Q2 2024 Micron Technology Inc Earnings Call

March 20, 2024

Okay.

Speaker Change: Thank you for standing by and welcome to Micron <unk> second quarter 2024 financial call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone.

Speaker Change: <unk> has been answered and you'd like to remove yourself from the queue simply press star one again.

Speaker Change: As a reminder, today's program is being recorded and now I'd like to introduce your host for today's program set to Air Kumar Corporate Vice President Investor Relations and Treasurer. Please go ahead Sir.

Thank you and welcome to Micron technologies fiscal second quarter 2024 financial conference call.

Harsh V. Kumar: On the call with me today are Sanjay Mehrotra, President and CEO and Mark Murphy our CFO.

Harsh V. Kumar: Today's call is being webcast from our Investor Relations site at investors got micron dot com, including audio and slides in.

Harsh V. Kumar: In addition, the press release detailing our quarterly results has been posted on the website along with the prepared remarks for this call.

Harsh V. Kumar: Today's discussion of financial results as being presented on a non-GAAP financial basis, unless otherwise specified.

Harsh V. Kumar: A reconciliation of GAAP to non-GAAP financial measures can be found on our website.

Harsh V. Kumar: We encourage you to visit our web site at Micron Dot com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending.

Harsh V. Kumar: Can also follow us on X at Micron Tech.

Harsh V. Kumar: As a reminder, the matters. We're discussing today include forward looking statements regarding market demand and supply market and pricing trends and drivers our technology product ramp plans and market position, our expected results and guidance and other matters.

Harsh V. Kumar: These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today.

Harsh V. Kumar: We refer you to the documents, we filed with the SEC, including our most recent Form 10-Q and upcoming 10-Q for a discussion of risks that may affect our future results.

Harsh V. Kumar: Although we believe that the expectations reflected in the forward looking statements are reasonable.

Harsh V. Kumar: We cannot guarantee future results levels of activity performance or achievements.

Harsh V. Kumar: We are under no duty to update any of the forward looking statements to confirm these statements to actual results.

Harsh V. Kumar: I will now turn the call over to Sanjay.

Sanjay Mehrotra: Thank you good afternoon, everyone I'm pleased to report that Micron delivered fiscal Q2 revenue gross margin and EPS well above the high end of guidance Micron has returned to profitability and delivered positive operating margin a quarter ahead of expectations.

Sanjay Mehrotra: I would like to thank all our micron global team members for their dedication and excellent execution that made this result possible.

Sanjay Mehrotra: Micron drove robust price increases as the supply and demand balance tightens.

Sanjay Mehrotra: This improvement in market conditions was due to a confluence of factors, including strong AI server demand a healthier demand environment in most end markets and supply reductions across the industry.

Sanjay Mehrotra: AI server demand is driving rapid growth in HBM, DDR, five and data center, Ssds, which is tightening leading edge supply availability for DRAM and NAND.

Sanjay Mehrotra: This is resulting in a positive ripple effect on pricing across all memory and storage end markets.

Sanjay Mehrotra: We expect DRAM and NAND pricing levels to increase further throughout calendar year, 2024, and expect to record revenue and much improved profitability now in fiscal year 2025.

Micron is at the forefront of ramping the industry's most advanced technology nodes in both DRAM and NAND.

Sanjay Mehrotra: Reinforcing our leadership position over three quarters of our DRAM bits are now on leading edge, one alpha and one beta nodes and over 90% of our NAND bits are on 176 layer and 232 layer nodes.

Sanjay Mehrotra: We expect fiscal 2020 for front end cost reductions.

Excluding the impact of HBM to track in line with our long term expectations of mid to high single digits in DRAM and low teens in NAND supported by the continued volume ramp of one beta DRAM and 232 layer <unk> NAND.

Sanjay Mehrotra: We have begun one gamma DRAM pilot production using <unk> and are on track for volume production in calendar 2025.

Sanjay Mehrotra: The development of our next generation NAND node is on track with volume production plans for calendar 2025.

Sanjay Mehrotra: We effect to maintain our technology leadership in NAND.

Sanjay Mehrotra: Now turning to our end market.

Sanjay Mehrotra: Inventories for memory and storage have improved significantly in the data center and we continue to expect normalization in the first half of calendar 2024.

Sanjay Mehrotra: In PC and smartphone there were some strategic purchases in calendar Q4 in anticipation of a return to unit growth.

Sanjay Mehrotra: Inventory remained near normal levels for auto industrial and other markets.

Sanjay Mehrotra: We are in the very early innings of a multiyear growth phase driven by AI as this disruptive technology will transform every aspect of business and society.

Sanjay Mehrotra: That is on to create artificial general intelligence on.

Sanjay Mehrotra: Agi Mitchell require ever increasing module sizes with trillions of parameters.

Sanjay Mehrotra: On the other end of the spectrum. There is considerable progress being made on improving AI models. So that they can run on edge devices.

Pcs and smartphones and create new and compelling capabilities.

Sanjay Mehrotra: As AI training workloads remain a driver of technology and innovation in finance growth is also rapidly accelerating.

Sanjay Mehrotra: Memory and storage technologies are key enablers of Eni in both training and inference workloads and micron is well positioned to capitalize on these trends in both the data center and the edge.

Sanjay Mehrotra: We view micron as one of the biggest beneficiaries in the semiconductor industry.

Multiyear growth opportunity driven by AI.

Sanjay Mehrotra: In data center total industry server unit shipments are expected to grow mid to high single digits in calendar 2024, driven by strong growth for AI servers, and a return to modest growth for traditional servers.

Sanjay Mehrotra: Micron is well positioned with our portfolio of HBM D. Five LP five high capacity them, CSL and datacenter SSD products.

Sanjay Mehrotra: Delivering improved memory bandwidth power consumption and overall performance is critical to enable cost efficient scaling of AI workloads insight modern GPU, our ASIC accelerated AI servers.

Sanjay Mehrotra: Our customers are driving an aggressive roadmap on their GPU and ASIC based server platforms that require significantly higher content and higher performance memory and storage solutions.

Sanjay Mehrotra: For example earlier this week Nvidia announced its next generation Blackwell GPU architecture based AI systems.

<unk> provides a 33% increase in the HBM <unk> content, continuing a trend of steadily increasing HBM content our GPU.

Sanjay Mehrotra: Micron's industry, leading high bandwidth memory <unk> E solution provides more than 20 times, the memory bandwidth compared to standard <unk>, Jim server module.

Sanjay Mehrotra: We are executing well on our HCM product ramp plans and have made significant progress in ramping our capacity yield and quality.

Sanjay Mehrotra: We commenced volume production and recognized our first revenue from <unk> in fiscal Q2, and now have began high volume shipments of our <unk> III product.

Sanjay Mehrotra: Customers continue to give strong feedback that our <unk> solution has a 30% lower power consumption compared to competitors' solutions.

Sanjay Mehrotra: This benefit is contributing to strong demand.

Our <unk> product will be part of <unk>, H 200, tensor core Gpus, and we're making progress on additional background qualifications with multiple customers.

Sanjay Mehrotra: We are on track to generate several $100 million of revenue from HBM in fiscal 2024, and expect <unk> revenues to be accretive to our DRAM and overall gross margins starting in the fiscal third quarter.

Sanjay Mehrotra: Our <unk> is sold out for calendar 2024, and the overwhelming majority of our 2025 supply has already been allocated.

Sanjay Mehrotra: We continue to expect HBM bit share equivalents to our overall DRAM bit share sometime in calendar 2025.

Sanjay Mehrotra: Earlier this month, we sampled our <unk> <unk> product, which provides 50% increased capacity of DRAM <unk> to 36 gigabyte.

Sanjay Mehrotra: This increase in capacity allows our customers to pack more memory per GPU, enabling more powerful AI training and inference solutions.

Sanjay Mehrotra: We expect well high <unk> E will start ramping in high volume production and increase in mix throughout 2025.

Sanjay Mehrotra: We have a robust roadmap and we are confident we will maintain our technology leadership with <unk> for the next generation of HBM, which will provide further performance and capacity enhancements compared to <unk>.

Sanjay Mehrotra: We are making strong progress on our suite of high capacity server dem products.

Operator: Thank you for standing by, and welcome to Micron's Q2 2024 financial call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star one one again. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, Satya Kumar, Corporate Vice President, Investor Relations and Treasurer. Please go ahead, sir.

Sanjay Mehrotra: During the quarter, we completed validation of the industry's first mono based 128 gigabyte server DRAM module.

Sanjay Mehrotra: This new product provides.

Sanjay Mehrotra: The industry's highest bandwidth D five capability with greater than 20% better energy efficiency and over 15% improved latency performance compared to competitors CD TSV based solutions.

Sanjay Mehrotra: We see strong customer pool, and expect a robust volume ramp for our 128 gigabyte product with several hundred million dollars of revenue in the second half of fiscal 2024.

Satya Kumar: Thank you, and welcome to Micron Technology's fiscal second quarter 2024 financial conference call. On the call with me today are Sanjay Mehrotra, our President and CEO, and Mark Murphy, our CFO. Today's call is being webcast from our investor relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website, along with the prepared remarks for this call. Today's discussion of financial results is being presented on a non-GAAP financial basis, unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures can be found on our website. We encourage you to visit our website at micron.com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending. You can also follow us on X at MicronTech.

Sanjay Mehrotra: Additionally, we also started sampling our $2 56, gigabyte and see our dem module, which further enhances performance and increases DRAM content per server.

Sanjay Mehrotra: We achieved record revenue share in the datacenter SSD market in calendar 2023.

Sanjay Mehrotra: During the quarter, we grew our revenue by over 50% sequentially for our 232 layer base 60, 530, terabyte, Ssds, which offer best in class performance reliability and endurance for AI it'll leak application.

Sanjay Mehrotra: In PC after two years of double digit declines unit volumes are expected to grow modestly in the low single digit range for calendar 2024.

Satya Kumar: As a reminder, the matters we're discussing today include forward-looking statements regarding market demand and supply, market and pricing trends and drivers, our technology, product ramp plans and market position, our expected results and guidance, and other matters. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer you to the documents we file with the SEC, including our most recent Form 10-Q and upcoming 10-Q, for a discussion of risks that may affect our future results. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We are under no duty to update any of the forward-looking statements to confirm these statements to actual results. I will now turn the call over to Sanjay.

As a reminder, the matters we're discussing today include forward-looking statements regarding market demand and supply, market and pricing trends and drivers, our technology, product ramp plans and market position, our expected results and guidance, and other matters. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer you to the documents we file with the SEC, including our most recent Form 10-Q and upcoming 10-Q, for a discussion of risks that may affect our future results. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We are under no duty to update any of the forward-looking statements to confirm these statements to actual results. I will now turn the call over to Sanjay.

Sanjay Mehrotra: We are encouraged by the strong ecosystem momentum to develop next generation <unk>, which feature high performance neural processing unit chipsets, and 40% to 80% more DRAM content.

Sanjay Mehrotra: Today's avid hbc's.

Sanjay Mehrotra: We expect next generation AI PC unit to grow and become a meaningful portion of total PC units in calendar 2025.

Sanjay Mehrotra: At CES, the consumer electronics show in Las Vegas, Micron launched the industry's first low power compression of dashed memory module on LP Cam two for PC applications.

Sanjay Mehrotra: <unk> brings a modular form factor with a maximum capacity point of 64 gigabyte for PC module and 128 gigabyte per server module, along with a number of benefits such as higher bandwidth lower power and smaller form factor.

Sanjay Mehrotra: Thank you, Satya. Good afternoon, everyone. I'm pleased to report that Micron delivered fiscal Q2 revenue, gross margin, and EPS well above the high end of guidance. Micron has returned to profitability and delivered positive operating margin a quarter ahead of expectation. I would like to thank all our Micron global team members for their dedication and excellent execution that made this result possible. Micron drove robust price increases as the supply-demand balance tightened. This improvement in market conditions was due to a confluence of factors, including strong AI server demand, a healthier demand environment in most end markets, and supply reductions across the industry. AI server demand is driving rapid growth in HBM, DDR5, and data center SSDs, which is tightening leading-edge supply availability for DRAM and NAND. This is resulting in a positive ripple effect on pricing across all memory and storage end markets.

Sanjay Mehrotra: During the quarter, we launched our 232 layer based crucial T 705, Gen five consumer SSD, which won several editors choice awards and was recognized by a leading publisher as the fastest amdocs to SSD ever.

Sanjay Mehrotra: We increased our client SSD ULC bit shipments to record levels with TLC, representing nearly two thirds of our client SSD shipments.

Sanjay Mehrotra: Normally establishing micron as a leader in client <unk> Ssds.

Sanjay Mehrotra: Turning to mobile smartphone unit volumes in calendar 2024 remain on track to grow low to mid single digits.

Sanjay Mehrotra: Smartphones offer tremendous potential for personalized AI capabilities that offer greater security and responsiveness when executed on device.

Sanjay Mehrotra: We expect DRAM and NAND pricing levels to increase further throughout calendar year 2024 and expect record revenue and much improved profitability now in fiscal year 2025. Micron is at the forefront of ramping the industry's most advanced technology nodes in both DRAM and NAND. Reinforcing our leadership position, over three-quarters of our DRAM bits are now on leading-edge 1-alpha and 1-beta nodes, and over 90% of our NAND bits are on 176-layer and 232-layer nodes. We expect fiscal 2024 front-end cost reductions, excluding the impact of HBM, to track in line with our long-term expectations of mid to high single digits in DRAM and low teens in NAND, supported by the continued volume ramp of 1-beta DRAM and 232-layer NAND.

