DRAM Demand Powers Micron's Growth: Can it Sustain Momentum?

Micron Technology's MU DRAM revenues grew 47.3% year over year in the second quarter of fiscal 2025 to $6.12 billion. The DRAM segment, which accounted for a whopping 76% of the company’s top line, is getting propelled by the traction in AI data center, automotive, PC, mobile market growth and an increase in average selling price of products.

Micron’s DRAM segment is led by its products like low-power double data rate and high bandwidth memory (HBM) chips, which are experiencing a massive surge in use cases in AI workloads due to their higher capacity and low power consumption. Micron experienced a sequential surge of 50% in HBM revenues, crossing $1 billion mark in the second quarter of fiscal 2025.

Despite facing challenges like low demand from its consumer-oriented customers as they are focusing on reducing inventory, the DRAM segment benefited from traction in HBMs and leading-edge DRAMs, which are in high demand among data centers. Micron is now refocusing its business model around high-growth data center DRAM customers and moving away from segments where there is seasonality.

As the demand for its DRAM solutions remains high, Micron is now focusing on capacity expansion. The company is installing a new DRAM fabrication facility in Boise, ID, supported by $6.1 billion in funding under the CHIPS and Science Act. Based on these factors, it is quite evident that momentum in its DRAM solutions will persist for a long time.

Micron anticipates third-quarter fiscal 2025 revenues of $8.80 billion (+/-$200 million). The Zacks Consensus Estimate for third-quarter fiscal 2025 revenues is pegged at $8.81 billion, indicating year-over-year growth of 29.33%.

How Competitors Fare Against Micron

Although the global DRAM market is highly consolidated, and has few direct competitors like Samsung, Taiwan Semiconductor Manufacturing Company TSM and SK hynix competing against Micron for market share, Micron faces stiff competition in the broader market from companies like Western Digital WDC, Seagate and Corsair.

In the global DRAM market, Taiwan Semiconductor develops HBM DRAM packages based on SK Hynix’s HBMs. In 2024, SK hynix and TSMC collaborated to collectively develop HBM4 and next-generation packaging technology. This collaboration has led SK hynix to adopt Taiwan Semiconductor’s foundry process to develop its HBM4, showcased for the first time in April 2025.

In the broader market, Western Digital develops NAND under the brand name of SanDisk. It also develops consumer and enterprise SSDs, including NVMe like Micron, making it a strong contender. Western Digital offers products like 128-Layer 3D NAND, PC SN730, PC SN5000S, WD Blue SN500, and PC SN540 NVMe SSDs.

Micron’s Price Performance, Valuation and Estimates

Shares of MU have gained 43% year to date compared with the Zacks Computer - Integrated Systems industry’s growth of 20.2%.

From a valuation standpoint, MU trades at a forward price-to-sales ratio of 3.06X, lower than the industry’s average of 3.69X.

The Zacks Consensus Estimate for MU’s fiscal 2025 earnings implies year-over-year growth of 433%, while the 2026 earnings estimate implies growth of 55.87%. The estimates for fiscal 2025 earnings have been revised upward, while the 2026 earnings have been revised downward in the past 60 days.

MU currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research