Micron’s headline numbers looked strong last night, but be careful to read the fine print.
Micron Technology (MU -2.83%) stock fell 2.8% through 3:15 p.m. ET Wednesday despite beating earnings and giving strong guidance last night.
Heading into its fiscal fourth-quarter 2025 report, analysts forecast Micron would earn $2.86 per share on $11.2 billion in revenue. In fact, Micron earned $3.03 per share (adjusted for one-time items) in the period ended Aug. 28, and sales were $11.3 billion. Management forecast strong sequential growth in both sales and profits in fiscal Q1 2026.
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Micron Q4 earnings
Despite investors giving Micron stock the cold shoulder today, Micron’s numbers looked red-hot. Quarterly sales grew 45% year over year. Gross profit margin gained nearly 10 full percentage points, rising to 44.7%, and operating margin gained 12 points to 32.3%.
On the bottom line, earnings as calculated according to generally accepted accounting principles (GAAP) rose to $2.83 — not quite as good as the adjusted earnings, but still more than triple what Micron earned a year ago.
For the full year fiscal 2025, Micron booked $37.4 billion in revenue (49% sales growth), and earned $7.59 per share.
Is Micron stock a buy?
So why are investors upset with the results? Here’s one possibility: Although not highlighted in the report, buried deep within the cash-flow statement it appears that while Micron delivered powerful operating cash flow in fiscal 2025 — $17.5 billion, or more than twice the cash generated in fiscal 2024 — Micron then had to turn around and spend almost all its cash on capital expenditures.
The company still ended up with positive free cash flow for the year, but only $1.7 billion. Turns out, for every $1 in GAAP profit the company earned, it generated only $0.20 in real cash profit.
With numbers like those, I might be tempted to sell Micron stock myself.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.