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micron's latest quarterly Financial results really disappointed stock market investors including myself because I've had Micron stock rated as a buy and the big stock price drop was disappointing to be sure so a lot of investors are curious about what's going on with Micron that's why I'm going to make this video to really highlight the inner workings of the latest quarter the things management said that disappointed investors and what you can expect from this compan is this drop a temporary drop is it a buying opportunity all of those details I'm going to share with you in this video discussing its latest quarterly Financial results Micron management said that data center Revenue grew over 400% year-over-year and 40% from the previous quarter that's a record level for the company and now the data center business is over 50% of the company's overall business that's good news because the data center segment is expected to grow much faster than the company's other segments so following the earnings release and following the change in the business mix you're now getting a business that's skewed more towards the data center which is an area I like much better than Myron's other segments which are things like personal computers and smartphones and tablets Etc other electronics these are more mature industries that are not growing anywhere near the rate of the data center segment that's why i' prefer Micron be a business that's skewed more towards the data center than the other segments because the data center business is growing more quickly and it's expected to continue and it's in a long Runway of growth so the company saying that they're hbm which stands for high bandwidth memory shipments were ahead of plan and they achieved a more sequential more than a sequential doubling of hbm Revenue so quarter over quarter their hbm revenue more than doubled this is a newer segment and newer product for micron and it's just ramping up so this rate of increase was ahead of schedule which is what you like to hear this is part of the business executing and when you're investing in a business one of the things you want to see is strong execution this is outside of forces like macroeconomic factors that drive demand higher or lower right these are things that company cannot control but what you always want to see is the company doing an excellent job controlling the things that it can control executing on its plan regardless of those outside factors and that's what you saw here from Micron in the latest quarter but in 2028 they expect the high bandwidth memory total adjustable Market to grow by 4X from the $16 billion level in 2024 to exceed $ 100 billion by 2030 that's a massive increase in this market and another reason why what I was highlighting earlier this goes into the data center market and this is one reason why I said I prefer the business be skewed more towards the data center segment other outside of the other segments in the business so this hbm growth will be transformational for micron and we are excited about our leadership in this important product category so this is a product category that's expect it to grow by $884 billion in 5 years and it's a category that Micron holds a leadership position in so that's great news for micron stock investors you might say well everything you've talked about so far is good news why is the stock falling well we'll get into that but for now the company wanted to lead with the good things about the company about its longer term prospects before it gave investors the bad news so the Leading Edge dram Supply remains tight driven by robust demand in the data center dram Market which includes hbm and that will underpin their business results throughout fiscal and calendar year 2025 so in the upcoming year they're going to benefit from the growth in that Data Center Market that's looking for the most Cutting Edge Dam technology which Micron is selling but here's where where things got sour is the consumer oriented segments and seasonality are going to impact the company's upcoming quarter Q2 they're seeing a more pronounced impact of consumer customer inventory reductions so they already thought that this upcoming quarter there was going to be a seasonal slowdown right of course following the holiday quarter sales of electronics like personal computers smartphones tablets Etc they decrease from the holiday season right the holiday season is when sales are the highest and so they were already expecting a Slowdown but that slowdown is going to be much worse than they expected and that's what they're saying their Q2 shipment Outlook is weaker than we previously expected but the good news is that they expect this adjustment period to be relatively brief and they expect stronger shipments in the second half of the year for calendar 202 so the second quarter will be bad but they expect the third and fourth quarters to be much better and for the full year they expect substantial Revenue record Revenue significantly improved profitability and positive free cash flow and this note here while you might think it's a good thing when they're highlighting positive free cash flow that was actually also a concern a company with the level of Revenue that might generates just saying that they're going to be positive free cash flow was a bit of a disappointment and one of the reasons why it's only going to be positive and not like meaningfully positive not in the billions of dollars is because they're spending so much capital expenditure on building newer facilities expanding existing facilities benefiting from or trying to capitalize from government incentives to build out men manufacturing but also investing ahead of this strong demand that they're forecasting right we talked about earlier how the total adjustable market for hbm is going to grow from 16 billion to 100 billion by 2030 so with its existing manufacturing capacity Micron doesn't have enough to capitalize on this growing demand so it needs to invest to prepare for that incoming demand and so markets of course whenever you announce increasing Capital expenditures markets are always skeptical right and it's been a surprise that remember last year there was a lot of pressure on the large tech companies that are investing in these data centers spending ey were receiving some push back from stock market investors asking and pushing why are you spending so much money in this category how can you be sure that it's going to pay off and so with Micron it's the same thing there as $3 billion they only generated revenue of $8.7 billion so they're spending significant percentages of Revenue on capital expenditure that makes investors nervous that makes investors more nervous especially because of the disaster that Intel experienced in recent years by increasing its capital expenditures significantly I'm not saying Micron is going to face the same story as Intel but Intel has spooked a lot of investors and they don't want to see companies like Micron go down that same path so that explains why Micron stock prices down as much as it was following the earnings release but as I highlighted in the another video I did yesterday that I think this is a buying opportunity because there is such robust demand for micron's products it's reasonable to invest in anticipation of that growth and on top of that you're getting the government incentives to build out those manufacturing facilities so I think the management team is making reasonably prudent decisions there and I think longer term the stock is a good value for here
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