Q3 2024 Micron Technology Inc Earnings Call

June 26, 2024

Thank you for standing by and welcome to Micron Technology's fiscal third quarter 2024 financial results conference 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'll need to press star 1 1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue simply press star 1 1 again.

Satya Kumar: And now I'd like to introduce your host for today's program, Sathya Kumar, Investor Relations. Thank you, and welcome to Micron Technology's fiscal third 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. Today's discussion of financial results is 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.

Speaker Change: As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Satya Kumar, Investor Relations. Please go ahead, sir.

Satya Kumar: 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 Micron Tech. As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, market and pricing trends and drivers, the impact of new technologies such as AI, product ramp plants, and market position, our expected results and guidance, and other matters.

Satya Kumar: Thank you, and welcome to Micron Technology's fiscal third quarter 2024 financial conference call.

Speaker Change: 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.

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

Speaker Change: Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified.

Speaker Change: A reconciliation of GAAP to non-GAAP financial measures can be found on our website.

Speaker Change: 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 Micron Tech.

Speaker Change: As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, market and pricing trends and drivers, the impact of new technologies such as AI, product ramp plants and market position, our expected results and guidance, and other matters.

Satya Kumar: These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those made today. We refer you to the documents we filed with the SEC, including our most recent Form 10-Q and the upcoming Form 10-K, 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 achievement. Furthermore, we are under no duty to update any of the forward-looking statements to conform these statements to actual results.

Speaker Change: These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today.

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

Speaker Change: 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 conform these statements to actual results.

Satya Kumar: With that, let me turn the call over to Sanjay. Thank you, Satya. Good afternoon, everyone.

Speaker Change: With that, let me turn the call over to Sanjay. Thank you, Satya. Good afternoon, everyone. I'm pleased to report that Micron delivered fiscal Q3 revenue, gross margin, and EPS all above the high end of guidance ranges.

Sanjay Mehrotra: I'm pleased to report that Micron delivered fiscal Q3 revenue, gross margin, and EPS all above the high end of guidance ranges. Micron drove robust price increases as industry supply and demand conditions continued to improve. This improved pricing, combined with our strengthening product mix, resulted in increased profitability across all our end markets.

Sanjay Mehrotra: Micron drove robust price increases as industry supply-demand conditions continue to improve. This improved pricing, combined with our strengthening product mix, resulted in increased profitability across all our end markets.

Sanjay Mehrotra: In data center, rapidly growing AI demand enabled us to grow our revenue by over 50% on a sequential basis, and we grew share in high-margin AI-related product categories such as HBM, high-capacity DEMs, and data center SSDs. Our mix of data center revenue is on track to reach record levels in fiscal 2024 and to grow significantly from there in fiscal 2025. Robust AI-driven demand for data center products is causing tightness on our leading edge nodes.

Sanjay Mehrotra: In data center, rapidly growing AI demand enabled us to grow our revenue by over 50% on a sequential basis.

Sanjay Mehrotra: And we grew share in high-margin AI-related product categories such as HBM, high-capacity DIMMs, and data center SSDs.

Sanjay Mehrotra: Our mix of data center revenue is on track to reach record levels in fiscal 2024 and to grow significantly from there in fiscal 2025.

Sanjay Mehrotra: Robust AI-driven demand for data center products is causing tightness on our leading-edge nodes.

Sanjay Mehrotra: Consequently, we expect continued price increases throughout calendar 2024 despite only steady near-term demand for PCs and smartphones. As we look ahead to 2025, demand for AI PCs and AI smartphones and continued growth of AI in the data center create a favorable setup that gives us confidence that we can deliver a substantial revenue record in fiscal 2025 with significantly improved profitability underpinned by our ongoing portfolio shift to higher margin products. Micron is ramping up the industry's most advanced technology nodes in both DRAM and NAND.

Sanjay Mehrotra: Consequently, we expect continued price increases throughout calendar 2024, despite only steady near-term demand in PCs and smartphones.

Sanjay Mehrotra: As we look ahead to 2025,

Sanjay Mehrotra: Demand for AI PCs and AI smartphones and continued growth of AI in the data center.

Sanjay Mehrotra: Create a favorable setup that gives us confidence that we can deliver a substantial revenue record in fiscal 2025 with significantly improved profitability underpinned by our ongoing portfolio shift to higher margin products.

Sanjay Mehrotra: Micron is ramping the industry's most advanced technology nodes in both DRAM and NAND.

Sanjay Mehrotra: Over 80% of our DRAM bit production is now on leading edge, one alpha and one beta nodes. Over 90% of our NAND bit production is on our two leading edge NAND nodes. 1 Gamma DRAM pilot production using extreme ultraviolet lithography is progressing well, and we are on track for volume production in calendar 2025.

Sanjay Mehrotra: Over 80% of our DRAM bit production is now on leading-edge 1? and 1? nodes.

Sanjay Mehrotra: Over 90% of our NAND bit production is on our two leading edge NAND nodes.

Sanjay Mehrotra: 1-Gamma DRAM pilot production using Xtreme Ultraviolet lithography is progressing well and we are on track for volume production in calendar 2025.

Sanjay Mehrotra: Our next generation NAND node is on track with high volume production planned for calendar 2025. We experienced some operational disruptions after the recent Taiwan earthquake, but were able to recover quickly thanks to diligent efforts from Micron Taiwan team members working together with our global operations team. Despite impacts from the earthquake, we now expect our fiscal 2024 DLAM front-end cost reductions, excluding HBM, to be in the high single-digit percentage range. We expect our fiscal 2024 NANT front-end cost reductions to be in the low-teens percentage range.

Sanjay Mehrotra: Our next generation NAND node is on track with high volume production planned for calendar 2025.

Sanjay Mehrotra: We experienced some operational disruptions after the recent Taiwan earthquake, but were able to recover quickly thanks to diligent efforts from Micron Taiwan team members working together with our global operations teams.

Sanjay Mehrotra: Despite impacts from the earthquake, we now expect our fiscal 2024 DLAM front-end cost reductions, excluding HBM, to be in the high single-digit percentage range.

Sanjay Mehrotra: We expect our fiscal 2024 NANT front-end cost reductions.

Sanjay Mehrotra: These cost reductions are supported by our industry-leading one beta DRAM and 232-layer NAND node. During the quarter, Micron signed a non-binding Preliminary Memorandum of Terms, or PMT, with the U.S. government for $6.1 billion in grants under the CHIPS and Science Act.

Sanjay Mehrotra: To be in the low team percentage range.

Sanjay Mehrotra: These cost reductions are supported by our industry-leading 1-beta D-RAM and 232-layer NAND nodes.

Sanjay Mehrotra: During the quarter, Micron signed a non-binding Preliminary Memorandum of Terms, or PMT, with the U.S. government for $6.1 billion in grants under the Chips and Signs Act.

Sanjay Mehrotra: These grants support our planned leading-edge memory manufacturing expansion in Idaho and New York. Federal and state incentives, projected power cost advantages, and R&D co-location synergies will enable Micron to achieve cost-competitive, leading-edge memory manufacturing in the United States when these projects reach efficient manufacturing scales. Fab construction in Idaho is underway, and we are working diligently to complete the regulatory and permitting processes in New York.

Sanjay Mehrotra: These grants support our planned leading-edge memory manufacturing expansion in Idaho and New York.

Sanjay Mehrotra: Federal and state incentives, projected power cost advantages, and R&D co-location synergies will enable Micron to achieve cost-competitive, leading-edge memory manufacturing in the United States when these projects reach efficient manufacturing scale.

Sanjay Mehrotra: Fab construction in Idaho is underway and we are working diligently to complete the regulatory and permitting processes in New York.

Sanjay Mehrotra: This additional leading-edge greenfield capacity, along with continued technology transition investments in our Asia facilities, is required to meet long-term demand in the second half of this decade and beyond. These investments support our objective to maintain our current bit share over time and to grow our memory bit supply in line with long-term industry bit demand. Micron retains flexibility under the PMT to manage construction and timing of supply growth in a manner that allows it to remain responsive to market conditions.

Sanjay Mehrotra: These investments support our objective to maintain our current bit share over time and to grow our memory bit supply in line with long-term industry bit demand.

Sanjay Mehrotra: Micron retains flexibility under the PMT to manage construction and timing of supply growth in a manner that allows us to remain responsive to market conditions.

Sanjay Mehrotra: Now turning to our end market. We are in the early innings of a multi-year race to enable Artificial General Intelligence, or AGI, which will revolutionize all aspects of life. Enabling AGI will require training ever-increasing model sizes with trillions of parameters and sophisticated servers for inference.

Sanjay Mehrotra: Now turning to our end markets.

Sanjay Mehrotra: We are in the early innings of a multi-year race to enable Artificial General Intelligence or AGI, which will revolutionize all aspects of life.

Sanjay Mehrotra: Enabling AGI will require training ever-increasing model sizes with trillions of parameters and sophisticated servers for inferencing.

Sanjay Mehrotra: AI will also permeate to the edge via AI PCs and AI smartphones, as well as smart automobiles and intelligent industrial systems. These trends will drive significant growth in the demand for DRAM and NAND. And we believe that Micron will be one of the biggest beneficiaries in the semiconductor industry of the multi-year growth opportunity driven by AI. Most data center customer inventories have normalized, and demand from customers continues to strengthen. PC and smartphone customers have built additional inventories due to the rising price trajectory, the anticipated growth in AI PCs and AI smartphones, as well as the expectation of tight supply as an increasing portion of DRAM and LAN output is dedicated to meeting growing data center demand.

Sanjay Mehrotra: AI will also permeate to the edge via AI PCs and AI smartphones, as well as smart automobiles and intelligent industrial systems.

Sanjay Mehrotra: These trends will drive significant growth in the demand for DRAM and NAND, and we believe that Micron will be one of the biggest beneficiaries in the semiconductor industry of the multi-year growth opportunity driven by AI.

Sanjay Mehrotra: Most data center customer inventories have normalized and demand from customers continues to strengthen.

Sanjay Mehrotra: PC and smartphone customers have built additional inventories due to the rising price trajectory.

Sanjay Mehrotra: The anticipated growth in AI PCs and AI smartphones, as well as the expectation of tight supply as an increasing portion of DRAM and LAN output is dedicated to meeting growing data center demand.

Sanjay Mehrotra: Due to expectations for continued leading-edge node tightness, we are seeing increased interest from many customers across market segments to secure 2025 long-term agreements ahead of their typical schedule. In the data center, industry server unit shipments are expected to grow in the mid to high single digits in calendar 2024, driven by strong growth for AI servers and the return to modest growth for traditional servers. Micron is well-positioned with its portfolio of HBM, D5, LP5, high-capacity DIMM, CXL, and data center SSD products.

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

Sanjay Mehrotra: Micron is well positioned with our portfolio of HBM, D5, LP5, High Capacity DIMM, CXL, and Data Center SSD products.

Sanjay Mehrotra: Recently, our customers have announced their long-term AI server product roadmaps with an annual cadence of new products with significantly improved capabilities for the next several years. Micron's technology and product leadership puts us in an excellent position to support this growth. Customers continue to provide feedback that our HBM3e solution has 30% lower power consumption compared to competing solutions.

Sanjay Mehrotra: Micron's technology and product leadership puts us in an excellent position to support this growth.

Sanjay Mehrotra: Customers continue to provide feedback that our HBM3e solution has 30% lower power consumption compared to competitors' solutions.

Sanjay Mehrotra: Our HBM shipment ramp began in fiscal Q3, and we generated over $100 million in HBM3e revenue in the quarter, at margins accretive to DRAM and overall company margins. We expect to generate several hundred million dollars of revenue from HBM in fiscal 2024 and multiple billions of dollars in revenue from HBM in fiscal 2025. We expect to achieve HBM market share commensurate with our overall DLAM market share sometime in calendar 2025. Our HVM is sold out for calendar 2024 and 2025, with pricing already contracted for the overwhelming majority of our 2025 supply.

Sanjay Mehrotra: Our HBM shipment ramp began in fiscal Q3 and we generated over $100 million in HBM3e revenue in the quarter, at margins accretive to DRAM and overall company margins.

Sanjay Mehrotra: We expect to generate several hundred million dollars of revenue from HBM in fiscal 2024 and multiple billions of dollars in revenue from HBM in fiscal 2025.

Sanjay Mehrotra: We expect to achieve HBM market share commensurate with our overall D-RAM market share sometime in calendar 2025.

Sanjay Mehrotra: Our HVM is sold out for calendar 2024 and 2025, with pricing already contracted for the overwhelming majority of our 2025 supply.

Sanjay Mehrotra: We are making significant strides towards expanding our HVM customer base in calendar 2025 as we design in our industry-leading HVM technology with major HVM customers. We have sampled our 12 high HBM3E product and expect to ramp it into high volume production in calendar 2025 and increase its mix throughout 2025. We have a robust roadmap for HBM and are confident we will maintain our technology leadership with HBM4 and HBM4e.

Sanjay Mehrotra: We are making significant strides towards expanding our HVM customer base in calendar 2025 as we design in our industry-leading HVM technology with major HVM customers.

Sanjay Mehrotra: We have sampled our 12-high HBM3E product and expect to ramp it into high-volume production in calendar 2025 and increase in mix throughout 2025.

Sanjay Mehrotra: We have a robust roadmap for HBM and are confident we will maintain our technology leadership with HBM4 and HBM4e.

Sanjay Mehrotra: Our next generations of HBM will provide further performance and capacity enhancements while we continue to evolve our industry-leading low power innovation. We achieved full validation on our one beta 32 gigabit monolithic die based 128 gigabyte high capacity server DIMM products and are on track to achieve several hundred million dollars of revenue from high capacity DIMMs in the second half of fiscal 2024. Additionally, we continue to see strong interest in our industry-leading one beta LPD RAM in data center applications.

Sanjay Mehrotra: Our next generations of HBM will provide further performance and capacity enhancements while we continue to evolve our industry-leading low-power innovations.

Sanjay Mehrotra: We achieved full validation on our one beta 32 gigabit monolithic dye based 128 gigabyte high capacity server DIMM products.

Sanjay Mehrotra: and are on track to achieve several hundred million dollars of revenue from high-capacity DEMs in the second half of fiscal 2024.

Sanjay Mehrotra: Additionally, we continue to see strong interest in our industry-leading One Beta LPD RAM in data center applications.

Sanjay Mehrotra: Data Center SSD is in the midst of a strong demand recovery as customers have worked through their 2023 inventory. Hyperscale demand is improving, driven primarily by AI training and inference infrastructure and supplemented by the start of a recovery of traditional compute and storage infrastructure demand. Micron is gaining share in data center SSDs as we reach new revenue and market share records in this important product category.

Sanjay Mehrotra: Data Center SSD is in the midst of a strong demand recovery as customers have worked through their 2023 inventory.

Sanjay Mehrotra: Hyperscale demand is improving, driven primarily by AI training and inference infrastructure, and supplemented by the start of a recovery of traditional compute and storage infrastructure demand.

Sanjay Mehrotra: Micron is gaining share in data center SSDs as we reach new revenue and market share records in this important product category.

Sanjay Mehrotra: During the quarter, we more than tripled bid shipments of our 232-layer-based 6530TB SSDs, which offer best-in-class performance, reliability, and endurance for AI data lake applications. We continued our leadership and innovation by becoming the first NAND vendor to supply 200-plus-layer QLC for the Enterprise Storage Mod. In PC, unit volumes remain on track to grow in the low single-digit range for calendar 2024. We are optimistic that the planned Windows 10 end of life in 2025, the launch of Windows 12 and the introduction of new generation of AI PCs will accelerate the PC replacement cycle starting in late calendar 2024.

Sanjay Mehrotra: We continued our leadership and innovation by becoming the first NAND vendor to supply 200-plus-layer QLC for the enterprise storage market.

Sanjay Mehrotra: In PC, unit volumes remain on track to grow in the low single-digit range for calendar 2024.

Sanjay Mehrotra: We are optimistic that the planned Windows 10 end of life in 2025, the launch of Windows 12, and the introduction of new generation of AI PCs will accelerate the PC replacement cycle starting in late calendar 2024.

Sanjay Mehrotra: The PC replacement cycle should gather momentum through calendar 2025 as new AI applications are rolled out. During Computex in Taiwan, we saw several announcements of next-generation chipsets and AI-powered PCs. These devices feature high-performance neural processing unit chipsets, and we expect these devices will have 40% to 80% more DRAM content than today's average PC. Microsoft's minimum system requirement for CoPilot Plus PCs, such as the Surface Pro, is 16GB of DNA.