We expect DRAM and NAND pricing levels to increase further throughout calendar year 2024 and expect record revenue and much improved profitability now in fiscal year 2025. Micron is at the forefront of ramping the industry's most advanced technology nodes in both DRAM and NAND. Reinforcing our leadership position, over three-quarters of our DRAM bits are now on leading-edge 1-alpha and 1-beta nodes, and over 90% of our NAND bits are on 176-layer and 232-layer nodes. We expect fiscal 2024 front-end cost reductions, excluding the impact of HBM, to track in line with our long-term expectations of mid to high single digits in DRAM and low teens in NAND, supported by the continued volume ramp of 1-beta DRAM and 232-layer NAND.

Sanjay Mehrotra: Enabling these on device AI capabilities is driving increased memory and storage capacity needs and increasing demand for new value add solutions.

For example, we expect iphones to carry 50% to 100% greater DRAM content compared to non AI flagship phones today.

Sanjay Mehrotra: Micron's, leading mobile solutions provide the critical high performance and power efficiency needed to unlock an unprecedented level of AI capability.

Sanjay Mehrotra: In DRAM, we are now sampling our second generation, one beta LP DRAM LP, five X product, which delivers the industry's highest performance at improved power or flagship smartphones.

Sanjay Mehrotra: And in NAND, we announced our second generation of 232 layer NAND Uff's for all devices, featuring the industry's smallest package and breakthrough features that enable greater reliability and significantly higher.

Sanjay Mehrotra: We continue to mature our production capability with extreme ultraviolet lithography and have achieved equivalent yield and quality on our one alpha as well as one beta nodes between EUV and non-EUV flows. We have begun one gamma DRAM pilot production using EUV and are on track for volume production in 2025. The development of our next generation NAND node is on track, with volume production plans for 2025. We expect to maintain our technology leadership in NAND... Now turning to our end market. Inventories for memory and storage have improved significantly in the data center, and we continue to expect normalization in the first half of 2024. In PC and smartphone, there were some strategic purchases in calendar Q4 in anticipation of a return to unit growth. Inventories remain near normal levels for auto, industrial, and other markets.

We continue to mature our production capability with extreme ultraviolet lithography and have achieved equivalent yield and quality on our one alpha as well as one beta nodes between EUV and non-EUV flows. We have begun one gamma DRAM pilot production using EUV and are on track for volume production in 2025. The development of our next generation NAND node is on track, with volume production plans for 2025. We expect to maintain our technology leadership in NAND... Now turning to our end market. Inventories for memory and storage have improved significantly in the data center, and we continue to expect normalization in the first half of 2024. In PC and smartphone, there were some strategic purchases in calendar Q4 in anticipation of a return to unit growth. Inventories remain near normal levels for auto, industrial, and other markets.

Sanjay Mehrotra: <unk> performance for complex workloads.

Sanjay Mehrotra: Our mobile DRAM and NAND solutions are now widely adopted and industry, leading flagship smartphones with two examples being Samsung Galaxy F. 'twenty four and the honor magic fix grow announced this year.

Sanjay Mehrotra: The Samsung Galaxy F. 'twenty four can provide two way real time voice and text our translations during life phone calls.

Sanjay Mehrotra: The honor Magic fix drove features the magic L M. A $7 billion parameter large language model.

Sanjay Mehrotra: Can intelligently understand our users' intent.

Sanjay Mehrotra: Our language image I have movement, and gestures and proactively offer services to enhance and simplify the user experience.

Sanjay Mehrotra: Turning to auto and industrial.

Sanjay Mehrotra: We are in the very early innings of a multi-year growth phase driven by AI, as this disruptive technology will transform every aspect of business and society. The race is on to create artificial general intelligence, or AGI, which will require ever-increasing model sizes with trillions of parameters. On the other end of the spectrum, there is considerable progress being made on improving AI models so that they can run on edge devices like PCs and smartphones and create new and compelling capabilities. As AI training workloads remain a driver of technology and innovation, inference growth is also rapidly accelerating. Memory and storage technologies are key enablers of AI in both training and inference workloads, and Micron is well positioned to capitalize on these trends in both the data center and the edge.

We are in the very early innings of a multi-year growth phase driven by AI, as this disruptive technology will transform every aspect of business and society. The race is on to create artificial general intelligence, or AGI, which will require ever-increasing model sizes with trillions of parameters. On the other end of the spectrum, there is considerable progress being made on improving AI models so that they can run on edge devices like PCs and smartphones and create new and compelling capabilities. As AI training workloads remain a driver of technology and innovation, inference growth is also rapidly accelerating. Memory and storage technologies are key enablers of AI in both training and inference workloads, and Micron is well positioned to capitalize on these trends in both the data center and the edge.

Sanjay Mehrotra: The automotive sector continues to experience robust demand for memory and storage as non memory semiconductor supply constraints have eased and as new vehicle platforms are launched.

Sanjay Mehrotra: In the past quarter, we experienced strong growth with partners, who are driving the most advanced capabilities within the automobiles increasingly intelligent and connected digital cockpits.

Sanjay Mehrotra: In addition.

Sanjay Mehrotra: The option of level, two plus Adas capabilities continues to gain momentum further expanding content per vehicle.

Sanjay Mehrotra: The industrial market fundamentals for memory are also healthy with improving distributor inventory book to bill and demand visibility improvements as well as pricing benefits from the tight supply for products, especially those built on leading edge nodes.

Speaker Change: Now turning to our market outlook.

Speaker Change: Calendar 2023, DRAM bit demand growth was in the low double digit percentage range.

Sanjay Mehrotra: We view Micron as one of the biggest beneficiaries in the semiconductor industry of this multi-year growth opportunity driven by AI. In data center, total industry server unit shipments are expected to grow mid to high single digits in calendar 2024, driven by strong growth for AI servers and a return to modest growth for traditional servers. Micron is well positioned with our portfolio of HBM, D5, LP5, high-capacity DIMM, CXL, and data center SSD products. Delivering improved memory bandwidth, power consumption, and overall performance is critical to enable cost-efficient scaling of AI workloads inside modern GPU or ASIC-accelerated AI servers. Our customers are driving an aggressive AI roadmap on their GPU and ASIC-based server platforms that require significantly higher content and higher performance memory and storage solutions.

We view Micron as one of the biggest beneficiaries in the semiconductor industry of this multi-year growth opportunity driven by AI. In data center, total industry server unit shipments are expected to grow mid to high single digits in calendar 2024, driven by strong growth for AI servers and a return to modest growth for traditional servers. Micron is well positioned with our portfolio of HBM, D5, LP5, high-capacity DIMM, CXL, and data center SSD products. Delivering improved memory bandwidth, power consumption, and overall performance is critical to enable cost-efficient scaling of AI workloads inside modern GPU or ASIC-accelerated AI servers. Our customers are driving an aggressive AI roadmap on their GPU and ASIC-based server platforms that require significantly higher content and higher performance memory and storage solutions.

Speaker Change: And NAND bit demand growth was in the low 20 percentage range.

Speaker Change: Board, a few percentage points higher than previous expectations.

Speaker Change: We forecast calendar 2024 bit demand growth for the industry to be near the long term CAGR for DRAM and around mid teens for NAND.

Speaker Change: Given the higher baseline of 2023 demand these expectations of 2024 bit growth have driven an increase in the absolute level of 2024 bit to demand in our module for DRAM and NAND versus our prior expectations.

Speaker Change: The industry supply demand balance is tight for DRAM and NAND and our outlook for pricing has increased for calendar 2024.

Speaker Change: Over the medium term, we expect bit demand growth CAGR of mid teens in DRAM and long low twenties percentage range and net.

Speaker Change: Turning to supply the supply outlook remains roughly the same as last quarter.

Sanjay Mehrotra: For example, earlier this week, NVIDIA announced its next generation Blackwell GPU architecture-based AI systems, which provides a 33% increase in HBM3E content, continuing a trend of steadily increasing HBM content per GPU. Micron's industry-leading high bandwidth memory, HBM3E solution, provides more than 20 times the memory bandwidth compared to standard DDR5-based DIMM server module. We are executing well on our HBM product ramp plans and have made significant progress in ramping our capacity, yields, and quality. We commenced volume production and recognized our first revenue from HBM3E in fiscal Q2, and now have begun high volume shipments of our HBM3E product. Customers continue to give strong feedback that our HBM3E solution has a 30% lower power consumption compared to competitors' solutions. This benefit is contributing to strong demand.

For example, earlier this week, NVIDIA announced its next generation Blackwell GPU architecture-based AI systems, which provides a 33% increase in HBM3E content, continuing a trend of steadily increasing HBM content per GPU. Micron's industry-leading high bandwidth memory, HBM3E solution, provides more than 20 times the memory bandwidth compared to standard DDR5-based DIMM server module. We are executing well on our HBM product ramp plans and have made significant progress in ramping our capacity, yields, and quality. We commenced volume production and recognized our first revenue from HBM3E in fiscal Q2, and now have begun high volume shipments of our HBM3E product. Customers continue to give strong feedback that our HBM3E solution has a 30% lower power consumption compared to competitors' solutions. This benefit is contributing to strong demand.

Speaker Change: We expect calendar 2024 industry supply to be below demand for both DRAM and NAND.

Speaker Change: Micron's bit supply growth in fiscal 2024 remains below our demand growth for both DRAM and NAND.

Speaker Change: And we expect to decrease our days of inventory in fiscal year 2024.

Speaker Change: Micron's fiscal 2020 for Capex plan remains unchanged at a range between $7 5 billion and $8.01 billion.

Speaker Change: We continue to project, our <unk> spending will be down year on year in fiscal 2024.

Speaker Change: Micron's capital efficient approach to reuse equipment from older nodes to support conversions to leading edge nodes has resulted in a material structural reduction of our DRAM and NAND, we referred capacities.

Speaker Change: We are now fully utilized on our high volume manufacturing nodes and are maximizing output against the structurally lower capacity.

Speaker Change: We believe this approach to node migration and consequent reaffirm the capacity reduction is an industry wide phenomenon.

Sanjay Mehrotra: Our HBM3E product will be part of NVIDIA's H200 Tensor Core GPUs, and we are making progress on additional platform qualifications with multiple customers. We are on track to generate several hundred million dollars of revenue from HBM in fiscal 2024, and expect HBM revenues to be accretive to our DRAM and overall gross margins starting in the fiscal Q3. Our HBM is sold out for calendar 2024, and the overwhelming majority of our 2025 supply has already been allocated. We continue to expect HBM bit share equivalent to our overall DRAM bit share sometime in calendar 2025. Earlier this month, we sampled our 12-high HBM3E product, which provides 50% increased capacity of DRAM per cube to 36 GB. This increase in capacity allows our customers to pack more memory per GPU, enabling more powerful AI training and inference solutions.

Our HBM3E product will be part of NVIDIA's H200 Tensor Core GPUs, and we are making progress on additional platform qualifications with multiple customers. We are on track to generate several hundred million dollars of revenue from HBM in fiscal 2024, and expect HBM revenues to be accretive to our DRAM and overall gross margins starting in the fiscal Q3. Our HBM is sold out for calendar 2024, and the overwhelming majority of our 2025 supply has already been allocated. We continue to expect HBM bit share equivalent to our overall DRAM bit share sometime in calendar 2025. Earlier this month, we sampled our 12-high HBM3E product, which provides 50% increased capacity of DRAM per cube to 36 GB. This increase in capacity allows our customers to pack more memory per GPU, enabling more powerful AI training and inference solutions.

Speaker Change: We project to end fiscal 2024, mid low double digit percentage less wafer capacity in both DRAM and NAND.

Speaker Change: Then our peak levels in fiscal 2022.

Speaker Change: Significant supply reductions across the industry have enabled the pricing recovery that is now underway.

Speaker Change: Although our financial performance has improved our current profitability levels are still well below our long term targets and significantly improved profitability as required to support R&D and capex investments needed for long term innovation and supply growth.

Speaker Change: Micron will continue to exercise supply and capex discipline and focus on restoring improved profitability, while maintaining our bid market share for DRAM and NAND.

Speaker Change: As discussed previously the ramp of HBM production will constrain supply growth and non HBM products.

Speaker Change: Industry wide <unk> CE consumes approximately three times the wafer supply as D. Five to produce a given number of bids in the same technology node.

Sanjay Mehrotra: We expect 12-high HBM3E will start ramping in high volume production and increase in mix throughout 2025. We have a robust roadmap, and we are confident we will maintain our technology leadership with HBM4, the next generation of HBM, which will provide further performance and capacity enhancements compared to HBM3E. We are making strong progress on our suite of high-capacity server DIMM products. During the quarter, we completed validation of the industry's first mono-die based 128 GB server DRAM module. This new product provides the industry's highest bandwidth DDR5 capability with greater than 20% better energy efficiency and over 15% improved latency performance compared to competitors' 3D TSV-based solutions. We see strong customer pull and expect a robust volume ramp for our 128 GB product, with several hundred million dollars of revenue in the second half of fiscal 2024.

