Micron's Guidance Gap Signals Capacity, Not Collapse

Micron fell sharply after its fiscal Q3 report in June. The stock lost nearly 30% from its high. The Q4 revenue guide landed well below the consensus.

The Q3 numbers were strong on their own. Revenue came in at $6.81 billion, above the midpoint of the company's range. Earnings per share of $0.62 beat the $0.51 estimate. Data center revenue hit a record, driven by HBM3E memory for AI accelerators. Broadcom's Google deal shows the long-term demand backing Micron's HBM backlog.

The Q4 outlook told a different story. Micron guided for revenue of $7.6 billion, plus or minus $200 million. The Street was at $7.98 billion. The $380 million gap at the midpoint explains the selloff.

The market read the guide as a signal that non-HBM demand was turning. PC and phone markets remain slow. DRAM and NAND pricing faces pressure from inventory builds at customers. The stock priced a scenario where the AI memory boom peaks before the rest of the cycle recovers.

That reading skips a key detail. HBM3E is sold out through calendar 2025, Micron said on the call. The company allocated its full HBM supply for next year months ago. The Q4 guide reflects a capacity constraint, not demand destruction. Priority went to the highest-margin backlog. That caps near-term revenue growth but protects the margin structure and locks in the AI backlog for years.

The non-HBM weakness is cyclical. PC and phone memory content rises every generation. The inventory adjustment in those end markets has run for two quarters. A recovery in the second half of the calendar year would fall inside Micron's fiscal 2025 window.

At the current price near $110, Micron trades at roughly 3.5x forward revenue and 12x forward earnings. The HBM ramp alone could add $8 billion to $10 billion in annual revenue by fiscal 2026. If the non-HBM cycle turns, the earnings power sits above the current consensus.

The risk is that the non-HBM downturn deepens or that HBM margins compress with Samsung and SK Hynix ramping their own output. The stock has discounted a scenario where both hit at once. A recovery in either leg would produce a re-rating.

The fiscal Q4 report is scheduled for late September. The $100 low has held since the selloff.