Sanjay Mehrotra: The PC replacement cycle should gather momentum through calendar 2025 as new AI applications are rolled out.

Sanjay Mehrotra: During Computex in Taiwan, we saw several announcements of next-generation chipsets and AI PCs.

Sanjay Mehrotra: These devices feature high-performance neural processing unit chipsets, and we expect these devices will have 40% to 80% more DRAM content than today's average PC.

Sanjay Mehrotra: Microsoft's minimum system requirement for CoPilot Plus PCs, such as the Surface Pro, is 16GB of DRAM.

Sanjay Mehrotra: We expect next-generation AI PCs to make up a meaningful portion of total PC units in calendar 2025, growing each year until most PCs ultimately support next-generation AI PC specifications. AI PCs are also likely to require higher performance and higher average capacity SSDs than traditional PCs, aligning well with our leading technology portfolio on our 232-layer NAND with our performance 3500 SSD and our industry-leading value QLC 2500 NVMe SSD. Turning to mobile.

Sanjay Mehrotra: AIPCs are also likely to require higher performance and higher average capacity SSDs.

Speaker Change: than traditional PCs, aligning well with our leading technology portfolio on our 232-layer NAND with our performance 3500 SSD and our industry-leading value QLC 2500 NVMe SSDs.

Sanjay Mehrotra: Smartphone unit volumes in calendar 2024 remain on track to grow in the low to mid single-digit percentage range. Leading smartphone OEMs recently announced new AI capabilities, and we are optimistic that delivering high-quality AI experiences can accelerate the smartphone refresh cycle. Smartphones have tremendous potential for personalized AI capabilities that offer greater security and responsiveness when executed on devices.

Speaker Change: Turning to mobile, smartphone unit volumes in calendar 2024 remain on track to grow in the low to mid single-digit percentage range.

Speaker Change: Leading smartphone OEMs recently announced new AI capabilities, and we are optimistic that delivering high-quality AI experiences can accelerate the smartphone refresh cycle.

Speaker Change: Smartphones have tremendous potential for personalized AI capabilities that offer greater security and responsiveness when executed on device.

Sanjay Mehrotra: Micron's leading LP5X is enabling the recent 12GB and 16GB AI phone releases at all Android Tier 1 customers, representing a 50% to 100% increase over last year's flagship model. Micron's leading mobile solutions provide the critical performance, capacity, and power efficiency needed to unlock AI capabilities. Our mobile DRAM and LAN solutions are now widely adopted in industry-leading flagship smartphones. In calendar Q1, we received recognition for being number one in quality by five of the world's leading smartphone OEMs.

Speaker Change: Micron's leading LP5X is enabling the recent 12GB and 16GB AI phone releases at all Android Tier 1 customers, representing a 50% to 100% increase over last year's flagship models.

Speaker Change: Micron's leading mobile solutions provide the critical performance, capacity, and power efficiency needed to unlock AI capability.

Speaker Change: Our mobile DRAM and LAN solutions are now widely adopted in industry-leading flagship smartphones.

Speaker Change: In calendar Q1, we received recognition for being number one in quality by five of the world's leading smartphone OEMs.

Sanjay Mehrotra: Qualifications are on track for our second-generation 1 Beta LP5X products, and we see broadening use of our 232-layer NAND, moving beyond flagship phones into high-capacity, high- and mid-tier phones, and now turning to auto and industrial. The automotive sector continued to experience robust demand for memory and storage, and Micron achieved a record quarter for automotive revenue. Car production volumes are returning to pre-pandemic levels, and broader adoption of intelligent digital cockpits and more advanced driver assistance capabilities are driving content growth. We anticipate further content growth as additional intelligence, including generative AI-based technologies, is adopted. Micron continues to be a leader in automotive with high quality and industry-first product introduction.

Speaker Change: Qualifications are on track for our 2nd generation 1 Beta LP5X products and we see broadening use of our 232 layer NAND moving beyond flagship phones into high capacity, high and mid tier phones.

Speaker Change: Turning to auto and industrial.

Speaker Change: The automotive sector continued to experience robust demand for memory and storage and Micron achieved a record quarter for automotive revenues.

Speaker Change: Car production volumes are returning to pre-pandemic levels and broader adoption of intelligent digital cockpits and more advanced driver assistance capabilities are driving content growth.

Speaker Change: We anticipate further content growth as additional intelligence, including generative AI-based technologies.

Speaker Change: is adopted in vehicles.

Speaker Change: Micron continues to be a leader in automotive with high quality and industry first product introductions.

Sanjay Mehrotra: In the fiscal third quarter, we launched the world's first multiport Gen 4 NVMe SSD in support of next-generation centralized compute architecture. In the industrial and retail consumer segments, which are a smaller part of our business, we are seeing some near-term demand uncertainty from our distribution partners and end customers. We remain confident in the long-term fundamentals and growth drivers of these businesses, especially with the increasing adoption of AI in a variety of applications.

Speaker Change: In the fiscal third quarter, we launched the world's first multiport Gen4 NVMe SSD in support of next-generation centralized compute architectures.

Speaker Change: In industrial and retail consumer segments, which are a smaller part of our business, we are seeing some near-term demand uncertainty from our distribution partners and end customers.

Speaker Change: We remain confident in the long-term fundamentals and growth drivers of these businesses, especially with the increasing adoption of AI in a variety of applications.

Sanjay Mehrotra: Now turning to our market outlook. We forecast calendar 2024 bit demand growth for the industry to be in the mid-teens percentage range for both DRAM and NAND. Over the medium term, we expect industry-bid-demand growth categories of mid-teens in DRAM and high-teens in NAS. Turning to Supply.

Speaker Change: Now turning to our market outlook.

Speaker Change: We forecast calendar 2024 best demand growth for the industry to be in the mid-teens percentage range for both DRAM and NAND.

Speaker Change: Over the medium term, we expect industry-bid-demand growth categories of mid-teens in DLAM and high-teens in NAND.

Sanjay Mehrotra: We expect calendar 2024 industry supply to be below demand for both DRAM and NAND. As discussed previously, the ramp of HBM production will constrain industry 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.

Speaker Change: Turning to Supply.

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

Speaker Change: As discussed previously, the ramp of HBM production will constrain industry supply growth in non-HBM products.

Speaker Change: Industry-wide, HBM3E consumes approximately three times the wafer supply as D5 to produce a given number of bits in the same technology node.

Speaker Change: With increased performance and packaging complexity across the industry, we expect this trade ratio for HBM4 to be even higher than the trade ratio for HBM3e.

Sanjay Mehrotra: 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. As the memory industry is still recovering from the challenging environment in 2023, this tight supply environment will help drive the considerable improvements in profitability and ROI that are needed to enable the investments required to support future growth. However, Micron's bid supply growth in fiscal 2024 remains below our demand growth for both DRAM and NAND.

Speaker Change: 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: As the memory industry is still recovering from the challenging environment in 2023, this tight supply environment will help drive the considerable improvements in profitability and ROI that are needed to enable the investments required to support future growth.

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

Sanjay Mehrotra: Micron will continue to exercise supply and CAPEX discipline and focus on improving profitability while maintaining our bid market share for DRAM and NAND. We continue to project we will end fiscal 2024 with a low double-digit percentage less wafer capacity in both DRAM and NAND than our peak levels in fiscal 2022. We intend to use our existing inventory to drive a portion of the bid growth supporting our revenue in fiscal 2025 to enable a more optimized use of our CapEx investment. Micron's fiscal 2024 CapEx plan will be approximately $8 billion, and WFP spending will be down year on year in fiscal 2024.

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

Speaker Change: We continue to project we will end fiscal 2024 with low double-digit percentage less wafer capacity in both DRAM and NAND than our peak levels in fiscal 2022.

Speaker Change: We intend to use our existing inventory to drive a portion of the bid growth supporting our revenue in fiscal 2025 to enable a more optimized use of our CapEx investments.

Speaker Change: Micron's fiscal 2024 CapEx plan will be approximately $8 billion and WFP spending will be down year-on-year in fiscal 2024.

Sanjay Mehrotra: We expect to increase our capital spending materially next year with CapEx around the mid-30s percentage range of revenue for fiscal 2025, which will support HBM assembly and test equipment, fab and back-end facility construction, as well as technology transition investment to support demand growth. The construction capex in the planned Idaho and New York Greenfield fabs in fiscal 2025 will be half or more of the expected increase in total capex. In fact, the growth in both greenfield fab construction and HBM CapEx investments is projected to make up the overwhelming majority of the year-over-year CapEx increase. These fab construction investments are necessary to support supply growth for the latter half of this decade.

Speaker Change: We expect to increase our capital spending materially next year with CapEx around mid-30s percentage range of revenue for fiscal 2025.

Speaker Change: which will support HBM assembly and test equipment, fab and back-end facility construction, as well as technology transition investment to support demand growth.

Speaker Change: The construction capex in the planned Idaho and New York greenfield fabs in fiscal 2025 will be half or more of the expected increase in total capex.

Speaker Change: In fact, the growth in both Greenfield Fab Construction and HBM CapEx investments is projected to make up the overwhelming majority of the year-over-year CapEx increase.

Speaker Change: These fab construction investments are necessary to support supply growth for the latter half of this decade.

Mark Murphy: This Idaho fab will not contribute meaningful bid supply until Fiscal 2027, and the New York Construction CapEx is not expected to contribute to bid supply growth until fiscal 2028 or later. The timing of future WFE spend in these FABs will be managed to align supply growth with expected demand growth. I will now turn it over to Mark for our financial results and outcomes. Thanks Sanjay and good afternoon everyone.

Speaker Change: This Idaho fab will not contribute to meaningful bid supply until Fiscal 2027, and the New York Construction CapEx is not expected to contribute to bid supply growth until Fiscal 2028 or later.

Speaker Change: The timing of future WSE spend in these fabs will be managed to align supply growth with expected demand growth.

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

Mark Murphy: Micron delivered strong results in fiscal Q3, with revenue, gross margin, and EPS above the high end of the guidance ranges provided in our last earnings call. Improving market conditions and strong price and cost execution drove the financial outperformance. Total fiscal Q3 revenue was $6.8 billion, up 17% sequentially and up 82% year over year. Fiscal Q3 DRAM revenue was approximately $4.7 billion, representing 69% of total revenue. DRAM revenue increased 13% sequentially, with bid shipments declining in the mid-single-digit percentage range and prices increasing by approximately 20% Fiscal Q3 NAND revenue was approximately $2.1 billion, representing 30% of Micron's total revenue.

Mark Murphy: Thanks Sanjay and good afternoon everyone.

Mark Murphy: Micron delivered strong results in fiscal Q3 with revenue, gross margin, and EPS above the high end of the guidance ranges provided in our last earnings call.

Mark Murphy: Improving market conditions and strong price and cost execution drove the financial outperformance.

Mark Murphy: Total fiscal Q3 revenue is $6.8 billion, up 17% sequentially and up 82% year-over-year.

Mark Murphy: Fiscal Q3 DRAM revenue was approximately $4.7 billion.

Mark Murphy: Representing 69% of total revenue.

Mark Murphy: DRAM revenue increased 13% sequentially, with pitch shipments declining in the mid-single-digit percentage range, and prices increasing by approximately 20%.

Mark Murphy: Fiscal Q3 NAND revenue was approximately $2.1 billion.

Mark Murphy: representing 30% of Micron's total revenue.

Mark Murphy: NAN revenue increased 32% sequentially, with fit shipments increasing in the high single-digit percentage range and prices increasing by approximately 20%. Now turning to revenue by business, compute and networking business unit revenue was $2.6 billion, up 18% sequentially. DRAM data center revenue more than doubled year over year. Revenue for the mobile business unit was $1.6 billion, down 1% sequentially as a planned decline in volume was partially offset by improved prices.

Mark Murphy: Man Revenue increased 32% sequentially, with bit shipments increasing in the high single-digit percentage range and prices increasing by approximately 20%.

Mark Murphy: Now turning to revenue by business unit.

Mark Murphy: Compute and networking business unit revenue is $2.6 billion, up 18% sequentially.

Mark Murphy: VRAM data center revenue more than doubled year over year.

Mark Murphy: Revenue for the mobile business unit was $1.6 billion, down 1% sequentially as a planned decline in volume was partially offset by improved pricing.

Mark Murphy: Embedded business unit revenue was $1.3 billion, up 16% sequentially driven by record revenue and automotive. Revenue for the storage business unit was $1.4 billion, up 50% sequentially, with growth across all ends. We achieved record data center center SSD revenue, which nearly doubled sequentially. The consolidated gross margin for fiscal Q3 was approximately 28%.

Mark Murphy: Embedded business unit revenue is $1.3 billion.

Mark Murphy: Up 16% sequentially, driven by record revenue in automotive.

Mark Murphy: Revenue for the storage business unit was $1.4 billion, up 50% sequentially, with growth across all end markets.

Mark Murphy: We achieved record data center SSD revenue, which nearly doubled sequentially.

Mark Murphy: The consolidated gross margin for Fiscal Q3 was approximately 28%.

Mark Murphy: Up over 8 percentage points sequentially, driven primarily by higher pricing and helped by product mix and cost reduction. Excluding the effects of previously written down inventories on fiscal Q2 gross margin, the sequential improvement in fiscal Q3 would have been 15%. As a reminder, previously written down inventories had no impact on fiscal Q3 gross margin, so I will not affect our gross margin moving forward. Operating expenses in fiscal Q3 were $976 million.

Mark Murphy: Up over 8 percentage points sequentially, driven primarily by higher pricing and helped by product mix and cost reductions.

Mark Murphy: Excluding the effects of previously written down inventories on Fiscal Q2 gross margin, the sequential improvement in Fiscal Q3 would have been 15 percentage points.

Mark Murphy: As a reminder, previously written down inventories had no impact on fiscal Q3 gross margin.

Mark Murphy: I will not affect our gross margin moving forward.

Mark Murphy: Operating expenses in fiscal Q3 were $976 million, up $17 million quarter over quarter.

Mark Murphy: Top $17 million quarter over quarter. Continued Spend Discipline and Ongoing Operational Efficiencies help deliver operating expenses at the low end of the guidance. We generated operating income of $941 million in fiscal Q3, resulting in an operating margin of 14%, which was up 10 percentage points sequentially and up 53 percentage points from the year-ago. Fiscal Q3 adjusted EBITDA was $2.9 billion, resulting in an EBITDA margin of 43%, up 6 percentage points sequentially and up 30 percentage points or $2.4 billion from the year-ago quarter. Fiscal Q3 taxes were $227 million.

Mark Murphy: Continued Spend Discipline and Ongoing Operational Efficiencies help deliver operating expenses at the low end of the guidance range.

Mark Murphy: We generated an operating income of $941 million in fiscal Q3.

Mark Murphy: Resulting in an operating margin of 14%, which was up 10 percentage points sequentially and up 53 percentage points from the year ago quarter.

Mark Murphy: Fiscal Q3 adjusted EBITDA was $2.9 billion, resulting in an EBITDA margin of 43%.

Mark Murphy: Up 6 percentage points sequentially, and up 30 percentage points, or $2.4 billion from the year ago quarter.

Mark Murphy: Lower than expectations at the time of our guidance, driven by one-time discrete items. Non-GAAP diluted earnings per share in fiscal Q3 was $0.62, compared to $0.42 in the prior quarter and a loss per share of $1.43 in the year-ago. Fiscal Q3 non-GAAP EPS exceeded the high end of our guidance range by 10 cents, driven by better revenue and profitability. Turning to cash flows and capital spending, our operating cash flows were $2.5 billion in fiscal Q3, representing 36% of revenue. Capital expenditures were $2.1 billion during the, and we generated free cash flow of $425 million.

Mark Murphy: Fiscal Q3 taxes were $227 million, lower than expectations at the time of our guidance driven by one-time discrete items.

Mark Murphy: non-GAAP diluted earnings per share in fiscal Q3 was $0.62.

Mark Murphy: compared to 42 cents in the prior quarter and a loss per share of $1.43 in the year-ago quarter.

Mark Murphy: and many more.

Mark Murphy: Fiscal Q3 non-GAAP EPS succeeded the high end of our guidance range by $0.10, driven by better revenue and profitability.

Mark Murphy: Turning to cash flows and capital spending, our operating cash flows are $2.5 billion in fiscal Q3, representing 36% of revenue.

Mark Murphy: Capital expenditures were $2.1 billion during the quarter.

