Micron Technology, Inc. (MU Quick QuoteMU - Free Report) reported overwhelming third-quarter fiscal 2024 results, wherein the top and bottom lines surpassed the respective Zacks Consensus Estimate and marked a significant year-over-year improvement. The key metrics, including revenues, gross margin and earnings per share, came above the high end of management’s guidance range.

Micron reported non-GAAP earnings of 62 cents per share, significantly higher than the consensus mark of 50 cents and management’s forecast of 45 cents (+/- 7 cents). The bottom-line result registered strong improvement from the year-ago quarter’s loss of $1.43 per share, as well as the previous quarter’s earnings of 42 cents per share.

Micron’s quarterly revenues soared 82% year over year and 17% sequentially to $6.81 billion. The top line also surpassed the Zacks Consensus Estimate of $6.7 billion and management’s guidance of $6.60 billion (+/- $200 million).

Micron’s better-than-expected third-quarter performance reflects the benefits of the robust demand for the artificial intelligence (AI) product portfolio, which resulted in higher pricing for DRAM (Dynamic Random Access Memory) and NAND. Strong sales executions and an improving supply-demand environment also aided growth in the third-quarter top and bottom lines.

Q3 Top-Line Details

Technology-wise, DRAM revenues of $4.69 billion, accounting for 69% of the total revenues in the fiscal third quarter, increased 76% year over year and 13% sequentially. Bit shipments decreased in the mid-single-digit percentage range sequentially, while the average selling price (ASP) rose by approximately 20% on a quarter-over-quarter basis.

NAND revenues of $2.07 billion, representing 31% of the total top line, were up 104% year over year and 32% quarter over quarter. While NAND ASP increased approximately 20% sequentially, bit shipments grew in the high-single-digit percentage range.

Other revenues were 1% of the total revenues of $54 million in the reported quarter.

Business segment-wise, revenues of $2.57 billion from the Computing and Networking Business Unit soared 85% from the year-ago quarter and 18% sequentially. Revenues of $1.59 billion from the Mobile Business Unit jumped 94% on a year-over-year basis but declined 1% on a quarter-over-quarter basis.

The Embedded Business Unit’s revenues logged in at $1.29 billion, up 42% from the year-ago period and 16% from the previous quarter. Revenues from the Storage Business Unit, comprising solid-state drive NAND components, totaled $1.35 billion, up 116% year over year and 50% sequentially.

Operating Details

For the third quarter, Micron posted a non-GAAP gross profit of $1.92 billion, a robust improvement from the previous quarter’s $1.16 billion and the year-ago quarter’s non-GAAP gross loss of $603 million. The third-quarter non-GAAP gross margin of 28.1% also improved from the second quarter’s 20%. In the year-ago quarter, it had registered a negative gross margin of 16.1%.

Non-GAAP operating expenses came in at $976 million compared with the previous quarter’s $959 million and the year-ago quarter’s $866 million.

Micron’s non-GAAP operating income of $941 million was way higher than the previous quarter’s non-GAAP operating loss of $204 million. It also shows improvement from the year-ago quarter’s non-GAAP operating loss of $1.47 billion.

The non-GAAP operating margin came in at 13.8%. Micron posted a non-GAAP operating margin of 3.5% for the second quarter of fiscal 2024, while it had a non-GAAP operating margin of negative 39.2%

Balance Sheet & Cash Flow

Micron exited the reported quarter with cash and investments of $9.22 billion compared with the $9.72 billion recorded at the end of the prior quarter. It ended the quarter with total liquidity of $11.7 billion, down from 12.2 billion at the end of the previous quarter.

Micron’s long-term debt as of May 30, 2024 was $12.9 billion compared with the $13.7 billion witnessed at the end of the second quarter.

The company generated operating cash flow of $2.5 billion in the third quarter. It spent $2.1 billion on capital expenditure during the quarter, resulting in an adjusted free cash flow of $425 million. MU paid out $128 million in dividends during the reported quarter. However, the company did not repurchase any stocks during the quarter as it kept the share buyback plan suspended since the second quarter of fiscal 2023.

Outlook

Micron provided guidance for the fourth quarter of fiscal 2024. The company anticipates revenues of $7.60 billion (+/-$200 million) for the fiscal fourth quarter. The Zacks Consensus Estimate stands at $7.45 billion.

For the fiscal fourth quarter, MU projects a non-GAAP gross margin of 34.5% (+/-100 basis points). Operating expenses on a non-GAAP basis are estimated at $1.06 billion (+/-$15 million).

Adjusted earnings per share are anticipated at $1.08 (+/-8 cents). The consensus mark is pegged at a loss of 90 cents per share.

Zacks Rank & Other Stocks to Consider

Micron currently carries a Zacks Rank #2 (Buy). The stock has rallied 66.8% year to date (YTD).

Some other top-ranked stocks from the broader technology sector are NVIDIA (NVDA Quick QuoteNVDA - Free Report) , Dropbox (DBX Quick QuoteDBX - Free Report) and Zscaler (ZS Quick QuoteZS - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for NVIDIA’s second-quarter fiscal 2025 earnings has been revised 6 cents upward to 63 cents per share over the past 60 days. Shares of NVDA have skyrocketed 155.2% YTD.

The Zacks Consensus Estimate for Dropbox’s second-quarter 2024 earnings has been revised by 2 cents northward to 52 cents per share in the past 60 days. Shares of DBX have plunged 26.2% YTD.

The Zacks Consensus Estimate for Zscaler’s fourth-quarter fiscal 2024 earnings has been revised upward by 2 cents to 69 cents per share in the past 30 days. Shares of ZS have declined 19.3% YTD.