Micron’s Explosive Earnings Report: The 1 Mind-Boggling Number You Won’t Want to Miss. (Hint: It Beats Nvidia.)

Key Points

Micron Technology (NASDAQ: MU) has wowed investors once again with an earnings report showing explosive growth. The company, like tech giants such as Nvidia and Amazon, is playing a key role in the artificial intelligence (AI) revolution, and we have seen this very clearly quarter after quarter.

While Nvidia offers chips that power AI, and cloud providers like Amazon offer capacity for workloads, Micron makes the memory and storage necessary for AI to do its job. Due to the fact that all of these offerings are essential to the functioning of AI, these companies have been early winners of the AI boom. By this, I mean that they aren’t just investing in AI; they have also been bringing in significant revenue since the earliest days of this technology revolution.

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Micron has reported record earnings in recent quarters — and the latest period reinforced this positive momentum. The company this week delivered yet another explosive earnings report. Many elements of this report may impress you, but there is one mind-boggling number you won’t want to miss. Micron’s performance here even surpasses that of AI superstar Nvidia…

Image source: Getty Images.

How Micron fits into the AI story

So, first, let’s consider how Micron fits into the AI space. As mentioned, it offers memory, and this is through products such as DRAM, NAND, and HBM. DRAM serves as the primary memory of computers or graphics processing units (GPUs), while NAND is used for storage over the longer term. Finally, HBM, or high bandwidth memory, is a key tool for AI, supercharging performance and increasing efficiency.

Micron isn’t a new kid in town; the company has been around for nearly 50 years, serving memory for the computing era. But the AI revolution has offered growth a tremendous lift, as we can see in the chart below.

MU Revenue (Quarterly) data by YCharts

Demand has been so high that it’s exceeded supply, and Micron expects this trend to continue beyond the current calendar year — this is due to AI demand and supply constraints. These constraints stem from a variety of reasons, all linked to the complexity of memory development and manufacturing. For example, the time to construct fabs, shortages of skilled workers, and permitting processes are just a few of the elements that have slowed production down and made it impossible to serve 100% of current demand.

As a result, investors shouldn’t worry about competition any time soon — there is plenty of demand to generate growth across many memory providers.

The number that stands out

Now, let’s consider Micron’s latest earnings report and the one number in particular that stands out. As mentioned, the company excelled across the board, reporting revenue and net income that well surpassed analysts’ estimates — and climbed in the triple and quadruple digits. Revenue jumped to $41 billion from about $9 billion, while net income advanced to $28 billion from $1.8 billion.

But the one metric that caught my eye and suggests high profitability going forward is the company’s gross margin. It came in at more than 84%, surpassing the 74% gross margin of AI chip giant Nvidia. And the memory giant forecasts gross margin of 86% for the current quarter, suggesting these levels may be maintained.

All of this shows Micron has become an AI profit machine. Not only does the company have the ability to generate growth, but it’s also able to translate this into high profit. Micron said slowing price increases may limit further margin expansion, but that’s OK — if Micron is able to maintain a level of 80% or higher, we can count on this company scoring win after win in this AI revolution.

And it’s important to keep in mind that as the AI growth story progresses, the revenue opportunity will also expand. For example, memory is a key element needed in robotics, and robotics is seen as one of the next AI growth drivers.

This mind-boggling, Nvidia-beating number — Micron’s gross margin — is one you’ll want to focus on today and in the quarters to come. So far, it suggests the company could be one of the biggest success stories in the AI boom.

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Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.