Micron Technology’s second quarter earnings conference call highlights how IT demand is shifting amid the COVID-19 pandemic as demand in data centers and devices that support remote work gains with declines in smartphones and consumer electronics.
The storage and memory giant has a good view into technology demand since its products are used in most technologies. In addition, Micron delivered second quarter revenue at the high end of its projections as the COVID-19 crisis unfolded halfway through the quarter.
On a conference call with analysts, CEO Sanjay Mehrotra delivered an optimistic tone as he assessed IT demand during the COVID-19 pandemic. Mehrotra gave the following outlook:
COVID-19 is significantly impacting China’s economic growth in the calendar first quarter, reflected in the sharp decline of smartphone and automobile unit sales. Weaker sell-through of consumer electronics and our customers’ factory shutdowns in China were headwinds for us late in our FQ2. In China, lower consumer demand was offset by stronger data center demand due to increased gaming, e-commerce and remote work activity. Looking to the third quarter, as these trends also take shape worldwide, data center demand in all regions looks strong and is leading to supply shortages. In addition, we are seeing a recent increase in demand for notebooks used in the commercial and educational segments to support work-from-home and virtual learning initiatives occurring in many parts of the world.
We are also encouraged to see manufacturers in China increasingly returning to full production, and we have recently started to see China smartphone manufacturing volumes recover. Nevertheless, as the world deals with the outbreak of COVID19, we expect that overall demand for smartphones, consumer electronics and automobiles will be below our prior expectations for the second half of our fiscal 2020.
In other words, China is coming back online to manufacturer tech goods, but demand from the rest of the world is on hold as numerous countries wrestle with novel coronavirus. “Once the U.S. and other major economies have demonstrated containment of the virus’s spread, we expect a rebound in economic activity,” said Mehrotra. “We are modeling an improvement in the trajectory of economic activity later into the second half of calendar 2020, with a further rebound in economic momentum into 2021.”
The Micron CEO added that the situation was fluid, but the company has been moving supply from smartphones to data center markets for DRAM modules and solid-state drives. Mehrotra was also confident about Micron’s product roadmap and strategy.
In the second quarter, Micron reported revenue of $4.8 billion, down 18% from a year ago. Micron, like other storage and memory companies, has been emerging from a downturn in the market. Non-GAAP net income for the second quarter was $517 million, or 45 cents a share.
As for the outlook, Micron projected third quarter revenue between $4.6 billion to $5.2 billion with earnings between 55 cents a share and 15 cents a share. That wide range reflects a lot of COVID-19 uncertainty.