Story Stocks^®

Micron (MU) delivered a stellar performance in 3Q25, easily surpassing EPS and revenue expectations, despite macroeconomic headwinds tempering optimism for its consumer-oriented businesses. The outperformance was primarily driven by surging demand for high-bandwidth memory (HBM) chips, fueled by the accelerating adoption of AI infrastructure across data centers. MU’s strategic focus on high-margin HBM products, critical for AI workloads, capitalized on robust demand from cloud service providers and enterprise customers, offsetting sluggishness in traditional PC and smartphone markets.

• MU’s guidance for 4Q25 further underscored its momentum, projecting revenue of $10.7 bln (+/- $300 mln), a 15% sequential increase, and adjusted EPS of $2.50 (+/- $0.15), both significantly above analyst estimates. However, despite this upbeat outlook, MU’s shares are experiencing a muted response, reflecting investor caution about sustaining this growth trajectory. Some of this skepticism stems from concerns over tariff-related pull-ins, as customers may have accelerated orders to preempt potential trade disruptions under new U.S. policies, though MU noted that the impact of these pull-ins was relatively modest and it plans to pass on any tariff-related costs to customers.
• The standout driver of MU’s Q3 performance was its record-high DRAM revenue, propelled by a nearly 50% sequential surge in HBM revenue and a doubling of data center revenue yr/yr, which also hit a quarterly record. The robust demand for HBM chips is directly tied to the AI infrastructure buildout, as these high-performance memory solutions are essential for powering advanced GPUs used in AI model training and inference, particularly for customers like NVIDIA (NVDA) and Advanced Micro Devices (AMD).
• MU’s HBM3E chips, designed for cutting-edge AI and high-performance computing workloads, have seen exceptional traction, with the company reporting that its HBM supply is fully booked for 2025 and already seeing strong demand into 2026. To meet this demand, MU is ramping up production of its 12-high HBM3E chips in early 2025 and plans significant capital investments, including $200 bln over the next 20+ years in U.S. manufacturing and R&D, to bolster its HBM and advanced memory capabilities.
• MU's consumer-oriented businesses, particularly in PCs and smartphones, also showed notable sequential growth, contributing to the company’s broad-based strength in Q3. The Mobile Business Unit posted a 45% sequential revenue increase to $1.6 bln, driven by improving pricing conditions and rising demand for AI-enabled smartphones, which require 12 to 16 GB of DRAM compared to 8 GB in last year’s flagship models.
• Looking to 2025, MU expects low single-digit percentage growth in smartphone unit volumes and a low single-digit percentage increase in PC sales, with AI-enabled devices driving higher memory content per unit, particularly as next-generation AI PCs demand substantially more DRAM.

Despite the robust Q3 earnings beat and strong Q4 guidance, MU’s stock reaction remains subdued, reflecting investor caution about the sustainability of its momentum amid tariff uncertainties and cyclical risks in consumer markets. However, MU’s AI-driven growth potential, particularly in the high-margin HBM segment, is significantly more robust than its consumer-oriented end markets, positioning the company as a key beneficiary of the ongoing AI infrastructure expansion.