MICRON TECHNOLOGY INC Q2 FY2025 earnings call

• Micron is in the best competitive position in its history, achieving share gains in high-margin product categories.
• Data center DRAM revenue reached a new record in fiscal Q2, with HBM revenue growing over 50% sequentially to over $1 billion, and HBM shipments ahead of plan.
• Launched 1-gamma DRAM node with 20% lower power, 15% better performance, and over 30% bit density improvement vs 1-beta. Gen9 NAND node is the industry's fastest TLC-based NAND.
• Invested in HBM capacity expansion, broke ground on Singapore HBM advanced packaging facility, and Idaho DRAM fab made construction milestone.
• AI driving hardware improvements and broader deployment, creating growth for aggregate AI demand. HBM memory critical for GPU performance, with HBM3E in volume production and HBM4 ramping in 2026.
• LPDRAM leads data center, lowering memory power consumption in AI servers. Data center NAND demand moderated but Micron achieved record market share in data center SSDs in calendar Q4 2024.
• PC market expected to grow mid-single digits in 2025, mobile smartphone unit volume growth low single-digit, automotive embedded revenue affected by inventory adjustments.

DRAM: Fiscal Q2 DRAM revenue was $6.1 billion, up 47% year-over-year, representing 76% of total revenue. Sequentially, DRAM revenue decreased 4% with bit shipments down in high single-digit percentages and prices up in mid-single-digit percentages due to portfolio mix. NAND: Fiscal Q2 NAND revenue was $1.9 billion, up 18% year-over-year, representing 23% of total revenue. Sequentially, NAND revenue decreased 17% with bit shipments modestly higher and prices down in high-teens percentages. Business Units: Compute and Networking (CNBU) revenue was $4.6 billion, up 4% sequentially, reaching 57% of total revenue; Storage business unit revenue was $1.4 billion, down 20% sequentially; Mobile business unit revenue was $1.1 billion, down 30% sequentially; Embedded business unit revenue was $1 billion, down 3% sequentially.

• Fiscal Q3 revenue forecast: $8.8 billion ±$200 million. Gross margin: 36.5% ±100 basis points. Operating expenses: ~$1.13 billion. EPS: $1.57 ±$0.10.
• Fiscal 2025 CapEx remains ~$14 billion, focused on DRAM and HBM manufacturing.
• Expect DRAM and NAND bit shipments to grow in fiscal Q3. Gross margin expected to be up somewhat in fiscal Q4. Inventory DIO to decrease in fiscal 2025.

• Tariffs on limited volume of products from Canada, Mexico, China, with potential to pass costs to customers.
• NAND underutilization and inventory clearance challenges impacting gross margins.
• Start-up costs related to new DRAM node construction in fiscal Q4.

Q: Back in mid-February, you anticipated improved gross margin profile beyond fiscal Q3. Is gross margin expected to improve starting in fiscal Q4 and across segments?

A: Mark Murphy said gross margin would be up somewhat in Q4, with tailwinds from HBM and high-value products, but headwinds from NAND underutilization and start-up costs in DRAM.

Q: You increased DRAM bit demand outlook for 2025. What other segments in DRAM are driving this?

A: Sanjay Mehrotra said consumer inventory improvement, PC and smartphone AI-driven growth, and data center DRAM demand including HBM and LPDRAM are driving the demand.

Q: Can you detail fiscal Q3 guidance, how much from DRAM vs NAND?

A: Mark Murphy said fiscal Q3 expects bit growth in both DRAM and NAND, but specific breakdown by segment wasn't provided beyond general bit growth.

Q: Memory prices improved, how sustainable?

A: Sanjay Mehrotra said demand trends in DRAM (data center, PC, smartphone) and supply tightness in leading-edge DRAM (due to HBM trade ratio) are improving the demand/supply environment.

Q: Concern on HBM3E 12-high yields affecting gross margins?

A: Sanjay Mehrotra said HBM3E 8-high execution is good, and experience from 8-high will help with 12-high ramp, with yields expected to improve as ramp progresses.

Q: Inventory reduction target, how much volume needed?

A: Mark Murphy said inventory DIO will decrease through 2025, with DRAM inventory expected to be below 120 days by fiscal Q4 due to AI-driven growth and HBM supply trends.

Q: Why are gross margins lower now vs 3 years ago at similar revenue?

A: Sanjay Mehrotra said NAND industry environment and demand/supply imbalances have weighed on margins, but focus on high-value product mix will help improve margins over time.

Q: HBM TAM increased, can you maintain market share in HBM equal to overall DRAM share in 2026?

A: Sanjay Mehrotra said Micron is focused on increasing HBM capacity, ramping HBM4 in 2026, and has strong relationships and execution to maintain a strong HBM position.