Positive Industry Environment & Technology Transitions Help Micron Report Another Solid Quarter: Q3’17 Earnings Review

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Hitting record revenue, non-GAAP earnings per share (EPS), and operating cash flow, Micron Technology (NYSE:MU) reported another solid quarter on June 29th. At $5.6 billion, the company’s Q3 2017 revenue nearly doubled on an y-o-y basis, driven by primarily stronger DRAM ASPs and higher NAND bit volumes. The company continues to witness a positive industry environment, which combined with additional bit growth from current technologies and progress on deploying the next-generation technologies into manufacturing, helped Micron beat analyst guidance yet again in Q3 2017.

The production technology execution and the results in bit growth and cost reductions has enabled Micron to significantly strengthen its cash flow and financial performance in the last few quarters. In the last 12 months, the company’s bit output has been above industry average for both DRAM and Trade NAND while its cost per bit has declined approximately 25% and 30% in DRAM and Trade NAND, respectively. [1]

Micron expects the positive demand supply environment to persist into 2018, supported by continued strong growth in both DRAM and NAND demand, reflecting broader trends in the data center and mobile markets, as well as increased adoption of SSDs across enterprise, cloud and client PCs.

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MU Q3'17 Earnings1

Focus On Higher Value-Add Solution To Improve Micron’s Product Mix

In addition to the positive pricing environment and higher bit volumes in DRAM and NAND, the improving product mix (towards higher value-add solutions) is an important factor driving the company’s growth momentum.

In Q3 2017, Micron’s SSD revenue nearly tripled, while the DRAM bits embedded in high-value solution for enterprise, cloud, and graphics customers, together grew at a rate twice the company’s overall DRAM bit output for the same period last year. With improving technology and product competitiveness, Micron has made considerable progress in SSDs. Its market share in client SSDs as well as enterprise and cloud SSD’s has increased in the last few quarters, and currently stands at high single digit and sub-10% level in the two segments, respectively. [1]

“Applications like autonomous driving, machine learning, and big data analytics all promise to make an enormous impact on our lives. Memory and flash storage are the critical and increasingly strategic elements in every one of these applications.”

Lower Bit Growth Than The Industry In FY’18 Due To The Timing Of Technology Transition

Micron’s DRAM revenue increased 20% sequentially in Q3 2017 as a result of a 5% increase in bit shipments and a 14% increase in ASPs. For fiscal 2018, Micron expects its bit growth at or slightly below industry growth rates due to the timing of the DRAM technology transition. For calendar 2017, the company forecasts DRAM industry bit supply growth of between 15% and 20%, slightly below expected demand growth.

Micron’s Trade NAND revenue increased 21% sequentially in Q3 2017, driven by a 17% increase in bit shipments and a 3% increase in ASPs. Based on the timing of technology transition, Micron expects its bit growth in NAND to be relatively muted in the first half of fiscal 2018 but expects stronger growth in the second half of the year. For calendar 2017, the company anticipates NAND industry supply growth in the high 30% to low 40% range.

On the manufacturing operations front, Micron claims to be making good progress toward achieving meaningful output by the end of the fiscal year on both 64-layer 3D NAND and 1X DRAM. Both of these technologies have already begun revenue shipments and are advancing well in their production yield ramp.

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Notes:
  1. Micron’s Q3’17 Earnings Call Transcript, Seeking Alpha, June 29, 2017 [] []
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