Micron Technology, Inc. (NASDAQ: MU) shares rose by 8.6% on Thursday morning after the chipmaker reported its second quarter financial results after market close on Wednesday.
For the second quarter, Micron reported diluted earnings of USD 1.71 per share on revenue of USD 5.84 Billion. Wall Street analysts expected earnings of USD 1.67 per share on revenue of USD 5.3 Billion.
Despite the quarterly beat, Micron revenue has significantly declined year-over-year. Last year’s same quarter, Micron reported revenue of USD 7.35 Billion, representing a 25.9% decline.
The chip sector has been seeing weakness throughout the past few months due to lower demand as well as the ongoing trade wars with China. Other chip makers such as Apple (NASDAQ: AAPL) and Nvidia (NASDAQ: NVDA) reported weaker financial results than anticipated in their fourth quarter due to economic conditions in China.
Apple and Nvidia provided investors a guidance slash prior to the earnings release to highlight the slowdown ongoing in China. In combination with the trade wars as well, chip makers were facing a major barrier.
“Micron continues to execute well across a range of product, operational and financial initiatives against the backdrop of a challenging market environment,” said Micron Technology President and Chief Executive Officer Sanjay Mehrotra.
Micron mainly manufacturers NAND storage chips that are used in phones and internet servers as well as DRAM chips that help computer processors communicate with those storage chips.
Moving forward, Micron plans to cut its spending plans due to the lower demand the chip sector is facing. The reduced spending will help Micron maintain profits as well as maintain its share buyback program for shareholders.
For the third quarter, Micron expects to report revenue between USD 4.6 Billion and USD 5 Billion, falling short of Refinitiv analysts’ estimates of USD 5.3 Billion. Micron also expects to cut planned capital expenditures for fiscal 2019 to USD 9 Billion, lowered from the previous forecast of USD 9 Billion and USD 9.5 Billion.
“Expect a tough quarter,” said Morgan Stanley’s Joseph Moore in an earnings preview note. There are indications that expectations for a second half recovery “are too optimistic.”
“We expect MU earnings to reflect the weakness we have seen in the market since the company guided in mid-December, and we are frankly surprised that the company did not pre-announce, ” Moore said.
Micron shares now up 38% this year so far.