MU Q2 Deep Dive: AI-Driven Demand and Product Execution Shape Outlook

Memory chips maker Micron (NYSE:MU) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 36.6% year on year to $9.30 billion. On top of that, next quarter’s revenue guidance ($10.7 billion at the midpoint) was surprisingly good and 7.2% above what analysts were expecting. Its non-GAAP profit of $1.91 per share was 19% above analysts’ consensus estimates.

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StockStory’s Take

Micron’s second quarter reflected significant year-on-year growth, driven by robust demand for advanced memory products, particularly in data center and AI-related segments. Management credited the results to a sharp increase in high-bandwidth memory (HBM) revenue, strong execution in ramping up new product lines, and ongoing operational improvements. CEO Sanjay Mehrotra highlighted that the company reached new records in data center revenue and that customer inventories were generally healthy, with only modest effects from tariff-related order timing. He emphasized, “Micron's strong competitive position and solid execution delivered record revenue,” pointing to disciplined investments and successful transitions to newer technology nodes as central to the quarter's performance.

Looking forward, Micron’s guidance is based on continued momentum in AI-driven memory demand and further progress in technology transitions. Management expects sequential revenue growth, supported by advances in HBM and new DRAM technologies, as well as disciplined capacity expansion aligned with customer needs. Mehrotra noted, “We see a robust demand environment and expect to grow revenue by 15% sequentially,” attributing much of this optimism to ongoing adoption of Micron’s HBM and 1-gamma DRAM products. The company is also investing heavily in U.S. manufacturing and R&D to position itself for sustained industry growth, while remaining attentive to potential risks from evolving tariffs and global supply dynamics.

Key Insights from Management’s Remarks

Micron’s management attributed the quarter’s performance to strong growth in AI-related memory products, disciplined supply management, and ongoing technology advancements, while noting favorable pricing helped margins exceed expectations.

• AI and data center momentum: The quarter saw notable strength in data center memory, with HBM revenue nearly doubling sequentially. Management highlighted that Micron became the #2 brand by share in data center SSDs, according to third-party data. This was attributed to increased demand from AI server platforms and continued customer adoption of high-capacity DRAM and low-power server memory.
• Technology node progress: Significant progress was made on the 1-gamma DRAM node, with yields ramping ahead of previous generations. Micron shipped its first qualification samples of 1-gamma based LP5 DRAM, aiming for improved power efficiency and higher performance. These advances are positioned to support next-generation AI and mobile applications.
• Product mix and pricing discipline: Favorable shifts toward DRAM and data center products, as well as better-than-expected pricing for both DRAM and NAND, contributed to margin expansion. CFO Mark Murphy noted that “favorable mix effects” and “good cost performance” were key in driving operating margin improvements.
• Global capacity investments: The company announced a $200 billion long-term investment in U.S. manufacturing and R&D, including new fabs and advanced packaging capabilities. These initiatives are intended to support anticipated demand for AI memory and enhance supply chain resilience.
• Inventory and supply management: Inventory days outstanding decreased, reflecting tight supply and healthy customer inventories. Management signaled that DRAM inventories are expected to remain tight, with some allocation and shortages in older product lines due to end-of-life transitions.

Drivers of Future Performance

Micron’s forward guidance is shaped by persistent AI-related demand, continued progress in advanced memory products, and disciplined capital allocation.

• AI-driven product demand: Management expects ongoing growth from AI servers and next-generation GPUs to drive high-bandwidth memory and advanced DRAM shipments. The launch and ramp-up of HBM4 and 1-gamma DRAM are seen as critical to maintaining this momentum into 2026.
• Capacity and technology investments: The company is investing heavily in new U.S. facilities and technology nodes to support anticipated demand, while managing NAND supply transitions and capacity reductions to align with market needs. These moves are intended to maintain leadership in both cost and performance.
• Market and geopolitical risks: While the demand environment is constructive, management cited risks related to potential new tariffs, customer order timing around trade policy, and capacity constraints on certain product lines as factors that could impact future results.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will watch (1) the pace of HBM4 and 1-gamma DRAM adoption by key AI and server customers, (2) execution on U.S. manufacturing expansion and technology node transitions, and (3) trends in inventory levels and pricing across DRAM and NAND. The ability to manage supply constraints while scaling new products will be a critical marker of Micron’s ongoing strategy execution.

Micron currently trades at $128.27, in line with $127.49 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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