MICRON TECHNOLOGY INC Q1 FY2025 earnings call

• NAND market conditions: Challenging market conditions extend into calendar Q1, overlapping with fiscal third quarter.
• Data center growth: Data center revenue trajectory remains robust through fiscal and calendar 2025, with continued growth in data center SSD volume expected.
• Mix benefits: Continued growth in data center, mix benefits from higher margin products (HBM, high capacity DIMMs, LPDRAM).
• Inventory: Inventories are expected to be up in near-term due to volume declines in NAND and DRAM in Q2, but expected to improve by spring as inventories at customers become healthier.

The segment performance includes: Data center revenue trajectory remains robust, with data center now accounting for over 50% of revenue. NAND faces challenging market conditions, while DRAM has mix impacts with positive mix from higher margin products like HBM, high capacity DIMMs, LPDRAM. Data center SSD had near-term moderation but volume growth is expected to resume. Absolute terms for data center SSD was around $1.1 - $1.2 billion, contributing ~65% of overall NAND business.

• Gross margin constraints: Constraints on gross margin into fiscal third quarter, with near-term unfavorable items including NAND market conditions and underload charges (impact ~100 basis points).
• Positive drivers beyond third quarter: Continued growth in data center, mix benefits from higher margin products, volume growth and better market conditions in NAND, and resumption of data center SSD volume growth expected to support margin expansion beyond third quarter.

• NAND market conditions: Challenging market conditions in NAND extending into calendar Q1, overlapping with fiscal third quarter.
• Underload charges: Underload charges in fiscal third quarter impacting gross margin.
• Inventory: Near-term inventory build due to volume declines in NAND and DRAM in Q2, though expected to improve by spring.

Q: Harlan Sur asked about blended DRAM pricing up sequentially in Q2.

A: Sumit Sadana said they don't guide on pricing but mentioned mix improvement, HBM growth, and data center revenue trajectory remains robust despite near-term moderation in data center SSD.

Q: Aaron Rakers asked about impact of underload on gross margin in fiscal 3Q.

A: Mark Murphy said they're not guiding third quarter gross margin, with unfavorable items like NAND market conditions and underload charges (~100 basis points impact), but positive drivers like data center growth and mix benefits to support margin expansion beyond third quarter.

Q: Chris Caso asked about what precipitated cautiousness and impact on DRAM vs NAND bit demand.

A: Sumit Sadana said pushout of PC refresh cycle, inventory issues, and moderation in data center SSD impacted near-term outlook, with data center demand still robust. Mark Murphy said DRAM bits down in Q2, NAND down meaningfully with majority of revenue decline in Q2 from NAND.

Q: Vijay Rakesh asked about SPM capacity, conventional DRAM capacity, and HBM capacity.

A: Manish Bhatia talked about trade ratio between HBM and conventional DRAM (3:1), HBM being largest portion of CapEx, and focus on maintaining DRAM bit share. Mark Murphy said NAND CapEx cut, lower percent spend on NAND than revenue.

Q: Brian Chin asked about NAND suppliers following actions and DRAM shipment mix.

A: Sumit Sadana said difficult to predict others' actions, but Micron taking decisive actions; DRAM shipment mix shifted to leading edge products like HBM, with DDR4/LP4 at ~10% of revenue remaining.

Q: Quinn Bolton asked about NAND sequential decline and inventory.

A: Mark Murphy said NAND accounts for majority of sequential revenue decline, inventories improved in Q1 but deteriorated in Q2, expected to draw down through year with data center strength helping.

Q: Timothy Arcuri asked about DRAM and NAND bit shipments.

A: Mark Murphy said DRAM bit shipments in line with industry demand mid-teens for calendar 2025, NAND also expected to ship in-line with demand, considering calendar-fiscal skew.

Q: Hadi Orabi asked about HBM volume and pricing agreements cancelability.

A: Sumit Sadana said agreements have lengthy lead times, customers can cancel beyond certain times, but customers have been consistent with purchases giving confidence in strong ramp.

Q: Toshiya Hari asked about HBM ramp.

A: Sumit Sadana talked about HBM ramp and TAM, Manish Bhatia discussed 8-high ramp exceeding expectations, scalable process, and gradual ramp of HBM capacity through calendar 2025