Micron Technology, Inc. (Nasdaq: MU) delivered a stellar performance in its third quarter of fiscal 2025, exceeding analyst expectations and reinforcing its pivotal role in the AI-driven data economy.
On June 25, 2025, the Boise, Idaho-based semiconductor giant reported a non-GAAP earnings per share (EPS) of $1.91 and revenue of $9.301 billion for the quarter ending May 29, 2025, surpassing Bloomberg’s consensus estimates of $1.60 EPS and $8.9 billion in revenue. This marked a significant improvement from the prior quarter’s $1.56 EPS and $8.053 billion in revenue, and a dramatic turnaround from the $0.62 EPS and $6.811 billion in revenue recorded in the same period last year. The company’s stock closed at $127.25, though market data from Yahoo Finance and Google Finance indicated a post-earnings price of $141.12, reflecting investor enthusiasm.
Micron’s success was driven by record-breaking DRAM revenue, with high-bandwidth memory (HBM) sales surging nearly 50% sequentially. Data center revenue more than doubled year-over-year, setting a quarterly record, while consumer-oriented markets showed strong sequential growth. Operating cash flow reached $4.61 billion, up from $3.94 billion in the prior quarter, and adjusted free cash flow (FCF) for Q3 stood at $1.949 billion. These figures underscore Micron’s ability to capitalize on the growing demand for memory and storage solutions in artificial intelligence (AI) and compute-intensive applications.
Valuation Analysis: A Compelling Investment Opportunity
Using the Buffett and McGrew Valuation Methods, Micron’s intrinsic value was reassessed based on the latest earnings data. The Buffett Valuation, assuming a 10% growth rate for a growth stock, yielded an intrinsic value of $139.35 per share. The McGrew Valuation, starting with a 15% growth rate (aligned with management’s Q4 revenue guidance) and declining to 10% over seven years, estimated an intrinsic value of $140.04 per share. Both valuations incorporate a 25% margin of safety, resulting in buy prices of $104.51 and $105.03, respectively.
At a closing price of $127.25, Micron falls within the “Buy” range for both methods, defined as 7–25% below intrinsic value. The table below summarizes the valuation results:
| Stock Ticker | Valuation Method | Intrinsic Value per Share | Price with 25% Margin of Safety | Last Closing Price | Valuation Status |
|---|---|---|---|---|---|
| MU | Buffett Valuation | $139.35 | $104.51 | $127.25 | Buy |
| MU | McGrew Valuation | $140.04 | $105.03 | $127.25 | Buy |
The analysis used an estimated fiscal 2025 FCF of $4.793 billion, derived from $2.844 billion for the first three quarters and an assumed $1.949 billion for Q4, reflecting sustained performance. Shares outstanding were held constant at 1.118 billion, based on Q3 data. A 5-year FCF CAGR of 5.4% was overridden with growth stock assumptions (10% for Buffett, 15% for McGrew) due to strong recent performance and management’s optimistic outlook.
Financial Health: Robust Returns
Micron’s trailing 12-month (TTM) financial metrics highlight its operational strength. TTM net income reached $6.225 billion, yielding an EPS of $5.57. The TTM Return on Equity (ROE) was 13.0%, calculated using average shareholders’ equity of $47.827 billion. Return on Tangible Assets (ROTA) stood at 8.7%, based on average tangible assets of $71.512 billion. These figures reflect Micron’s efficient use of capital and its ability to generate profits in a capital-intensive industry.
Management Outlook: Bright Prospects
Micron’s management provided an upbeat forecast, projecting a 15% sequential revenue increase for Q4 fiscal 2025, translating to approximately $10.696 billion. This guidance is bolstered by continued demand for HBM and other memory solutions critical to AI and data center applications. The company’s strategic investments in high-performance DRAM, NAND, and NOR products position it to capture market share in these high-growth sectors.
Can Earnings Justify the Current Price?
With a current P/E ratio of 22.85 (based on TTM EPS of $5.57), Micron’s stock price of $127.25 requires earnings growth to align with a more conservative P/E of 15. This implies a target EPS of $8.48, or net income of $9.48 billion. Achieving this would require annual earnings growth of 15.0% over three years or 8.7% over five years. Given Micron’s Q3 momentum, Q4 guidance, and industry tailwinds, such growth is feasible. The semiconductor industry’s cyclical nature, however, warrants caution, as FCF volatility (e.g., negative $4.606 billion in FY 2023) could pose risks.
Strategic Positioning in the AI Era
Micron’s performance reflects its strategic alignment with the data economy’s evolution. Its Micron and Crucial brands deliver innovative memory and storage solutions that power AI, edge computing, and mobile user experiences. The company’s focus on high-performance products, such as HBM, positions it as a key supplier to data centers, where demand is soaring due to AI workloads. Micron’s global manufacturing footprint and ongoing investments in R&D (Q3: $965 million) and capital expenditures (nine months: $10.029 billion) ensure it remains competitive in a rapidly evolving market.
Investment Considerations
The valuation models suggest Micron is undervalued at $127.25, offering a compelling opportunity for long-term investors. However, discrepancies between the assumed closing price ($127.25) and market price ($141.12) could shift the valuation status to “Hold” if the higher price is used. Investors should monitor semiconductor industry cycles, geopolitical risks affecting supply chains, and Micron’s ability to sustain FCF growth. The company’s forward-looking statements, detailed in its SEC filings, highlight these uncertainties but express confidence in its technological and market leadership.
Micron Technology’s Q3 2025 results demonstrate its resilience and growth potential in a dynamic industry. Exceeding analyst expectations, delivering strong financial metrics, and issuing optimistic guidance, Micron is well-positioned to thrive in the AI-driven market. Its “Buy” status under both valuation methods makes it an attractive investment, provided investors remain mindful of industry volatility. As Micron continues to innovate and expand, it stands as a cornerstone of the data economy, fueling advancements that shape the future.
