Expectations are high, and Micron isn't topping estimates to the degree that it used to

Micron's stock was falling Thursday morning.

It's not as easy as it used to be to get Micron Technology investors excited.

Shares of the memory-chip company were falling about 2% shortly after the market open on Thursday, despite a better-than-expected earnings report and an upbeat forecast from one of the artificial-intelligence buildout's major beneficiaries.

One issue for Micron (MU) is that while the company is topping estimates, it's doing so by a smaller margin than in the recent past. Morgan Stanley's Joseph Moore flagged the 5% earnings beat for the latest quarter, versus what he said were beats more in the 20% to 40% range in the prior few quarters.

The chip maker's report "isn't an earnings surprise story anymore," said Matt Britzman, a senior equity analyst at Hargreaves Lansdown. "We're into the realm where earnings durability is driving shares higher, rather than any single set of blowout results."

Raymond James analyst Melissa Fairbanks pointed to Micron's commentary on having no line of sight into when supply can catch up to demand. Although that dynamic will continue to allow Micron to raise prices and become even more profitable, Fairbanks said in a note to clients that the supply crunch will limit near-term growth.

William Blair analyst Sebastien Naji said investors were also likely disappointed in Micron's softer-than-expected outlook for gross margin, a measure of profitability that tracks the amount of revenue a company retains once it's paid for the cost of making its products. Management disclosed that bonuses could weigh on this metric in the November quarter but that conditions should improve in the quarters that follow.

Still, that could be a knock against the stock at a time when Micron investors are wondering just how high gross margins can go. Micron posted an adjusted gross margin of 87% in the August quarter.

Another nagging issue is that the company didn't share much on its plans to return cash to shareholders when its Chips Act-related restrictions lift in December, Naji noted.

However, Naji said as the market shifts focus to how long Micron can sustain its pricing power and maintain higher margins, he sees opportunities for its shares to go higher. That buyback program slated to start later this year could be one major catalyst.

-Britney Nguyen