Mark Murphy: And we generated free cash flow of $425 million.

Mark Murphy: Our fiscal Q3 ending inventory was $8.5 billion, or 155 days. A decline of five days from the prior quarter. Our leading edge supply continues to be very tight for both DRAM and NAND. On the balance sheet, we held $9.2 billion of cash and investments at quarter end and maintained near $12 billion of liquidity when including our untapped credit facility. Considering our ample liquidity, return to free cash flow generation, and strong outlook, during the quarter, we repaid $650 million of debt maturing in November 2025. We ended the quarter with $13.3 billion in total debt, low net leverage, and a weighted average maturity on our debt of 2031.

Mark Murphy: Our fiscal Q3 ending inventory was $8.5 billion or 155 days.

Mark Murphy: A decline of five days from the prior quarter.

Mark Murphy: Our leading edge supply continues to be very tight for both DRAM and NAND.

Mark Murphy: On the balance sheet, we held $9.2 billion of cash and investments at quarter end and maintained near $12 billion of liquidity when including our untapped credit facility.

Mark Murphy: Considering our ample liquidity, return-to-free cash flow generation, and strong outlook, during the quarter, we repaid $650 million of debt maturing in November 2025.

Mark Murphy: We ended the quarter with $13.3 billion in total debt, low net leverage, and a weighted average maturity on our debt of 2031.

Mark Murphy: Now turning to our outlook for the fiscal fourth quarter. We expect DRAM bit shipments to be flattish and NAND shipments to be up slightly in fiscal Q4. We forecast shipment growth to strengthen modestly in the November quarter.

Mark Murphy: Now, turning to our outlook for the fiscal fourth quarter.

Mark Murphy: We expect DRAM bit shipments to be flattish and NAND shipments to be up slightly in Fiscal Q4.

Mark Murphy: We forecast shipment growth to strengthen modestly in the November quarter.

Mark Murphy: We project continued gross margin, and pricing trends remain positive, supported by favorable supply-demand conditions. Portfolio mix will be an important contributor over time as HBM, high-capacity DIMMs, data center SSDs, and other high-value products increase as a portion of our mix. The high mix for our leading edge nodes supports front-end cost reductions in line with our long-term cost reduction category, excluding HBM on DRAM. Keep in mind that a higher mix of HBM will offset non-HBM DRAM cost reduction.

Mark Murphy: We project continued gross margin expansion.

Mark Murphy: Pricing trends remain positive, supported by favorable supply-demand conditions.

Mark Murphy: Portfolio mix will be an important contributor over time as HBM, high capacity DIMMs, data center SSDs, and other high value products increase as a portion of our mix.

Mark Murphy: The high mix for our leading-edge nodes support front-end cost reductions in line with our long-term cost reduction CAGRs, excluding HBM on DRAM.

Mark Murphy: Keep in mind that higher mix of HBM will offset non-HBM DRAM cost reductions.

Mark Murphy: But HBM will be at a creative gross margin. We forecast operating expenses to increase sequentially in the fiscal fourth quarter due to an increase in R&D program expenses and a non-recurring Q3 asset sale gain contemplated in our Q3 guidance. We estimate fiscal 2-4 tax expense of approximately $320 million.

Mark Murphy: But HBM will be at accretive gross margins.

Mark Murphy: We forecast operating expenses to increase sequentially in the fiscal fourth quarter due to an increase in R&D program expenses.

Mark Murphy: and a non-recurring Q3 asset sale gain contemplated in our Q3 guidance.

Mark Murphy: We estimate fiscal 2-4 tax expense of approximately $320 million.

Mark Murphy: For fiscal 2025, we estimate our non-gap tax rate to be in the mid teens percent. We project days of inventory outstanding to decline through fiscal 2025 and DIO to approach our target by the end of fiscal year 2025. We forecast capital expenditures to increase sequentially in the fiscal fourth quarter to approximately $3 billion. Despite this increase in CapEx, we project continued positive free cash flow in fiscal Q4. We expect full year fiscal 2024 CapEx of around $8 billion.

Mark Murphy: For fiscal 2025, we estimate our non-GAAP tax rate to be in the mid-teens percent range.

Mark Murphy: We project days of inventory outstanding to decline through fiscal 2025 and DIO to approach our target by the end of fiscal year 2025.

Mark Murphy: We forecast capital expenditures to increase sequentially in the fiscal fourth quarter to approximately $3 billion.

Mark Murphy: Despite this increase in CapEx, we project continued positive free cash flow in fiscal Q4.

Mark Murphy: We expect full year fiscal 2024 CapEx of around $8 billion.

Mark Murphy: Record revenue and significantly improved profitability in fiscal 2025 will help support average quarterly CapEx in fiscal 2025 to be meaningfully above the fiscal Q4 2024 level of $3 billion. We expect CapEx to be around the mid-30s percent percent range of revenue for fiscal 2025, which will support HBM assembly, and Test Equipment. Fab and back-end facility construction, as well as technology transition investment to support demand growth. As noted earlier, half or more of the expected CapEx increase in fiscal 2025 will be to support U.S. Greenfield fab construction. As we have noted in the past, the CHIPS Grants, the ITC, and State Incentives offset a significant portion of U.S. FAB CAPEX investment.

Mark Murphy: Record revenue and significantly improved profitability in fiscal 2025 will help support average quarterly capex in fiscal 2025 to be meaningfully above the fiscal Q4 2024 level of $3 billion.

Mark Murphy: We expect CapEx around mid-30s percentage range of revenue for fiscal 2025, which will support HBM assembly.

Mark Murphy: and Test Equipment.

Mark Murphy: Fab and back-end facility construction.

Mark Murphy: as well as technology transition investment to support demand growth.

Mark Murphy: As noted earlier, half or more of the expected CapEx increase in fiscal 2025 will be to support U.S. Greenfield fab construction.

Mark Murphy: As we have noted in the past, the CHIPS grants, ITC, and state incentives

Mark Murphy: Offset a significant portion of U.S. FAB CAPEX investments.

Mark Murphy: Receipt of some of these incentive reimbursements occur well after when we incur the spend, resulting in higher CAPEX for a period while we ramp our greenfield U.S. investments.

Mark Murphy: Micron will remain disciplined in our capital spending and will modulate our WFE investments to grow bit supply in line with industry demand.

Mark Murphy: The receipt of some of these incentive reimbursements occurs well after when we incur the spend, resulting in higher capex for a period while we ramp our greenfield U.S. investment. Micron will remain disciplined in our capital spending and will modulate our WFE investments to grow bit supply in line with industry demand. With all these factors in mind, our non-GAAP guidance for the fiscal Q4 is as follows. We expect revenue to be $7.6 billion, plus or minus $200 million, gross margin to be in the range of 34.5%, plus or minus 100 basis points, and operating expenses to be approximately $1.06 billion, plus or minus $15 million. We expect tax expenses of approximately $320 million.

Mark Murphy: With all these factors in mind, our non-GAAP guidance for the fiscal Q4 is as follows.

Mark Murphy: We expect revenue to be $7.6 billion.

Mark Murphy: Plus or minus $200 million.

Mark Murphy: Gross Margin to be in the range of 34.5%.

Mark Murphy: Plus or minus 100 basis points.

Mark Murphy: and operating expenses to be approximately 1.06 billion dollars plus or minus 15 million dollars.

Mark Murphy: We expect tax expenses of approximately $320 million.

Mark Murphy: Based on a share count of approximately 1.1 billion shares, we expect EPS to be $1.08 per share, plus or minus $0.08. In closing, market conditions are improving, with price increases driven by favorable supply-demand trends and tightness on the leading edge. Micron is executing well on leveraging its technology leadership to grow our mix of high-value solutions, especially in products that support AI applications. Finally... Our leading-edge investments and productivity initiatives are delivering cost downs and operating leverage during this market recovery. We expect record revenue and significantly better profitability in fiscal 2025 to support disciplined investment to maintain stable bit share and deliver free cash flow growth. I will now turn it back over to Sanjay.

Mark Murphy: Based on a share count of approximately 1.1 billion shares, we expect EPS to be $1.08 per share plus or minus 8 cents.

Mark Murphy: In closing, market conditions are improving with price increases driven by favorable supply-demand trends and tightness on the leading edge.

Mark Murphy: Micron is executing well on leveraging our technology leadership to grow our mix of high-value solutions.

Mark Murphy: especially in products that support AI applications.

Mark Murphy: Finally, our leading-edge investments and productivity initiatives are delivering cost downs and operating leverage during this market recovery.

Mark Murphy: We expect record revenue and significantly better profitability in fiscal 2025 to support disciplined investment to maintain stable bit share and deliver free cash flow growth.

Sanjay Mehrotra: Thank you, Mark. I want to close by commending our team in Taiwan for their response to the significant earthquake in fiscal Q3. In many ways, that response exemplifies Micron, an agile, prepared team that assesses and reacts quickly, supported by a brilliant network of colleagues around the globe. That collaboration, planning, discipline, and experience are precisely what ensures Micron is so well positioned today. I look forward to our team accelerating Micron's memory and storage leadership as AI solutions present increasing opportunities to provide greater value from data centers to the edge. Thank you for joining us today.

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

Sanjay Mehrotra: Thank you, Mark. I want to close by commending our team in Taiwan for their response to the significant earthquake in fiscal Q3.

Sanjay Mehrotra: In many ways, that response exemplifies Micron, an agile, prepared team that assesses and reacts quickly, supported by a brilliant network of colleagues around the globe.

Speaker Change: That collaboration, planning, discipline, and experience are precisely what ensures Micron is so well positioned today.

Speaker Change: I look forward to our team's accelerating Micron's memory and storage leadership as AI solutions present increasing opportunities to provide greater value from data centers to the edge.

Operator: We will now open the floor to questions. Thirdly, and one moment for our first question. Our first question comes from the line of Krish Sankar from TD Cowan. Your question, please? Hi, thanks for the question. I have two questions. Sanjay is the first one.

Speaker Change: Thank you for joining us today. We will now open for questions.

Speaker Change: Thirdly, and one moment for our first question.

Speaker Change: Our first question comes from the line of Krish Sankar from TD Cowan. Your question please.

Krish Sankar: It's on HBM. Clearly, you're gaining traction in HBM 3E. I'm just curious how the HBM 3E is, and how the qualification is going beyond one customer? Last time you publicly said that you were qualified for NVIDIA's H200. I'm kind of curious, how is it going with the B1 here for NVIDIA? And also, along the same path, your competitors spoke about pulling in the time frame for HBM score versus the regular 18-month cadence for HBM technology transfer. So basically, I'm curious, Sanjay, any color on XBM-3-EM? Calling a different customer's Stamium HBM tool will help and a quick follow-up.

Speaker Change: Thank you for the question. I have two questions. Sanjay is the first one. It's on HBM. Clearly, you're gaining traction on HBM 3E.

Speaker Change: I'm just curious how the SVM training is.

Speaker Change: And how is qualification going beyond one customer?

Speaker Change: Last time you publicly said that you're calling for an NVIDIA H200, kind of curious how is it going with the B1 for NVIDIA?

Speaker Change: And also, along the same path, your competitors spoke about...

Speaker Change: Pulling in the timeframe for HBM4 versus the regular 18-month cadence for HBM technology transit system. So, basically, I'm curious, Sanjay, any comment on HBM3 EEM? Call a different customer, timing of HBM4 would help, and a quick follow-up.

Sanjay Mehrotra: So let me start off by again pointing out that we delivered over $100 million in revenue in fiscal Q3 with our HBM3E, and I'm very pleased with our team's focus on this and delivering this number, and note that this was margin accretive to our overall margins, but also to our DRAM margins. And, of course, we remain very much focused on delivering several hundred million dollars in revenue in fiscal 2024 for HBM And in HBM, we are very much focused on continuing to ramp up our production and also improve our yields.

Speaker Change: So let me start off by again pointing out that we delivered over 100 million dollars in revenue in fiscal Q3.

Speaker Change: with our HBM3E. And I'm very pleased with our team's focus on this and delivering this number. And note,

Speaker Change: This was margin accretive to our overall margins, but also to our DRAM margins.

Speaker Change: And of course, we remain very much focused on delivering several hundred million dollars in fiscal 2024 for HBM revenue, and as I noted, multiple billion dollars in revenue.

Speaker Change: And in HBM, we are very much focused on continuing to ramp our production and also to improve our yields. And that is, of course, an important priority and any new product that is as

Sanjay Mehrotra: And that is, of course, an important priority, and any new product that is as complex as HBM or any new technology node always has a yield ramp, and the team is extremely focused on that. So as we look ahead to 2025, we remain confident in our ability to deliver our market share consistent with DRAM share sometime in 2025. And again, very pleased with Micron's strong product of HBM3E that, as I noted, has been well recognized by our customers to have 30 percent better power than any competitor's product that is out there.

Speaker Change: complex as HBM or any new technology node always has a yield ramp, and the team is extremely focused on that. So as we look ahead to 2025,

Speaker Change: We remain confident in our ability to deliver our market share consistent with DRAM share sometime in 2025.

Speaker Change: And again, I'm very pleased with.

Speaker Change: Micron's strong product of HBM3E that, as I noted, has been well-recognized by our customers.

Speaker Change: who have.

Speaker Change: 30% better power than any competitor's product that is out there.

Sanjay Mehrotra: Now, regarding your question on qualifications, of course, we are in competition with other customers as well, and, as I noted in my remarks, that in the 2025 timeframe, we expect to be broadening and diversifying our customer base as well. And HBM4, I mentioned in my remarks that we have a strong roadmap ahead for HBM4 and HBM4E, and we feel very good about our capabilities there, the roadmap that we have in front of us, and our ability to deliver leadership with HBM4 and HBM4E as well. I got it.

Speaker Change: Now regarding your question on qualifications, of course, we are in qualifications with other customers as well, and as I noted in my remarks, that in 2025 timeframe

Speaker Change: We expect to be broadening, diversifying our customer base as well.

Speaker Change: And HBM4, I mentioned in my remarks that we have a strong roadmap ahead for HBM4 and HBM4E. And we feel very good about our capabilities there, the roadmap that we have in front of us, and our ability to deliver leadership with HBM4 and HBM4E as well.

Krish Sankar: Thanks, Sanjay, for that. And a quick follow-up. On NAND bid demand, you kind of mentioned that the bid growth, demand bid growth, is going to be in the high teens. If I remember right, last quarter, you said it was going to be in the low 20s. So I'm kind of curious, what was the delta over the last few months. Because there's a general view that AI should be helping NAND.

Speaker Change: Got it. Thanks, Sanjay, for that. Another quick follow-up. On the NAND-BIT demand, you kind of mentioned that...

Speaker Change: The bid growth, demand bid growth, they mean the high teams.

Speaker Change: If I remember right, last quarter, you said it's going to be in the low 20s. So I'm kind of curious, what was the delta over the last few months ago? Because there's a general view that AI should be helping NAND. So why is the NAND bid demand growth not going higher? It looks like it's going lower.

Sanjay Mehrotra: So why is the NAND bid demand growth not going higher? It looks like it's going lower. So, what I would tell you, Krish, is that, you know, there is really not much of a difference between the CAGR that we shared last time versus the CAGR we shared here. And I'll also tell you that, you know, we basically revised the base year for the CAGR that we used. So this time, the CAGR that we used, we used the base year of 2023.

Speaker Change: Thank you. So what I would tell you, Krish, is that, you know, there is really not much of a difference between the CAGR that we shared last time versus the CAGR we shared here. And I'll also tell you that, you know, we basically revised the base year for the CAGR.

Sanjay Mehrotra: And in 2023, as you know, we had bid demand growth in NAND that was higher, meaningfully higher, than the CAGR. So that, of course, the larger base of 2023 just, you know, somewhat changed our outlook on the overall CAGR. But you're absolutely right to note, as we have also highlighted, that, you know, data center SSDs are a good growth demand driver. And I'll just provide you some color.

Speaker Change: that we used. So this time, the Kaggle that we used, we use the base year of 2023. And in 2023, as you know, we had

Speaker Change: ... demands growth in NANTR that was meaningfully higher than the CAGR. So that, of course the larger base of 2023 just somewhat changed our outlook on the overall CAGR. But you're absolutely right to note, as we have also highlighted, that data centres' SSDs are good growth demand drivers and I'll just provide you some color. The data center automotive and industrial.