We expect 12-high HBM3E will start ramping in high volume production and increase in mix throughout 2025. We have a robust roadmap, and we are confident we will maintain our technology leadership with HBM4, the next generation of HBM, which will provide further performance and capacity enhancements compared to HBM3E. We are making strong progress on our suite of high-capacity server DIMM products. During the quarter, we completed validation of the industry's first mono-die based 128 GB server DRAM module. This new product provides the industry's highest bandwidth DDR5 capability with greater than 20% better energy efficiency and over 15% improved latency performance compared to competitors' 3D TSV-based solutions. We see strong customer pull and expect a robust volume ramp for our 128 GB product, with several hundred million dollars of revenue in the second half of fiscal 2024.

Speaker Change: With increased performance and packaging complexity across the industry. We expect the trade ratio of four <unk> four to be even higher than the trade ratio for <unk> III.

We anticipate strong HBM demand due to AI combined with increasing silicon intensity of the HBM roadmap to contribute to tight supply conditions for DRAM across all end markets.

Speaker Change: Finally, as we consider these demand and technology trends, we're carefully planning, our global Fab and assembly test capacity requirements to ensure the diversified and cost competitive manufacturing footprint.

Speaker Change: Announced projects in China, India, and Japan are proceeding as planned.

On potential U S expansion plans, we have assumed chip plans in our Capex plans for fiscal 2024.

Speaker Change: Our planned Idaho, and New York projects require micron to receive the combination of sufficient chips grants investment tax credits and local incentives to address the cost difference compared to overseas expansion.

Sanjay Mehrotra: Additionally, we also started sampling our 256 GB MCRDIMM module, which further enhances performance and increases DRAM content per server. We achieved record revenue share in the data center SSD market in calendar 2023. During the quarter, we grew our revenue by over 50% sequentially for our 232-layer 6500 30 TB SSDs, which offer best-in-class performance, reliability, and endurance for AI data lake applications. In PC, after two years of double-digit declines, unit volumes are expected to grow modestly in the low single-digit range for calendar 2024. We are encouraged by the strong ecosystem momentum to develop next-generation AI PCs, which feature high-performance neural processing unit, chipsets, and 40% to 80% more DRAM content versus today's average PCs.

Additionally, we also started sampling our 256 GB MCRDIMM module, which further enhances performance and increases DRAM content per server. We achieved record revenue share in the data center SSD market in calendar 2023. During the quarter, we grew our revenue by over 50% sequentially for our 232-layer 6500 30 TB SSDs, which offer best-in-class performance, reliability, and endurance for AI data lake applications. In PC, after two years of double-digit declines, unit volumes are expected to grow modestly in the low single-digit range for calendar 2024. We are encouraged by the strong ecosystem momentum to develop next-generation AI PCs, which feature high-performance neural processing unit, chipsets, and 40% to 80% more DRAM content versus today's average PCs.

Speaker Change: I will now turn it over to Mark for our financial results and outlook.

Mark Murphy: Thanks, Sanjay and good afternoon, everyone.

Mark Murphy: Micron delivered strong results in fiscal Q2 with revenue gross margin and EPS well above the high end of the guidance ranges provided in our last earnings call.

Mark Murphy: Much improved market conditions, along with the team's excellent execution on pricing products and operations.

Mark Murphy: Drove the strong financial results.

Mark Murphy: Total fiscal Q2 revenue was $5 8 billion.

Mark Murphy: Up 23% sequentially and up 58% year over year.

Mark Murphy: Fiscal Q2, DRAM revenue was approximately $4 $2 billion, representing 71% of total revenue.

DRAM revenue increased 21% sequentially with pet shipments increasing by a low single digit percentage and prices increasing by high teen.

Mark Murphy: Fiscal Q2, NAND revenue was approximately $1 6 billion.

Sanjay Mehrotra: We expect next-generation AI PC units to grow and become a meaningful portion of total PC units in calendar 2025. At CES, the Consumer Electronics Show in Las Vegas, Micron launched the industry's first low-power compression attached memory module or LPCAMM2 for PC applications. LPCAMM2 brings a modular form factor with a maximum capacity point of 64 GB for PC module and 128 GB for server module, along with a number of benefits such as higher bandwidth, lower power, and smaller form factor. During the quarter, we launched our 232-layer-based Crucial T705 Gen5 SSD, which won several Editor's Choice Awards and was recognized by a leading publisher as the fastest M.2 SSD ever.

We expect next-generation AI PC units to grow and become a meaningful portion of total PC units in calendar 2025. At CES, the Consumer Electronics Show in Las Vegas, Micron launched the industry's first low-power compression attached memory module or LPCAMM2 for PC applications. LPCAMM2 brings a modular form factor with a maximum capacity point of 64 GB for PC module and 128 GB for server module, along with a number of benefits such as higher bandwidth, lower power, and smaller form factor. During the quarter, we launched our 232-layer-based Crucial T705 Gen5 SSD, which won several Editor's Choice Awards and was recognized by a leading publisher as the fastest M.2 SSD ever.

Mark Murphy: Representing 27% of Micron's total revenue.

NAND revenue increased 27% sequentially.

Mark Murphy: With <unk> shipments decreasing by a low single digit percentage and prices increasing by over 30%.

Mark Murphy: Yes.

Mark Murphy: Now turning to revenue by business unit.

Mark Murphy: Compute and networking business unit revenue was $2 2 billion up.

Mark Murphy: Up 26% sequentially.

Mark Murphy: Data center revenue grew robustly.

Mark Murphy: And cloud more than doubled sequentially.

Mark Murphy: Revenue for the mobile business unit was $1 6 billion.

Mark Murphy: Up 24% sequentially as an expected decline in volume was more than offset by improved pricing.

Mark Murphy: Embedded business unit revenue was $1 1 billion up.

Mark Murphy: Up 7% sequentially on solid demand for leading edge products in the industrial market.

Yeah.

Sanjay Mehrotra: We increased our client SSD QLC bit shipments to record levels, with QLC representing nearly 2/3 of our client SSD shipments, firmly establishing Micron as a leader in client QLC SSDs. Turning to mobile. Smartphone unit volumes in calendar 2024 remain on track to grow low to mid-single digits. Smartphones offer tremendous potential for personalized AI capabilities that offer greater security and responsiveness when executed on-device. Enabling these on-device AI capabilities is driving increased memory and storage capacity needs, and increasing demand for new value-add solutions. For example, we expect AI phones to carry 50 to 100% greater DRAM content compared to non-AI flagship phones today. Micron's leading mobile solutions provide the critical high performance and power efficiency needed to unlock an unprecedented level of AI capability.

We increased our client SSD QLC bit shipments to record levels, with QLC representing nearly 2/3 of our client SSD shipments, firmly establishing Micron as a leader in client QLC SSDs. Turning to mobile. Smartphone unit volumes in calendar 2024 remain on track to grow low to mid-single digits. Smartphones offer tremendous potential for personalized AI capabilities that offer greater security and responsiveness when executed on-device. Enabling these on-device AI capabilities is driving increased memory and storage capacity needs, and increasing demand for new value-add solutions. For example, we expect AI phones to carry 50 to 100% greater DRAM content compared to non-AI flagship phones today. Micron's leading mobile solutions provide the critical high performance and power efficiency needed to unlock an unprecedented level of AI capability.

Mark Murphy: Revenue for the storage business unit was $905 million.

Mark Murphy: Up 39% sequentially with strong double digit growth across all end markets.

Mark Murphy: Data center SSD revenue more than doubled from a year ago, driven by share gains from micron's products.

Mark Murphy: Our consolidated gross margin for fiscal Q2 was 20%.

Mark Murphy: Up 19 percentage points sequentially driven by higher pricing.

Mark Murphy: Fiscal Q2 gross margins benefited from $382 million.

Mark Murphy: Associated with selling the remainder of previously written down inventory.

In our second fiscal quarter.

Mark Murphy: Utilization charges were modest and related to our legacy manufacturing capacity.

Mark Murphy: We access we expect to sustain these lower levels of Underutilization charges moving forward.

Operating expenses in fiscal Q2 or $959 million.

Mark Murphy: Down $33 million quarter over quarter and in line with our guidance range.

Mark Murphy: Opex was modestly above the midpoint of our guidance range.

Sanjay Mehrotra: In DRAM, we are now sampling our second-generation 1-beta LPDDR5X product, which delivers the industry's highest performance at improved power for flagship smartphones. In NAND, we announced our second generation of 232-layer NAND UFS 4.0 devices, featuring the industry's smallest package and breakthrough features that enable greater reliability and significantly higher real-world performance for complex workloads. Our mobile DRAM and NAND solutions are now widely adopted in industry-leading flagship smartphones, with two examples being Samsung's Galaxy S24 and the Honor Magic6 Pro, announced this year. The Samsung Galaxy S24 can provide two-way real-time voice and text translations during live phone calls.

In DRAM, we are now sampling our second-generation 1-beta LPDDR5X product, which delivers the industry's highest performance at improved power for flagship smartphones. In NAND, we announced our second generation of 232-layer NAND UFS 4.0 devices, featuring the industry's smallest package and breakthrough features that enable greater reliability and significantly higher real-world performance for complex workloads. Our mobile DRAM and NAND solutions are now widely adopted in industry-leading flagship smartphones, with two examples being Samsung's Galaxy S24 and the Honor Magic6 Pro, announced this year. The Samsung Galaxy S24 can provide two-way real-time voice and text translations during live phone calls.

Mark Murphy: As variable compensation expense was higher on an improved fiscal 2020 for outlook.

Mark Murphy: We generated operating income of $204 million in fiscal Q2.

Resulting in an operating margin of 4%.

Mark Murphy: And turning positive a quarter earlier than originally forecasted.

Mark Murphy: We recognized a net benefit for income taxes in fiscal Q2 of $294 million.

Mark Murphy: We had previously guided that we would recognize tax expense of $45 million based on expected quarterly results for fiscal Q2.

Mark Murphy: With our improved fiscal 2020 for our outlook, we can now estimate more reliable annual effective tax rate.

Mark Murphy: And have reverted to a global annual effective tax rate method.

Mark Murphy: The second fiscal quarter tax benefit.

Mark Murphy: Arises from applying this estimated annual effective tax rate.

Sanjay Mehrotra: The Honor Magic6 Pro features the MagicLM, a seven billion parameter large language model, which can intelligently understand a user's intent based on language, image, eye movement, and gestures, and proactively offer services to enhance and simplify the user experience. Turning to auto and industrial. The automotive sector continues to experience robust demand for memory and storage as non-memory semiconductor supply constraints have eased and as new vehicle platforms are launched. In the past quarter, we experienced strong growth with partners who are driving the most advanced capabilities within the automobile's increasingly intelligent and connected digital cockpits.... In addition, adoption of level two plus ADAS capabilities continues to gain momentum, further expanding content per vehicle.

The Honor Magic6 Pro features the MagicLM, a seven billion parameter large language model, which can intelligently understand a user's intent based on language, image, eye movement, and gestures, and proactively offer services to enhance and simplify the user experience. Turning to auto and industrial. The automotive sector continues to experience robust demand for memory and storage as non-memory semiconductor supply constraints have eased and as new vehicle platforms are launched. In the past quarter, we experienced strong growth with partners who are driving the most advanced capabilities within the automobile's increasingly intelligent and connected digital cockpits.... In addition, adoption of level two plus ADAS capabilities continues to gain momentum, further expanding content per vehicle.

Mark Murphy: So our year to date results.

Mark Murphy: non-GAAP diluted earnings per share in fiscal Q2 was 42 <unk>.

Mark Murphy: Compared to a loss per share of <unk> 95.

Mark Murphy: In the prior quarter and a loss per share of $1 91.

Mark Murphy: In the year ago quarter.

Mark Murphy: Fiscal Q2, EPS benefited from the aforementioned favorable income tax effect of.

Mark Murphy: Of approximately 34 per share.

Mark Murphy: Turning to cash flows and capital spending.

Our operating cash flows were approximately $1 2 billion in fiscal Q2, representing 21% of revenue.

Mark Murphy: Capital expenditures were $1 $2 billion during the quarter and free cash flow was near breakeven.

Mark Murphy: Our fiscal Q2, ending inventory was $8 $4 billion or 160 days.

Sanjay Mehrotra: The industrial market fundamentals for memory are also healthy, with improving distributor inventory, book-to-bill, and demand visibility improvements, as well as pricing benefits from the tight supply for products, especially those built on leading-edge nodes. Now turning to our market outlook. Calendar 2023 DRAM bit demand growth was in the low double-digit percentage range, and NAND bit demand growth was in the low twenties percentage range, both a few percentage points higher than previous expectations. We forecast calendar 2024 bit demand growth for the industry to be near the long-term CAGR for DRAM and around mid-teens for NANDs. Given the higher baseline of 2023 demand, these expectations of 2024 bit growth have driven an increase in the absolute level of 2024 bit demand in our model for DRAM and NAND versus our prior expectations.

The industrial market fundamentals for memory are also healthy, with improving distributor inventory, book-to-bill, and demand visibility improvements, as well as pricing benefits from the tight supply for products, especially those built on leading-edge nodes. Now turning to our market outlook. Calendar 2023 DRAM bit demand growth was in the low double-digit percentage range, and NAND bit demand growth was in the low twenties percentage range, both a few percentage points higher than previous expectations. We forecast calendar 2024 bit demand growth for the industry to be near the long-term CAGR for DRAM and around mid-teens for NANDs. Given the higher baseline of 2023 demand, these expectations of 2024 bit growth have driven an increase in the absolute level of 2024 bit demand in our model for DRAM and NAND versus our prior expectations.

Mark Murphy: <unk> in line with the prior quarter.

Mark Murphy: Finished goods were down in the quarter.

Mark Murphy: Our leading edge supply both for DRAM and NAND is very tight.

