Micron Technology Inc. shares were falling more than 5% in morning trading Tuesday after the memory-chip producer said that it expects to be impacted by “challenging” market conditions.
Ahead of an investor presentation, Micron MU, -3.74% executives disclosed in a filing that they expect that revenue for the company’s fiscal fourth quarter, which ends in August, “may come in at or below the low end of the revenue guidance range provided in our June 30 earnings call.”
The company had called for $6.8 billion to $7.6 billion in revenue in its June earnings report.
The executives noted in Tuesday’s filing that they have recently seen “a broadening of customer inventory adjustments” that have caused the Micron management team to lower expectations for industry bit demand growth in DRAM and NAND relative to the June 30 earnings call.
“[W]e expect a challenging market environment in FQ4 22 and FQ1 23,” the company said in its filing.
Micron executives now expect bit shipments to drop off sequentially in the fiscal first quarter, “and we expect significant sequential declines in revenue and margins.” They further expect negative free-cash flow in the fiscal first quarter.
“It’s very difficult to stop capex in the very short term, and we have some very critical technology programs you need to invest in,” Chief Financial Officer Mark Murphy said later Tuesday at a KeyBanc conference, according to a transcript provided by Sentieo. “As a result of those two things, we do expect to be negative free cash flow in the first quarter.”
The free-cash disclosure was the “biggest stick in the eye” from Micron’s announcement, according to Mizuho’s Jordan Klein, a desk-based analyst associated with the sales team and not the research unit.
“Many have highlighted that as bad as conditions in memory might get, MU would remain cash-flow positive through the ultimate downturn,” he wrote. “Well, that is not happening. Not the end of the world, but adds pressure to the view MU is safe to own close to 1x book value as that book value not going lower.”
He added that Micron “[p]robably still is safe, but less so than prior expectations.”
The company further announced Tuesday that it would institute capital-expenditure reductions for wafer-fab equipment when looking at fiscal 2023, “adding to the WFE capex reductions discussed in our June 30 earnings call.”
Executives “now expect FY23 total capex to be down meaningfully versus FY22,” per the filing.
The announcement is weighing on shares of semiconductor-equipment companies Lam Research Corp. LRCX, -7.88%, Applied Materials Inc. AMAT, -7.58%, and KLA Corp. KLAC, -7.57%
Despite the more muted view on short-term dynamics, Micron executives seemed more upbeat about the long run, announcing earlier Tuesday that they planned to invest $40 billion in U.S. manufacturing through the end of the decade, tapping grants and credits available through the CHIPS and Science Act.
The company intends to help grow domestic production of memory from less than 2% of the global market currently to “up to 10%” within the next decade, Chief Executive Sanjay Mehrotra said in that announcement.
Shares of Micron have fallen 14.1% over the past three months as the S&P 500 SPX, -0.42% has gained 3.5%.