Sanjay Mehrotra: The data center, automotive, and industrial sectors are all growing faster in terms of NAND demand versus the CAGR that we have shared, while client, mobile, and consumer are somewhat slower. But these slow-growing segments actually have average capacity increases ahead of them, you know, as I gave you examples of AI PCs and AI smartphones driving content growth. And we have just conservatively planned for this, perhaps. And we will continue to assess the average capacity growth in smartphones and PCs in the times ahead.

Speaker Change: These are all growing faster in terms of NAND demand versus the Kaggler that we have shared.

Speaker Change: Client, mobile, and consumer somewhat slower.

Speaker Change: But these slow-growing segments actually have also average capacity increases ahead of them.

Speaker Change: You know, as I gave you examples of AI PCs and AI smartphones driving content growth.

Speaker Change: And we have just conservatively planned for this, perhaps, and we will continue to assess the average capacity growth in smartphones and PCs in the times ahead.

Sanjay Mehrotra: And it's important that the CAGR that we highlight here is what we use for our capacity planning. And we want to, of course, always remain disciplined with respect to our capacity planning and very much focus on demand-supply balance and ROI. Thanks a lot, Sanjay. Very helpful.

Speaker Change: And it's important that the CAGR that we highlight here, this is what we use for our capacity planning, and we want to, of course, always remain disciplined with respect to our capacity planning and very much focusing on demand supply balance and ROI.

Vivek Arya: And our next question comes from the line of Vivek Arya from Bank of America Securities. Your question, please. Sanjay, you mentioned a 3x trade ratio of HBM to D5. What happens to this ratio as you go to higher stacks, you know, 12 high or more?

Speaker Change: Thanks to Sanjay, very helpful, thank you.

Speaker Change: Thank you. And our next question comes from the line of Vivek Arya from Bank of America Securities. Your question, please.

Sanjay Mehrotra: And on the other hand, what happens as you make yield improvements? Just overall, is 3x still the operative assumption for calendar 25? And just what are the puts and takes around this?

Vivek Arya: Thanks for taking my question. Sanjay, you mentioned a 3x trade ratio of HBM to D5. What happens to this ratio as you go to higher stacks, you know, 12 high or more? And on the other hand, what happens as you make yield improvements? Just overall, is 3x?

Speaker Change: Still the operative assumption for calendar 25, and just what are the puts and takes around this ratio.

Sanjay Mehrotra: Yeah, I mean, I think for HBM3E, 3X is, you know, the operative guidance here with respect to the trade ratio. And again, just keep in mind that this already accounts for, you know, the larger die that exists with HBM3E, given its performance and packaging and overall product expectations, as well as, of course, with the eight die stack, as well as the logic die in there, the mature yield expectations there as well.

Sanjay Mehrotra: Yeah, I mean, I think for the HBM 3E, 3X is...

Speaker Change: The Operative Guidance here with respect to the trade ratio. And again just keep in mind that this already accounts for the larger die that exists with HBM3E, given its performance and packaging and overall product expectations.

Speaker Change: As well as, of course, with the 8 die stack, as well as the logic die in there, the mature yield expectations there as well. And as the yield will be ramping up for us, of course, you know, we will be able to get the benefit on the lower cost as we go forward. But with mature yields, the trade ratio with HBM3E is about three times over the mature yields of D5.

Sanjay Mehrotra: And as the yield will be ramping up for us, of course, you know, we will be able to get the benefit of the lower cost as we go forward. But with mature yields, the trade ratio with HBM3E is about three times the mature yields of D5 in the same technology node. And as you go up to HBM4, of course, the trade ratio, as we have said before, increases and goes higher than three.

Speaker Change: In the same technology node.

Speaker Change: And as you go up to HBM 4, of course.

Sanjay Mehrotra: And, you know, as you go up from eight die stack to 12 die stack in HBM3E, of course, 12 die stack will have somewhat lower mature yields as well. That's just the nature of how, you know, device yields work. And but the operative guidance, I think, remains still 3X for HBM3E and greater than that for HBM4. And, of course, our section of mature youth here is world-class. Got it.

Speaker Change: The trade ratio, as we have said before, increases.

Speaker Change: Goals higher than 3 and you know as you go out from 8 diastat to 12 diastat in HBM 3e of course 12 diastat will have somewhat lower lower matured yields as well That's just the nature of

Speaker Change: How, you know, devices work. And but the operative guidance, I think, remains still 3x for HBM3E and greater than that for HBM4, inclusive of the assumption of mature yields.

Speaker Change: And of course our section of mature yields here is world class mature yields.

Mark Murphy: And a quick follow up, maybe for Mark. So, you know, you're suggesting fiscal 25 could be a record in terms of sales. Why can't it be a record in terms of gross margins? What are the puts and takes of gross margins as we go into next year? So maybe give us some sense of what incremental margins can be, let's say sales are up 5 billion or 10 billion year on year. Just so you know, we can level set our model from a gross perspective. Vivek, we're happy to take that we're not providing fiscal year 25 guidance yet. You know, I can talk about some sequential improvements from here.

Speaker Change: Got it. And a quick follow-up, maybe for Mark.

Speaker Change: You know, you're suggesting fiscal 25 could be a record in terms of sales.

Speaker Change: Why can't it be a record in terms of gross margins? What are the puts and takes of gross margins as we go into next year? So maybe give us some sense of what incremental margins can be. Let's just say there are 5 billion or 10 billion year on year, just so we can level set our model from a gross margin perspective. Thank you.

Mark Murphy: Of course, we guided a 600 basis point increase in gross margin guidance between third quarter and the guide and forth. And yeah, that's driven by price, but also, you know, mix is beginning to become a more substantive factor in the sequential gross margin expansion. We see November quarter.

Speaker Change: Vivek, we're happy to take that. We're not providing fiscal year 25 guidance yet.

Speaker Change: You know, I can talk about some sequential improvements from here. Of course, we guided a 600 basis point increase gross margin guidance between third quarter and the guide.

Speaker Change: and forth. And yeah, that's driven

Vivek Arya: That's driven by price, but also, you know, mix is beginning to become a more substantive factor in the sequential gross margin expansions.

Mark Murphy: We see gross margin expansion continuing at a few hundred basis points. Again, price is a factor, but also as a fourth quarter mix factor, contributing to the increase. And that's the effect of HBM and high-capacity DIMMs and other higher value products.

Vivek Arya: We see November quarter.

Vivek Arya: Yeah, we see gross margin expansion continuing.

Vivek Arya: Up a few hundred basis points again.

Vivek Arya: Price is a is a factor but also as a fourth quarter mix

Vivek Arya: Participating in the, or contributing to the increase.

Vivek Arya: And that's, you know, that's the effect of HBM and high-capacity DIMMs and other higher-value products.

Mark Murphy: We do expect through fiscal 25 price to continue to increase, and we expect this favorable mix effect to continue to increase. You've seen, you know, very clearly in the third quarter and our fourth quarter guide, the strength and data center, and we see that growth continuing. And then later in the year, we see, you know, the replacement cycle for the smartphone and PC, and then the associated content with AI picking up.

Vivek Arya: We do expect through Fiscal 25

Vivek Arya: for price to continue to increase and we expect this favorable mix effect to continue to increase. You've seen

Vivek Arya: You know, very clearly in the third quarter and our fourth quarter guide, the strength and data center, and we see that growth continuing. And then later in the year, we see

Vivek Arya: Replacement Cycle for Smartphone and PC

Mark Murphy: So we expect that again in the second half of the calendar year into, you know, early 25 for that to kick in. Then on the supply side, you know, you've got just tight conditions. You know you've got structurally lower capacity in the industry, and inventories are trending down, which we believe ours will trend down through fiscal 25 to close to our target by the end of 25. And then just the HBM trade ratio, which Sanjay just commented on.

Vivek Arya: And then the associated content with AI picking up, so we expect that to, again, second half of the calendar year into, you know, early 25 for that to kick in. Then on the supply side, you know, you've got just tight conditions.

Vivek Arya: You know, you've got structurally lower capacity in the industry, inventories are trending down, which we believe ours will trend down through fiscal 25, to close to our target by the end of 25.

Speaker Change: and and then just the HBM trade ratio which which Sanjay just commented on

Mark Murphy: And then, of course, I talked about the sequential gross margin and talked about, you know, the mix that we see in the business with our higher-value products, which are, you know, HBM, high-capacity DIMMs, and SSDs, which we've talked about. So the momentum is very strong.

Speaker Change: And then, of course, I talked about in the sequential gross margin, talked about, you know, the mix that we see in the business with our higher value products.

Speaker Change: which are, you know, HBM, high-capacity DIMMs, SSDs, which we've talked about.

Mark Murphy: You know, we've got technology leadership. We've got the best product position the company's ever had, and the manufacturing is operating very well. So we are very well-positioned for fiscal 25. Thank you.

Speaker Change: So the momentum is very strong, we've got technology leadership, we've got the best product position the company's ever had, and the manufacturing is operating very well, so well positioned for Fiscal 25.

Toshiya Hari: And our next question comes from the line of Toshiya Hari from Goldman Sachs. Your question, please? Hi, thank you so much for taking the questions. I had two as well.

Speaker Change: Thank you.

Speaker Change: Thank you. And our next question comes from the line of Toshiya Hari from Goldman Sachs. Your question, please.

Toshiya Hari: The first one on HBM. I guess recently there have been a couple of reports about you all having some yield issues. But based on your commentary, it didn't sound like you were having these issues.

Toshiya Hari: Hi, thank you so much for taking the question. I had two as well. The first one on HBM,

Toshiya Hari: I guess recently there have been a couple of reports about, you know, you all having some yield issues. Based on your commentary, it didn't sound like you were having these issues, but just wanted to clarify that.

Sanjay Mehrotra: So just wanted to clarify that. If you could address that, that would be really helpful. And then on HBM, the second part is, so gross margins are intrusive to overall, overall corporate margins today. What are your thoughts on sort of relative profitability going into the second half of the year and the calendar 25, particularly given the fact that you have pretty good visibility as it pertains to HBM prices?

Toshiya Hari: If you could address that, that would be that would be really helpful. And then on HBM, the second part is.

Speaker Change: So if the gross margins are intuitive to overall corporate margins today, what are your thoughts on relative profitability going into the second half of the year and into calendar 25, particularly given the fact that you have pretty good visibility as it pertains to HPM pricing?

Sanjay Mehrotra: So regarding yields, I think I already commented that we are pleased that in the very first quarter of production, we were able to ship over 100 million dollars of HBM revenue, and we remain focused on our goals and remain confident about our goals of delivering several hundred million dollars of revenue in fiscal 24 and multiple hundred billions of dollars of revenue in fiscal 25 and getting our share to be in line with our share for HBM to be in line with our DRAM share sometime in So, of course, our yield assumptions are baked into all of that.

Speaker Change: So regarding the yields, I think I already commented that we are pleased that in the very first quarter of production, we were able to ship.

Speaker Change: over $100 million of HBM revenue, and we remain focused on our goals and remain confident about our goals of delivering several hundred million dollars of revenue in fiscal 24 and

Speaker Change: multiple hundred billions of dollars of revenue in fiscal 25 and getting to our share to be in line with our share for HBM to be in line with our DRAM share sometime in 2025. So of course, our yield assumptions are baked in in all of that. And, you know, we look to...

Sanjay Mehrotra: And, you know, we look to continue to work on all aspects of ramping up our capacity. And, of course, we expect to improve yields as we go forward. Again, that is typical of any new technology, any new product that you ramp up.

Speaker Change: Continue to work on all aspects of ramping up our capacity, and of course, we expect to improve yields as we go forward. Again, that is typical of any new technology, any new product that you ramp up.

Mark Murphy: So that's what we remain focused on. And regarding the gross margin comment, maybe Mark can add some color. But as I mentioned earlier, the gross margin is accretive not only to our corporate margins, but it is also accretive to our DRAM margins. And our DRAM margins, as you know, tend to be higher than our corporate margins, which are, you know, lower because of the lower margins in NAND generally in the industry. It is it is helping to drive continued gross margin expansion through 20, Okay, got it. That's helpful.

Speaker Change: So that's what we remain focused on.

Speaker Change: And regarding the gross margin comment, maybe Mark can add some color, but as I mentioned earlier, the gross margin is accretive not only for

Mark Murphy: to our corporate margins, but it is also accretive to our DRAM margins, and our DRAM margins, as you know, tend to be higher than our corporate margins, which are lower because of the lower margins in NAND, generally in the industry.

Unknown Executive: It is helping to drive continued gross margin expansion through 25.

Mark Murphy: It is helping to drive continued gross margin expansion through 25.

Toshiya Hari: And then, as my follow-up, maybe one for Mark on CapEx. So you're guiding fiscal year 25 up materially. You know, given some of the hints that you've provided, you know, maybe you're looking at a mid-teens billion dollar number for fiscal 25. I know more than half of that or half of that is coming from greenfield investments in the US, but how should we be thinking about your bid supply growth? In fiscal 25 or calendar 25?

Toshiya Hari: Maybe one from Mark on tap-acts, sister guiding fiscal year 25 of material. You know, given some of the hints that you've provided, you know, maybe you're looking at a mid-team $1 billion number for fiscal 25. I know more than half of that are happening. That is coming from the green field investments in the U.S.

Speaker Change: Okay, got it. That's helpful. And then as a follow-up, maybe one for Mark on CapEx, since you're guiding fiscal year 25 up materially,

Speaker Change: You know, given some of the hints that you've provided, you know, maybe you're looking at a mid-teens billion-dollar number for fiscal 25.

Speaker Change: I know more than half of that or half of that is coming from the Greenfield investments in the U.S., but how should we be thinking about your bid supply growth in fiscal 25 or calendar 25? Should we expect you guys to grow, you know, more or less in line with...

Unknown Executive: But how should we be thinking about your bid to buy growth in fiscal 25 with calendar 25? Should we respect you guys to grow, you know, more or less in line with the demand sazer if you have career in demand, mid-teams, and high teams, respectively, or do you expect to underserved relative to those relative to those ranges in fiscal 25?

Mark Murphy: Should we expect you guys to grow, you know, more or less in line with the demand pager you have for DRM and NAND mid-teens and high-teens, respectively? Or do you expect to undership relative to those relative to those ranges in fiscal 25? Thank you. Yeah, we do. Good questions, Toshiya.

Speaker Change: The demand pager you have for DRM and NAND, mid-teams and high-teams respectively, or do you expect to undershift relative to those ranges in fiscal 25? Thank you.

Sanjay Mehrotra: Thank you. Yeah, we, uh, good questions, Toshiya. And, you know, you're, you're, you're view on capex.

Mark Murphy: And yeah, your, your view on CapEx, you know, we've given enough that, you know, we don't want to guide revenue for 25. Because we, you know, we'll do that at a future date, by quarter. But, but we do expect a material increase year over year. For the quarter, sequentially, we'll see a, you know, meaningful step up. Yeah, to your question on, you know, we are very constrained on bits, bit production.

Speaker Change: Yeah, we, uh, good questions, uh, Toshiya, and, and, you know, your, your, your view on CapEx, um, you know, we, we've given enough that, you know, we don't want to guide revenue for 25 because we, you know, we'll, we'll do that at a future date, uh, by quarter.

Sanjay Mehrotra: You know, we’ve given enough that, you know, we don’t want to guide revenue for 25 because we, you know, we’ll do that at a future date, uh, by quarter. But, um, but we do expect, uh, you know, a, a material increase year over year. Uh, for the quarter sequentially, we'll see us, you know, a meaningful step up, um, you know, we were, we were at 3 billion, um, you know, we increased from 2.1 to 3 billion, third quarter to fourth quarter a guide. Um, I would, I would characterize that both on a dollar and percent basis is more than meaningful.

Speaker Change: But, but we do expect a, you know, a material increase.

Speaker Change: year over year. For the quarter, sequentially, we'll see a meaningful step up. And we were at $3 billion. We increased from $2.1 to $3 billion, third quarter to fourth quarter guide.

Speaker Change: I would, I would characterize that both on a dollar and percent basis is more than meaningful. So, so it'd be less than that sequentially, but, you know, but we are, are spending, spending more.

Sanjay Mehrotra: So, um, so it'd be less than that, um, sequentially, but, you know, um, but we are spending more.

Sanjay Mehrotra: Um, you know, to your, to your question on, um, you know, we are very constrained on bits. Um, a bit production and, um, you know, uh, so we will, you know, as I mentioned in my earlier comments, we will certainly see inventory levels come down.

