Micron Technology Inc on Tuesday forecast that third-quarter revenue would fall nearly 60% year over year, but the precipitous drop matched Wall Street expectations, and company executives painted a rosy outlook for 2025 as artificial intelligence accelerated the will boost sales. With the chip industry still plagued by flooding, Micron expects its sales to fall the most since 2001. Micron said it will keep capital expenditures for fiscal 2023 at about $7 billion, the low end of a previously announced range. The company is targeting a 15% headcount reduction this year, up from the previous 10% target.
Micron shares are up about half a percent in after-hours trading.
Wedbush Securities chip analyst Matt Bryson said the capital spending cut is positive for investors because it would “advance the timing and breadth of a future recovery.”
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Sanjay Mehrotra, President and CEO of Micron Technology, told analysts on a conference call on the results that he is bullish over the long term and said the memory chip industry will see a record 2025 calendar year in terms of market size.
“If you look to the future, it’s equal to AI. And AI equals storage, and Micron is well positioned with our technology and product roadmap to address the growing opportunities there,” he said.
A proliferation of generative AI chatbots like OpenAI’s ChatGPT, developed by Microsoft Corp. Analysts say the expansion of generative AI could skyrocket memory requirements.
Sumit Sadana, Micron’s chief business officer, told Reuters that a typical AI server has up to eight times the DRAM and three times the NAND than a regular server. DRAM is memory that is erased when the device is turned off, while NAND stores memory even when the device is turned off.
Sadana said the new plants in Idaho and New York are on track to start construction this year and next year, respectively, despite near-term challenges. “We are making good progress on our chip application,” he said of the CHIPS and Science Act’s application for funding for these facilities.
Micron said customer inventories are improving and expects the industry’s supply-demand balance to gradually improve. It also said gross margins, hit by the chip glut, will continue to improve.
The company expects third-quarter revenue of $3.70 billion, plus or minus $200 million, in line with analysts’ average estimate, according to Refinitiv data.
Second-quarter revenue fell about 53% to $3.69 billion and the company lost $2.3 billion compared to a profit of $2.26 billion a year earlier.
Micron expects a loss of $1.58 a share, excluding special items, plus or minus 7 cents for the current quarter, compared to Wall Street’s expectation of 90 cents a share.
