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The Micron Technology (NASDAQ: MU) juggernaut isn't showing any signs of stopping, as it thumped Wall Street's expectations with a solid fiscal second-quarter earnings report and good forward guidance. The memory specialist's strong showing wouldn't have surprised investors as it has been enjoying favorable pricing conditions in the DRAM (dynamic random access memory) market.
Still, shares of the chipmaker fell after the earnings report as investors were possibly expecting bigger guidance numbers. But a closer look at Micron's results, guidance, and memory market conditions indicate that it is capable of sustaining its impressive rally in the future, and there's no reason for investors to panic.
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Terrific growth once again
Micron's fiscal second-quarter revenue shot up 58% year over year to $7.35 billion, and its net income more than tripled to $3.5 billion. The company enjoyed such massive growth thanks to the strong demand for its DRAM and NAND flash memory chips. More specifically, DRAM shipments increased in the mid-single-digits, while the average selling prices were up in the low double digits as compared to the first quarter.
This boosted Micron's DRAM revenue by 14% on a sequential basis and 76% as compared to the year-ago period. The sequential rise in DRAM pricing and demand suggests that this market is in great shape, which is good news for Micron investors as this segment supplies 71% of the total revenue.
What's more, the favorable pricing conditions boosted DRAM non-GAAP gross margins by a whopping 22% from the prior-year period. Similarly, the NAND flash business, which accounts for a fourth of the top line, also reported substantial growth. Gross profit margins in this segment increased 16% year over year on the back of a 28% increase in the revenue.
However, while demand looks strong there were mixed indications on the pricing front. Though NAND shipments increased in the low double digits sequentially, average selling prices dropped in the mid-teens. Micron has put the blame for this price drop on a shift in the mix of product sales and a higher proportion of "last-time purchase of higher price MLC NAND" in the previous quarter. Investors shouldn't panic just yet as Micron expects the long-term scenario in the NAND industry to play out in its favor.
Why Micron isn't done growing yet
Micron expects $7.4 billion in revenue and $2.83 per share in earnings during the current quarter that ends in May. Both these numbers are comfortably above consensus estimates and the company's last year's revenue and earnings per share of $5.57 billion and $1.62 per share, respectively.