The quarter may be over, but the selling is extending to the after-hours session where the closely watched semiconductor bellwether just reported earnings which were not that bad. The problem is the guidance: it was catastrophic and sent the stock sharply lower after hours.

First, a look at the just-concluded third fiscal quarter:

• Adjusted revenue $8.64 billion, +16% y/y, meeting the estimate $8.64 billion (this was the smallest increase in more than a year).
• Adjusted EPS $2.59 vs. $1.88 y/y, beating the estimate $2.45
• Adjusted gross margin 47.4% vs. 42.9% y/y, missing the estimate 47.9%
• Cash flow from operations $3.84 billion, +7.8% y/y, missing estimate $4.42 billion

But while the historical numbers may have been good, the guidance was an absolute disaster, disappointing on the top line, the bottom line, and margin - The company now sees:

• Adjusted revenue $6.8 billion to $7.6 billion, missing the consensus estimate of $9.14 billion by about $2 billion!
• Adjusted EPS $1.43 to $1.83, missing the estimate $2.57 by about 40%!
• Adjusted gross margin 41% to 44%, wildly missing the estimate 47.9%, and confirming that margin pressure is here and is real.

The outlook reflects a slowdown for two key markets for Micron’s (MU) memory chips: computers and smartphones. Consumers and businesses have been reining in spending amid concern that the major world economies are headed for recession.

CEO Sanjay Mehrotra was almost as laconic as RH CEO Gary Friedman yesterday, saying that “recently, the industry demand environment has weakened, and we are taking action to moderate our supply growth in fiscal 2023. We are confident about the long-term secular demand for memory and storage and are well-positioned to deliver strong cross-cycle financial performance."

"Weakened?" We would say the industry demand has fallen off a cliff. As for being positioned for the long-term, the market begs to differ, sending the stock as much as 7% lower, and following a drop of 41% this year through the close as part of a rout for semiconductor stocks that had rallied over the last five years, as traders brace for much worse horror stores in the coming weeks when the horror Q2 earnings seasons begins in earnest...

(Click on image to enlarge)