MW Why Micron's stock is leading the chip sector's decline

By Emily Bary

Micron CFO mentions various factors that could weigh on margins for next quarter but also says that period should mark the low point

Micron Technology Inc. sees a few factors that could weigh on margins next quarter, and that's pressuring the stock on Wednesday.

The maker of memory chips already forecast a 38.5% gross margin at the midpoint for its February quarter, which would be down from the 39.5% level seen in the last quarter. But speaking at a Wolfe Research conference on Wednesday, Chief Financial Officer Mark Murphy said while that outlook is still intact, the company now expects "a few hundred basis points" of sequential margin decline in the May quarter.

Micron's stock $(MU)$ is off 2.6% in Wednesday morning action, having pared losses after being down as much as 7.1% earlier in the session. It's currently the worst performer in the PHLX Semiconductor Index SOX on the day.

Murphy said that Micron is seeing better-than-expected volumes in many consumer segments, but that means those lower-margin businesses will be a bigger portion of the company's overall business mix in the May quarter. There's also been lower pricing in consumer-focused businesses early this year.

Read: Buy Nvidia's stock ahead of earnings? This analyst makes the case.

Micron also flagged "underutilization" issues in NAND, which is a type of memory, though Murphy said conditions could get better going forward.

"There needs to be a continued drawdown of inventories in NAND, and that's happening," he said. "You've seen the supply response in the industry. You've seen and we see it in some of these end markets that the volumes are bit higher and the inventory levels are improving."

While Micron isn't giving a quantitative forecast any farther out than what it offered on Wednesday, Murphy said various factors support the May quarter "being the low point."

See also: Micron's stock skids as AI momentum doesn't make up for pressures elsewhere

-Emily Bary

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February 12, 2025 11:02 ET (16:02 GMT)

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