Micron Just Did Something Even Nvidia Hasn't Done. Is the AI Stock a Buy?

**Micron **(MU 3.86%) just delivered another blockbuster earnings report.

Investors had expected another growth surge from the memory chip leader, but Micron easily exceeded expectations. Revenue nearly tripled, jumping 196% to $23.9 billion, which was well ahead of the consensus at $19.2 billion.

That growth was driven by soaring demand for memory in the AI build-out and a supply crunch that’s driving up prices for memory chips.

While revenue tripled in the quarter, profits were up considerably more, as gross margin more than doubled, jumping from 36.8% to 74.4%, and net income jumped 771% to $13.8 billion, or $12.07 per share. After adjustments, EPS came in at $12.20, easily beating the consensus estimate of $8.65.

Pricing dynamics for Micron were strong enough that operating margin more than tripled to 67.6%, a level that even **Nvidia **(NVDA 0.98%) has never reached.

Like Micron, Nvidia has also seen profit margins soar, and it’s delivered phenomenal results with its operating margin reaching a record of 65% in its most recent quarter.

That achievement shows that Micron is now seeing a similar windfall to Nvidia, which explains why the stock has surged over the past year.

Image source: Getty Images.

Is Micron’s AI boom sustainable?

Despite Micron’s phenomenal results, Wall Street seems to believe that its margins may be peaking as the stock actually fell on the news, trading down 3% after hours.

Memory is notoriously cyclical, prone to shortages and inventory gluts, and Micron has lost billions of dollars during the bottom of the cycle. The AI cycle is the biggest one yet, and it’s unclear how long Micron will be able to deliver bumper profits. Supply and demand dynamics will eventually shift, either as more supply comes online or as demand cools once the data center build-out peaks.

However, the boom could last longer than investors seem to believe, at least based on the post-earnings sell-off. Micron’s fiscal third-quarter guidance calls for another top-line surge and even wider margins.

The company forecast revenue of around $33.5 billion, or up 260%, gross margin of 81%, up from 74.4% in the second quarter, and adjusted earnings per share of $18.75-$19.55, up from just $1.91 a year ago.

CEO Sanjay Mehrotra said the company expects DRAM and NAND chips to remain tight beyond 2026. Bit shipments in both categories are expected to grow by around 20%, showing the vast majority of Micron’s revenue growth is due to higher prices, though that also reflects more advanced products.

To capitalize on the AI boom, Micron expects to spend more than $25 billion on capital expenditures this year, and that includes its acquisition of a manufacturing facility in Taiwan from Powerchip Semiconductor Manufacturing Corporation. The company is making plans to ramp up production in 2027, showing confidence that the AI boom will continue.

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NASDAQ: MU

Micron Technology

Today’s Change

(-3.86%) $-17.81

Current Price

$443.92

Key Data Points

Market Cap

$520B

Day’s Range

$421.23 - $457.20

52wk Range

$61.54 - $471.34

Volume

2M

Avg Vol

35M

Gross Margin

45.53%

Dividend Yield

0.10%

Is Micron a buy?

Micron is a challenging stock to value, as investors are anticipating another cycle in memory, and cyclical stocks tend to peak before the businesses do.

However, Micron’s results, guidance, and management commentary indicate the momentum is still accelerating, and the stock is now dirt cheap on a forward basis, trading at a price-to-earnings ratio of less than 10.

At this point, though, with the stock up 400% over the last year, Micron may need more than just blowout numbers. It needs confidence in the AI trade to return, and it’s unclear whether that will happen. Even Nvidia CEO Jensen Huang’s forecast that his company would bring in $1 trillion in revenue over the next two years did little to move the stock.

Still, Micron’s growth rate and valuation make it uniquely attractive, and the company is making investments to grow the business over the long term, regardless of what happens with the memory cycle. Despite the post-earnings sell-off, Micron still looks like a buy.

It won’t be the next Nvidia, even as it’s topped the AI leader in operating margin, but it’s in the right place at the right time. It’s clearly executing effectively, and analysts can’t keep up with its growth.