Core Viewpoint - Micron Technology (NASDAQ: MU) reported a negative market reaction to its Q2 earnings, with a 9.2% decline in stock price since February [1] Financial Performance Summary - Revenue for Q2-25 reached $8.053 billion, a 38.3% increase year-over-year from $5.824 billion in Q2-24 [2] - Gross margin was $3.053 billion, representing 37.9% of revenue, compared to 20.0% in Q2-24 [2] - Operating income increased to $2.007 billion, or 24.9% of revenue, up from $204 million in Q2-24 [2] - Net income was $1.783 billion, or 22.1% of revenue, compared to $476 million in Q2-24 [2] - Diluted earnings per share were $1.56, up from $0.42 in Q2-24 [2] Revenue Breakdown - DRAM sales increased by 47% year-over-year, while NAND sales grew by 18% [2] - Revenue from computing and networking grew by 4% quarter-over-quarter and 57% year-over-year, driven by high-bandwidth memory chip sales [2] - Storage revenue declined by 20% due to reduced investment from data center customers and falling NAND prices [2] - Mobile revenue fell by 30% due to inventory adjustments, while embedded revenue decreased by 3% due to automotive customer issues [2] Profitability Insights - Gross profit surged by 162.6% to $3.053 billion, with operating income rising from $204 million to $2.007 billion [3] - The company’s guidance for sales was at the high end of expectations, with a projected revenue midpoint of $7.9 billion [3] - Profit margins increased by nearly 18 percentage points year-over-year, although there was a 1.6 percentage point decline quarter-over-quarter [3] Future Outlook - Micron expects Q3 revenue to be between $8.6 billion and $9.0 billion, indicating a sequential increase [4] - Non-GAAP gross margin is projected to decline to a midpoint of 36.5% [4] - The company faces ongoing pricing pressures in NAND and DRAM markets, particularly due to competition and customer technology choices [5] Market Dynamics - The demand for HBM chips requires continuous investment, and there are concerns about potential oversupply [5] - The automotive sector is experiencing challenges, impacting suppliers, with NAND solutions being particularly affected by competition and market volatility [5] - Transitioning to new technology nodes presents opportunities, but maintaining sales volume is crucial as density increases [6] Valuation and Investment Considerations - Micron's current valuation appears reasonable, supporting a buy rating, especially if stock prices decline further without significant changes in earnings expectations [8] - Analysts predict a modest increase in EBITDA between FY2025 and FY2027, with free cash flow forecasts declining due to HBM capital expenditure requirements [8] - Despite the unstable demand environment affecting pricing and margins, analysts do not view the current sell-off as justified, citing substantial demand potential [8]