Mark Murphy: We expect to reduce inventory levels and.

Mark Murphy: And excluding strategic inventory stock.

Mark Murphy: Within a few weeks of our 120 days target by the end of fiscal 2024.

Mark Murphy: We project DIR improvements to continue into fiscal year 2025.

Mark Murphy: On the balance sheet, we held $9 7 billion of cash and investments at quarter end and maintain $12 $2 billion of liquidity, when including our untapped credit facility.

Mark Murphy: During fiscal Q2, we refinanced approximately $1 billion of existing debt.

Mark Murphy: Extending our debt maturities and lowering our near term borrowing costs.

We ended the quarter with $13 7 billion in total debt.

Mark Murphy: Low net leverage.

Mark Murphy: And a weighted average maturity on our debt of 2031.

Sanjay Mehrotra: The industry supply-demand balance is tight for DRAM and NAND, and our positive outlook for pricing has increased for calendar 2024. Over the medium term, we expect bit demand growth CAGRs of mid-teens in DRAM and low twenties percentage range in NAND. Turning to supply, the supply outlook remains roughly the same as last quarter. We expect calendar 2024 industry supply to be below demand for both DRAM and NAND. Micron's bit supply growth in fiscal 2024 remains below our demand growth for both DRAM and NAND, and we expect to decrease our days of inventory in fiscal year 2024. Micron's fiscal 2024 CapEx plan remains unchanged at a range between $7.5 billion and $8.0 billion. We continue to project our WFE spending will be down year on year in fiscal 2024.

The industry supply-demand balance is tight for DRAM and NAND, and our positive outlook for pricing has increased for calendar 2024. Over the medium term, we expect bit demand growth CAGRs of mid-teens in DRAM and low twenties percentage range in NAND. Turning to supply, the supply outlook remains roughly the same as last quarter. We expect calendar 2024 industry supply to be below demand for both DRAM and NAND. Micron's bit supply growth in fiscal 2024 remains below our demand growth for both DRAM and NAND, and we expect to decrease our days of inventory in fiscal year 2024. Micron's fiscal 2024 CapEx plan remains unchanged at a range between $7.5 billion and $8.0 billion. We continue to project our WFE spending will be down year on year in fiscal 2024.

Speaker Change: Now turning to our outlook for the fiscal third quarter.

Speaker Change: Fiscal Q3 bit shipments are expected to be down modestly for DRAM and up somewhat for NAND.

Speaker Change: Compared to fiscal Q2 levels.

Speaker Change: While demand continues to improve supply is constrained.

Speaker Change: Especially at the leading edge.

Speaker Change: We expect <unk> to improve sequentially in fiscal Q3.

Speaker Change: Note that fiscal Q2 gross margins had the benefit from previously written down inventories.

Speaker Change: Which have cleared completely in fiscal Q2.

Speaker Change: Despite this benefit in fiscal Q2, we expect solid sequential improvement in fiscal Q3 gross margins.

Speaker Change: Due to robust price increases across both DRAM and NAND.

Speaker Change: We forecast operating expenses to increase by approximately $30 million in the fiscal third quarter driven by R&D expenses.

Speaker Change: For the fiscal year, we now project opex to be approximately $4 billion.

Sanjay Mehrotra: Micron's capital efficient approach to reuse equipment from older nodes to support conversions to leading-edge nodes has resulted in a material structural reduction of our DRAM and NAND wafer capacity. We are now fully utilized on our high volume manufacturing nodes and are maximizing output against the structurally lowered capacity. We believe this approach to node migration and consequent wafer capacity reduction is an industry-wide phenomenon. We project to end fiscal 2024 with low double-digit percentage less wafer capacity in both DRAM and NAND than our peak levels in fiscal 2022. Significant supply reductions across the industry have enabled the pricing recovery that is now underway. Although our financial performance has improved, our current profitability levels are still well below our long-term targets, and significantly improved profitability is required to support the R&D and CapEx investments needed for long-term innovation and supply growth.

Micron's capital efficient approach to reuse equipment from older nodes to support conversions to leading-edge nodes has resulted in a material structural reduction of our DRAM and NAND wafer capacity. We are now fully utilized on our high volume manufacturing nodes and are maximizing output against the structurally lowered capacity. We believe this approach to node migration and consequent wafer capacity reduction is an industry-wide phenomenon. We project to end fiscal 2024 with low double-digit percentage less wafer capacity in both DRAM and NAND than our peak levels in fiscal 2022. Significant supply reductions across the industry have enabled the pricing recovery that is now underway. Although our financial performance has improved, our current profitability levels are still well below our long-term targets, and significantly improved profitability is required to support the R&D and CapEx investments needed for long-term innovation and supply growth.

Speaker Change: Having delivered operating profit in fiscal Q2 ahead of prior expectations.

Speaker Change: Forecast continued improvement in operating income through the remainder of the year.

Speaker Change: Based on an improved taxable income outlook.

Speaker Change: Our tax forecast for fiscal year 2024 has increased from our prior projection of over $300 million.

Speaker Change: Approximately $400 million.

Speaker Change: In fiscal 2025, we expect our annual effective tax rate to be in the mid teens percentage range.

Speaker Change: We plan fiscal Q3 capital expenditures to be higher than in the second quarter.

Speaker Change: Full year fiscal 2020 for Capex plan is unchanged at a range between $7 $5 billion and $8 billion.

Speaker Change: We now expect to generate positive free cash flow in fiscal Q3 and Q4.

Speaker Change: With all these factors in mind, our non-GAAP guidance for fiscal Q3 is as follows.

Speaker Change: We expect revenue to be $6, 6 billion, plus or minus $200 million.

Sanjay Mehrotra: Micron will continue to exercise supply and CapEx discipline and focus on restoring improved profitability while maintaining our bit market share for DRAM and NAND. As discussed previously, the ramp of HBM production will constrain supply growth in non-HBM products. Industry-wide, HBM3E consumes approximately three times the wafer supply as D5 to produce a given number of bits in the same technology node. With increased performance and packaging complexity across the industry, we expect the trade ratio for HBM4 to be even higher than the trade ratio for HBM3E. We anticipate strong HBM demand due to AI, combined with increasing silicon intensity of the HBM roadmap, to contribute to tight supply conditions for DRAM across all end markets. Finally, as we consider these demand and technology trends, we are carefully planning our global fab and assembly test capacity requirements to ensure a diversified and cost-competitive manufacturing footprint.

Micron will continue to exercise supply and CapEx discipline and focus on restoring improved profitability while maintaining our bit market share for DRAM and NAND. As discussed previously, the ramp of HBM production will constrain supply growth in non-HBM products. Industry-wide, HBM3E consumes approximately three times the wafer supply as D5 to produce a given number of bits in the same technology node. With increased performance and packaging complexity across the industry, we expect the trade ratio for HBM4 to be even higher than the trade ratio for HBM3E. We anticipate strong HBM demand due to AI, combined with increasing silicon intensity of the HBM roadmap, to contribute to tight supply conditions for DRAM across all end markets. Finally, as we consider these demand and technology trends, we are carefully planning our global fab and assembly test capacity requirements to ensure a diversified and cost-competitive manufacturing footprint.

Speaker Change: Gross margin to be in the range of 26, 5% plus.

Speaker Change: Plus or minus 150 basis points.

Speaker Change: And operating expenses to be approximately $990 million.

Speaker Change: Or minus $15 million.

Speaker Change: We expect tax expenses of approximately $240 million.

Speaker Change: Based on a share count of approximately $1 1 billion shares we expect earnings per share of <unk> 45.

Speaker Change: Plus or minus seven.

Speaker Change: In closing with a significantly improved supply demand balance in the industry, coupled with excellent execution.

Speaker Change: Micron is driving a strong inflection in pricing and a richer mix of high value solutions.

Speaker Change: We remain disciplined with our investments in supply growth and focused on driving efficiency across the company.

Speaker Change: We expect positive free cash flow for the second half of fiscal 2024 and project record revenue in fiscal 2025.

Speaker Change: I will now turn it back over to Sanjay.

Sanjay Mehrotra: Thank you Mark.

Sanjay Mehrotra: Announced projects in China, India, and Japan are proceeding as planned. On potential US expansion plans, we have assumed chip grants in our CapEx plans for fiscal 2024. Our planned Idaho and New York projects require Micron to receive the combination of sufficient chips, grants, investment tax credits, and local incentives to address the cost difference compared to overseas expansion. I will now turn it over to Mark for our financial results and outlook.

Announced projects in China, India, and Japan are proceeding as planned. On potential US expansion plans, we have assumed chip grants in our CapEx plans for fiscal 2024. Our planned Idaho and New York projects require Micron to receive the combination of sufficient chips, grants, investment tax credits, and local incentives to address the cost difference compared to overseas expansion. I will now turn it over to Mark for our financial results and outlook.

Sanjay Mehrotra: Okay.

Sanjay Mehrotra: Ladies and gentlemen, please remain on your line your program will resume momentarily. Once again. Please remain on your line. Your program will begin moment will resume momentarily.

Sanjay Mehrotra: Once again, ladies and gentlemen, please remain on your line your program.

Sanjay Mehrotra: We will resume momentarily once again please remain on your line your program will resume momentarily.

Mark Murphy: Thanks, Sanjay, and good afternoon, everyone. Micron delivered strong results in fiscal Q2, with revenue, gross margin, and EPS well above the high end of the guidance ranges provided in our last earnings call... Much improved market conditions, along with the team's excellent execution on pricing, products, and operations, drove the strong financial results. Total fiscal Q2 revenue was $5.8 billion, up 23% sequentially and up 58% year-over-year. Fiscal Q2 DRAM revenue was approximately $4.2 billion, representing 71% of total revenue. DRAM revenue increased 21% sequentially, with bit shipments increasing by a low single-digit percentage and prices increasing by high teens. Fiscal Q2 NAND revenue was approximately $1.6 billion, representing 27% of Micron's total revenue.

Sanjay Mehrotra: Once again, ladies and gentlemen, please remain on your lines.

Sanjay Mehrotra: Okay.

Speaker Change: Thank you.

Speaker Change: May proceed.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Are you able to hear me.

Speaker Change: Once again, ladies and gentlemen, please standby your program will resume momentarily once again, please remain on the line.

Mark Murphy: NAND revenue increased 27% sequentially, with bit shipments decreasing by a low single-digit percentage and prices increasing by over 30%. Now, turning to revenue by business unit. Compute and networking business unit revenue is $2.2 billion, up 26% sequentially. Data center revenue grew robustly and cloud more than doubled sequentially. Revenue for the mobile business unit was $1.6 billion, up 24% sequentially, as an expected decline in volume was more than offset by improved pricing. Embedded business unit revenue was $1.1 billion, up 7% sequentially on solid demand for leading-edge products in the industrial market. Revenue for the storage business unit was $905 million, up 39% sequentially, with strong double-digit growth across all end markets.

NAND revenue increased 27% sequentially, with bit shipments decreasing by a low single-digit percentage and prices increasing by over 30%. Now, turning to revenue by business unit. Compute and networking business unit revenue is $2.2 billion, up 26% sequentially. Data center revenue grew robustly and cloud more than doubled sequentially. Revenue for the mobile business unit was $1.6 billion, up 24% sequentially, as an expected decline in volume was more than offset by improved pricing. Embedded business unit revenue was $1.1 billion, up 7% sequentially on solid demand for leading-edge products in the industrial market. Revenue for the storage business unit was $905 million, up 39% sequentially, with strong double-digit growth across all end markets.

Speaker Change: Okay.

Speaker Change: Ladies.

Speaker Change: And gentlemen, your program will resume momentarily once again, please standby your program will resume momentarily. Thank you for your patience. So please continue to hold.

Speaker Change: Yes.

Speaker Change: Once again, please remain on your line your program will resume momentarily.

Mark Murphy: Data center SSD revenue more than doubled from a year ago, driven by share gains from Micron's products. The consolidated gross margin for fiscal Q2 was 20%, up 19 percentage points sequentially, driven by higher pricing. Fiscal Q2 gross margins benefited from $382 million associated with selling the remainder of previously written down inventories. In the second fiscal quarter, underutilization charges were modest and related to our legacy manufacturing capacity. We expect to sustain these lower levels of underutilization charges moving forward. Operating expenses in fiscal Q2 were $959 million, down $33 million quarter over quarter, and in line with our guidance range. OpEx was modestly above the midpoint of our guidance range, as variable compensation expense was higher on an improved fiscal 2024 outlook.

Data center SSD revenue more than doubled from a year ago, driven by share gains from Micron's products. The consolidated gross margin for fiscal Q2 was 20%, up 19 percentage points sequentially, driven by higher pricing. Fiscal Q2 gross margins benefited from $382 million associated with selling the remainder of previously written down inventories. In the second fiscal quarter, underutilization charges were modest and related to our legacy manufacturing capacity. We expect to sustain these lower levels of underutilization charges moving forward. Operating expenses in fiscal Q2 were $959 million, down $33 million quarter over quarter, and in line with our guidance range. OpEx was modestly above the midpoint of our guidance range, as variable compensation expense was higher on an improved fiscal 2024 outlook.

Speaker Change: Thank you for your patience and please continue to hold.

Speaker Change: Okay.

Speaker Change: Hi can you hear us yes welcome.

Welcome back ladies and gentlemen, we will resume.

Speaker Change: Yes, we are.

Apologize for the technical difficulty here, but operator, if you can go ahead and start the Q&A section. Please.