Mark Murphy: And, you know, as I mentioned in my earlier comments, we will certainly see inventory levels come down. In fact, we expect to be approaching target inventory levels by the end of 2025. Thank you.

Speaker Change: Yeah, to your to your question on

Speaker Change: Yeah, we are very constrained on bits.

Speaker Change: You know, so we will.

Speaker Change: You know, as I mentioned in my earlier comments, we will certainly see inventory levels come down. In fact, we expect to be approaching target inventory levels by the end of 2025.

Sanjay Mehrotra: In fact, we expect to be, uh, approaching target inventory levels by the end of 2025.

Thomas O'malley: And our next question comes from the line of Thomas O'Malley from Barclays. Your question, please? Hey, guys, thanks for taking my question. This is for Sanjay or Mark.

Unknown Executive: Hey, hand. Our next question comes from the line of Thomas Olmattley from Barclays. Your question, please.

Speaker Change: Thank you.

Speaker Change: Thank you. And our next question comes from the line of Thomas O'Malley from Barclays. Your question, please.

Sanjay Mehrotra: So you've given us the fiscal year 25 kind of company guidance of several billion in HBM, and then you kind of talked about the share that you're getting to is equivalent to that of DRAM. So you kind of solve for that market, the low teens, the total HBM market. I just kind of want to understand. What's your view of the suppliers to that market? As it stands today, it seems like there are really two major suppliers. When you look at the out year, do you think that number changes if there are additional qualifications?

Toshiya Hari: Hey, guys. Thanks for taking my question. This is for Sanjay or Mark. So, you've given us the fiscal year 25 kind of company guidance of several billion in HBM. And then you've kind of talked about the share that you're getting to is equivalent to that of DRAM. So, you kind of saw for that market, low teens total HBM market. I just kind of want to understand, what's your view of the suppliers to that market? Um, as it stands today, it seems like there's really two major suppliers. When you look at the out year, do you think that number changes if there's additional qualifications?

Thomas O'malley: Hey guys, thanks for taking my question. This is for Sanjay or Mark.

Speaker Change: You've given us the fiscal year 25 kind of company guidance of several billion in HVM, and then you've kind of talked about the share that you're getting to is equivalent to that of DRAM. So you kind of solve for that market, low teens, total HVM market. I just kind of want to understand

Speaker Change: What's your view of...

Speaker Change: The suppliers to that market. As it stands today, it seems like there's really two major suppliers. When you look at the out year, do you think that number changes if there's additional qualifications?

Sanjay Mehrotra: Would that number change if you were to have a third qualification, aka the market being bigger? And how did you kind of come up with that total market numbers, that kind of a bottoms-up accelerator forecast, but just kind of how you're thinking about the market, and did that change, or is it contingent upon the qualifications of some of your competitors? Well, as we have said before, that we see the CAGR for HBM growth, you know, in terms of bid growth, to be well above 50% over the next few years.

Toshiya Hari: Um, would that number change? Uh, if you were to have a third qualification, aka the market be bigger? And, you know, how did you kind of come up with that total market? Um, numbers, that kind of bottoms up accelerator forecast. But just kind of how you're thinking about the market, and did that change? Or is it contingent upon qualifications of some of your competitors?

Speaker Change: Would that number change if you were to have a third qualification, a.k.a. the market be bigger, and how did you kind of come up with that total market numbers, that kind of a bottoms-up accelerator forecast, but just kind of how you're thinking about the market, and did that change, or is it contingent upon qualifications of some of your competitors?

Sanjay Mehrotra: Rivers. Well, as we have said before, that we see the caggers for HBM growth, you know, in terms of bit growth, caggers to be well above 50% over the next few years. So, you know, certainly HBM is a strong growth driver, and again, you know, as we increase our mix of HBM going forward, it will, of course, be, you know, continuing to be excretive to our financial performance, including margins. And we have pleased that with the strong performance that we have, you know, we are sold out for 25 as well, with overwhelming part of our output already committed in terms of pricing.

Sanjay Mehrotra: So, you know, certainly, HBM is a strong growth driver. And again, as we increase our mix of HBM going forward, it will, of course, continue to be accretive to our financial performance, including margins. And we are pleased that with the strong performance that we have, you know, we are sold out for 25 as well, with an overwhelming part of our output already committed in terms of pricing. So, you know, that points to a strong position that we have in terms of continuing to work toward achieving our goal of getting our HBM market share to be in line with DRAM share sometime in 2025.

Speaker Change: Well, as we have said before that we see the CAGR for HBM growth.

Speaker Change: In terms of bit growth, Kaggle to be well above 50% over the next few years. So, you know, certainly HBM is a strong.

Speaker Change: Growth Driver and again, you know, as we increase our mix of HBM going forward, it will of course be, you know, continuing to be accretive to our financial performance, including margins.

Speaker Change: And we are pleased that with the strong performance that we have.

Speaker Change: We are sold out for 2025 as well with an overwhelming part of our output already committed in terms of pricing. So that points to a strong position that we have in terms of continuing to work toward achieving our goal of getting to our HBM market share to be in line with DRAM share sometime in 2025.

Sanjay Mehrotra: So, you know, that points to a strong position that we have in terms of continue to work toward achieving our goal of getting to our HBM market share to be in line with the land share sometime in 2025. And of course, you know, we are working with a broad range of customers in qualifications, and next year we plan to be shipping to a broader set of customers. Having said all of that, no question that HBM is a complex product for our customers to qualify as well. It's a highly resource-intensive, not just for us, but for our customers as well.

Sanjay Mehrotra: And of course, you know, we are working with a broad range of customers in qualifications. And next year, we plan to be shipping to a broader set of customers. Having said all of that, there is no question that HBM is a complex product for our customers to qualify as well.

Speaker Change: And of course, you know, we are working with a broad range of customers in qualifications and next year we plan to be shipping to a broader set of customers.

Sanjay Mehrotra: It's highly resource intensive, not just for us, but for our customers as well. And this is where we think that our strong product position, highlighting again those attributes of 30% better power than the nearest competitor, and better performance, and really high quality here positions us as well when customers work in with those resource intensive qualifications for Micron. And that's what, you know, we are already seeing in terms of our engagement. So we feel pretty good about our plans here for HBM. Super helpful.

Speaker Change: Having said all of that, no question that HBM is a complex product for our customers to qualify as well. It's highly resource intensive, not just for us, but for our customers as well. And this is where we think that our strong product position...

Sanjay Mehrotra: And this is where we think that our strong product position, highlighting again those attributes of 30% better power than nearest competitor and a better performance and really high quality, he has positions as well when customers work in the source intensive qualifications for Micron. And that's what, you know, we are already seeing in terms of other engagement. So, we feel pretty good about our plans here for HBM.

Speaker Change: Highlighting again those attributes of 30% better power than nearest competitor and a better performance and really high quality here positions as well when customers work in with those resource intensive qualifications

Speaker Change: for Micron. And that's what, you know, we are already seeing in terms of our engagement. So we feel pretty good about our plans here for HBM.

Sanjay Mehrotra: And then just switching gears over to the NAND side of things. Obviously, you had a competitor out in the market talking about kind of run rate industry CapEx and kind of talking about the change in industry architecture, maybe not scaling as quickly or as capital intensively as you have in the past. You obviously are talking about CapEx; a lot of your CapEx next year is going towards Greenfield and HBM. Could you talk about the remainder of that CapEx? Could you give us any color on the DRAM or NAND split between that?

Unknown Executive: Super helpful. And just switching gears over to the the names out of things.

Speaker Change: Super helpful, and then just switching gears over to the NAND side of things.

Toshiya Hari: Obviously, you had a competitor out in the market talking about kind of run rate industry capex and kind of talking about the change in industry architecture, maybe not scaling as quickly or as capital intensively as you had in the past. You obviously are talking about CapEx. A lot of your capex next year is going towards Greenfield and HBM. Could you talk to the remainder of that capex? Could you give us any color on DRAM or NAND split between that? And then do you agree with, in this instance, there was Western Digital talking about capital intensity longer term on the NAND side?

Speaker Change: Obviously, you had a competitor out in the market talking about kind of run rate industry CapEx and kind of talking about the change in industry architecture, maybe not scaling as quickly or as capital intensively as you have in the past.

Speaker Change: You obviously are talking about CapEx. A lot of your CapEx next year is going towards Greenfield and HBM.

Speaker Change: Could you talk to the remainder of that CapEx?

Sanjay Mehrotra: And then do you agree with, in this instance, it was Western Digital talking about capital intensity longer term on the NAND side? Do you agree that maybe, structurally, you'll see a lower investment threshold in the future to kind of continue to maintain what the industry needs? So, you know, for us, certainly, our CAPEX is dominated by our DRAM related CAPEX. That's, you know, certainly HBM because it's growing as a mixed in the industry, and HBM is capital intensive when it comes to unique clean room requirements for HBM, and in packaging and assembly, as well as, you know, test equipment.

Speaker Change: Could you give us any color on DRAM or NAND split between that? And then do you agree with, in this instance, it was Western Digital talking about capital intensity longer term on the NAND side, do you agree that maybe structurally you'll see a lower investment threshold in the future to kind of continue to maintain what the industry needs?

Toshiya Hari: Do you agree that maybe structurally you'll see a lower investment threshold in the future to kind of continue to maintain what the industry needs?

Sanjay Mehrotra: So, you know, for us, you know, certainly our capex is dominated by our DRAM related capex, you know, that's, you know, certainly HBM because it's growing as makes in the industry and HBM is capital intensive. Then it comes to any clean room requirements for HBM and in packaging in the assembly as well as, you know, test equipment. So our capex is dominated by that as well as to meet the future requirements in the second half of this decade, and that involves the construction of the fabs. So, NAND capex is, you know, certainly, a much smaller portion of our total capex, and we have a very strong technology position with our NAND and strong portfolio that you see, and we are continuing to shift that portfolio toward high value solutions as well.

Speaker Change: So, you know, for us, you know, certainly our CapEx.

Speaker Change: is dominated by our DRAM related CapEx, you know, that's, you know, certainly HBM.

Speaker Change: because it's growing as mixed in the industry and HBM is capital intensive when it comes to unique clean room requirements for HBM and in packaging and assembly as well as you know test

Sanjay Mehrotra: So, our CAPEX is dominated by that, as well as meeting future requirements in the second half of this decade, and that involves the construction of the fabs. So, NAND CAPEX is, you know, certainly a much smaller portion of our total CAPEX, and we have a very strong technology position with our NAND and a strong portfolio that you see, and we are continuing to shift that portfolio toward higher-value solutions, as well.

Speaker Change: Equipment. So our CAPEX is dominated by that, as well as to meet the future requirements.

Speaker Change: In the second half of this decade, and that involves the construction of the fabs. So NAND CAPEX is, you know, you know, certainly

Speaker Change: A much smaller portion of our total CAPEX. And we have a very strong technology position with our NAND and strong portfolio that you see. And we are continuing to shift that portfolio toward higher value solutions as well. So we certainly will remain extremely disciplined when it comes to NAND as well in terms of driving the CAPEX. And we will be disciplined in terms of driving our technology node transitions.

Sanjay Mehrotra: So, we certainly will remain an extremely disciplined when it comes to NAND as well in terms of driving the capex and we will be disciplined in terms of driving our technology, no transitions in the timing of no transitions, you know, helpful given the bit growth that you get from those transitions to, you know, slow down, the timing of those, the cadence of those, no transitions, so that, you know, your bit growth CAGR versus the gain of bits that you get from the vapors can be managed well. These are the kind of things we have very much focus on in order to maintain a good supply discipline, maintain supply growth that is very much in line with the demand growth and managing our capex here, prudently, but yes, I mean overall our capex is in NAND is significantly smaller, but, you know, we remain extremely disciplined, you know, focus on managing our supply growth in NAND with demand growth.

Sanjay Mehrotra: I think it is, you know, certainly helpful, given the bid growth that you get from those transitions, to, you know, slow down the timing of those – the cadence of those node transitions, so that, you know, your bid growth CAGR versus the gain of bids that you get from the wafers can be managed well.

Speaker Change: in the timing of node transitions across the industry. I think it is certainly helpful given the big growth that you get from those transitions to slow down the timing of those, the cadence of those node transitions.

Speaker Change: So that, you know, your bid growth CAGR versus the gain of bids that you get from the wafers.

Sanjay Mehrotra: These are the kind of things we are very much focused on in order to maintain good supply discipline, maintain supply growth that is very much in line with demand growth, and manage our CAPEX here prudently. But, yes, I mean, overall, our CAPEX in NAND is significantly smaller, but, you know, we remain extremely disciplined, focused on managing our supply growth in line with demand there. And again, I want to point out that, with NAND, technology transitions are sufficient to meet demand growth.

Speaker Change: can be managed well. These are the kind of things we are very much focused on in order to maintain a good supply discipline, maintain supply growth that is very much in line with the demand growth and managing our CapEx here prudently. But yes, I mean overall our CapEx is...

Speaker Change: In NAND is significantly smaller, but you know, we remain extremely disciplined, you know, focused on managing our supply growth in line with demand there.

Sanjay Mehrotra: And again, I want to point out that, you know, with manned technology, transitions are sufficient to meet the demand growth.

Speaker Change: And again, I want to point out that, you know, with NAND, technology transitions are sufficient.

Sanjay Mehrotra: We do not meet the new clean room, the new greenfield fab, the kind that are needed in DRAM and, you know, HBM. And the trade ratio of HBM with standard DRAM is a factor in the green field requirements only also.

Sanjay Mehrotra: We do not need the new clean room, the new greenfield fabs, the kind that are needed in DRAM. And, you know, HBM and the trade ratio of HBM with standard DRAM are also a factor in the greenfield requirements.

Speaker Change: To meet the demand growth, we do not need the new clean room, the new greenfield fabs, the kind that are needed in DRAM. And you know, HBM and the trade ratio of HBM with standard DRAM is a factor in the greenfield requirements only also.

Unknown Executive: Thank you. One moment for our next question.

Sanjay Mehrotra: Thank you. One moment for our next question. And our next question comes in the line of Christopher Danely from Citi. Your question, please. Hey, thanks, guys. So I think you mentioned you're signing up some customers to long term contracts. You know, given your belief that the pricing is going to keep going up, why sign people up to long term contracts and potentially, you know, miss out, Well, the long term contracts, you know, really help us and customers get closer, not only with respect to, let's say, supply or pricing discussions as may be relevant to our various customer contracts, but also with respect to the technology roadmap, the product roadmap, the timing of the supply, and they are very helpful factors in building a close relationship with the customers.

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

Christopher Danely: And our next question comes online from Christopher Danely from City, your question please. Hey, thanks, guys. So I think you mentioned you're signing up some customers to long-term contracts. You know, given your belief that the pricing is going to keep going up.

Sanjay Mehrotra: And you can see that, you know, we are pointing to, you know, a substantial revenue record in 2025, of course, leveraging some of these contracts that we have put in place, and we have also pointed to a significant improvement in profitability. So, I think we are well positioned in these contracts with respect to not only the supply and demand fundamentals but also with respect to the financial aspects. Great. This is a quick one for Mark. Mark was the Taiwan Quake Impact: Not a material impact, Chris. It was just me.

Speaker Change: And our next question comes to the line of Christopher Danely from Citi. Your question, please.

Christopher Brett Danely: Hey, thanks guys. So I think you mentioned you're signing up.

Christopher Brett Danely: Some customers to long-term contracts.

Sanjay Mehrotra: Why sign people up to long-term contracts? And potentially, you know, miss out on some of the increased pricing, or is there some potential for wiggle room on pricing with the contracts and it's more of a unit basis, just curious there. Well, the long-term contracts, you know, really help us and customers get closer, not only with respect to, let's say, supply or pricing discussions as maybe relevant to our various customer contracts, but also with respect to the technology roadmap, the product roadmap, the timing of the supply, and they are very helpful factors in building a close relationship with the customers.

Christopher Brett Danely: You know, given your belief that the pricing is going to keep going up, why sign people up to long-term contracts and potentially, you know, miss out on some of the increased pricing or is there some potential for wiggle room on pricing with the contracts and it's more of a unit basis? I'm just curious there.

Speaker Change: Well, the long-term contracts, you know, really help us and customers get closer, not only with respect to, let's say, supply or pricing discussions as may be relevant to our various customer contracts, but also with respect to the technology roadmap, the product roadmap, the timing of the supply, and they are very helpful factors in building a close relationship with the customers.

