassing Expectations, But Capital Expenditures More Than Expected

Micron expects that by August 2026, its capital expenditures will exceed $25 billion, compared to the average analyst expectation of $22.4 billion. The company also disclosed that capital expenditures for FY2027 will continue to increase by over $10 billion.

CEO Sanjay Mehrotra stated during the conference call:

We expect a significant increase in capital expenditures for FY2027.

In comparison, the performance itself is indeed impressive. The third-quarter revenue guidance is about $33.5 billion, while analysts’ average expectation was $23.7 billion; earnings per share guidance is about $19.15, with analysts expecting $11.29 — both exceeding expectations by over 40%.

The just-concluded second quarter (ending February 26) was also strong, with revenue nearly tripling to $23.9 billion and EPS of $12.20, both higher than the analysts’ average expectations of $19.7 billion and $9.

Progress in HBM4 Mass Production and Nvidia Dependency as Key Variables

In the next-generation AI storage competition, Micron is actively advancing the mass production ramp-up of the new high-bandwidth memory HBM4.

Last month, CFO Mark Murphy explicitly stated during investor communications that the company has achieved large-scale mass production of HBM4, boosting the stock price significantly at that time.

However, a key uncertainty remains: to what extent will Nvidia rely on Micron to supply HBM4?

Nvidia is the dominant player in the AI accelerator chip market. Its new Vera Rubin product line’s storage procurement decisions will directly impact Micron’s market share in HBM. If Nvidia shifts to competitors for this product line, it could pose a substantial blow to Micron.

Against this backdrop, Micron’s stock has already risen 62% this year, making it the best-performing component stock in the Philadelphia Semiconductor Index.

(Top three performers in the Philadelphia Semiconductor Index year-to-date)

AI Storage Demand Drives Price Increases, High-Bandwidth Memory Becomes Core Battleground

Micron’s explosive performance is rooted in the global surge in AI computing investment, which has led to a shortage of storage chips.

High-bandwidth memory (HBM) is an essential data transfer component for training and running AI models. The sharp increase in demand has prompted storage manufacturers, including Micron, to shift more capacity toward higher-margin HBM orders, further tightening supply for regular storage chips and driving overall prices higher.

The global storage chip market is highly concentrated, dominated by Micron, Samsung Electronics, and SK Hynix. Analysts expect strong demand to continue for several years.

SK Group Chairman Choi Tae-won stated this week that structural bottlenecks in semiconductor manufacturing could prolong the global storage shortage for another four to five years. According to International Data Corporation (IDC), the storage crisis is expected to cause a 13% decline in smartphone shipments this year.

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