Micron (MU, Financial) outperformed expectations in Q3 2025, exceeding EPS and revenue forecasts despite macroeconomic challenges affecting consumer businesses. This success was largely due to the rising demand for high-bandwidth memory (HBM) chips, driven by the growing adoption of AI infrastructure in data centers. Micron's strategic focus on high-margin HBM products, essential for AI workloads, helped offset slowdowns in the PC and smartphone markets.
Key Highlights:
- Micron's guidance for Q4 2025 predicts revenue of $10.7 billion (+/- $300 million), a 15% sequential increase, and adjusted EPS of $2.50 (+/- $0.15), both surpassing analyst estimates. However, the stock's muted response reflects investor caution about sustaining this growth, partly due to concerns over tariff-related order accelerations.
- Record-high DRAM revenue in Q3 was driven by a nearly 50% sequential increase in HBM revenue and a doubling of data center revenue year-over-year. The demand for HBM chips is linked to AI infrastructure, crucial for powering GPUs used in AI by companies like NVIDIA (NVDA, Financial) and Advanced Micro Devices (AMD, Financial).
- Micron's HBM3E chips, designed for AI and high-performance computing, are in high demand, with supply fully booked for 2025 and strong demand into 2026. The company plans to ramp up production and invest $200 billion over the next 20+ years in U.S. manufacturing and R&D.
- Micron's consumer-oriented businesses, particularly in PCs and smartphones, showed significant sequential growth. The Mobile Business Unit reported a 45% sequential revenue increase to $1.6 billion, driven by improved pricing and demand for AI-enabled smartphones requiring more DRAM.
- For 2025, Micron anticipates low single-digit growth in smartphone unit volumes and PC sales, with AI-enabled devices driving higher memory content per unit.
Despite the strong Q3 results and optimistic Q4 guidance, Micron's stock remains subdued due to investor concerns about the sustainability of its growth amid tariff uncertainties and cyclical consumer market risks. However, the company's AI-driven growth, especially in the high-margin HBM segment, positions it as a key player in the expanding AI infrastructure market.