Speaker Change: Certainly one moment for our first question.

Toshiya Hari: And our first question comes from the line of tissue Hari from Goldman Sachs. Your question. Please.

Toshiya Hari: Hi can you guys hear me okay.

Toshiya Hari: Yes, we can.

Toshiya Hari: Okay great. Thank.

Toshiya Hari: Thank you for taking the question.

Toshiya Hari: Sanjay on HBM, Hugh you mentioned that you continue to expect your market position in 'twenty fiber at some point in 'twenty five to be similar to be in line with your overall position in DRAM.

Toshiya Hari: Given your your revenue outlook for <unk> for 24.

Sanjay Mehrotra: That seems to imply that I don't know could quadruple anger quintuple any of your business in HBM year to year.

Mark Murphy: We generated operating income of $204 million in fiscal Q2, resulting in an operating margin of 4% and turning positive a quarter earlier than originally forecasted. We recognized the net benefit for income taxes in fiscal Q2 of $294 million. We had previously guided that we would recognize tax expense of $45 million based on expected quarterly results for fiscal Q2. With our improved fiscal 2024 outlook, we can now estimate a more reliable annual effective tax rate and have reverted to a global annual effective tax rate method. The second fiscal quarter tax benefit arises from applying this estimated annual effective tax rate to our year-to-date results.

We generated operating income of $204 million in fiscal Q2, resulting in an operating margin of 4% and turning positive a quarter earlier than originally forecasted. We recognized the net benefit for income taxes in fiscal Q2 of $294 million. We had previously guided that we would recognize tax expense of $45 million based on expected quarterly results for fiscal Q2. With our improved fiscal 2024 outlook, we can now estimate a more reliable annual effective tax rate and have reverted to a global annual effective tax rate method. The second fiscal quarter tax benefit arises from applying this estimated annual effective tax rate to our year-to-date results.

Sanjay Mehrotra: I guess part one am I thinking about the trajectory.

Sanjay Mehrotra: Currently and then part two.

Sanjay Mehrotra: How does what does that mean for your Capex over the next 12 18 months and more importantly, your wafer capacity United in fiscal year, 'twenty, four youre down low double digits.

Sanjay Mehrotra: Your wafer capacity likely to be down again in fiscal 'twenty five thank you.

Sanjay Mehrotra: So H B M.

Sanjay Mehrotra: He first of all it's a great product as I mentioned, you know well received by our customers high performance and 30% lower power than any other product that's out there. So of course it has strong demand and as we have highlighted we are sold out for the calendar year 'twenty four.

Sanjay Mehrotra: Supply and our calendar year 'twenty five supply is also mostly vast majority is on.

Sanjay Mehrotra: <unk> allocated a V.

Sanjay Mehrotra: A J we have just begun production shipments and these will continue to increase through the course of calendar year 'twenty four as well as continue to increase through calendar year 'twenty five.

Mark Murphy: Non-GAAP diluted earnings per share in fiscal Q2 was $0.42, compared to a loss per share of $0.95 in the prior quarter, and a loss per share of $1.91 in the year ago quarter. Fiscal Q2 EPS benefited from the aforementioned favorable income tax effect of approximately $0.34 per share. Turning to cash flows and capital spending, our operating cash flows were approximately $1.2 billion in fiscal Q2, representing 21% of revenue. Capital expenditures were $1.2 billion during the quarter, and free cash flow was near breakeven. Our fiscal Q2 ending inventory was $8.4 billion, or 160 days, roughly in line with the prior quarter. Finished goods were down in the quarter. Our leading edge supply, both for DRAM and NAND, is very tight.

Non-GAAP diluted earnings per share in fiscal Q2 was $0.42, compared to a loss per share of $0.95 in the prior quarter, and a loss per share of $1.91 in the year ago quarter. Fiscal Q2 EPS benefited from the aforementioned favorable income tax effect of approximately $0.34 per share. Turning to cash flows and capital spending, our operating cash flows were approximately $1.2 billion in fiscal Q2, representing 21% of revenue. Capital expenditures were $1.2 billion during the quarter, and free cash flow was near breakeven. Our fiscal Q2 ending inventory was $8.4 billion, or 160 days, roughly in line with the prior quarter. Finished goods were down in the quarter. Our leading edge supply, both for DRAM and NAND, is very tight.

Sanjay Mehrotra: We are continuing to work on increasing our capacity and making good progress with respect to capacity as well as overall leaned in of quality. So certainly.

Sanjay Mehrotra: In calendar year, 'twenty five versus calendar year 'twenty four given that we are just starting our production here now will certainly be a significant growth over our.

Sanjay Mehrotra: Calendar year 'twenty for our numbers and you can look at it same way for fiscal 'twenty four versus 25. So it will be definitely a significant increase with us achieving our shares in HBM are in line with our industry share sometime in calendar 'twenty five I'm not in a position to.

Sanjay Mehrotra: Spell it out exactly for you in terms of what is the volume increase but certainly H B M <unk>.

Our strong product position.

Sanjay Mehrotra: Will that be a strong driver of revenue growth fiscal year 'twenty for fiscal year 'twenty five all in fiscal year 'twenty four regarding the wafer capacity by end of this fiscal year, we have said low double digit.

Mark Murphy: We expect to reduce inventory levels and, excluding strategic inventory stock, be within a few weeks of our 120 days target by the end of fiscal 2024. We project DIO improvements to continue into fiscal year 2025. On the balance sheet, we held $9.7 billion of cash and investments at quarter end and maintained $12.2 billion of liquidity when including our untapped credit facility. During fiscal Q2, we refinanced approximately $1 billion of existing debt, extending our debt maturities and lowering our near-term borrowing costs. We ended the quarter with $13.7 billion in total debt, low net leverage, and a weighted average maturity on our debt of 2031. Now turning to our outlook for the fiscal Q3.

We expect to reduce inventory levels and, excluding strategic inventory stock, be within a few weeks of our 120 days target by the end of fiscal 2024. We project DIO improvements to continue into fiscal year 2025. On the balance sheet, we held $9.7 billion of cash and investments at quarter end and maintained $12.2 billion of liquidity when including our untapped credit facility. During fiscal Q2, we refinanced approximately $1 billion of existing debt, extending our debt maturities and lowering our near-term borrowing costs. We ended the quarter with $13.7 billion in total debt, low net leverage, and a weighted average maturity on our debt of 2031. Now turning to our outlook for the fiscal Q3.

Sanjay Mehrotra: As Jeff Sloan and reduction in capacity and of course, we will be managing this capacity in fiscal year 'twenty for keeping in mind our.

Focus on.

Sanjay Mehrotra: Supply demand discipline, I'm, staying extremely disciplined risk with respect to supply growth staying extremely disciplined with respect to our HBM shared as well.

And managing our technology transitions.

Sanjay Mehrotra: As we go through the year and onward.

Sanjay Mehrotra: Capex and 25.

Sanjay Mehrotra: Then in fiscal 'twenty, five we'll be higher than fiscal 2004, <unk> will be higher as well and of course <unk>.

Sanjay Mehrotra: Section Capex related to the Greenfield that is required for the second half of the.

Sanjay Mehrotra: The decade will contribute to some of the Capex increase in fiscal 'twenty five but some of those details will provide you as we get closer to fiscal year 'twenty five.

Mark Murphy: Fiscal Q3 bit shipments are expected to be down modestly for DRAM and up somewhat for NAND compared to fiscal Q2 levels. While demand continues to improve, supply is constrained, especially at the leading edge. We expect AIO to improve sequentially in fiscal Q3. Note that fiscal Q2 gross margins had the benefit from previously written down inventories, which have cleared completely in fiscal Q2. Despite this benefit in fiscal Q2, we expect solid sequential improvement in fiscal Q3 gross margins due to robust price increases across both DRAM and NAND. We forecast operating expenses to increase by approximately $30 million in the fiscal third quarter, driven by R&D expenses. For the fiscal year, we now project OpEx to be approximately $4 billion. Having delivered operating profit in fiscal Q2 ahead of prior expectations, we forecast continued improvement in operating income through the remainder of the year.

Fiscal Q3 bit shipments are expected to be down modestly for DRAM and up somewhat for NAND compared to fiscal Q2 levels. While demand continues to improve, supply is constrained, especially at the leading edge. We expect AIO to improve sequentially in fiscal Q3. Note that fiscal Q2 gross margins had the benefit from previously written down inventories, which have cleared completely in fiscal Q2. Despite this benefit in fiscal Q2, we expect solid sequential improvement in fiscal Q3 gross margins due to robust price increases across both DRAM and NAND. We forecast operating expenses to increase by approximately $30 million in the fiscal third quarter, driven by R&D expenses. For the fiscal year, we now project OpEx to be approximately $4 billion. Having delivered operating profit in fiscal Q2 ahead of prior expectations, we forecast continued improvement in operating income through the remainder of the year.

Sanjay Mehrotra: So most important thing is that we will manage our wafer capacity technology transitions to really maintain.

Sanjay Mehrotra: Our bit share that as part of our strategy to have stable mid share even with increasing penetration of HBM.

Sanjay Mehrotra: And again, just keep in mind that our overall framework of our capex being 35% of our revenue across the cycles still applies.

Speaker Change: Thank you for all the details.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Aaron Rakers from Wells Fargo. Your question. Please.

Aaron Christopher Rakers: Yes. Thank you very much for taking the question I guess two real quick ones.

Aaron Christopher Rakers: One I just want to understand or maybe I appreciate the context of the accretive nature of the HBO three iron owner in the prepared remarks, I think or that are in the slide deck. It notes that youll be accretive gross margin from HBM in the in the current quarter and then I know you talk a little bit about P season.

Aaron Christopher Rakers: And smartphones I'm curious of what Youre seeing in terms of traditional server demand and whether or not your forecast assumes any improvement of shipments in that end market. Thank you.

Mark Murphy: Based on an improved taxable income outlook, our tax forecast for fiscal year 2024 has increased from a prior projection of over $300 million to approximately $400 million. In fiscal 2025, we expect our annual effective tax rate to be in the mid-teens % range. We plan fiscal Q3 capital expenditures to be higher than in Q2. Our full-year fiscal 2024 CapEx plan is unchanged at a range between $7.5 billion and $8 billion. We now expect to generate positive free cash flow in fiscal Q3 and Q4. With all these factors in mind, our non-GAAP guidance for fiscal Q3 is as follows: We expect revenue to be $6.6 billion, ±$200 million.

Based on an improved taxable income outlook, our tax forecast for fiscal year 2024 has increased from a prior projection of over $300 million to approximately $400 million. In fiscal 2025, we expect our annual effective tax rate to be in the mid-teens % range. We plan fiscal Q3 capital expenditures to be higher than in Q2. Our full-year fiscal 2024 CapEx plan is unchanged at a range between $7.5 billion and $8 billion. We now expect to generate positive free cash flow in fiscal Q3 and Q4. With all these factors in mind, our non-GAAP guidance for fiscal Q3 is as follows: We expect revenue to be $6.6 billion, ±$200 million.

Aaron Christopher Rakers: So with respect to the accretive nature of H B M.

<unk> carries a higher cost, but it also carries a significantly higher pricing because it brings such great value in the application in terms of its performance and power and we are executing well our yield ramp is going well as well according to plan.

Aaron Christopher Rakers: And therefore, we are pleased that in this quarter than we had begun production shipments vivo be having it accretive to our gross margins in the quarter and of course. This momentum will continue to build in the quarters ahead and regarding the second part of your question on traditional server demand.

Aaron Christopher Rakers: So yes, we do see that in calendar 'twenty five.

Aaron Christopher Rakers: Traditional server demand will grow modestly.

Aaron Christopher Rakers: And of course, it's coming after.

Mark Murphy: Gross margin to be in the range of 26.5%, ±150 basis points. Operating expenses to be approximately $990 million, ±$15 million. We expect tax expenses of approximately $240 million. Based on a share count of approximately 1.1 billion shares, we expect earnings per share of $0.45, ±$0.07. In closing, with a significantly improved supply-demand balance in the industry, coupled with excellent execution, Micron is driving a strong inflection in pricing and a richer mix of high-value solutions. We remain disciplined with our investments in supply growth and focused on driving efficiency across the company. We expect positive free cash flow for the second half of fiscal 2024 and project record revenue in fiscal 2025.

Gross margin to be in the range of 26.5%, ±150 basis points. Operating expenses to be approximately $990 million, ±$15 million. We expect tax expenses of approximately $240 million. Based on a share count of approximately 1.1 billion shares, we expect earnings per share of $0.45, ±$0.07. In closing, with a significantly improved supply-demand balance in the industry, coupled with excellent execution, Micron is driving a strong inflection in pricing and a richer mix of high-value solutions. We remain disciplined with our investments in supply growth and focused on driving efficiency across the company. We expect positive free cash flow for the second half of fiscal 2024 and project record revenue in fiscal 2025. I will now turn it back over to Sanjay.

Aaron Christopher Rakers: The significant decline in server unit sales in calendar 'twenty three.

Aaron Christopher Rakers: We are very pleased to see the increasing momentum of content growth in the traditional server demand, but also AI server units are going up.

Aaron Christopher Rakers: And we have said overall server units.

Aaron Christopher Rakers: Growing up in.

Aaron Christopher Rakers: Mid to high single digits range with AI server, driving a higher growth percentage year over year and traditional servers being modest and.

Aaron Christopher Rakers: And I May have said 25 here I just wanted to clarify that im talking more 2000 2040 here. So when I'm talking about modest several unit growth, if they're referring to 2024 versus 2023.