Sanjay Mehrotra: And you can see that, you know, we are pointing to, you know, substantial revenue record in 2025. Of course, you know, leveraging some of these contracts that we have put in place, and we have also pointed to a significant improvement in profitability. So I think we are well positioned in these contracts with respect to not only the supply and demand fundamentals, but also with respect to the financial aspects.

Speaker Change: And you can see that, you know, we are pointing to, you know, a substantial revenue record in 2025, of course, you know, leveraging some of these contracts that we have put in place, and we have also pointed to a significant improvement in profitability. So I think we are well positioned in these contracts with respect to not only the supply.

Speaker Change: and Demand Fundamentals, but also with respect to the financial aspects.

Unknown Executive: Great. Thanks, Sanjay.

Mark Murphy: And then just a quick one for Mark. Mark, was the Taiwan quake impact limited to the May quarter, or is it impacting the current quarter as well? Not a material impact, Chris. Just made, all right, thanks.

Speaker Change: Great, thanks Sanjay. And then just a quick one for Mark. Mark, was the Taiwan quake impact limited to the May quarter or is it impacting the current quarter as well?

Speaker Change: Not a material impact, Chris.

Harlan Sur: Thank you. And our next question comes from line of Harlan, Sir, from JP Morgan. Your question, please. Good afternoon. Thanks for taking my question. Enterprise SSDs are seen really strong, the man pull from AI workloads, right? The team has driven significant sharegames in enterprise that was the just over the past few quarters. I think encounter Q one. The Micron was the number three global share leader in enterprise SSD. I think it's not about 20, 25% of your overall and business. I mean, this is a position that we've never seen Micron in the floor.

Speaker Change: That was just me. All right, thanks.

Christopher Brett Danely: All right, thanks. And our next question comes from the line of Harlan Sur from J.P. Morgan. Your question, please. Yeah, good afternoon, thanks for taking my question. Enterprise SSDs are seeing really strong demand pull from AI workloads, right? The team has driven significant share gains in enterprise SSDs just over the past few quarters. I think in calendar Q1, Micron was the number three global share leader in enterprise SSD. I think it's now about 20, 25% of the overall NAND business. I mean, this is a position that we've never seen Micron in before.

Speaker Change: Thank you.

Speaker Change: And our next question comes from the line of Harlan Sur from J.P. Morgan. Your question, please.

Harlan L. Sur: So I think the first question is, are enterprise SSD gross margins accretive to your overall NAND gross margins? And then secondly, I saw your next-gen PCIe Gen 5 SSD demo at NVIDIA's GTC conference, pretty significant performance uplift on AI workloads versus your Gen 4 SSD. So are you qualifying these next-gen Gen 5 SSDs for AI applications?

Harlan L. Sur: Good afternoon, thanks for taking my question. Enterprise SSDs are seeing really strong demand pull from AI workloads, right? The team has driven significant share gains in enterprise SSD just over the past few quarters, I think in calendar Q1.

Speaker Change: I think Micron was the number three.

Speaker Change: Global Share Leader at Enterprise SSD. I think it's now about 20-25% of your overall NAND business.

Harlan L. Sur: So I think first question is. Our enterprise SSD gross margins are creative to your overall nine gross margins. And then secondly, I saw your next gen PCIe Gen 5 SSD demo and Nvidia's GTC conference. Pretty significant performance up list on AI workloads versus your Gen 4 SSD. So are you qualifying these next Gen 5 SSDs for AI applications?

Speaker Change: I mean, this is a position...

Speaker Change: that we've never seen Micron in before. So I think first question is.

Speaker Change: or Enterprise SSD Gross Margins.

Speaker Change: Accretive to your overall non-gross margins.

Speaker Change: And then secondly, I saw your next-gen PCIe Gen 5 SSD demo at NVIDIA's GTC conference. Pretty significant performance uplift on AI workloads versus your Gen 4 SSDs. So are you qualifying these next-gen Gen 5 SSDs for AI applications?

Sanjay Mehrotra: When do you expect to just want to understand the sustainability of your strong share position here? Well, thank you, Harlan, for recognizing the strong momentum that Micron's data center SSDs have, and you know, certainly our data center SSDs are accretive to our overall man margins, and we have really great products. I already highlighted in my prepared remarks where we saw, you know, tripling of bits that we shipped. They are 32 layer land AI SSDs; you know, going absolutely toward AI data center applications, and we have a broad set of customers that we are working with in terms of growing our share.

Sanjay Mehrotra: When do you expect to shift? I just wanted to understand the sustainability of your strong share position here. Well, thank you, Harlan, for recognizing the strong momentum that Micron's data center SSDs have. And, you know, certainly, our data center SSDs are accretive to our overall NAND margins, and we have really great products. I already highlighted in my prepared remarks that we saw, you know, a tripling of bits that we shipped with our 32-layer NAND AI SSDs, going absolutely toward AI data center applications.

Speaker Change: When do you expect to shift? Just wanted to understand the sustainability of your strong share position here.

Speaker Change: Well, thank you, Harlan, for recognizing the strong momentum that Micron's...

Speaker Change: Data Center SSD have. And, you know, certainly our data center SSDs are accretive to our overall man margins. And we have really great products. I already highlighted in my prepared remarks that we saw, you know, tripling of bits that we shipped.

Speaker Change: With are in 32 layer NAND, AI, SSDs, you know, going absolutely toward AI data center applications. And we have broad set of customers that we are working with, in terms of growing our shares. So we see when we talk about, you know, sequentially we had

Sanjay Mehrotra: And we have a broad set of customers that we are working with in terms of growing our share. So when we talk about, you know, sequentially, we had, you know, a 50% increase in revenue for our data center products, of course, that includes the benefit of our strong data center SSD roadmap. And, yes, I mean, we will, of course, continue to work with our Gen 5 SSDs, you know, in terms of working with customers for qualifying, and, you know, not prepared to discuss at this point specifics regarding timing of, you know, some of the roadmap that is in front of us for shipping.

Sanjay Mehrotra: So we see when we talk about, you know, sequentially, we had, you know, 50% increase in revenue for our data center products. Of course, that includes the benefit of our strong.

Speaker Change: You know, 50% increase in revenue for our data center products, of course.

Sanjay Mehrotra: Data center SSD roadmap, and yes, I mean we will of course continue to work with our Gen 5 SSDs, you know, in terms of working with customers for qualifying and, you know, not prepared to discuss at this point specifics regarding timing of, you know, some of the roadmap that is in front of us for shipments. So yes, in terms of sustainability of the strong improvement to share, you know, we are definitely with our strong product portfolio counting on it, and this will our SSD momentum data center SSD momentum will absolutely contribute also toward my remarks that I said that we will increase our mix of data center revenue in fiscal year 25 as well.

Speaker Change: That includes the benefit of our strong.

Speaker Change: Data Center SSD Roadmap. And yes, I mean, we will, of course, continue to work with our Gen 5 SSDs, you know, in terms of working with customers.

Speaker Change: For qualifying and you know not prepared to discuss at this point specifics regarding timing of you know some of the roadmap that is in front of us for shipments.

Sanjay Mehrotra: So yes, in terms of sustainability of the strong improvement to share, you know, we are definitely counting on it with our strong product portfolio. And this will, our SSD momentum, data center SSD momentum, will absolutely contribute also toward my remarks that I said that we would increase our mix of data center revenue in fiscal year 25 as well. Of course, HBM, and high-density DEMs, you know, these will, of course, be a big part of it, but also data center SSDs are going to be another big part of our growth in fiscal 2025 related to data center revenue.

Speaker Change: So yes, in terms of sustainability of the strong improvement to share, you know, we are definitely with our strong product portfolio counting on it.

Speaker Change: And this will, our SSD momentum, data center SSD momentum, will absolutely contribute also toward my remarks that I said that we will increase our mix.

Sanjay Mehrotra: Of course, HBM, high density dams. You know, these will of course be a big part of it, but also data center SSDs is going to be another big part of our growth in fiscal 2025 related to data center revenue.

Speaker Change: of Data Center Revenue in Fiscal Year 2025 as well. Of course, HBM, high-density DEMs, you know, these will, of course, be a big part of it, but also data center SSDs is going to be another big part of our growth in Fiscal 2025-related.

Mark Murphy: I would just add Harlow, I would just add Harlow and that the storage business unit delivered operating profit in the quarter. Oh, perfect.

Speaker Change: to Data Center Revenue.

Speaker Change: I would just add, Harlan, that the Storage Business Unit delivered operating profit in the quarter.

Unknown Executive: Thank you very much and insightful.

Speaker Change: Perfect. Thank you very much. Insightful.

Unknown Executive: Thank you.

Unknown Executive: This does conclude the question and answer session, as well as today's program. Thank you, ladies and gentlemen. If you're participation, you may now disconnect.

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.

Unknown Executive: Good day.

Unknown Executive: Thank you.

Unknown Executive: Thank you very much.

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Speaker Change: Satsang with Mooji

Speaker Change: [inaudible]

Speaker Change: Thank you for standing by. Welcome to Micron Technology's fiscal third quarter 2024 financial results conference call.

Mark Murphy: I would just add that the storage business unit delivered operating profit in the quarter. Oh, perfect. Thank you very much.

Speaker Change: 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'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.

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.

Speaker Change: As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Satya Kumar, Investor Relations. Please go ahead, sir.

Operator: .. .. .. .. .. .. .. .. ....

Speaker Change: Thank you and welcome to Micron Technology's fiscal third quarter 2024 financial conference call.

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

Operator: Copyright 2021 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. Copyright 2019 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. Thank you for standing by.

Operator: Welcome to Micron Technology's fiscal third quarter 2024 financial results conference 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'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again.

Speaker Change: 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.

Satya Kumar: As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Satya Kumar, investor relations. Please go ahead, sir.

Speaker Change: Today's discussion of financial results is 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.

Unknown Executive: A reconciliation of gap the non-gap 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 Micron Tech.

Unknown Executive: As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, market and pricing trends and drivers, the impact of new technologies such as AI, product ramp plans and market position, expected results and guidance, and other matters. These forward-looking statements are subject, 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.

Satya Kumar: Thank you, and welcome to Micron Technology's fiscal third 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. Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified.

Speaker Change: These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today.

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

Unknown Executive: We are under no duty to update any of the forward-looking statements to confirm these statements to actual results.

Sanjay Mehrotra: With that, let me turn the call over to Sanjay.

Sanjay Mehrotra: Thank you, Satya.

Satya Kumar: 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 Micron Tech.

Sanjay Mehrotra: Good afternoon, everyone. I am pleased to report that Micron delivered fiscal Q3 revenue, gross margin, and EPS all above the high end of guidance ranges. Micron drove robust price increases as industry supply-demand conditions continue to improve. This improved pricing combined with our strengthening product max resulted in increased profitability across all our end markets. In data center rapidly growing AI demand enabled us to grow our revenue by over 50% on a sequential basis, and we grew share in high margin AI-related product categories such as HBM, high-capacity dams, and data center SSDs. Our mix of data center revenue is on track to reach record levels in fiscal 2024 and to grow significantly from there in fiscal 2025.

Speaker Change: With that let me turn the call over to Sanjay. Thank You Satya. Good afternoon everyone. I'm pleased to report that Micron delivered fiscal Q3 revenue, gross margin, and EPS all above the high end of guidance ranges.

Satya Kumar: As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, market and pricing trends and drivers, the impact of new technologies such as AI, product ramp plants 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 those made today. We refer you to the documents we filed with the SEC, including our most recent Form 10-Q and the upcoming Form 10-K, for a discussion of risks that may affect our future results.

Sanjay Mehrotra: With that, let me turn the call over to Sanjay. Thank you, Satya. Good afternoon, everyone. I'm pleased to report that Micron delivered fiscal Q3 revenue, gross margin, and EPS all above the high end of guidance ranges. Micron drove robust price increases as industry supply and demand conditions changed.

Satya Kumar: Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievement. Furthermore, we are under no duty to update any of the forward-looking statements to conform these statements to actual results.

Sanjay Mehrotra: Robust AI-driven demand for data center products is causing tightness on our leading edge nodes. Consequently, we expect continued price increases throughout calendar 2024 despite only steady near-term demand in PCs and smartphones. As we look ahead to 2025, demand for AI PCs and AI smartphones and continued growth of AI in the data center create a favorable setup that gives us confidence that we can deliver a substantial revenue record in fiscal 2025 with significantly improved profitability, underpinned by our ongoing portfolio shift to higher margin products.

Sanjay Mehrotra: Micron is ramping the industry's most advanced technology nodes in both DRAM and NAND. Over 80% of our DRAM-based production is now on leading-edge one alpha and one beta nodes. Over 90% of our NANDBIT production is on our two leading-edge NAND nodes. One gamma DRAM pilot production using extreme ultraviolet lithography is progressing well, and we are on track for volume production in calendar 2025. Our next generation NAND node is on track with high volume production plans for calendar 2025. We experienced some operational disruptions after the recent Taiwan earthquake, but were able to recover quickly thanks to diligent efforts from Micron Taiwan team members working together with our global operations teams. Despite impacts from the earthquake, we now expect our fiscal 2024 DLAM front end cost reductions excluding HBM to be in the high single-digit percentage range.

Sanjay Mehrotra: We expect our fiscal 2024 NAND front-end cost reductions to be in the low-teens percentage range. These cost reductions are supported by our industry-leading one beta DLAM and 232-layer NAND nodes.

Sanjay Mehrotra: During the quarter, Micron signed a non-binding preliminary memorandum of terms or PMT with the U.S. government for $6.1 billion in grants under the Chips and Science Act. These grants support our planned leading-edge memory manufacturing expansions in Idaho and New York. Federal and state incentives, projected power cost advantages, and R&D co-location synergies will enable Micron to achieve cost competitive leading-edge memory manufacturing in the United States when these projects reach efficient manufacturing scale. Fab construction in Idaho is underway, and we are working diligently to complete the regulatory and permitting processes in New York. This additional leading-edge greenfield capacity, along with continued technology transition investments in our Asia facilities, is required to meet long-term demand in the second half of this decade and beyond.

Sanjay Mehrotra: These investments support our objectives to maintain our current bit share over time and to grow our memory bit supply in line with long-term industry bit demand. Micron retains flexibility under the PMT to manage construction and timing of supply growth in a manner that allows us to remain responsive to market conditions.

Sanjay Mehrotra: Now turning to our end markets. We are in the early innings of a multi-year race to enable artificial general intelligence or AGI, which will revolutionize all aspects of life. Enabling AGI will require training ever-increasing model sizes with trillions of parameters and sophisticated servers for influencing. AI will also permeate to the edge via AI PCs and AI smartphones, as well as smart automobiles and intelligent industrial systems. These trends will drive significant growth in the demand for DRAM and NAND, and we believe that Micron will be one of the biggest beneficiaries in the semiconductor industry of the multi-year growth opportunity driven by AI.

Sanjay Mehrotra: Most data center customer inventories have normalized, and demand from customers continues to strengthen. PC and smartphone customers have built additional inventories due to the rising price trajectory. The anticipated growth in AI PCs and AI smartphones, as well as the expectation of tight supply, as an increasing portion of DRAM and LAND output is dedicated to meeting and growing data center demands. Due to expectations for continued leading edge node tightness, we are seeing increased interest from many customers across market segments to secure 2025 long term agreements ahead of their typical schedule. In data center industry, server unit shipments are expected to grow in the mid to high single digits in calendar 2024, driven by strong growth for AI servers and the return to modest growth for traditional servers.

Sanjay Mehrotra: Micron is well positioned with our portfolio of HBM, D5, LP5, high capacity DEM, CXL, and data center SSD products. Recently, our customers have announced their long term AI server product roadmap with an annual cadence of new products that significantly improved capabilities for the next several years. Micron's technology and product leadership puts us in an excellent position to support this growth. Customers continue to provide feedback that our HBM 3E solution has 30% lower power consumption compared to competitors' solutions. Our HBM shipment ramp began in fiscal Q3, and we generated over $100 million in HBM 3E revenue in the quarter at margins accretive to DEM and overall company margins.

Sanjay Mehrotra: We expect to generate $700 million of revenue from HBM in fiscal 2024 and multiple billions of dollars in revenue from HBM in fiscal 2025. We expect to achieve HBM market share commensurate with our overall DEM market share sometime in calendar 2025. Our HBM is sold out for calendar 2024 and 2025, with pricing already contracted for the overwhelming majority of our 2025 supply. We are making significant strides towards expanding our HBM customer base in calendar 2025 as we design in our industry leading HBM technology with major HBM customers. We assembled our 12 high HBM 3E product and expect to ramp it into high volume production in calendar 2025 and increase and mix throughout 2025.

