Micron sees lower margins in fiscal Q3 than previously expected

Speaking at the Susquehanna Technology Conference, Micron CFO Mark Murphy said: "we are not providing a quantitative update on the quarter, which ends today, but I can provide you in the audience some color. Customer inventories are improving. They are still elevated with some markets like mobile in relatively better shape than others, such as cloud. We continue to expect improving demand through the year, but pricing trends remain challenging. Consequently, we expect lower margins in our fiscal Q3 than we previously expected. This outlook may lead to material inventory write-downs, which could or would have an adverse impact on our second quarter margins and EPS. While we’re encouraged by supply actions across the industry, it’s clear that there is still significant supply/demand mismatch in the industry. So as we’ve said before, we expect our DRAM supply to contract in calendar ’23 to help better align supply demand. To supply anticipated volume growth in the near term, we have ample inventories and adequate production. While our cost of goods are being impacted by the effects of underutilization that we’ve talked about before, our broad-based spend reductions are generally coming down in line to ahead of plan… But the important point is that we’re seeing progress as planned… We will continue to evaluate and navigate these challenging market conditions and adjust our operating spend and CapEx as appropriate. We remain confident in the long-term demand for memory and storage and in our ability to capitalize on these long-term trends." Asked later on the call if fiscal Q3 revenue could be down again, Murphy replied in part: "I mean the market is clearly trying to get it splitting and while we expect volumes to improve through the year. And actually pricing, we expect the declines to moderate through the year. But the pricing environment currently is weak. And our third quarter could be flat to down or we believe will be flat to down versus the second quarter as we see it today. But of course, we’ve got — this is the end of the quarter. We’ll report at the end of March, and we’ll have a clearer picture and more commentary at that point."