Micron’s earnings report last week continued the key theme of AI-related companies shattering expectations. The company reported $23.9 billion in sales against their guidance of $18.7 billion. This $5.2 billion beat compared to their expectations is the largest upside surprise in the company’s history and reflects the underlying momentum the semiconductor industry is experiencing.
To put Micron’s results in perspective, their $5.2 billion beat was larger than Nvidia’s this quarter. Nvidia’s latest result of $68.1 billion in sales exceeded its expectation of $65.0 billion, or a $3.1 billion beat. As shown in the chart below, Micron’s beat exceeds any of Nvidia’s surprises since the AI-boom started in late 2022. While Nvidia has seen a steadier cadence of surprises, Micron’s momentum is undeniable from these results.
As AI usage advances more towards agentic systems, the memory Micron supplies is playing a bigger role. Micron CEO Sanjay Mehrotra noted on the company’s earnings call that “Our memory and storage solutions are at the heart of this AI revolution. Memory makes AI smarter and more capable, enabling longer context windows, deeper reasoning chains, and multi-agent orchestration. As AI evolves, we expect compute architectures to become more memory-intensive.”1 These breakthroughs in AI models – and their need for memory – are a key reason why Micron is closely tied to Nvidia’s new Vera Rubin chip.
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Booming Expectations
Wall Street consensus may be catching up to Micron’s underlying business fundamentals. Analysts anticipate Micron’s earnings to boom. As shown in the chart below, FactSet consensus now expects Micron to earn $91 in earnings per share (“EPS”) in its fiscal year ending August 2027. Just twelve months ago, consensus expected Micron to earn $11 for this same period. While the company has executed exceptionally well in the past few quarters, expectations are now higher than ever.
Micron’s momentum in recent quarters has been astounding. The company posted a large revenue beat in its latest results, with the size of the beat surpassing Nvidia’s latest comparable results. Memory chips are playing an important role in the current phase of AI’s growth, and Micron’s work with Nvidia has helped them gain momentum. But expectations are booming as well – consensus earnings estimates are now nearly 9x higher than this time last year. Investors may be well served to assess how much longer Micron’s momentum can exceed expectations.
For more content by Blake Anderson, CFA®, Associate Portfolio Manager, click here.
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