Sanjay Mehrotra: We have a robust roadmap for HBM and are confident we will maintain our technology leadership with HBM 4 and HBM 4E. Our next generations of HBM will provide further performance and capacity enhancements while we continue to evolve our industry-leading low power innovation. We achieved full validation on our 1 beta 32 gigabit monolithic die-based 128 gigabyte high-capacity server dem products and are on track to achieve several hundred million dollars of revenue from high-capacity dems in the second half of fiscal 2024. Additionally, we continue to see strong interest in our industry-leading one beta LPD-LAM in data center applications.

Sanjay Mehrotra: Data center SSD is in the midst of a strong demand recovery as customers have worked through their 2023 inventory. Hyper-scale demand is improving, driven primarily by AI training and inference infrastructure and supplemented by the start of a recovery of traditional compute and storage infrastructure demand. Micron is gaining share in data center SSDs as we reach new revenue and market share records in this important product category. During the quarter, we more than tripled bed shipments of our 232-layer-based 6500 30 terabyte SSDs, which offer best-in-class performance, reliability, and endurance for AI data lake applications. We continued our leadership and innovation by becoming the first NAND vendor to supply 200 plus layer QLC for the enterprise storage market.

Sanjay Mehrotra: In PC, unit volumes remain on track to grow in the low single-digit range for calendar 2024. We are optimistic that the planned Windows 10 end-of-life in 2025, the launch of Windows 12, and the introduction of new generation of AI PCs will accelerate the PC replacement cycles starting in late calendar 2024. The PC replacement cycles should gather momentum through calendar 2025 as new AI applications are rolled out.

Sanjay Mehrotra: During Computex Taiwan, we saw several announcements of next generation chipsets and AI PCs. These devices feature high-performance neural processing unit chipsets, and we expect these devices will have 40% to 80% more DRAM content than today's average PC. Microsoft's minimum system requirement for Co-Pilot Plus PCs such as the Surface Pro is 16 gigabyte of DRAM. We expect next generation AI PCs to make up a meaningful portion of total PC units in calendar 2025, growing each year until most PCs ultimately support next generation AI PCs specs. AI PCs are also likely to require higher performance and higher average capacity SSDs than traditional PCs, aligning well with our leading technology portfolio on our 232-layer NAND, with our performance 3500 SSD and our industry leading value QLC 2500 NVMe SSDs.

Sanjay Mehrotra: Turning to mobile smartphone unit volumes in calendar 2024, remain on track to grow in the low to mid single-digit percentage range. Leading smartphone OEMs recently announced new AI capabilities, and we are optimistic that delivering high-quality AI experiences can accelerate the smartphone's refresh cycle. Smartphones have tremendous potential for personalized AI capabilities that offer greater security in responsiveness when executed on device. Micron's leading LP5X is enabling the recent 12-gigabyte and 16-gigabyte AI phone releases at all Android tier 1 customers, representing a 50% to 100% increase over last year's flagship models. Micron's leading mobile solutions provide the critical performance, capacity, and power efficiency needed to unlock AI capability.

Sanjay Mehrotra: Our mobile DRAM and NAND solutions are now widely adopted in industry-leading flagship smartphones. In calendar Q1, we received recognition for being number one in quality by five of the world's leading smartphone OEMs. Qualifications are on track for our second generation, one beta LP5X products, and we see broadening use of our 232-layer NAND moving beyond flagship phones into high capacity, high and mid-tier phones.

Sanjay Mehrotra: Turning to auto and industrial. The automotive sector continues to experience robust demand for memory and storage, and Micron achieved a record quarter for automotive revenues. Car production volumes are returning to pre-pandemic levels, and broader adoption of intelligent digital cockpit and more advanced driver assistance capabilities are driving content growth. We anticipate further content growth as additional intelligence, including generative AI-based technologies, is adopted in vehicles. Micron continues to be a leader in automotive with high quality and industry first product introduction. In the fiscal third quarter, we launched the world's first multi-poor Gen 4 NVME SSD in support of next generation centralized compute architectures.

Sanjay Mehrotra: In industrial and retail consumer segments, which are a smaller part of our business, we are seeing some near-term demand uncertainty from our distribution partners and end customers. We remain confident in the long-term fundamentals in growth drivers of these businesses, especially with the increasing adoption of AI in a variety of applications.

Sanjay Mehrotra: Now turning to our market outlook. We forecast calendar 2024 bit-demand growth for the industry to be in the mid-teens percentage range for both DRAM and NAND. Over the medium term, we expect industry bit-demand growth cadres of mid-teens in DRAM and high-teens in NAND. Turning to supply. We expect calendar 2024 industry supply to be below demand for both DRAM and NAND. As discussed previously, the ramp of HBM production will constrain industry supply growth in non-HBM products. Industrywide, HVN3E consumes approximately three times the wafer supply as D5 to produce a given number of bits in the same technology node.

Sanjay Mehrotra: With increased performance and packaging complexity across the industry, we expect the trade ratio for HVN4 to be even higher than the trade ratio for HVN3E. We anticipate strong HVN demand due to AI combined with increasing silicon intensity of the HVN roadmap to contribute to tight supply conditions for DRAM across all markets. As the memory industry is still recovering from the challenging environment in 2023, this tight supply environment will help drive the considerable improvements in profitability and ROI that are needed to enable the investments required to support future growth. Micron's bit supply growth in fiscal 2024 remains below our demand growth for both DRAM and NAND.

Sanjay Mehrotra: Micron will continue to exercise supply and capex discipline and focus on improving profitability while maintaining our bit market share for DRAM and NAND. We continue to project we will end fiscal 2024 with low double-digit percentage less wafer capacity in both DRAM and NAND than our peak levels in fiscal 2022. We intend to use our existing inventory to drive a portion of the bit growth supporting our revenue in fiscal 2025 to enable the more optimized use of our capex investments. Micron's fiscal 2024 capex plan will be approximately 8 billion dollars, and WSE spending will be down year on year in fiscal 2024.

Sanjay Mehrotra: We expect to increase our capital spending materially next year, with capex around mid 30s percentage range of revenue for fiscal 2025, which will support HBM assembly and test equipment, fab and backend facility construction, as well as technology transition investment to support demand growth. The construction capex in the planned Idaho and New York greenfield fab in fiscal 2025 will be half or more of the expected increase in total capex. In fact, the growth in both Greenfield fab construction and HBM capex investments is projected to make up the overwhelming majority of the year-over-year capex increase. These fab construction investments are necessary to support supply growth for the latter half of this decade.

Sanjay Mehrotra: This Idaho fab will not contribute to meaningful bit supply until fiscal 2027, and the New York construction capex is not expected to contribute to bit supply growth until fiscal 2028 or later. The timing of future WSE spent in these fab will be managed to align supply growth with expected demand growth.

Mark Murphy: I will now turn it over to Mark for our financial thank you.

Mark Murphy: Thanks, John Jay, and good afternoon, everyone. Micron delivered strong results in fiscal Q3, with revenue, gross margin, and EPS above the high end of the guidance ranges provided in our last earnings call. Improving market conditions and strong price and cost execution drove the financial outperformance. Total fiscal Q3 revenue is $6.8 billion, up 17% sequentially and up 82% year-over-year. Fiscal Q3 DRAM revenue was approximately $4.7 billion, representing 69% of total revenue. DRAM revenue increased 13% sequentially, with fit shipments declining in the mid-single-digit percentage range, and prices increasing by approximately 20%. Fiscal Q3 NAND revenue was approximately $2.1 billion, representing 30% of Micron's total revenue.

Mark Murphy: NAND revenue increased 32% sequentially, with fit shipments increasing in the high single-digit percentage range, and prices increasing by approximately 20%.

Mark Murphy: Now, turning to revenue by business unit. Compute and networking business unit revenue was $2.6 billion, up 18% sequentially. DRAM data center revenue more than doubled year-over-year. Revenue for the mobile business unit was $1.6 billion, down 1% sequentially as a planned decline, and volume was partially offset by improved pricing. Embedded business unit revenue was $1.3 billion, up 16% sequentially driven by record revenue and automotive. Revenue for the storage business unit was $1.4 billion, up 50% sequentially, with growth across all end markets. We achieve record data center SSD revenue, which nearly doubled sequentially. The consolidated gross margin for Fiscal Q3 was approximately 28%, up over 8% sequentially, driven primarily by higher pricing and helped by product mix and cost reductions.

Mark Murphy: Excluding the effects of previously written down inventories on fiscal Q2 gross margin, the sequential improvement in fiscal Q3 would have been 15% knowledge points. As a reminder, previously written down inventories had no impact on fiscal Q3 gross margin and will not affect our gross margin moving forward. Operating expenses in fiscal Q3 were $976 million, up $17 million quarter over quarter. Continued spend discipline and ongoing operational efficiencies helped deliver operating expenses at the low end of the guidance range. We generated operating income of $941 million in fiscal Q3. Resulting in an operating margin of 14%, which was up 10 percentage points sequentially and up 53 percentage points from the year-ago quarter.

Mark Murphy: Fiscal Q3 adjusted EBIT dollars $2.9 billion, resulting in an EBITDA margin of 43%. Up 6 percentage points sequentially and up 30 percentage points, or $2.4 billion, from the year ago quarter. Fiscal Q3 taxes were $227 million, lower than expectations at the time of our guidance, driven by one-time discrete items. Non-GAAP diluted earnings per share in Fiscal Q3 was 62 cents compared to 42 cents in the prior quarter and a loss per share of $1.43 in the year-ago quarter. Fiscal Q3 non-GAAP EPS exceeded the high end of our guidance range by 10 cents, driven by better revenue and profitability.

Mark Murphy: Turning to cash flows and capital spending, our operating cash flows were $2.5 billion in fiscal Q3, representing 36% of revenue. Capital expenditures were $2.1 billion during the quarter, and we generated free cash flow of $425 million. Our Fiscal Q3 ending inventory was $8.5 billion or 155 days at a client of 5 days from the prior quarter. Our leading edge supply continues to be very tight for both DRAM and NAND. On the balance sheet, we held $9.2 billion of cash and investments at quarter end and maintained near $12 billion of liquidity when including our untapped credit facility.

Mark Murphy: Considering our ample liquidity, returned a free cash flow generation and strong outlook during the quarter, we repaid $650 million of debt maturing in November 2025. We ended the quarter with $13.3 billion in total debt, low net leverage, and a weighted average maturity on our debt of 23.1.

Mark Murphy: Turning to our outlook for the fiscal fourth quarter, we expect DRAM debt shipments to be flatish and NAND shipments to be up slightly in fiscal Q4. We forecast shipment growth to strengthen modestly in the November quarter. We project continued gross margin expansion. Pricing trends remain positive, supported by favorable supply-demand conditions. Portfolio mix will be an important contributor over time as HBM, high-capacity DIMS, data center SSDs, and other high-value products increase as a portion of our mix. The high mix for our leading edge nodes support front end cost reductions in line with our long term cost reduction CAGRs, excluding HBM on DRAM.

Mark Murphy: Keep in mind that a higher mix of HBM will offset non-HBM DRAM cost reduction. Actions, but HBM will be at a creative gross margins.

Mark Murphy: We forecast operating expenses to increase sequentially in the fiscal fourth quarter due to an increase in R&D program expenses and a non-recurring Q3 asset sale gained contemplated in our Q3 guidance. We estimate fiscal Q4 tax expense of approximately $320 million. For fiscal 2025, we estimate our non-GAAP tax rate to be in the mid-teens percent range. We project days of inventory outstanding to decline through fiscal 2025, and DIO to approach our target by the end of fiscal year 2025. We forecast capital expenditures to increase sequentially in the fiscal fourth quarter to approximately $3 billion. Despite this increase in CAPEX, we project continued positive free cash flow in fiscal Q4.

Mark Murphy: We expect full year fiscal 2024 CAPEX of around $8 billion. Record revenue and significantly improved profitability in fiscal 2025 will help support average quarterly CAPEX in fiscal 2025 to be meaningfully above the fiscal Q4 2024 level of $3 billion. We expect CAPEX around mid-30s percentage range of revenue for fiscal 2025, which will support HBM assembly and test equipment, FAV and back-end facility construction, as well as technology transition investment to support demand growth. As noted earlier, half or more of the expected CAPEX increase in fiscal 2025 will be to support U.S. Greenfield FAV construction. As we have noted in the past, the chips grants, ITC, and state incentives offset a significant portion of U.S.

Mark Murphy: fab CAPEX investments. Receipt of some of these incentive reimbursements occur well after when we incur the spend, resulting in higher CAPEX for a period while we ramp our Greenfield U.S. investments. Micro-on will remain disciplined in our capital spending and will modulate our WFE investments to grow BIT supply in line with industry demand.

Mark Murphy: With all these factors in mind, our non-GAAP guidance for the fiscal Q4 is as follows. We expect revenue to be $7.6 billion plus or minus $200 million. Gross margin to be in the range of 34.5%, plus or minus 100 basis points. And operating expenses to be approximately $1.06 billion plus or minus $15 million. We expect tax expenses of approximately $320 million. Based on a share account of approximately $1.1 billion shares, we expect EPS to be $1.8 per share plus or minus $8. In closing, marking conditions are improving with price increases driven by favorable supply demand trends and tightness on the leading edge.

Sanjay Mehrotra: Micron is executing well on leveraging our technology leadership to grow our mix of high-value solutions, especially in products that support AI applications. Finally, our leading edge investments and productivity initiatives are delivering cost-downs and operating leverage during this market recovery. We expect record revenue and significantly better profitability in fiscal 2025 to support disciplined investment to maintain stable bit share and deliver free cash flow growth.

Sanjay Mehrotra: I will now turn it back over to Sanjay.

Sanjay Mehrotra: Thank you, Mark.

Sanjay Mehrotra: I want to close by commending our team in Taiwan for their response to the significant earthquake in fiscal Q3. In many ways, that response exemplifies Micron, an agile prepared team that assesses and reacts quickly, supported by a brilliant network of colleagues around the globe. That collaboration, planning, discipline, and experience are precisely what ensures Micron is so well positioned today. I look forward to our team's accelerating Micron's memory and storage leadership as AI solutions present increasing opportunities to provide greater value from data centers to the edge.

Unknown Executive: Thank you for joining us today. We will now open for questions. Thirdly, and one moment for our first question.

Toshiya Hari: Our first question comes from the line of Kershanker from TD Cowan. Your question, please.

Toshiya Hari: Yeah, thank you in the question. Two questions. Sanjay is the first one; the second is BM. Clearly, you're gaining traction as BMTE. I'm just curious how the SVM team is and how its communication going beyond one customer. Last time, we publicly said that you're calling for an NVIDIA's H200. I'm curious how it is going to be wandering for NVIDIA. And also along the same path, your company will talk about pulling in the time frame for HBM code was the regular 18-month cadence for HBM technology transitive. So basically, I'm curious. Sanjay, any color, XBM 3 EM call a different customer timing of HBM code help and a quick follow up.

Sanjay Mehrotra: So let me start off by again pointing out that we delivered over $100 million in revenue in fiscal Q3 with our HBM 3E. And I'm very pleased with our team's focus on this and delivering this number. And note that this was margin accretive to our overall margins, but also to our DRAM margins. And of course, we remain very much focused on delivering $700 million in fiscal 2024 for HBM revenue. And, as I noted, multiple billion dollars in revenue. And in HBM, we are very much focused on continuing to ramp our production and also to improve our yields.

Sanjay Mehrotra: And that is, of course, an important priority, and any new product that is as complex as HBM or any new technology node always has a yield ramp. And the team is extremely focused on that. So as we look ahead to 2025, we remain confident in our ability to deliver our market share consistent with dRAM share sometime in 2025. And again, I'm very pleased with Micron's strong product of HBM 3E that, as I noted, has been well recognized by our customers to have 30% better power than any competitor's product that is out there. Now, regarding your question on qualifications, of course, we are in qualifications with other customers as well.

Sanjay Mehrotra: And, as I noted in my remarks, that in 2025 timeframe, we expect to be broadening, diversifying our customer base as well. And HBM 4, I mentioned in my remarks that we have a strong roadmap ahead for HBM 4 and HBM 4E. And we feel very good about our capabilities there, the roadmap that we have in front of us, and our ability to deliver leadership with HBM4 and HBM4E as well.

Toshiya Hari: Thanks, Francis, for that.

