By Akash Sriram and Jane Lanhee Lee
(Reuters) -Micron Technology Inc on Tuesday forecast its third-quarter sales to fall nearly 60% from a year earlier, but the sharp drop was in line with Wall Street expectations and business leaders outlined a rosy outlook for 2025 with artificial intelligence driving sales.
With a glut of chips still plaguing the chip industry, Micron expects its biggest revenue decline since 2001. Micron said it would keep capital expenditures for fiscal 2023 at about $7 billion, the lower end of a previously stated range. It is aiming for a 15% reduction in headcount this year, more than the previous target of 10%.
Micron shares in aftermarket trading rose about half a percent.
Matt Bryson, chip analyst at Wedbush Securities, said the capital expenditure cut was positive for investors because it would “accelerate the timing and scope of a future recovery.”
Sanjay Mehrotra, president and CEO of Micron Technology, told analysts during an earnings call that he was confident about the long term, saying the memory chip industry would see a record year 2025 in terms of market size.
“If you look to the future, it equates to AI. And AI equates to memory, and Micron is well positioned with our technology and product roadmaps to address the growing opportunities there,” he said.
A proliferation of generative AI chatbots, such as Microsoft Corp-backed OpenAI’s ChatGPT, has boosted demand for data centers, mitigating the trend of declining demand for chips. Analysts say the expansion of generative AI could fuel a jump in storage needs.
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 of a normal 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 that despite the near-term challenges, the new plants in Idaho and New York are on track to begin construction this year and next year, respectively. “We’re making good progress on our chips application,” he said of applying for funding for that plant through the CHIPS and Science Act.
Micron said customer inventories are improving and expects gradual improvements in the industry’s supply-demand balance. 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, which is in line with the median analyst estimate, according to data from Refinitiv.
Revenue for the second quarter 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 per share, excluding items, in the current quarter, plus or minus 7 cents, compared to Wall Street’s expectation of 90 cents per share.
(Reporting by Akash Sriram in Bengaluru and Jane Lanhee Lee in Oakland, California; editing by Sriraj Kalluvila and David Gregorio)
Leave a Reply