Micron shares jump as Q1 revenue forecast beats analyst estimates

Micron (MU) shares rose 14% after the close on Wednesday as the chipmaker forecast higher-than-expected revenue for the coming quarter.

Micron forecast first-quarter revenue of $8.5 billion to $8.9 billion, above the $8.3 billion expected by analysts.

Company executives attributed the forecast increase to a more favorable pricing environment and strong demand for Micron's memory chips, which are used in data centers to deliver artificial intelligence.

“With the advent of AI, we are in the most exciting phase I have seen in my career in memory and storage,” CEO Sanjay Mehrotra said on a conference call with investors Wednesday afternoon. Mehrotra said the company is entering fiscal 2025 with “the best competitive position in Micron's history.”

Micron is the first chipmaker to report quarterly results this earnings season. The report provides a first glimpse into how the semiconductor sector is faring amid Wall Street's high expectations.

The company reported revenue of $7.75 billion in the fourth quarter ended Aug. 29 — up 93 percent from a year earlier and more than the $7.66 billion expected by analysts, who recently revised their expectations down. Adjusted earnings per share of $1.18 beat both the upper range of Micron's forecast and the $1.11 Wall Street forecast.

Micron's memory chip business has seen a surge over the past year as major technology companies pump billions into the semiconductor sector to develop hardware for AI data centers.

Micron is notable for collaborating with, rather than competing with, industry superpower Nvidia (NVDA), which supplies memory chips for Nvidia's highly sought-after GPUs.

Investors have shockingly high and ever-increasing expectations of AI chipmakers, which has often disappointed them in recent months. Micron's above-average third-quarter earnings did little to convince investors in late June, and shares plunged because its fourth-quarter outlook was exactly in line with (and didn't beat) Wall Street's expectations. Nvidia stock also sank after the company reported its quarterly results in late August. Even though profits more than doubled and topped revenue forecasts, investors wanted more from the semiconductor superpower.

Nvidia stock has since recovered, and Micron's fourth-quarter results have given the stock a boost after an otherwise disappointing few months that saw shares plummet from their mid-June highs in the $150 range.

The PHLX Semiconductor Sector Index (^SOX) has begun to recover from a slump earlier in the month as technology stocks rallied following the U.S. Federal Reserve's rate cut and China's central bank's major stimulus package. The index is up nearly 6% over the past week.

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Laura Bratton is a reporter for Yahoo Finance.

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