Shares of Micron Technology (MU) experienced a significant tumble on Thursday, dropping as much as 7.9%, following the release of the company's quarterly financial report. Despite delivering outstanding results that surpassed expectations, Wall Street remained dissatisfied as Micron failed to provide the guidance they were hoping for.

In its fiscal 2024 third quarter (ended May 30), Micron reported a remarkable 82% year-over-year surge in revenue, amounting to $6.8 billion. This tremendous growth, coupled with the company's adjusted earnings per share (EPS) of $0.62, compared to a loss of $1.43 in the same quarter last year, easily outperformed analysts' consensus estimates of $6.67 billion in revenue and adjusted EPS of $0.50.

Micron attributed its strong financial performance to the improved balance between supply and demand, resulting in increased pricing power. The company also experienced substantial sales to data centers, particularly in highly lucrative AI-related product categories like high-bandwidth memory, high-capacity dual in-line memory modules, and data center solid-state drives.

However, despite these impressive results, Micron's stock experienced a significant decline. This was primarily due to investors' high expectations, fueled by the premium valuations of AI-related stocks since the AI boom began last year. The unpredictable timing of further gains in the AI sector weighed heavily on investor sentiment.

Looking ahead to the fourth fiscal quarter, Micron's management provided revenue guidance of $7.6 billion, representing a staggering 90% year-over-year growth. While this forecast is certainly enviable, it aligned precisely with Wall Street's consensus estimates, failing to meet investors' hopes of an earnings beat and raise.

Considering Micron's current valuation of approximately 52 times earnings and 126 times forward earnings, it is evident that investors had set lofty, if not unrealistic, expectations prior to the earnings report. However, it is crucial to note that the trajectory of AI growth is not necessarily linear and demand can fluctuate intermittently.

Management's conservative approach to forecasting should also be taken into account. Despite the slight disappointment in short-term expectations, the company's strong financial performance and optimistic growth prospects justify a focus on long-term investment rather than getting caught up in day-to-day stock price movements.

In conclusion, Micron Technologies' remarkable revenue surge, driven by robust AI demand and improved supply-demand balance, failed to meet the high expectations of investors. However, with 90% year-over-year growth and a solid foundation in the AI market, investors should keep their sights set on the long-term potential of Micron Technologies.

Disclaimer: Danny Vena 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.