Memory chips' "supercycle" comes: supply shortage boosts price hike. Time to buy?

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Micron's Real Test: Can Soaring Memory Prices Lift Earnings?

Moomoo Insights joined discussion · Sep 23 09:59

$Micron Technology (MU.US)$ , the leading U.S. memory chipmaker and the world's third-largest DRAM producer, is set to report its fiscal fourth-quarter 2025 earnings after the market closes on September 23, kicking off the latest earnings season for the semiconductor sector. Following a significant upward revision to its guidance, the market's attention is now focused on the progress of HBM4 and capacity bookings for the coming year, the sustainability of DRAM and NAND price hikes, and the demand outlook for the PC and mobile markets.

Micron's Real Test: Can Soaring Memory Prices Lift Earnings?

Core Financial Indicators

– Revenue: Wall Street consensus expects $11.15 billion, a 44% year-over-year and 20% quarter-over-quarter increase. The company had previously raised its guidance to $11.2 billion.

– GAAP Gross Margin: The consensus forecast is 43.6%, up 7.3 percentage points year-over-year and 5.9 percentage points quarter-over-quarter.

– Non-GAAP Gross Margin: Guidance is 44.5%, representing an increase of 8 percentage points year-over-year and 5.5 percentage points quarter-over-quarter.

– GAAP Net Income: The market anticipates $3.02 billion, a 240% year-over-year and 60% quarter-over-quarter increase. Micron's revised guidance was $2.97 billion.

– Non-GAAP Net Income: Consensus stands at $3.18 billion, a 137% year-over-year and 46% quarter-over-quarter increase. The company's updated forecast was $3.21 billion.

Three Things to Watch

Micron announced a business restructuring last quarter and is expected to report its financials under this new framework for the first time. The four new business units are the Cloud Memory Business Unit (CMBU), the Core Data Center Business Unit (CDBU), the Mobile and Client Business Unit (MCBU), and the Automotive and Embedded Business Unit (AEBU).

1. How Is HBM4 Progressing, and When Will 2026 Capacity Sell Out?

Micron reported over $1.5 billion in HBM revenue last quarter, a nearly 50% sequential increase, but still lags significantly behind industry leader SK Hynix. On the product front, the company stated last quarter that its 12-High HBM3E began ramping with a faster yield curve than its 8-High predecessor, and its revenue is expected to surpass other HBM products this quarter. HBM4 samples have been sent to multiple customers with mass production slated for 2026. However, unlike Samsung's fully vertically integrated approach or SK Hynix's partnership with $Taiwan Semiconductor (TSM.US)$ for its advanced logic die, Micron is using its own DRAM-based process technology for the HBM4 logic die. This has raised market concerns about its performance.

Recent media reports suggest $NVIDIA (NVDA.US)$ is requiring suppliers to achieve HBM4 data transfer speeds exceeding 10 Gbps, well above the current industry standard of 8 Gbps. Samsung's samples reportedly reached 11 Gbps and SK Hynix's hit 10 Gbps, while Micron's allegedly fell short of the 10 Gbps mark. Management will need to provide a clear update on HBM4's actual progress during the earnings call.

Given that Micron announced its 2025 HBM supply was sold out as early as Q3 FY24, the market is now eagerly awaiting an update on bookings for its 2026 capacity.

2. Can Price Hikes Sustain and Finally Fix NAND Profitability?

The highly cyclical memory industry has entered a period of sharp price increases. On September 5, $SanDisk Corp (SNDK.US)$ notified channel partners and customers of price hikes of around 10% across all product lines, citing tight supply and strong AI/enterprise demand. On September 13, Micron paused its NAND and DRAM quotes. On September 15, $Western Digital (WDC.US)$ raised prices for its entire HDD portfolio amid robust demand, with industry sources indicating lead times could extend to 6–10 weeks. On September 22, reports emerged that Samsung plans to raise DRAM prices by 30% and NAND prices by 10% in the fourth quarter.

According to TrendForce, Micron ranked third in the global DRAM market in Q2 but fourth in NAND, with a narrow lead over fifth-place SanDisk. Micron's strategy clearly prioritizes DRAM, which accounted for 76% of revenue last quarter compared to NAND's 23%. DRAM revenue surged 51% YoY, while NAND grew a mere 4%, primarily due to a slowdown in data center SSD demand after customers had built up high inventory levels in the prior quarter. Recently, however, Wall Street has begun to anticipate a new surge in data center SSD demand, and investors will be listening for management's commentary.

From a profitability standpoint, the NAND business has been a persistent drag, with the segment still operating at a loss last quarter, in stark contrast to the high margins of DRAM. A key question is how much this new pricing cycle can improve the profitability of Micron's NAND operations.

3. What is the Outlook for PC and Mobile Demand?

The explosive growth in the data center has overshadowed traditional demand from the PC and mobile sectors. Last quarter, Micron revised down its PC shipment growth forecast for 2025. The company currently projects low-single-digit growth for both PC and mobile shipments in 2025.

Although Micron achieved a record market share in client SSDs and saw a 45% sequential increase in mobile revenue last quarter, the company's decision to implement layoffs at its Shanghai facility on August 12 and exit the mobile NAND market (discontinuing UFS 5.0 development) has created some anxiety about the future of its mobile business.

Option Market Signals

Into earnings, MU options show “high IV, protective put overhang, but front-week bullish flow.” Total OI ≈ 2.2M with an OI put/call of 1.17 signals existing positioning skewed to puts, while the Sep-26 (W) expiry prints 98.7k calls vs 38.8k puts (137.5k total)—a short-dated tilt toward upside/short-covering.

IV at 66% sits well above HV at 45%, with IV Rank 49 and IV Percentile 87%, i.e., a high-vol regime typical pre-print and prone to post-earnings IV crush. Strike maps show call volume/OI clustering roughly 170–185, with puts stepping up around 160–165, implying potential gamma-pin or gap-through zones.

Summary

Fueled by the data center boom, Micron's valuation has stretched far beyond its historical price-to-book range. With HBM capacity largely sold out and its pricing locked in advance, the variance in Micron's performance will primarily come from its two other key growth pillars: high-density D5/LP5 DRAM and data center SSDs. The market will be watching closely to see if the recent wave of price hikes in these segments can provide a substantial boost to the company's results.