Aaron Christopher Rakers: And if you had actually seeing strong demand for both our DRAM products and NAND products in server and actually we are shifting some of our portfolio toward these higher mix.

Aaron Christopher Rakers: Our solutions are HBM being one of them high density dams being another one that's in strong demand for satellite applications.

Mark Murphy: I will now turn it back over to Sanjay.

And then data center Ssds all of this is we are seeing healthy demand drivers and just remember we had said that for memory and storage.

Operator: Thank you, Mark. Ladies and gentlemen, please remain on your line. Your program will resume momentarily. Once again, please remain on your line. Your program will resume momentarily. Once again, ladies and gentlemen, please remain on your line. Your program will resume momentarily. Once again, please remain on your line. Your program will resume momentarily. Once again, ladies and gentlemen, please remain on your line. You may proceed.

Sanjay Mehrotra: Thank you, Mark.

Operator: Ladies and gentlemen, please remain on your line. Your program will resume momentarily. Once again, please remain on your line. Your program will resume momentarily. Once again, ladies and gentlemen, please remain on your line. Your program will resume momentarily. Once again, please remain on your line. Your program will resume momentarily. Once again, ladies and gentlemen, please remain on your line. You may proceed. Are you able to hear me?

Aaron Christopher Rakers: Customer inventories.

Aaron Christopher Rakers: Data center market will be largely normalized in first half of 'twenty four and we are seeing the market play out just as we had predicted several quarters ago.

Speaker Change: Thank you.

Speaker Change: Sure.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Yes.

Speaker Change: And our next question comes from the line of C. J Muse from Cantor Fitzgerald. Your question. Please.

Yes. Good afternoon. Thanks for taking the question I guess Sanjay would love to hear your thoughts around.

Speaker Change: Wafer movement.

Speaker Change: Free to HBM, and what impact Thats, having.

On the supply demand outlook for DDR by then sort of any any context around customer engagement and longer term.

Speaker Change: And then more on the gross margin side.

Speaker Change: Talking about the inventory previously written down now behind US can you walk through the moving parts.

Speaker Change: That should get Gabe.

Speaker Change: We're seeing gross margins throughout the remainder of calendar 'twenty four thanks, so much.

Speaker Change: So on your question regarding the first shift to H B M as.

Speaker Change: As we have highlighted that H b M.

Speaker Change: Adrian three three.

Speaker Change: <unk> needs three times more wafers than nearly three times more wafers than DDR five in the same technology node of the same capacity to produce the same beds. So this is of course high.

Speaker Change: Really silicon intensive technology and this factor of three of the trade ratio between HBM and <unk> five is really common across the industry.

Mark Murphy: Are you able to hear me?

Operator: Once again, ladies and gentlemen, please stand by. Your program will resume momentarily. Once again, please remain on the line. Ladies and gentlemen, your program will resume momentarily. Once again, please stand by. Your program will resume momentarily. Thank you for your patience, and please continue to hold. Once again, please remain on your line. Your program will resume momentarily. Thank you for your patience, and please continue to hold.

Speaker Change: So what and H B M demand is increasing rapidly youll see all the recent announcements that are only showing you that even greater attach rate of H B M to the latest GPU solutions that were just announced earlier this week.

Speaker Change: 192 gigabyte.

Speaker Change: And the Blackwell platforms versus the.

Speaker Change: 144, gigabyte and of course this is a phenomenon thats occurring across the board.

Speaker Change: Even today I think broadcom talked about.

Speaker Change: HBM content is going to further increase so HBM is enough high demand growth phase and this demand growth will continue in terms of bids in terms of revenue over the course of foreseeable future and this is putting tremendous pressure on the non HCM supply.

Speaker Change: The trade ratio of three to one infusing demand in HBM, increasing growth and increased profitability of HBM is putting a non HCM part of the memory and tight supply. This is why we say that leading edge nodes are in very tight supply and.

Speaker Change: As a result, we would fully expect that <unk> as well as other DDR products will improve in their profitability.

Satya Kumar: Hi, can you hear us?

Sanjay Mehrotra: Hi, can you hear us?

Operator: Yes. Yes, welcome back. Ladies and gentlemen, we will resume.

Speaker Change: Picture as well given their very much.

Speaker Change: Tight supply there and of course HBM being again.

Satya Kumar: Yes, we apologize for the technical difficulty here, but operator, if you can go ahead and start the Q&A section, please.

Sanjay Mehrotra: Yes, we apologize for the technical difficulty here, but operator, if you can go ahead and start the Q&A section, please.

Speaker Change: Our strong positioned.

Speaker Change: And when you look at the FDA as we have talked to you about our supply already being locked up.

Operator: Certainly. One moment for our first question. Our first question comes from the line of Toshiya Hari from Goldman Sachs. Your question, please.

Speaker Change: For 2014 25, and this then increases our confidence in our defined as well as L. P. Five LP evolutions with our customers.

Toshiya Hari: Hi, can you guys hear me okay?

Speaker Change: And good afternoon C. J, it's mark on on the gross margin side as you mentioned it's been a.

Operator: Yes

Operator: Yes, we can.

Sanjay Mehrotra: Yes, we can.

Toshiya Hari: Okay, great. Thank you for taking the question. Sanjay, on HBM, you mentioned that you continue to expect your market position in 2025 or at some point in 2025 to be similar, to be in line with your overall position in DRAM. You know, given your revenue outlook for 2024, that seems to imply, I don't know, a quadrupling or quintupling of your business in HBM year to year. I guess part one, am I thinking about the trajectory accurately? And then part two, what does that mean for your CapEx over the next 12, 18 months, and more importantly, your wafer capacity? You mentioned fiscal year 2024, you're down low double digits. Is your wafer capacity likely to be down again in fiscal year 2025? Thank you.

C. J: Tough year, plus year, and a half on a lot of timing differences difficult.

C. J: Gage cost downs and gross margin progression monitor utilization of facts, Florida transitions structural capacity reduction and so forth or kantar.

C. J: Contributing to weaker cost downs.

C. J: And as you mentioned the lower the.

C. J: The rent down inventories.

Finally cleared.

In the second quarter.

C. J: It was a bit of a headwind actually in the sense that it was less of a benefit.

Then the first quarter.

C. J: But still nonetheless, it was it was a favorable benefit that we will not get in the third quarter.

C. J: And then the period costs.

C. J: Also reduced.

C. J: From first to second quarter. So we're now under $50 million on period costs related Underutilization as I mentioned in my comments that some.

Sanjay Mehrotra: So, HBM3E, first of all, it's a great product, as I mentioned, you know, well received by our customers, high performance, and 30% lower power than any other product that's out there. So of course, it has strong demand, and as we have highlighted, we are sold out for our calendar year 2024 supply, and our calendar year 2025 supply is also mostly, vast majority is already allocated. We have just begun production shipments, and these will continue to increase through the course of calendar year 2024, as well as continue to increase through calendar year 2025. We are continuing to work on increasing our capacity and making good progress with respect to capacity as well as overall yield and quality.

C. J: Thats legacy related capacity now only in and that would continue going forward. So now we see more normal conditions.

C. J: On cost downs and related margin effects recede node transitions occurring those are positive.

C. J: The under utilization of facts or are fading away as we mentioned.

C. J: We're getting volume leverage and the associated absorption in that just the business being able to focus on efficiencies so as.

C. J: As we mentioned the average we've mentioned before we're now on the front end would expect mid to high single digit cost downs.

C. J: As as as normal.

C. J: As you look forward in.

C. J: And Sanjay alluded to this you will begin to see.

C. J: Costs related to H B M a.

C. J: Weigh on our costs down performance now that's a good trade of course, because the the.

Sanjay Mehrotra: So certainly, you know, in calendar year 2025 versus calendar year 2024, given that we are just starting our production here now, will certainly be a significant growth over our calendar year 2024 numbers. And you can look at it same way for fiscal 2024 versus 2025. So it will be definitely a significant increase with us achieving our shares in HBM in line with our industry shares sometime in calendar 2025. I'm not in a position to spell it out exactly for you in terms of what is the volume increase, but certainly HBM with our strong product position, it will be a strong driver of revenue growth, fiscal year 2024, fiscal year 2025 over fiscal year 2024. Regarding the wafer capacity, by end of this fiscal year, we have said low double digit structural reduction in capacity.

So certainly, you know, in calendar year 2025 versus calendar year 2024, given that we are just starting our production here now, will certainly be a significant growth over our calendar year 2024 numbers. And you can look at it same way for fiscal 2024 versus 2025. So it will be definitely a significant increase with us achieving our shares in HBM in line with our industry shares sometime in calendar 2025. I'm not in a position to spell it out exactly for you in terms of what is the volume increase, but certainly HBM with our strong product position, it will be a strong driver of revenue growth, fiscal year 2024, fiscal year 2025 over fiscal year 2024. Regarding the wafer capacity, by end of this fiscal year, we have said low double digit structural reduction in capacity.

C. J: The mix is favorable the prices higher on those products. So it's an accretive margin trade, but that will impact the cost downs.

Speaker Change: Very helpful. Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question.

Speaker Change: It comes from the line of Timothy Arcuri from UBS. Your question. Please.

Timothy Michael Arcuri: Thanks, a lot on Sunday I had a question just around the tenor of the discussions that youre, having with your customers.

Timothy Michael Arcuri: I mean, the industry is bigger this year in terms of bits.

Speaker Change: Sounds like mostly due to a higher baseline coming off last year.

But it sounds like supply hasn't really increased to match that higher bids. This year. So the balance has gotten even tighter over the past three months so.

Speaker Change: How has that changed the dynamics of your discussions with your customers I know you had a $600 million prepay last quarter did you get any prepays. This quarter are you talking about new sort of contract structures with customers, where they may be fund some of your Capex can you kind of talk about all that thanks.

Sanjay Mehrotra: And of course, we will be managing this capacity in fiscal year 2024. Keeping in mind, you know, our focus on supply-demand discipline, staying extremely disciplined with respect to supply growth, staying extremely disciplined with respect to our HBM share as well, and managing our technology transitions, as we go through the year. Our CapEx in 2025, well, in fiscal 2025 will be higher than fiscal 2024. WFE will be higher as well, and of course, construction CapEx related to the greenfield that is required for the second half of the decade will contribute to some of the CapEx increase in fiscal 2025. But some of those details we'll provide you, you know, as we get closer to fiscal year 2025.

And of course, we will be managing this capacity in fiscal year 2024. Keeping in mind, you know, our focus on supply-demand discipline, staying extremely disciplined with respect to supply growth, staying extremely disciplined with respect to our HBM share as well, and managing our technology transitions, as we go through the year. Our CapEx in 2025, well, in fiscal 2025 will be higher than fiscal 2024. WFE will be higher as well, and of course, construction CapEx related to the greenfield that is required for the second half of the decade will contribute to some of the CapEx increase in fiscal 2025. But some of those details we'll provide you, you know, as we get closer to fiscal year 2025.

Speaker Change: So.

Speaker Change: Just keep in mind that in.

Speaker Change: Fiscal year 'twenty four.

Speaker Change: <unk> 24 versus 23.

Speaker Change: The shipments will increase substantially.

Speaker Change: And as you noted.

Speaker Change: The year over year increase in shipments will be substantial.

Speaker Change: And as you noted the supply is very tight supply is tight due to the factors that we have discussed before due to the downturn that the industry experienced last year Capex cuts were made utilization.

Speaker Change: Kurzweil made structural shift.

Speaker Change: From traditional older nodes to newer nodes of equipment was made in order to support the leading edge nodes and that resulted in a structural reduction in wafer capacity in the industry as well and then there is the HBM factor that trade ratio three two.

Sanjay Mehrotra: So most important thing is that we will manage our wafer capacity, technology transitions to really maintain our bit share. That is part of our strategy to have stable bit share, even with increasing penetration of HBM... And again, just keep in mind that our overall framework of our CapEx being 35% of our revenue across the cycle still applies.

So most important thing is that we will manage our wafer capacity, technology transitions to really maintain our bit share. That is part of our strategy to have stable bit share, even with increasing penetration of HBM... And again, just keep in mind that our overall framework of our CapEx being 35% of our revenue across the cycle still applies.

Speaker Change: One that I've discussed today all of this has contributed to a very tight supply situation and as I noted earlier in my remarks, non HBM supply is tight so some of our discussions with customers, particularly with respect to each be M. When we talk about that HCM is sold out those type of contracts.

C.J. Muse: Thank you for all the details.

Toshiya Hari: Thank you for all the details.

Speaker Change: Have both pricing as well as.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Aaron Rakers from Wells Fargo. Your question, please.

Speaker Change: Volumes as well as other stricter terms baked in as part of our LTE as.

Speaker Change: And 2024 unit volume as well as pricing is all locked up 2025 as I mentioned the volumes are.

Aaron Rakers: Yeah, thank you, very much for taking the question. I guess two real quick ones. One, I just wanna understand or maybe appreciate the context of the accretive nature of the HBM3. I know in the prepared remarks, I think, or in the slide deck, it notes that you'll be accretive gross margin from HBM in the current quarter. And then, you know, I know you talked a little bit about, you know, PCs and smartphones. I'm curious of what you're seeing in terms of traditional server demand and whether or not your forecast assumes any improvement of shipments in that end market. Thank you.

Speaker Change: Largely allocated a vast majority of our prediction supply is allocated.

