FILE PHOTO: A smartphone with a displayed Micron logo is placed on a computer motherboard in this illustration taken March 6, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
(Reuters) -Memory chip maker Micron Technology tapped a surge in artificial intelligence adoption to forecast third-quarter revenue above estimates on Wednesday and post a surprise quarterly profit.
Its shares shot up more than 16% in extended trading, adding to a rise of more than 60% over the last 12 months. Micron's stock was last at about $110, and a close at that level on Thursday would be its highest ever.
The strong report and forecast underscore surging demand for high-end memory chips and other advanced semiconductors as big tech companies race to incorporate generative AI.
Micron's high bandwidth memory (HBM) chips, which are used in the development of complex AI applications, were sold out for 2024 and a majority of 2025 supply had already been allocated, CEO Sanjay Mehrotra said.
AI chip front-runner Nvidia has also tapped Micron for the latest HBM 3E chips in its next-generation H200 graphics processing units (GPUs). South Korean competitor SK Hynix has been the sole supplier of HBM chips to Nvidia so far.
Micron's chief business officer, Sumit Sadana, also told Reuters that the company had signed up new customers for its HBM products that it is yet to announce.
The adjusted per-share profit reported on Wednesday was Micron's first after five straight quarters of losses, according to LSEG.
Analysts expect its share of the high-margin HBM market to grow throughout the year.
Micron offers flash memory chips that serve the data storage market and dynamic random access memory (DRAM) made for data centers, personal computers, smartphones and other computing devices.
"The impressive earnings and forecast from Micron suggest that GenAI momentum is spurring an important growth era for DRAM and, most importantly, HBM suppliers," said Bob O' Donnell, chief analyst at Technalysis Research.
The company's results, reported ahead of other chipmakers, are watched as a gauge of demand for various types of chips and end-markets. Its upbeat forecast sent shares of peer Western Digital up 4.6% in extended trade.
HBM revenues are expected to add to Micron's gross margins in the third quarter, Mehrotra said, reiterating that the company was on track to generate several hundred million dollars of revenue from the advanced chips in fiscal 2024, a small but growing fraction of its total sales.
Micron expects adjusted gross margin for the third quarter to be 26.5%, plus or minus 1.5%, compared with market estimates of 20.8%.
It forecast revenue of $6.60 billion, plus or minus $200 million, for the current quarter, largely above estimates of $6.03 billion, according to LSEG data.
The company posted adjusted profit of 42 cents per share for the second quarter, compared with estimates for a loss of 25 cents.
Mehrotra also said Micron's bit supply growth in fiscal 2024 remains below its demand growth for both DRAM and NAND.
Pricing across all memory and storage end markets is improving as well, Mehrotra said, adding that the company expects DRAM and NAND pricing levels to increase further throughout 2024.
Memory chip pricing is on the rebound after hitting some of its lowest levels in years as a pandemic-led buying spree ultimately resulted in a supply glut.
Micron reported second-quarter revenue of $5.82 billion, compared with estimates of $5.35 billion.
(Reporting by Arsheeya Bajwa and Harshita Mary Varghese in Bengaluru; Editing by Devika Syamnath)
