Micron (MU) Q2 Earnings Preview: AI Growth vs. NAND Weakness – What to Watch

Micron Technology (NASDAQ: MU) is set to report its fiscal second-quarter earnings on Thursday, March 20, after the market close. Investors will be watching closely to see if the memory and storage company can provide a more encouraging outlook after its disappointing guidance last quarter. While Micron’s growth in the AI-driven data center market remains a bright spot, the company has been struggling with weak NAND demand, particularly in consumer markets like smartphones and PCs. The stock has seen downward pressure in recent weeks, and analysts have been lowering their expectations for the quarter. However, some remain optimistic that the worst of the industry downturn may soon pass.

Ask Aime: What is the expected revenue for Micron Technology's second quarter, and how does the AI-driven data center market's growth affect the company's earnings?

Wall Street expects micron to report adjusted earnings per share of $1.43 on revenue of $7.92 billion, representing a 36% year-over-year increase in revenue. citi forecasts third-quarter revenue of $8.2 billion, citing lower DRAM sales as a headwind. Citi also projects Q3 EPS of $1.28, below the consensus, driven by lower revenue and margin pressure. Analysts expect DRAM sales to decline 4% sequentially in Q2 due to seasonal factors but anticipate a rebound in mobile DRAM demand in Q3. On the NAND side, Citi forecasts a steep 26% quarter-over-quarter decline to $1.66 billion, reflecting weaker pricing and slowing demand for enterprise solid-state drives (eSSDs).

The company’s guidance will be a major focus, particularly after its weak Q1 outlook triggered a sharp sell-off. Analysts will be looking for signs that NAND pricing is stabilizing and that inventory digestion in consumer markets is progressing. Wolfe Research cut its price target on Micron from $175 to $150, citing increased pricing pressure and unfavorable product mix shifts. However, the firm remains bullish on the long-term DRAM outlook, expecting a commodity DRAM recovery in the second half of 2025, driven by AI-related demand. Stifel also highlighted potential near-term margin pressure but sees improving NAND pricing and a recovery in bit demand as potential tailwinds later in the year.

Despite near-term headwinds, sentiment on Micron remains largely positive among analysts. Citi reiterated its buy rating with a $150 price target, arguing that DRAM pricing should improve as inventory normalizes. Hedgeye recently turned bullish on Micron, believing its consumer and edge AI business could surprise to the upside. However, risks remain, including a potential AI-driven slowdown, macroeconomic concerns, and the cyclical nature of the memory market. Investors will be closely watching Micron’s Q2 results and guidance for any indication that pricing pressures are easing and demand is turning the corner.

First Quarter Recap

Micron Technology (MU) reported fiscal first-quarter earnings that met analyst expectations but issued weak forward guidance, leading to a sharp sell-off in its shares. Revenue surged 84% year-over-year to $8.71 billion, while adjusted EPS came in at $1.79, slightly above the consensus estimate of $1.76. The company’s gross margin improved significantly, reaching 39.5% compared to just 0.8% a year ago. However, concerns over slowing demand for NAND memory chips, especially in the smartphone and PC markets, overshadowed the otherwise strong results. The stock dropped more than 11% following the report, with analysts adjusting their price targets downward in response to the weaker-than-expected guidance for fiscal Q2 and full-year 2025.

The key driver of Micron’s strong performance in the first quarter was continued strength in the data center market, where demand for high-bandwidth memory (HBM) remains robust. The company noted that HBM shipments more than doubled sequentially, and management raised its 2025 HBM total addressable market (TAM) estimate to $30 billion. Micron is now shipping to Nvidia’s B200 and GB200 platforms and has added two new high-volume customers, reinforcing its competitive position in the AI-driven data center segment. However, weakness in consumer electronics, particularly in smartphones and PCs, weighed on the company’s NAND business. Inventory reductions at original equipment manufacturers (OEMs) and softer NAND pricing led to a downward revision in Micron’s outlook, with Q2 revenue now projected between $7.7 billion and $8.1 billion, well below the consensus estimate of $8.99 billion. Gross margin guidance of 37.5%-39.5% also fell short of expectations.

Analysts remain split on the stock’s near-term trajectory. Bank of America downgraded Micron to Neutral, citing ongoing headwinds in NAND pricing and inventory digestion in the consumer markets. JPMorgan and Wolfe Research, however, maintained bullish views, pointing to the resilience of the DRAM segment and the long-term growth potential of HBM. Despite the current weakness, most analysts expect memory demand to recover in the second half of 2025 as DDR inventory normalizes and AI-driven workloads continue to expand. The company’s capital expenditures remain focused on HBM and leading-edge DRAM nodes, with management prioritizing investments in 1β and 1γ technologies. Tariffs remain a point of concern, with Micron acknowledging potential risks from U.S.-China trade tensions but noting that its high-end customer base in China remains stable for now.