Speaker Change: And some of the pricing is already firmed up keep in mind. This has never happened before right that you are talking about 2025, and we are sitting in CQ, one and we already have.

Speaker Change: So much discussion around supply and pricing for 2025 getting logged up yet as we speak.

Speaker Change: And of course. This is then as I said earlier impacting our.

Speaker Change: In a positive way our discussions with non HCM part of the market bed other customers and so I mean, this overall tight supply environment bodes well for all of the ability to manage the pricing increases as.

Sanjay Mehrotra: So with respect to the accretive nature of HBM, look, HBM carries higher cost, but it also carries significantly higher pricing, and because it brings such great value in the application in terms of its performance and power. And we are executing well. Our yield ramp is going well as well, according to plan. And therefore, we are pleased that in this quarter, when we have begun our production shipments, we will be having it accretive to our gross margins in the quarter. And of course, this momentum will continue to build in the quarters ahead. And regarding your, the second part of your question on traditional server demand, so yes, we do see that in calendar 2025, traditional server demand will grow modestly.

Speaker Change: As well as keep an eye on demand supply balance and demand extremely disciplined.

Speaker Change: In driving the growth of our business and revenue and profits while continue to execute our strategy of maintaining stable bridge here.

Speaker Change: So leading edge is very tight and we are continuing to work on maximizing our outboard, which means leading edges of running at full utilization.

Speaker Change: At this point.

Speaker Change: Okay.

Speaker Change: Great. Thanks, but I guess that means that there were no prepays this quarter correct.

Speaker Change: Well, we have not commented on that we have not provided any color on that.

Speaker Change: Okay. Okay. Thank you Sandra.

Sanjay Mehrotra: And, of course, it's coming after a significant decline in server unit sales in calendar 2023. We are very pleased to see the increasing momentum of content growth in the traditional server demand, but also AI server units are going up. And AI, we have said overall server units going up in mid to high single digits range, with AI server driving a higher growth percentage year over year, and traditional servers being modest. And I may have said twenty-five here. I just want to clarify that I'm talking about 2024 here. So when I'm talking about modest server unit growth, it's referring to 2024 versus 2023. And-

And, of course, it's coming after a significant decline in server unit sales in calendar 2023. We are very pleased to see the increasing momentum of content growth in the traditional server demand, but also AI server units are going up. And AI, we have said overall server units going up in mid to high single digits range, with AI server driving a higher growth percentage year over year, and traditional servers being modest. And I may have said twenty-five here. I just want to clarify that I'm talking about 2024 here. So when I'm talking about modest server unit growth, it's referring to 2024 versus 2023.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Joseph Moore from Morgan Stanley. Your question. Please.

Joseph Lawrence Moore: Great. Thank you.

Joseph Lawrence Moore: The 128 gig that you talked about getting qualified it seems like that's a pretty important market in AI and you guys are approaching Monolithically, where I know your competitor has used the stack approach can you talk about the reception to that and you spoke of several hundred million dollars, how big do you think that opportunity could be.

Joseph Lawrence Moore: And as I said I mean in my prepared remarks that this Florida has very strong customer pool there.

Joseph Lawrence Moore: This really offers a significantly improved latency as well as energy efficiency and this is simply due to the architecture that we chose to pursue a fully focusing on what is ultimately important to our customers.

And We are actually seeing strong demand for both our DRAM products and NAND products in server, and actually, we are shifting some of our portfolio toward these higher mix solutions, HBM being one of them, high density DIMMs being another one that's in strong demand for server applications, and then data center SSDs. All of this is, we are seeing healthy demand drivers. And just remember, we had said that for memory and storage, customer inventories in data center market will be largely normalized in H1 2024, and we are seeing the market play out just as we had predicted several quarters ago.

Aaron Rakers: Thank you.

Sanjay Mehrotra: We are actually seeing strong demand for both our DRAM products and NAND products in server, and actually, we are shifting some of our portfolio toward these higher mix solutions, HBM being one of them, high density DIMMs being another one that's in strong demand for server applications, and then data center SSDs. All of this is, we are seeing healthy demand drivers. And just remember, we had said that for memory and storage, customer inventories in data center market will be largely normalized in H1 2024, and we are seeing the market play out just as we had predicted several quarters ago.

Joseph Lawrence Moore: Mono Die architecture, just gives you versus a stacked architecture gives you the benefit of.

Joseph Lawrence Moore: More simplified interconnect, which results in pollen efficiency as well as greater performance advantage. So yes, I mean, we are seeing strong reception to this product.

Joseph Lawrence Moore: And this will we have said that this will have a meaningful revenue this fiscal quarter for us and several hundred million dollars of revenue in our fiscal 2024, so clearly on a strong growth rate and you know our goal again would be to continue to manage the mess.

Joseph Lawrence Moore: <unk> of our business across our portfolio in a prudent fashion and so.

Aaron Rakers: Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of C.J. Muse from Cantor Fitzgerald. Your question, please.

Joseph Lawrence Moore: So that we continue to shift the mix of other products to word more profitable parts of the business, particularly like data centers.

Joseph Lawrence Moore: Solutions, including these highest capacity dams that we just discussed as H B M data Center now.

C.J. Muse: Yeah, good afternoon. Thanks for taking the question. I guess, Sanjay, would love to hear your thoughts around wafer movement from big three to HBM and what impact that's having on the supply-demand outlook for DDR5 and sort of any context around customer engagement and longer-term contracts. And then, Mark, on the gross margin side, you've talked about the inventory previously written down, now behind us. Can you walk through the moving parts that should dictate you know what we'll see in gross margins throughout the remainder of calendar 2024? Thanks so much.

CJ Muse: Yeah, good afternoon. Thanks for taking the question. I guess, Sanjay, would love to hear your thoughts around wafer movement from big three to HBM and what impact that's having on the supply-demand outlook for DDR5 and sort of any context around customer engagement and longer-term contracts. And then, Mark, on the gross margin side, you've talked about the inventory previously written down, now behind us. Can you walk through the moving parts that should dictate you know what we'll see in gross margins throughout the remainder of calendar 2024? Thanks so much.

Joseph Lawrence Moore: SSD. So all of this really just shows you that how we are continuing to deliver successfully on strengthening our portfolio product portfolio and targeted targeting at.

Joseph Lawrence Moore: We're increasing the mix of our business towards more profitable parts of the market.

Speaker Change: Great. Thank you.

Speaker Change: Thank you one moment for our next question.

Sanjay Mehrotra: So on your question regarding wafer shift to HBM, as we have highlighted that HBM3E needs nearly three times more wafers than DDR5 in the same technology node of the same capacity to produce the same bits. So this is, of course, a highly silicon-intensive technology, and this factor of three as a trade ratio between HBM and DDR5 is really common across the industry. And HBM demand is increasing rapidly. You see all the recent announcements that are only showing you that even greater attach rate of HBM to the latest GPU solutions that were just announced earlier this week, you know, 192 GB in the Blackwell platforms versus 144 GB.

Speaker Change: And our next question.

Speaker Change: Comes from the line of Brian Chin from Stifel. Your question. Please.

Brian Edward Chin: Hi, great. Thanks for taking our questions and congratulations on the.

Brian Edward Chin: Results.

Brian Edward Chin: I guess.

Brian Edward Chin: Is it sort of a extrapolation question, but with H B M, where 20% of Micron's DRAM revenue and you have said out again at some point next year do you think on a bit basis. It could be equivalent to your market share that H b M, where 20% of micron's DRAM revenue as opposed to a much lower percentage today could you maybe help quantify how accretive to <unk>.

Brian Edward Chin: Gross margins just that richer mix would represent.

Mark Murphy: Brian It's mark.

Mark Murphy: <unk>.

Brian Edward Chin: Break it out specifically, but maybe just to give you a sense of.

Brian Edward Chin: The trajectory of gross margins.

Brian Edward Chin: Yes, the increase from first quarter of a percent to 20% in the second quarter was dominantly.

Sanjay Mehrotra: Of course, this is a phenomenon that's occurring across the board. Even today, I think, you know, Broadcom talked about how HBM content is going to further increase. So HBM is in a high demand growth phase, and this demand growth will continue in terms of bits, in terms of revenue over the course of foreseeable future, and this is putting tremendous pressure on the non-HBM supply, the trade ratio of three to one, increasing demand in HBM, increased profitability of HBM, is putting a non-HBM part of the memory in tight supply.

Of course, this is a phenomenon that's occurring across the board. Even today, I think, you know, Broadcom talked about how HBM content is going to further increase. So HBM is in a high demand growth phase, and this demand growth will continue in terms of bits, in terms of revenue over the course of foreseeable future, and this is putting tremendous pressure on the non-HBM supply, the trade ratio of three to one, increasing demand in HBM, increased profitability of HBM, is putting a non-HBM part of the memory in tight supply.

<unk>.

Brian Edward Chin: And.

Brian Edward Chin: Obviously, a lot of other things going on but the dominant feature of that increase was.

Brian Edward Chin: Was price.

Brian Edward Chin: Likewise in the.

Brian Edward Chin: 20% second quarter.

Brian Edward Chin: Actuals to the $26 five.

Brian Edward Chin: Guy.

Brian Edward Chin: Price remains the largest contributor.

Brian Edward Chin: And offsetting part of that is of course, what CJ mentioned on there.

Brian Edward Chin: The benefit of those lower cost inventories fade away so.

Brian Edward Chin: But price is still the largest factor bowel begins to come in.

Sanjay Mehrotra: This is why we say that leading-edge nodes are in very tight supply, and, as a result, you know, we would fully expect that D5 as well as other DDR products will improve in their profitability picture as well, given their very much tight supply there. And of course, HBM, being in a strong position, you know, when you look at the LTAs, we have talked to you about our supply already being locked up for 2024 and 2025, and this then increases our confidence in our D5 as well as LP5, LPA positions with the customers.

This is why we say that leading-edge nodes are in very tight supply, and, as a result, you know, we would fully expect that D5 as well as other DDR products will improve in their profitability picture as well, given their very much tight supply there. And of course, HBM, being in a strong position, you know, when you look at the LTAs, we have talked to you about our supply already being locked up for 2024 and 2025, and this then increases our confidence in our D5 as well as LP5, LPA positions with the customers.

Or both.

Brian Edward Chin: The resumption of cost Downs, and then we're starting to see some favorable mix effects for the products that Sanjay talked about including HBM and then as we move into the fourth quarter, where we would expect our margin increase.

Brian Edward Chin: Comparable to the to the levels that we saw.

Brian Edward Chin: Second the third quarter.

Brian Edward Chin: That becomes more balanced between price effects and product mix effects and cost downs and.

Brian Edward Chin: Most notably H B M <unk>.

Brian Edward Chin: <unk> begins to become more material in that would that would then proceed into 'twenty five as we look in 'twenty five we see continued.

Mark Murphy: Good afternoon, C.J., it's Mark. On the gross margin side, as you mentioned, you know, it's been a, you know, tough year, plus year and a half, on a lot of timing differences, difficult to gauge cost downs and gross margin progression, underutilization effects, slower node transition, structural capacity reduction, and so forth, that were contributing to weaker cost downs. And as you mentioned, the lower written down inventories finally cleared in this Q2. It was a bit of a headwind, actually, in the sense that it was less of a benefit than Q1. But still nonetheless, it was a favorable benefit that we will not get in Q3.

Brian Edward Chin: Pricing strength in 25, we see favorable product mixes product mix in 'twenty five and then our cost downs, excluding the H band attacks, we expected to have good cost out.

Brian Edward Chin: All contributing to our margin expansion.

Speaker Change: Okay. Thank you very helpful.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Yeah.

Speaker Change: And for our last question for today comes from the line of Chris Daily from Citi. Your question. Please.

Christopher Brett Danely: Hey, Thanks, I guess just another.

Christopher Brett Danely: Multi part question on margins like everybody else.

Christopher Brett Danely: So you mentioned that Theres still some under utilization charges related to legacy manufacturing capacity.

Mark Murphy: And then the period costs also reduced from Q1 to Q2. So we're now under $50 million on period costs related to underutilization. As I mentioned in my comments, that's legacy related capacity now only, and that would continue going forward. So now we see more normal conditions on cost downs and related margin effects. We see node transitions occurring. Those are positive. The underutilization effects are fading away, as we mentioned. We're getting volume leverage and the associated absorption, and then just the business being able to focus on efficiency. So, you know, as we mentioned, as we mentioned before, we're now on the, you know, front end, would expect mid- to high single-digit cost downs, as normal.

And then the period costs also reduced from Q1 to Q2. So we're now under $50 million on period costs related to underutilization. As I mentioned in my comments, that's legacy related capacity now only, and that would continue going forward. So now we see more normal conditions on cost downs and related margin effects. We see node transitions occurring. Those are positive. The underutilization effects are fading away, as we mentioned. We're getting volume leverage and the associated absorption, and then just the business being able to focus on efficiency. So, you know, as we mentioned, as we mentioned before, we're now on the, you know, front end, would expect mid- to high single-digit cost downs, as normal.

Christopher Brett Danely: When do those go away and then as a follow up to all these HBM.

Christopher Brett Danely: Margin questions can you just talk about the gross margin arc of your HBM products as more competition and capacity comes onto the market like when would the gross margins peak and then start to decline as <unk>.

Christopher Brett Danely: Samsung starts to increase capacity or capacity goes up all that stuff.

Speaker Change: I'll deal with the first question.

Speaker Change: On the Underutilization charges, Chris they went from.

Christopher Brett Danely: Well I think it was 165 in the first quarter down to under $50 million in the second quarter.

