Chipmaker Micron Technology (MU.O) forecast third-quarter revenue above estimates on Wednesday and posted a surprise second-quarter profit, benefiting from the rapid adoption of artificial intelligence technology by businesses.
The Boise, Idaho-based company's shares shot up 13.4% in extended trading, after a rise of more than 60% over the last 12 months.
High bandwidth memory (HBM) chips that are used in the development of complex AI applications have driven demand for Micron. CEO Sanjay Mehrotra said Micron's HBM was sold out for 2024, and a majority of its 2025 supply has already been allocated.
Tech companies and other businesses have been vying to incorporate generative artificial intelligence into their products and services, boosting demand for Micron's HBM chips.
AI chip front-runner Nvidia (NVDA.O) will use Micron's latest HBM 3E chips in its next-generation H200 graphic processing units (GPUs). This gives Micron a stronger footing against South Korean competitor SK Hynix (000660.KS), which was the sole supplier of HBM chips to Nvidia.
Analysts expect Micron's share of the high-margin HBM market to grow throughout the year.
The company reports results ahead of other chipmakers and its upbeat forecast sent shares of peer Western Digital (WDC.O) up 4.6% in extended trade.
HBM revenues are expected to add to its gross margins in the third quarter, he said, reiterating that the company was on track to generate several hundred million dollars of revenue from the advanced chips in fiscal 2024.
Micron expects adjusted gross margin for the third quarter to be 26.5%, plus or minus 1.5%, compared with market estimates of 20.8%.
The company forecast revenue of $6.60 billion, plus or minus $200 million, for the current quarter, largely above estimates of $6.03 billion, according to LSEG data.
It reported adjusted profit of 42 cents per share for the second quarter, compared with estimates for a loss of 25 cents.
Micron offers flash memory chips that serve the data storage market and dynamic random access memory (DRAM) made for data centers, personal computers, smartphones and other computing devices.
Mehrotra said Micron's bit supply growth in fiscal 2024 remains below its demand growth for both DRAM and NAND.
Pricing for memory chips has also been improving after hitting some of its lowest levels in years after a pandemic-led buying spree ultimately resulted in a supply glut.
Pricing across all memory and storage end markets is improving, Mehrotra said, adding that the company expects DRAM and NAND pricing levels to increase further throughout 2024.
Micron reported second-quarter revenue of $5.82 billion, compared with estimates of $5.35 billion.
