AI demand explodes driving performance surges, Micron's Q2 revenue nearly triples year-over-year, high capital expenditure raises market concerns.

Driven by the ongoing wave of artificial intelligence, the U.S. storage chip giant Micron Technology, Inc. (MU.US) delivered results far exceeding market expectations, but a high-intensity capital expenditure plan has made investors cautious, causing the company's stock price to fall by 2% in after-hours trading. According to the financial report, for the second quarter of fiscal year 2026 ending on February 26, Micron's revenue surged to $23.86 billion year-on-year, nearly tripling from $8.05 billion in the same period last year and well above the market's expected $20.07 billion. Adjusted earnings per share were $12.20, significantly surpassing the expected $9.31. Net profit jumped to $13.8 billion, compared to $1.58 billion in the same period last year, showing a significant improvement in profitability. The company's gross margin also surged to 74.4%, doubling from 36.8% in the same period last year. The strong performance was mainly due to the shortage of storage chips brought about by the explosive demand for artificial intelligence. As generative AI rapidly develops, the demand for data center computing power has surged, driving the growth in shipments of AI chips led by NVIDIA Corporation (NVDA.US) GPUs. Each generation of AI chips continues to increase the demand for storage capacity, further intensifying the shortage of DRAM and NAND. Micron CEO Sanjay Mehrotra stated that the growth in storage demand driven by AI, structural supply constraints, and the company's execution capabilities have all contributed to the significant upward adjustment of performance and guidance. In terms of business structure, the company's revenue from cloud computing-related storage grew by over 160% to $7.75 billion, while revenue from mobile and PC businesses also jumped from $2.24 billion in the same period last year to $7.71 billion, indicating a recovery in demand boosted by the AI cycle for traditional businesses as well. Looking ahead, Micron provided a more optimistic performance outlook. The company expects revenue for the third quarter to reach around $33.5 billion, with a year-on-year increase of over 200%, and adjusted earnings per share of around $19.15, well above the market's expected revenue of $24.3 billion and earnings per share of around $12. The company also emphasized that as AI develops, computing architectures will increasingly rely on storage resources, making Micron a key beneficiary of this trend. However, with the surge in demand also comes a significant increase in capital expenditure. The company expects capital expenditure for this fiscal year to exceed $25 billion, higher than the market's previous expectations of $22.4 billion, and forecasts further substantial increases in spending by the 2027 fiscal year, especially in investments related to fab construction, which will increase by an additional $10 billion. Currently, Micron is advancing large fab projects in Idaho and New York, with the Idaho fab expected to start production in mid-2027, while the $100 billion project in New York is anticipated to begin output in the second half of 2028. At the same time, Micron is accelerating its next-generation High Bandwidth Memory (HBM) product layout. The company began mass production of HBM4 for NVIDIA Corporation's next-generation Vera Rubin architecture in the first quarter of this fiscal year and plans to launch an upgraded version, HBM4e, in 2027. With the continuous upgrading of AI computing power demand, HBM has become one of the most profitable products in the industry, driving manufacturers to allocate more capacity to this area. However, there remains some uncertainty regarding Micron's long-term growth in the market. As a core player in AI computing power, NVIDIA Corporation's choice of HBM suppliers in future products will have a significant impact on Micron. If NVIDIA reduces its reliance on Micron's products in subsequent architectures, it could pose a challenge to the company. On an industry level, the shortage of storage chips has had spillover effects throughout the entire technology industry chain. Due to manufacturers prioritizing high-profit HBM products, supply of traditional storage products has tightened, leading to continuous price increases. HP Inc. (HPQ.US) previously stated that storage chip prices have nearly doubled in the current quarter. SK Group Chairman Chey Tae-won also forecasted that the global semiconductor supply-demand imbalance could persist for four to five more years.