Strong AI Revenue Lifts Micron Stock

Core Insights - Micron Technology reported strong Q3 FY'25 results with a 37% year-over-year revenue increase to $9.3 billion, exceeding expectations, and adjusted earnings of $1.91, above the $1.60 consensus [2] - The company anticipates Q4 revenue of approximately $10.7 billion, indicating a projected 38% increase compared to the previous year, driven by demand for AI infrastructure and high-bandwidth memory (HBM) products [2] Revenue Growth - Revenue from HBM increased nearly 50% sequentially, with an annualized revenue run-rate of $6 billion, driven by the rapid adoption of generative AI models requiring high-performance memory [3] - Micron's data center revenue more than doubled from the prior year, setting a new quarterly record, as the company is the sole volume producer of low-power DRAM for data centers [5] Supply Constraints - HBM production is more complex than traditional DRAM, requiring approximately three times the number of wafers to produce the same number of bits, leading to supply constraints [4] - Micron has already sold out its HBM output for calendar 2025 and anticipates strong demand for HBM supply in 2026 [4] Margin Improvement - The gross margin for Q3 was 39.0%, up 110 basis points sequentially and 250 basis points higher than the guidance midpoint, with expectations for Q4 gross margin to reach 42% [6] - The shift towards higher-margin products, particularly HBM, significantly contributed to margin growth, with HBM now representing around 15% of Micron's total revenue [6] Technological Advancements - Micron began shipping its next-generation HBM4 memory in June 2025, delivering 36GB, 12-high HBM4 samples to key customers, including Nvidia [5] - The latest 1-gamma DRAM node, produced using EUV technology, enhances power efficiency by 20% and bit density by 30%, allowing Micron to maintain an edge in yield and scalability [7] Market Position - Despite a slowdown in the NAND market due to weak demand from smartphones and PCs, Micron has increased sales to consumer-oriented markets and gained market share in both NAND and SSD sectors, becoming the second-largest supplier of data center SSDs [7]