Illustration shows Micron logo
A smartphone with a displayed Micron logo is placed on a computer motherboard in this illustration taken March 6, 2023. Reuters

Micron Technology Inc on Tuesday forecast third-quarter revenue would tumble nearly 60% from a year earlier but the steep drop was in line with Wall Street expectations and the company's shares rose after the close of regular trading.

With a glut still nagging the chip industry, Micron expects the deepest revenue drop since 2001. Micron said it would keep investments at about $7 billion for fiscal year 2023, the lower end of a previously stated range.

Micron shares in after hours trading rose about 1.5%.

The company also said it will target a 15% headcount reduction this year, up from its previous 10% target.

Matt Bryson, Wedbush Securities chip analyst, said the cut in capital spending was a positive for investors as it would "pull forward the timing and breadth of a future recovery". He added that shares also benefited from Micron's indication that customer inventory in certain areas was starting to normalize.

"We remain confident in long-term demand and are investing prudently to preserve our technology and product portfolio competitiveness," Micron Technology President and CEO Sanjay Mehrotra in the earnings release.

A proliferation of generative AI chatbots such as Microsoft Corp-backed OpenAI's ChatGPT has boosted demand for data centers, mitigating the trend of easing demand for chips. Analysts say the expansion of generative AI comes with an acceleration in data to feed large language models and could fuel a jump in the need for storage.

Mehrotra told analysts on the earnings call that factor would drive demand and said the industry could see record revenue again in 2025.

"When you look at the future, it equals AI. And AI equals memory, and Micron is well positioned with our technology and product road maps to address the growing opportunities there," he said.

Chipmakers and electronics companies had prepared for the pandemic-led demand surge to sustain but found themselves grappling with a glut as rising global interest rates and cost of living dampened demand for smartphones and other devices.

Micron said customer inventories are improving and it expects gradual improvements to the industry's supply-demand balance.

The company expects third-quarter revenue of $3.70 billion plus or minus $200 million, matching analysts' average estimate, according to Refinitiv data.

Revenue for the second quarter fell by about 53% to $3.69 billion, compared with estimate of $3.71 billion.

Net loss was $2.3 billion, compared with a profit of $2.26 billion a year earlier.

Micron expects to incur a loss of $1.58 per share, excluding items, plus or minus 7 cents, in the current quarter compared with Wall Street expectation of 90 cents per share.