Micron's Q3 revenue surged 37% to a record $9.3 billion, but the stock price rose and then fell in after-hours trading | Earnings Report Insights

Despite the seemingly impressive financial report from memory chip giant Micron Technology, the stock price quickly narrowed its gains in after-hours trading, which may reflect investors' concerns about the current valuation levels.

On Wednesday after the U.S. stock market closed, Micron Technology released its Q3 report for fiscal year 2025, with the core highlight undoubtedly being the AI-driven performance explosion. The company's revenue reached $9.3 billion, exceeding analysts' expectations of $8.87 billion and representing a significant 37% increase from $6.81 billion in the same period last year, setting a new historical high:

• Strong financial performance: Q3 revenue of $9.3 billion (expected $8.87 billion), adjusted earnings per share of $1.91 (expected $1.60), a year-on-year increase of 37%, setting a historical high.
• Gross profit exceeded expectations: Adjusted operating profit for Q3 was $2.49 billion, while analysts expected $2.13 billion. The adjusted gross profit margin for Q3 was 39%, compared to analysts' expectation of 36.8%.
• Significant AI-driven growth: Sales of high-bandwidth memory (HBM) chips increased nearly 50% quarter-on-quarter, and data center revenue doubled year-on-year, reaching a quarterly record.
• Strong outlook guidance: Q4 revenue is expected to be $10.7 billion (analysts' expectation $9.9 billion), a year-on-year increase of 38% and a quarter-on-quarter increase of 15%.
• Significant improvement in cash flow: Operating cash flow was $4.61 billion, a notable increase from $3.94 billion in the previous quarter and $2.48 billion in the same period last year.

It is noteworthy that there has been explosive growth in the data center business recently. This sector's revenue doubled year-on-year and set a quarterly record, with sales of high-bandwidth memory (HBM) chips increasing nearly 50% quarter-on-quarter. This data directly reflects the hot demand for AI infrastructure construction—memory products from Micron are needed for AI chips from companies like NVIDIA and AMD, and major investments by cloud service providers like Google in AI infrastructure this year have further driven this demand.

CEO Sanjay Mehrotra emphasized in a statement that the company is making "disciplined investments" to meet AI-driven demand. Micron Technology initially rose nearly 8% in after-hours trading but later turned to decline. Analysts pointed out that, in the current environment where AI concept stocks generally face valuation pressure, Micron's stock price has risen 51% this year. Even with performance exceeding expectations, the market's cautious attitude towards further upside is understandable.

The True Value of Financial Performance

From the financial data perspective, Micron's cash flow situation is quite healthy.

Operating cash flow was $4.61 billion, showing significant improvement both quarter-on-quarter and year-on-year, with adjusted free cash flow of $1.95 billion, indicating strong cash generation capability. The company's cash and cash equivalents at the end of the period were $12.22 billion, providing ample funding support for future capital expenditures and technology investments

However, it is important to note that Micron's capital expenditure in the third fiscal quarter reached $2.66 billion, reflecting the company's large-scale capacity expansion to meet AI demand.

Analysis indicates that while current demand is strong, the memory chip industry has historically been cyclical, and high capital expenditures may become a burden when demand weakens.

Expectation Gap and Future Highlights: From "Tailwind" to "Beachhead"

Despite the current strong performance, the real test lies ahead. Micron's management has set a highly challenging goal: to align its HBM market share with its overall share in the DRAM market in the second half of the 2025 calendar year.

Analysis points out that there is a significant expectation gap here. This is not just about riding the coattails of AI but about seizing market share in the highly competitive HBM market from industry leaders SK Hynix and giants Samsung.

Additionally, company executives attempted to downplay the impact of "tariff-related customer stockpiling," stating it is "relatively mild." Reports indicate that while management claims "not to be concerned about this," investors still need to remain vigilant about such macro risks and observe the true quality of demand in the second half of the year.

Record revenues, explosive growth in the HBM business, and robust cash flow paint a promising picture. However, the key to the future lies in whether Micron can convert the current AI windfall into a sustainable competitive advantage, rather than just a cyclical performance surge