Toshiya Hari: Another quick follow-up. On the NAND bid demand, you kind of mentioned that the bid growth demand is going to be in the high team. If you remember right last quarter, you said it's going to be in the low 20. So I'm kind of curious, what was the delta versus last three months ago? Because it's a general view that AI should be helping NAND. So why is the NAND bid demand growth not going higher? Look like it's going lower. Thank you.

Sanjay Mehrotra: So what I would tell you fresh is that, you know, there is really not much of a difference between the Kagger that we shared last time. What's the Kagger we shared here? And I'll also tell you that, you know, we basically revise the base year for the Kagger that we used. So this time, the Kagger that we used, we used the base year of 2023. And in 2023, as you know, we had bid demand growth in NAND. That was higher. Meaningfully, higher than the Kagger.

Sanjay Mehrotra: So that, of course, the larger base of 2023 just, you know, somewhat changed our outlook on the overall Kagger.

Sanjay Mehrotra: But you're absolutely right to note, as we have also highlighted that, you know, data center SSDs are a good growth demand driver. And I'll just provide you some color. The data center automotive and industrial, these are all growing faster in terms of man demand versus the Kagger that we have shared. Science, mobile and consumer, somewhat slower, but these slow growing segments actually have also average capacity increases ahead of them. You know, as I gave you examples of AIPCs and AI smartphones driving content growth. And we have just conservatively planned for this, perhaps, and we will continue to assess the average capacity growth in smartphones and PCs in the times ahead.

Unknown Executive: And it's important that the Kagger that we highlight here; this is what we use for our capacity planning. And we want to, of course, always remain disciplined with respect to our capacity planning and very much focusing on demand supply balance and ROI.

Unknown Executive: And our next question comes from the line of the back area from Bank of America Securities. Your question, please.

Sanjay Mehrotra: Thanks for taking my question. Sandra, you mentioned 3X, the trade ratio of HBM to D5. What happens to this ratio as you go to higher stacks, you know, 12 high or more? And on the other hand, what happens as you make yield improvement? This overall is 3X, still the operative assumption for calendar 25 and just what are the puts and takes around this ratio? Yeah, I mean, I think for HBM 3E 3X is, you know, the operative guidance here, you know, with respect to the trade ratio. And again, just keep in mind that this already accounts for, you know, the larger die that exists with HBM 3E given its performance and packaging and overall product expectations.

Sanjay Mehrotra: As well as, of course, with the eight die stack, as well as the logic die in there, the mature yield expectations there as well. And as the yield will be ramping up for us, of course, you know, we will be able to get the benefit on the lower cost as we go forward. But with mature yields, the trade ratio where HBM 3E is about 3X over the mature yields of D5 in the same technology node. And as you go up to HBM 4, of course, the trade ratio, as we have said before, increases and goes higher than 3.

Sanjay Mehrotra: And, you know, as you go up from 8 die stack to 12 die stack in HBM 3E, of course, the 12 die stack will have somewhat lower mature yields as well. That's just the nature of how, you know, device yields work. But the operative items, I think, remain still 3X for HBM 3E and greater than that for HBM 4, inclusive of the assumption of mature yields.

Sanjay Mehrotra: And a quote on the question of maturity: here is world-class maturity.

Mark Murphy: Sorry. And a quick follow-up, maybe for Mark. So, you know, you're suggesting fiscal 25 could be a record in terms of sales. Why can't it be a record in terms of gross margins? What are the puts and takes of gross margins as we go into next year? So maybe give us some sense of what incremental margins can be. Let's say sales are up 5 billion or 10 billion a year on year. So, you know, we can level set our model from a gross margin perspective. Thank you.

Mark Murphy: Yeah, Vivek, we're happy to take that. We're not providing Fiscal Year 25 guidance yet. You know, I can talk about some sequential improvements from here. Of course, we guided 600 basis point increase. Gross margin guidance between third quarter and the guide and fourth. And yeah, that's driven by price, but also, you know, mixes beginning to become a more substantive factor in the sequential gross margin expansions. We see November quarter. You know, we see gross margin expansion continuing up a few hundred basis points. Again, price is a factor, but also, as a fourth quarter mix participating in the contributing to the increase.

Mark Murphy: And that's, you know, that's the effect of HBM and high capacity DIMMs and other higher higher value products. We do expect through fiscal 25 for price to continue to increase, and we expect this favorable mix effect to continue to increase. You've seen, you know, very clearly in the third quarter in our fourth quarter guide, the strength in data center and we see that growth continuing and then later in the year, we see, you know, a replacement cycle for smartphone and PC. And then they associate content with AI picking up. So we expect that to again, second half of the calendar year and this in the, you know, early 25 for that to kick in.

Mark Murphy: Then, on the supply side, you know, you've got just tight conditions. Yeah, you've got structurally lower capacity. Industry inventories are trending down, which we believe ours will trend down through fiscal 25, close to our target by the end of 25. And then just the HBM trade ratio, which Sanjay just commented on. And then, of course, I talked about in the sequential gross margin talked about, you know, the mix that we see in the business with our higher value products, which are, you know, HBM high capacity DIMMs, SSDs, which we've talked about. So the momentum is very strong.

Mark Murphy: You know, we've got technology leadership. We've got the best product position the company's ever had, and the manufacturing is operating very well. So well positioned for Fiscal 25.

Toshiya Hari: And our next question comes from the line of Toshiya Hari from Goldman Sachs. Your question, please.

Toshiya Hari: Hi, thank you so much for taking the question. I head to as well. The first one on HBM. I guess recently there have been a couple of reports about, you know, you all having some of the old issues, based on your commentary. It didn't sound like you were having these issues. I just wanted to clarify that. If you could address it, that would be, that would be really helpful. And then on HBM, the second part is, so the gross margins are imperative to overall, overall corporate margins today. What are your thoughts on sort of relative profitability?

Sanjay Mehrotra: Don't get the second half of the year, and it becomes a 25, particularly given the fact that you have pretty good visibility as it pertains to a HBM person.

Sanjay Mehrotra: So regarding the ease, I think I already commented that we are pleased that in the very first quarter of production, we were able to shift over 100 million of HBM revenue, and we remain focused on our goals and remain confident about our goals of delivering 700 million dollars of revenue in fiscal 24 and multiple 100 billions of dollars of revenue in fiscal 25 and getting to our share to be in line with our share for HBM to be in line with our DSBM share sometime in 2025. So, of course, our yield assumptions are baked in in all of that.

Sanjay Mehrotra: And you know, we look to continue to work on all aspects of ramping up our capacity. And of course, we expect to improve yields as we go forward. Again, that is typical of any new technology, any new product that you ramp up. So that's what we remain focused on.

Sanjay Mehrotra: And regarding the gross margin comment, maybe Mark can add some color, but as I mentioned earlier, the gross margin is a creative not only for to our corporate margins, but it is also a creative to our DNM margins and our DNM margins, as you know, tend to be higher than our corporate margins, which are, you know, lower because of the lower margins and then generally in the industry. It is helping the drive continue gross margin expansion through 25. OK, got it.

Toshiya Hari: That's helpful.

Toshiya Hari: As I follow up, maybe once from Mark on tap acts, so you're guiding fiscal year 25 up materially. You know, given some of the hints that you provided, you know, maybe you're looking at a mid-teens, a billion dollar number for fiscal 25.

Sanjay Mehrotra: I know more than half of that or half of that is coming from the green field investments in the US, but how should we be thinking about your bit supply growth in fiscal 25 or calendar 25 to be specialized to grow, you know, more or less in line with the demand. So, if you have a current major, you have career and then mid teams and high teams, respectively, or do you expect to to under shift relative to those relative to those ranges in fiscal 25.

Sanjay Mehrotra: Thank you. Yeah, we, it's good questions, Toshia. And yeah, your view on CapEx.

Sanjay Mehrotra: Yeah, we've given enough that, you know, we don't want to guide revenue for 25 because we, you know, we'll do that at a future date by quarter. But, but we do expect a, you know, a material increase year over year for the quarter sequentially. We'll see a meaningful step up, you know, and we were, we were at 3 billion. You know, we increased from 2.1 to 3 billion third quarter to fourth quarter guide. I would characterize that both on a dollar and percent basis is more than meaningful.

Sanjay Mehrotra: So, so it'd be less than that sequentially, but, you know, but we are, are spending, spending more. Yeah, to your question on, you know, we are very constrained on bits, bit production and, you know, so we will, you know, as I mentioned in my earlier comments, we will certainly see inventory levels come down.

Sanjay Mehrotra: In fact, we expect to be approaching target inventory levels by the end of 2025.

Thomas O'malley: And our next question comes from the line of Thomas O'Malley from Barkley. Is your question, please?

Thomas O'malley: Hey guys, thanks for taking my question. This is first Sanjay or Mark. So you've given us the fiscal year 25. Kind of company got into several billion in HBM. And then you've kind of talked about the share that you're getting to is equivalent to that of DRAM. So you kind of solve for that market, low teams, total HBM market. I just kind of want to understand what's your view of the suppliers to that market. As it stands today, it seems like there's really two major suppliers. When you look at the out year, do you think that number changes?

Thomas O'malley: If there's additional qualifications, would that number change? If you were to have a third qualification, aka the market be bigger? And you know, how did you kind of come up with that total market?

Sanjay Mehrotra: Numbers that kind of a bottoms up accelerator forecast, but just kind of how you're thinking about the market and did that change or is it contingent upon qualifications of some of your competitors? Well, as we have said before that we see the Kagger for HBM growth, you know, in terms of big growth Kagger to be available 50% over the next few years. So, you know, certainly HBM is a strong growth driver. And again, you know, as we increase our mix of HBM going forward, it will of course be, you know, continuing to be executive to our financial performance, including margins.

Sanjay Mehrotra: And we are pleased that with the strong performance that we have, you know, we are sold out for 25 as well, with the overwhelming part of our output already committed in terms of pricing.

Sanjay Mehrotra: So, I would like to share to be in line with Dean. I'm sure sometime in 2025, and of course, you know, we are working with a broad range of customers in qualifications, and next year we plan to be shipping to a broader set of customers. Having said all of that, no question that HBM is a complex product for our customers to qualify as well. It's a highly resource intensive, not just for us, but for our customers as well. And this is where we think that our strong product position, highlighting again those attributes of 30% better power than nearest competitor and a better performance and really high quality here positions as well when customers work in with those resource intensive qualifications for micron.

Sanjay Mehrotra: And that's what, you know, we are already seeing in terms of our engagement.

Sanjay Mehrotra: So he feels pretty good about our plans here, but HBM.

Toshiya Hari: Super helpful, and then just switching gears over to the the nance out of things. Obviously, you had a competitor out in the market talking about kind of run rate industry, CapEx and kind of talking about the change in industry architecture, maybe not scaling as quickly or as capital intensively as you had in the past. You obviously are talking about CapEx. A lot of your CapEx next year is going towards Greenfield and HBM. Could you talk to the remainder of that CapEx? Could you give us any color on DRAM or NAND split between that? And then do you agree with, in the sense that it was Western Digital talking about capital intensity longer term on the NAND side?

Sanjay Mehrotra: Do you agree that maybe structurally you'll see a lower investment threshold in the future to kind of continue to maintain what the industry needs? So for us, certainly our CAPEX is dominated by our DRAM-related CAPEX. That's certainly HBM because it's growing as makes in the industry, and HBM is capital intensive when it comes to unique clean room requirements for HBM and packaging and assembly, as well as test equipment. So our CAPEX is dominated by that, as well as to meet the future requirements in the second half of this decade, and that involves the construction of the fab.

Sanjay Mehrotra: So NAND CAPEX is, you know, certainly a much smaller portion of our total CAPEX, and we have a very strong technology position with our NAND and strong portfolio that you see. And we are continuing to shift that portfolio toward higher value solutions as well. So we certainly will remain extremely disciplined when it comes to NAND as well in terms of driving the CAPEX, and we will be disciplined in terms of driving our technology, no transitions in the timing of no transitions across the industry. These are the kind of things we are very much focused on in order to maintain a good supply discipline, maintain supply growth that is very much in line with the demand growth, and managing our CAPEX here.

Sanjay Mehrotra: But yes, I mean overall our CAPEX is in NAND is significantly smaller, but, you know, we remain extremely disciplined, you know, focused on managing our supply growth in line with demand bill. And again, I want to point out that, you know, with NAND technology, transitions are sufficient to meet the demand growth.

Sanjay Mehrotra: We do not need the new clean room, the new greenfield fab, the kind that are needed in DRAM and, you know, HBM. The trade ratio of HBM with standard DRAM is a factor in the green field requirements only also.

Unknown Executive: Thank you. One moment for our next question.

Christopher Danely: And our next question comes along. Of course, for daily from city your question please.

Christopher Danely: Hey, thanks guys. So, thank you mentioned you're signing up some customers to long-term contracts. You know, given your belief that pricing is going to keep going up.

Sanjay Mehrotra: Why sign people up to long term contracts and potentially, you know, miss out on some of the increased pricing, or is there some potential for wiggle room on pricing with the contracts and it's more of a unit basis. Well, the long term contracts, you know, really help us and customers get closer not only with respect to, let's say, supply or pricing discussions as maybe relevant to our various customer contracts, but also with respect to the technology roadmap, the product roadmap, the timing of the supply, and they are very helpful factors in building a close relationship with the customers.

Sanjay Mehrotra: And you can see that, you know, we are pointing to a substantial revenue record in 2025. Of course, you know, leveraging some of these contracts that we have put in place, and we have also pointed to a significant improvement in profitability. So, I think we are well positioned in these contracts with respect to not only the supply and demand fundamentals, but also with respect to the financial aspects.

Mark Murphy: Thanks, Sanjay, and then just a quick one for Mark. Mark, was the Taiwan quake impact limited to the May quarter, or is it impacting the current quarter as well? Not a material impact, Gris, which is May.

Unknown Executive: Thank you.

Harlan Sur: And our next question comes from line of Harlan Sur from JP Morgan. Your question, please.

Harlan Sur: Good afternoon. Thanks for taking my question. Enterprise SSDs are seeing really strong demand pull from AI workloads, right? The team has driven significant share gains in enterprise SSD just over the past few quarters. I think in calendar Q1, the Micron was the number three global share leader in enterprise SSD. I think it's not about 20, 25% of your overall man business. I mean, this is a position that we've never seen Micron in before.

Harlan L. Sur: So I think first question is our enterprise SSD gross margins are creative to your overall nine gross margins. And then secondly, I saw your next gen PCIe Gen flag with the demo. And in videos, GTC conference pretty significant performance of list on AI workloads versus your Gen 4 SSD. So are you qualifying these next gen? Gen 5 SSDs for AI applications?

Sanjay Mehrotra: When do you expect to shift? Just want to understand the sustainability of your strong share position here? Well, thank you, Harlan, for recognizing the strong momentum that Micron's data center SSD have. And you know, certainly our data center SSDs are a creative to our overall man margins. And we have really great products. I already highlighted in my prepared remarks where we saw. You know, tripling of bits that we shipped, they are 32-layer land AI SSDs, you know, going absolutely toward AI data center applications. And we have a broad set of customers that we are working with.

Sanjay Mehrotra: It turns up growing our share. So we see, when we talk about, you know, sequentially, we had, you know, 50% increase in revenue for our data center products. Of course. That includes the benefit of our strong data center SSD roadmap.

Sanjay Mehrotra: And yes, I mean, we will of course continue to work with our gen 5 SSDs, you know, in terms of working with customers for qualifying and, you know, not prepared to discuss at this point, specifics regarding the timing of, you know, some of the roadmap that is in front of us for shipments. So yes, in terms of sustainability of the strong improvement to share, you know, we are definitely with our strong product portfolio counting on it. And this will our SSD momentum data center SSD momentum will absolutely contribute also towards my remarks that I said that we will increase our mix of data centers.

Sanjay Mehrotra: So we will have a lot of revenue in fiscal year 25 as well. Of course, HBM high density dams, you know, these will of course be a big part of it, but also data center SSDs is going to be another big part of our growth in fiscal 2025 related to data center.

Mark Murphy: I would just add Harlan. I would just add, Harlan, that the storage business unit delivered operating profit in the quarter. Oh, perfect.

Unknown Executive: Thank you very much and thankful.

Unknown Executive: Thank you.

Unknown Executive: This does conclude the question and answer session, as well as today's program. Thank you, ladies and gentlemen, for your participation.

Unknown Executive: You may now disconnect.

Q3 2024 Micron Technology Inc Earnings Call

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