Micron forecasts first-quarter revenue above estimates on AI demand
FILE PHOTO: A Micron logo and a computer motherboard appear in this illustration taken August 25, 2025. REUTERS/Dado Ruvic/Illustration/File Photo
Micron Technology forecast first-quarter revenue above market estimates on Tuesday, betting on booming demand for its high-bandwidth memory chips, or HBM, as a race to dominate artificial intelligence tech intensifies.
Efforts to build the most sophisticated AI models and expand the data center infrastructure that they run on have boosted demand for Micron's HBM.
Much of the competition among the world's largest memory suppliers has centered on becoming a key HBM supplier to Nvidia, owing to the world's most valuable company's dominant market position. Micron supplies HBM for some of Nvidia's semiconductors.
In the fourth quarter, Micron's HBM revenue grew to nearly $2 billion, implying an annualized run rate of nearly $8 billion, CEO Sanjay Mehrotra said on a post-earnings call.
HBM — a type of dynamic random access memory — involves stacking chips vertically to reduce power consumption, helping process large volumes of data, making it invaluable in AI development.
Micron expects to lock in deals to sell out all of its HBM chips for calendar year 2026 in the coming months, with pricing agreements on HBM3E mostly wrapped up, while deals regarding the more advanced HBM4 chips are still in discussion, Mehrotra said.
"The pricing on HBM4 is actually significantly higher than the pricing on HBM3E," Chief Business Officer Sumit Sadana told Reuters. "Because of the very tight industry environment that we are in ... we expect a pretty strong return on investment for our HBM business."
Micron forecast first-quarter sales of $12.50 billion, plus or minus $300 million, compared with the analysts' average estimate of $11.94 billion, according to data compiled by LSEG.
TSMC will also be a partner for manufacturing the base logic die for Micron's upcoming HBM4E for both customized products and off-the-shelf iterations.
MARGIN BOOST
Micron also forecast adjusted gross margin of 51.5 per cent, far above estimates of 45.9 per cent.
The margin boost is because "pricing is better than expected," said Kinngai Chan, an analyst at Summit Insights.
Micron recorded adjusted earnings of $3.03 per share in the fourth quarter, beating estimates.
The company was also allotted a $6.2 billion government subsidy under former U.S. President Joe Biden's CHIPS and Science Act.
Current U.S. Commerce Secretary Howard Lutnick is looking to rework the grants into equity stakes in the chipmakers that received them, similar to a historic deal with Intel, Reuters has reported.
Micron does not expect any changes to its CHIPS Act agreement, Sadana told Reuters.
"The government has been very pleased with our commitment to U.S. manufacturing ... we don't anticipate any changes there," Sadana said, referring to the grant.
In the fourth quarter, Micron received a CHIPS grant disbursement after completing a key construction milestone for its Idaho manufacturing fab, CEO Mehrotra said.