Christopher Brett Danely: We believe they will stay at low levels, well below 50 for the foreseeable future. So we will no longer comment on those.

Mark Murphy: I think that as you look forward, and Sanjay alluded to this, you will begin to see the costs related to HBM weigh on our cost down performance. Now, it's a good trade, of course, because the mix is favorable, the price is higher on those products, so it's an accretive margin trade, but that will impact the cost downs.

I think that as you look forward, and Sanjay alluded to this, you will begin to see the costs related to HBM weigh on our cost down performance. Now, it's a good trade, of course, because the mix is favorable, the price is higher on those products, so it's an accretive margin trade, but that will impact the cost downs.

Christopher Brett Danely: And again as I mentioned in my comments, there related to the legacy capacity.

Christopher Brett Danely: And regarding your question on gross margin projections for H B M. So we're not going to do that here, we are totally focused on.

Christopher Brett Danely: Increasing our production capability and bringing in 2025 bps shares or visa upon H P. M to be in line with our DRAM share and of course this will bring about greater profitability. Unfortunately, but we are really not.

C.J. Muse: Very helpful. Thank you.

CJ Muse: Very helpful. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line at Timothy Arcuri from UBS. Your question, please.

Christopher Brett Danely: <unk> pricing of H B M here in the future, but clearly HBM brings tremendous value and the applications. You are seeing these new platform that are hungry for more H B M and H B M has been in shortage and we have talked about our 'twenty four and 'twenty five supply being scores spoken.

Timothy Arcuri: Thanks a lot. Sanjay, I had a question just around the tenor of the discussion that you're having with your customers. I mean, the industry is bigger this year in terms of bits. It sounds like mostly due to a higher baseline coming off last year, but it sounds like supply hasn't really increased to match that, you know, higher bits this year. So the, you know, balance has gotten even tighter over the past three months. So how has that changed the dynamics of your discussions with your customers? I know you had a $600 million prepay last quarter. Did you get any prepays this quarter? Are you talking about new sort of, you know, contract structures with customers, where they maybe fund some of your CapEx? Can you kind of talk about all that? Thanks.

Christopher Brett Danely: Four so all of that I think bodes well for <unk>.

Christopher Brett Danely: High revenue growth and highly profitable HBM business photos and of course, we will stay extremely focused on maintaining disciplined maintaining our capex discipline and maintaining our shared target discipline for the HBM and <unk>.

Christopher Brett Danely: Really staying very disciplined on.

Christopher Brett Danely: Overall supply growth being in line with our DRAM share for the whole DRAM part of our business. So I think these will be key as we continue to look ahead at our execution and driving it opportunities forward.

Sanjay Mehrotra: So, just keep in mind that in fiscal year 2024 or calendar 2024 versus 2023, the shipments will increase substantially. And as you noted, I mean, the year-over-year increase in shipments will be substantial. And as you noted, the supply is very tight. Supply is tight due to the factors that we have discussed before. Due to the downturn that the industry experienced last year, CapEx cuts were made, utilization cuts were made, structural shift from traditional older nodes to newer nodes of equipment was made, in order to support the leading-edge nodes, and that resulted in a structural reduction in wafer capacity in the industry as well. And then there is the HBM factor, the trade ratio, you know, three to one, that I have discussed today.

Speaker Change: Got it thanks guys.

Speaker Change: Thank you. This does conclude the question and answer session as well as today's program. Thank you ladies and gentlemen for your participation you may now disconnect. Good day.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: <unk>.

Speaker Change: [music].

Sanjay Mehrotra: All of this has contributed to a very tight supply situation, and as I noted earlier in my remarks, non-HBM supply is tight. So some of our discussions with customers, you know, particularly with respect to HBM, when we talk about that HBM is sold out, those type of contracts have both pricing as well as volumes as well as other stricter terms baked in as part of our LTAs. And 2024, you know, volume as well as pricing is all locked up. 2025, as I mentioned, the volumes are, you know, largely allocated. A vast majority of our production supply is allocated, and some of the pricing is already firmed up. Keep in mind, this has never happened before, right? That we are talking about 2025, and we are sitting in Q1, and we already have-...

All of this has contributed to a very tight supply situation, and as I noted earlier in my remarks, non-HBM supply is tight. So some of our discussions with customers, you know, particularly with respect to HBM, when we talk about that HBM is sold out, those type of contracts have both pricing as well as volumes as well as other stricter terms baked in as part of our LTAs. And 2024, you know, volume as well as pricing is all locked up. 2025, as I mentioned, the volumes are, you know, largely allocated. A vast majority of our production supply is allocated, and some of the pricing is already firmed up. Keep in mind, this has never happened before, right? That we are talking about 2025, and we are sitting in Q1, and we already have-...

Uh huh.

Speaker Change: Mhm.

Speaker Change:

Speaker Change: No.

Speaker Change: [music].

Speaker Change: Okay.

Sanjay Mehrotra: You know, so much discussion around supply and pricing for 2025 getting locked up here as we speak. And of course, this is then, as I said earlier, impacting our, in a positive way, our discussions with non-HBM part of the market with other customers. And so, I mean, this overall tight supply environment bodes well for our ability, to manage the pricing increases, as well as keep an eye on demand, supply, and balance, and remain extremely disciplined, in driving the growth of our business and revenue and profits, while continuing to execute our strategy of maintaining stable bit share. So leading edge is very tight, and we are continuing to work on maximizing our output, which means leading edge is running at full utilization, at this point.

Mark Murphy: Great, thanks. But I guess that means that there were no prepays this quarter, correct?

Timothy Arcuri: Great, thanks. But I guess that means that there were no prepays this quarter, correct?

Sanjay Mehrotra: Well, we have not commented on that. We have not provided any color on that.

Mark Murphy: Okay. Okay, thank you, Sanjay.

Timothy Arcuri: Okay. Okay, thank you, Sanjay.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Joseph Moore from Morgan Stanley. Your question, please.

Joseph Moore: Great, thank you. The 128 gig that you talked about getting qualified, seems like that's a pretty important market in AI, and you guys are approaching it monolithically, where I know your competitor has used a stacked approach. Can you talk about the reception to that? And, you know, you spoke of several hundred million dollars. How big do you think that opportunity could be?

Speaker Change: [music].

Sanjay Mehrotra: As I said, I mean, in my prepared remarks, that this product has very strong customer pull. This really offers significantly improved latency as well as energy efficiency, and this is simply due to the architecture that we chose to pursue, fully focusing on what is ultimately important to our customers. This mono-die architecture just gives you, versus a stacked architecture, gives you the benefit of more simplified interconnect, which results in power efficiency as well as greater performance advantage. So yes, I mean, we are seeing strong reception to this product, and this will—we have said that this will have meaningful revenue this fiscal quarter for us, and $several hundred million of revenue in our fiscal 2024. So clearly on a strong growth rate.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Sanjay Mehrotra: And, you know, our goal, again, would be to continue to manage the mix of our business across our portfolio in a prudent fashion, you know, so that we continue to shift the mix of our products toward more profitable parts of the business, particularly like data center solutions, including these high capacity DIMMs that we just discussed, as HBM, data center SSD. So all of this really just shows you that how we are continuing to deliver successfully on strengthening our product portfolio and targeting it toward increasing the mix of our business toward more profitable parts of the market.

And, you know, our goal, again, would be to continue to manage the mix of our business across our portfolio in a prudent fashion, you know, so that we continue to shift the mix of our products toward more profitable parts of the business, particularly like data center solutions, including these high capacity DIMMs that we just discussed, as HBM, data center SSD. So all of this really just shows you that how we are continuing to deliver successfully on strengthening our product portfolio and targeting it toward increasing the mix of our business toward more profitable parts of the market.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Joseph Moore: Great, thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Brian Chin from Stifel. Your question, please.

Speaker Change:

Brian Chin: Hi, great, thanks for taking our questions, and congratulations on the results. I guess, you know, it's a sort of an extrapolation question, but if HBM were 20% of Micron DRAM revenue, and you have said that, you know, again, at some point next year, you think on a bit basis, it could be equivalent to your market share. But if HBM were 20% of Micron DRAM revenue, as opposed to a much lower percentage today, could you maybe help quantify how accretive the gross margins, just that richer mix would represent?

Speaker Change: Both.

Speaker Change: [music].

Mark Murphy: Yeah, Brian, it's Mark. We won't break it out specifically, but maybe just to give you a sense of the trajectory of gross margins. Yeah, the increase from Q1 of 1% to 20% in Q2 was dominantly price. And you know, obviously, a lot of other things going on, but the dominant feature of that increase was price. Likewise, in the 20% Q2 actuals to the 26.5% guide, price remains the largest contributor, and offsetting part of that is, of course, what C.J. mentioned on the benefit of those lower cost inventories fade away. So, but price is still the largest factor.

Speaker Change: Okay.

Speaker Change: [music].

Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Mark Murphy: But what begins to come in are both a resumption of cost downs, and then we're starting to see some favorable mix effects for the products that Sanjay talked about, including HBM. And then as we move into the fourth quarter, where we would expect a margin increase, you know, comparable to the, you know, to the levels that we saw as second to third quarter, you know, that becomes more balanced between price effects and product mix effects, and, and, most notably, HBM begins, begins to become more material, and that would-... That would then proceed into 2025. As we look in 2025, we see continued pricing strength in 2025. We see favorable product mixes, product mix in 2025, and then our cost downs, excluding the HBM effects, we expect it to have good cost down.

But what begins to come in are both a resumption of cost downs, and then we're starting to see some favorable mix effects for the products that Sanjay talked about, including HBM. And then as we move into the fourth quarter, where we would expect a margin increase, you know, comparable to the, you know, to the levels that we saw as second to third quarter, you know, that becomes more balanced between price effects and product mix effects, and, and, most notably, HBM begins, begins to become more material, and that would-... That would then proceed into 2025. As we look in 2025, we see continued pricing strength in 2025. We see favorable product mixes, product mix in 2025, and then our cost downs, excluding the HBM effects, we expect it to have good cost down.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay.

Mark Murphy: All contributing to margin expansion.

Speaker Change: [music].

Operator: Okay. Thank you, very helpful. Thank you. One moment for our next question. For our last question for today, comes from the line of Chris Danely from Citi. Your question please.

Brian Chin: Okay. Thank you, very helpful.

Operator: Thank you. One moment for our next question. For our last question for today, comes from the line of Chris Danely from Citi. Your question please.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Yes.

Speaker Change: Okay.

Chris Danely: Hey, thanks, gang. I guess just another multi-part question on margins like everybody else. So you mentioned that there's still some underutilization charges related to legacy manufacturing capacity. When do those go away? And then as a follow-up to all these HBM margin questions, can you just talk about the gross margin arc of your HBM products, as you know, more competition and capacity comes onto the market? Like, when would the gross margins peak and then start to decline as you know, Samsung starts to increase capacity or capacity goes up, all that stuff? Thanks.

Speaker Change: [music].

Okay.

Speaker Change: Okay.

Okay.

Speaker Change: Yeah.

Speaker Change: [music].

Mark Murphy: I'll deal with the first question. On the underutilization charges, Chris, they went from, well, I think it was $165 million in Q1 down to under $50 million in Q2. We believe they'll stay at you know, at low levels, you know, well below $50 million for the foreseeable future. So we'll no longer comment on those. They're... Again, as I mentioned in my comments, they're related to the legacy capacity.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Thank you.

Speaker Change: Sure.

Speaker Change: Yeah.

Sanjay Mehrotra: Regarding your question on gross margin projections for HBM. We are not going to do that here. We are totally focused on increasing our production capability and bringing in 2025, our bit share for HBM to be in line with our DRAM share. And of course, this will bring about greater profitability opportunities, but we are really not projecting pricing of HBM here in the future. Clearly, HBM brings tremendous value in the applications. You are seeing these new platforms that are hungry for more HBM, and HBM has been in shortage, and we have talked about our 2024 and 2025 supply being spoken for. All of that, I think bodes well for high revenue growth and highly profitable HBM business for us.

[music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Okay.

Yes.

Speaker Change: [music].

Sanjay Mehrotra: And of course, we will stay extremely focused on maintaining discipline, maintaining our CapEx discipline, and maintaining our share target discipline, for the HBM, and really staying very disciplined on overall supply growth, being in line with our DRAM share for the whole DRAM part of our business. So I think these will be key as we continue to look ahead at our execution and at driving our opportunities forward.

And of course, we will stay extremely focused on maintaining discipline, maintaining our CapEx discipline, and maintaining our share target discipline, for the HBM, and really staying very disciplined on overall supply growth, being in line with our DRAM share for the whole DRAM part of our business. So I think these will be key as we continue to look ahead at our execution and at driving our opportunities forward.

Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Thank you.

Speaker Change: Okay.

Chris Danely: Got it. Thanks, guys.

Operator: Thank you. This does conclude the question and answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.

Speaker Change: Okay.

Okay.

Speaker Change: Yes.

Speaker Change: Okay.

[music].

Speaker Change: Thanks Julien.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

[music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Sure.

Speaker Change: Okay.

Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Okay.

Speaker Change: [music].

Speaker Change: Okay.

Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Thank you.

Okay.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Yes.

Speaker Change: Okay.

Okay.

Speaker Change: [music].

Speaker Change:

Speaker Change: Thanks.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Hum.

Speaker Change: [music].

Q2 2024 Micron Technology Inc Earnings Call

Request a DemoDemo

Micron Technology

Earnings