After an initial surge due to strong Q2 earnings and revenue, Micron (MU, Financial) shares fell as guidance for Q3 did not indicate a significant trend change. MU projected Q3 adjusted EPS of $1.47-1.67, aligning with consensus, and revenue of $8.6-9.0 billion, surpassing expectations. However, this guidance was not seen as a meaningful improvement from the previous outlook.

In the last quarter, MU noted weakness in consumer markets, expected to persist through Q2. Management anticipates growth in the latter half of FY25. Despite targeting a 29% year-over-year revenue increase for Q3, a slowdown from Q2's 38% rise, macroeconomic uncertainties continue to obscure recovery timing in consumer electronics, offering little relief.

• Q2 highlights include record data center DRAM revenues and a 50% sequential surge in high bandwidth memory (HBM) to over $1 billion. This placed Q2 revenue at $8.05 billion, near the high end of MU's guidance.
• AI remains a key demand driver, with major hyperscalers like Amazon, Microsoft, and Google planning significant capital investment growth in 2025. MU anticipates mid-single-digit server growth, driven by traditional and AI servers, and increased its HBM total addressable market estimate by $5 billion to over $35 billion.
• Competition looms as MU faces Samsung (SSNLF, Financial) and SK Hynix in the HBM market. MU is currently a qualified supplier for NVIDIA's (NVDA, Financial) GB300 AI system. Samsung's entry could disrupt MU's position.
• Other segments face economic challenges. In PCs, MU expects mid-single-digit market growth in 2025, mainly in the second half due to Windows 10's end-of-life. Mobile projections remain low-single-digit, with AI adoption potentially boosting DRAM demand. Industrial and automotive sectors are nearing the end of inventory adjustments.

Investors are skeptical of MU's recovery prospects, despite strong AI demand. Consumer segments struggle, but potential tailwinds like the Windows 10 transition could aid recovery. Investors await confirmation of a second-half turnaround before MU can surpass the $110 resistance level.