Micron (MU) Up 35.4% Since Last Earnings Report: Can It Continue?

Core Viewpoint - Micron has shown significant growth in its recent earnings report, with shares increasing by approximately 35.4% since the last report, outperforming the S&P 500, raising questions about the sustainability of this positive trend leading up to the next earnings release [1] Earnings Performance - Micron reported Q1 earnings of $4.78 per share, exceeding the Zacks Consensus Estimate by 22.25% and marking a 167% year-over-year increase from $1.79 per share [2] - Revenues for the first quarter reached $13.64 billion, a 56.7% year-over-year increase, surpassing the Zacks Consensus Estimate by 7.26%, driven by strong demand for high bandwidth memory (HBM) products [2] Revenue Breakdown - DRAM revenues accounted for $10.8 billion, representing 79% of total revenues, with a 69% year-over-year increase and a 20% sequential increase, attributed to record demand for data center DRAM and high-capacity DIMMs [3] - NAND revenues were $2.7 billion, making up 20% of total revenues, with a 22% increase year-over-year and sequentially [3] - Other revenues increased to $88 million from $68 million year-over-year and from $79 million in the previous quarter [4] Business Segments - The Cloud Memory Business Unit generated $5.28 billion, a 100% year-over-year increase and a 16% sequential increase, driven by higher bit shipments and pricing [6] - The Core Data Business Unit's revenues were $2.38 billion, growing 4% year-over-year and 51% sequentially due to higher pricing and bit shipments [6] - The Mobile and Client Business Unit reported revenues of $4.26 billion, up 63% year-over-year and 13% sequentially, while the Auto and Embedded Business Unit's revenues totaled $1.72 billion, increasing 49% year-over-year and 20% sequentially [7] Operating Metrics - Micron's non-GAAP gross profit for Q1 was $7.75 billion, a 125% increase year-over-year and a 50% increase sequentially, with a non-GAAP gross margin of 56.8%, up from 39.5% year-over-year and 45.7% sequentially [8][10] - Non-GAAP operating income reached $6.42 billion, significantly higher than the previous quarter's $3.96 billion and the year-ago quarter's $2.39 billion [9] Financial Position - At the end of the reported quarter, Micron had cash and investments of $12.02 billion, up from $11.94 billion in the previous quarter, with total debt decreasing to $11.19 billion from $14.02 billion [11] - The company generated an operating cash flow of $8.4 billion, with capital expenditures of $4.5 billion, resulting in an adjusted free cash flow of $3.9 billion [12] Future Guidance - For Q2 of fiscal 2026, Micron anticipates revenues of $18.7 billion (+/- $400 million) and a non-GAAP gross margin of 68% (+/- 100 basis points), with estimated operating expenses of $1.38 billion (+/- $20 million) and adjusted EPS of $8.42 (+/- 20 cents) [13] Market Sentiment - Following the earnings release, there has been a notable upward trend in estimates revisions, with the consensus estimate shifting by 90.77% [14] - Micron holds a strong Growth Score of A, with an aggregate VGM Score of A, indicating positive market sentiment and expectations for above-average returns in the coming months [15][16]