Micron Technology (NASDAQ:MU) shares tumbled by 2.2% as of 12.09pm on Wednesday after CFO Mark Murphy reaffirmed the company's second-quarter outlook but warned of margin pressures ahead. Speaking at the Wolfe Research Auto, Auto Tech, and Semiconductor Conference, Murphy stated there would be no changes to the previously issued guidance, which forecasts adjusted earnings between $1.33 and $1.53 per share. However, he cautioned that third-quarter gross margins are expected to decline by several hundred basis points due to a shift in the company's customer mix and broader industry challenges.
Micron's gross margin midpoint for the February quarter stands at 38.5%, already a slight dip from the prior quarter's 39.5%. Murphy noted that while consumer demand has exceeded expectations, it has been concentrated in lower-margin segments, putting additional pressure on overall profitability. Additionally, the company flagged ongoing "underutilization" in NAND production, though supply corrections are underway.
Despite the near-term headwinds, Micron believes the May quarter could mark the bottom for margins, with industry conditions improving beyond that point. Murphy pointed to strengthening data center demand, better smartphone inventory levels, and ongoing reductions in NAND supply as factors that should gradually support pricing and profitability. While the company refrained from providing a longer-term forecast, investors will be watching closely to see if these tailwinds materialize in the latter half of the year.
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