Artificial intelligence is inspiring companies to make huge capital investments. Much of that money is planned to go to companies that produce essential components for hardware to run AI-powered applications and leverage the data needed to produce the most valuable insights. For companies that specialize in producing those components, every news story boasting another multibillion-dollar investment in AI is cause for celebration.
Micron technology (NASDAQ:MU) has put itself in exactly that position as an essential supplier of memory chips for AI hardware, and yesterday, the first article in this series on Micron for the Voyager Portfolio analyzed the company’s inspiring history and its rise to the top of the technology industry. Today, you’ll learn more about Micron’s financial results and why the best times could still be ahead.
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One thing investors can learn a lot from Micron’s financial results is that when you’re starting out, a comparison makes a big difference. The following two narratives are completely true, but they paint very different pictures of Micron’s growth:
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Over the past 12 months, Micron’s revenue has been nearly triple what it was during the company’s 2023 fiscal year. The semiconductor memory chip maker has gone from a huge loss of $5.8 billion three years ago to net income of $11.9 billion over the past four quarters. Margins have enjoyed explosive growth.
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Micron’s sales have increased just under 40% since the chipmaker’s strong fiscal 2022 year. Operating and profit margins have recently returned to their same levels as four years ago, and the 37% increase in net income, while solid, appears disproportionate to the stock’s much larger gains over the same period.
The way to reconcile those two points of view is to understand that historically, Micron’s memory chip business has followed the ups and downs of the technology business cycle. At certain times, Micron’s chips are in high demand and the high prices it can command for the chips it can produce lead Micron to make investments to increase capacity. Inevitably, however, that increase in demand was followed by a weakening of the market for Micron components. At that point, just as we saw during the bear market in calendar 2022, sales can take a big hit. Therefore, it is crucial to ensure that when comparing recent Micron results with older numbers, they are measured from peak to peak or valley to valley. At the very least, avoiding lopsided comparisons prevents embarrassing miscalculations about what the future is likely to hold.