Micron's Q3 surges, outlook raised for Q4 as profit margins approach software levels

Micron Technology delivered a strong third quarter and raised its outlook and delivered profit margins on par with software companies.

The memory market has historically been boom or bust. Micron is benefiting from an unprecedented boom. Micro reported third quarter earnings of $28.24 billion, or $24.67 a share on revenue of $41.46 billion, up from $9.3 billion a year ago or 346%. Non-GAAP earnings for Micron were $25.11 a share.

Wall Street was looking for non-GAAP earnings of $20.83 a share on $35.85 billion in revenue for the third quarter.

CEO Sanjay Mehrotra said the third quarter results and fourth quarter outlook "reflect the strategic value of memory in the AI era." Micron previously announced a multi-year pact with Anthropic to supply memory. The company has been inking multiple long-term contracts.

• Memory price surge may crimp on-premise AI, data center deployments

To illustrate Micron's pricing power consider that its operating margins across its primary units--cloud, data center, mobile and PC and automotive--ranged from 75% to 86%.

As for the outlook, Micron projected fourth quarter revenue of $50 billion give or take $1 billion, gross margins of 86% and non-GAAP earnings of about $31 a share.

Mehrotra said in prepared remarks:

"The memory industry has been structurally transformed by the proliferation of AI. We are only in the early innings of the significant innovation and productivity that can be unleashed in every part of the global economy over time. Data center-driven growth will be increasingly complemented by AI-enabled features in smartphones, high-end PCs and new consumer devices, as well as in automotive, industrial applications and robotics. Exciting possibilities enabled by robotics and humanoids, as well as fully autonomous vehicles, portend a robust long-term demand environment for memory and storage.

With respect to supply, our customers are recognizing that supply shortages in memory and storage will take considerable time to improve. Even as we expect industry supply to improve gradually in 2028, we currently do not have line of sight as to when memory supply will be able to catch up with increasing demand."

Key numbers:

• Micron's data center revenue topped $25 billion in the third quarter.
• SSD data center revenue topped $5 billion.
• Micron expects "tight conditions to persist beyond calendar 2027 as a result of AI-driven demand across all segments coupled with structural supply constraints."
• Micron has signed 16 strategic agreements with customers.
• "Even as we expect industry supply to improve gradually in 2028, we currently do not have line of sight as to when memory supply will be able to catch up with increasing demand."