The Key Takeaways From Micron’s Better-Than-Expected Forecast

Hendi Susanto is research analyst and portfolio manager over at Gabelli, and he actually holds Micron in one of his main ETFs. Hendi, give me your reaction here, your knee jerk reaction to the earnings that we just got out of Micron. What do you make of it? Thank you for having me, Romaine. I think this is another strong bit and race for Micron. The debate about Micron will continue, like its cyclicality. And I do think that Micron present a big divergence between the bears and bulls. The bears are demanding perfections while the bulls are contemplating, like, multiple upside scenarios. Give me a sense when we talk about the upside scenarios, and I know we have to wait for the conference call to get a more longer term outlook out of this company. But is this a situation that we're not gonna get 300 plus percent revenue growth forever? We're not gonna get a thousand plus EPS growth forever. Can this company glide down to a safe and, I guess, normalized growth rate that's gonna please investors and not spook them? Yes. So, Romaine, investor are putting a high burden on Micron to double its revenue and double its earning in the next fiscal year. And when it comes to the questions whether this time is different or this time is similar to the to the boom and bust of memory cycle, I would argue that there are different elements this time. We are seeing hyperscalers securing, like, multiyear supply of memories ahead with some pricing window, and I think that is something that that can provide, like, sustainability and durability of this memory cycle. At this point, I have not heard any negative data points pointing that the memory cycle is going to reverse toward a decline anytime soon for the foreseeable future. And then pricing also remains strong, and then Micron attempts to provide durability by signing multiyear supply agreement that can be as long as three to five years, and then that amount of multiyear supply agreement will grow. So I do think that the supply shortage outlook for 2027, it remains solid. Well, give me a sense here too that when we start to talk about the the big fear here, which is always that, okay, if we do start to see a scale back in some of the spending, not by the hyperscalers, but by open AI and anthropic, are there sort of second and third tier players out there that could actually step in to keep the infrastructure demand going? Because one of the arguments has been made that while this build out is about AI, that there are other uses for all of this infrastructure beyond just AI. Yes. So I do think, Micron present, like, strong growth stories. When we look at AI, they are, like, AI training, AI in AI inference, and then agentic AI. We are hearing, like, agentic AI applications popping up, like, week in and week out now, and then it fills up the news. And then second, we also have, like, traditional server market that is seeing agentic AI driving more workload and then therefore, driving a higher demand. And then we also have, like, a surfer multiyear surface refresh cycle that will continue for the next two two or three years. Yeah. And on top of that, I do think that memory, like, the increase of electronic contents across, like, consumer electronics, physical AI will continue to be sustaining growth drivers for the memory demand. When we start to talk about sort of what comes next and, I mean, what do you wanna hear from the CEO and the CFO on this call tonight that we, I guess, I guess, double down on your convictions about the company, about the stock? Yes. I think the key focus is the durability and then early visibility into growth and profitability, what gross margin looks like. I know that the bears may not be pleased if gross margin dip towards, like, low 80%, but low 80% compared to the historical peak is a very commanding position for Micron. I would like also to note that Micron operates in the oligopoly market with limited number of players, and they are the leaders in both DRAM and then fast memory. Yeah. And then I think referring back to what if a certain hyperscalers, let's say, like, scaled down, I do think there are many, like, tier two, tier three across, like, hype neo clouds, enterprise AI, and then software and AI that would be happy to pick up the slack and then, like, buy the extra memory supplies.