Q2 2025 Micron Technology Inc Earnings Call
Speaker Change: Aaron Rakers, Brian Chin, Sumit Sadana, Quinn Bolton, Satya Kumar, Aaron Rakers, Mark Murphy,
Speaker Change: Did you to visit our website at Micron dot com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending.
Speaker Change: You can also follow us on X at my contact.
Speaker Change: As a reminder, the matters. We're discussing today include forward looking statements regarding market demand and supply.
Speaker Change: Demand for our products, our market share market pricing and cost trends and drivers our plants for manufacturing the impact of developing technologies, such as AI product transplants technologies and market position expected capabilities of our future products, our planned investments and expenditures are expected results and guidance.
Speaker Change: Quickly matters and other matters.
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 documents, we filed with the SEC, including our Form 10-K forms 10-Q, and other reports and filings 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.
Speaker Change: We are under no duty to update any of the forward looking statements to conform these statements to actual results.
Sanjay: I will now turn the call over to Sanjay.
Sanjay: Thank you.
Sanjay: Good afternoon, everyone.
Sanjay: Micron is in the best competitive position in our history, and we are achieving share gains across high margin product categories in our industry.
Sanjay: Our strong product momentum has enabled us to build deeper customer relationships and micron's industry, leading products are now more firmly entrenched in our customers' high value product roadmaps.
Sanjay: In fiscal Q2 data center DRAM revenue reached a new record.
Sanjay: <unk> revenue grew more than 50% sequentially to a new milestone of over $1 billion of quarterly revenue.
Sanjay: But HBM shipments were ahead of our plans demonstrating strong execution.
The ongoing ramp.
Sanjay: The combination of our revenue from high capacity DRAM modules, and our industry, leading LP DRAM for the data center also exceeded the $1 billion milestone for the quarter.
Sanjay: Micron remains the only company in the world to ship low power DRAM into the data center and high volume showcasing our pioneering innovation and deep partnership with our customers for differentiated solutions.
Sanjay: As we build on this momentum we expect fiscal Q3 revenue to be another record for micron driven by shipment growth across both DRAM and NAND.
Sanjay: We see the combination of AI data center demand and the ramp of HBM and its associated payout ratio contributing to tightness at the leading edge and constraining non HBM DRAM supply.
Sanjay: We expect supply actions announced by NAND companies to improve the dynamics in the NAND market.
Sanjay: Micron's, one beta DRAM technology leads the industry and we are extending our leadership with the launch of our one gamma node and the industry's first shipments of <unk> products last month.
Sanjay: Micron's, one gamma is our first DRAM node in calculating <unk> and we have achieved 20% lower power, 15% better performance and over 30% improvement and bit density compared to our one beta arena.
Sanjay: Micron's, leading edge Gen nine NAND technology nodes delivers the industry's fastest TLC <unk> NAND and we are managing the ramp at this node mindful of the supply demand balance in the industry.
Sanjay: Micron continues to make disciplined investments that position us to capitalize on the significant growth opportunities driven by AI we.
Sanjay: We are focused on growing HBM capacity in our existing manufacturing facilities to meet requirements through 2026.
Sanjay: In January we broke ground on an HBM advanced packaging facility in Singapore.
Sanjay: This investment allows us to meaningfully expand our total advanced packaging capacity beginning in calendar 2027.
Sanjay: Our new DRAM fab construction in Idaho completed an important construction milestone that enable the receipt of the first disbursement of funding from our chips land for the project during the quarter.
Sanjay: This new Idaho fab will provide meaningful DRAM output starting in fiscal 2027.
Sanjay: Okay.
Sanjay: Turning to our end markets dramatic improvements in competition hardware have reduced the parkville can cost a generator of AI models.
Sanjay: <unk> hardware improvements along with more efficient algorithms and software drive down the cost of influence and meet generator vib's capabilities more accessible to new applications and use cases.
Sanjay: This broadening deployment creates a powerful growth vector for the aggregate AI demand and recent innovations and those in the pipeline from key contributors to the AI ecosystem will continue to fuel this growth trend.
Sanjay: At GPU and custom AI accelerator performance capabilities continue to improve with each new generation of product. These high performance processors are starved of memory bandwidth.
Sanjay: HBM memory provides the bandwidth necessary to leverage these powerful processors in the most effective and efficient manner and we are excited to see the growth opportunities ahead for this complex and high value product category, where our customer is now recognized micron as the HBM technology leader in our industry.
Recently large hyperscale customers reiterated strong year over year growth for their capital investments in calendar 2025.
Sanjay: We project mid single digit server unit growth in calendar 2025, we had growth in both traditional and AI servers.
Sanjay: We see strong demand for HCM and have once again increased our HBM Tam estimate for calendar 2025 to over $35 billion.
Sanjay: We remain on track to reach HBM share similar to our overall DRAM supply share on a run rate basis in calendar Q4 2025.
Sanjay: As previously mentioned Micron is sold out of our HBM output in calendar 2025.
Sanjay: We are seeing strong demand for our <unk> supply in 2026 and are in discussions with our customers on agreements for their calendar 2026 HBM demand.
Sanjay: Micron's industry, leading HBM CE delivers a 30% power reduction compared to the competition and about <unk> 12 high has a remarkable 20% power advantage over competing a tie products, while providing a 50% higher memory capacity.
Sanjay: <unk>.
Sanjay: We have begun volume production of <unk> 12 high and are focused on ramping capacity and yield.
Sanjay: We anticipate <unk> 12 high will comprise the vast majority of our HBM shipments in the second half of calendar 2025.
Sanjay: We are making good progress on additional platform and customer qualifications with HBM.
Sanjay: Microns <unk> high is designed into Nvidia is GBP 200 system and our <unk> 12 high is designed into the GBP 300.
Sanjay: In fiscal Q2, we initiated volume shipments to our third large HBM CE customer and anticipate additional customers over time.
Sanjay: We expect multibillion dollars in <unk> revenue in fiscal 2025.
Sanjay: Looking ahead, we are enthusiastic about micron's, HBM floor, which will ramp in volume in calendar 2026.
Sanjay: Let <unk> provide the bandwidth and cheese of over 60% compared to <unk> <unk>.
The timing of our HBM floor is aligned to our customers' requirements and we are focused on delivering the best <unk> products to the market exhaust power efficiency quality and performance.
Sanjay: Our proven HBM product performance, our strong HBM roadmap and our demonstrated manufacturing excellence uniquely position micron to capitalize on next generation needs to be enforced and HP and <unk> solutions.
Sanjay: Michael has led adoption of LTE and data center.
Speaker Change: And the AI servers, Micron's LP Norris memory power consumption by over two thirds compared to <unk> five.
Speaker Change: We expect to maintain our leadership position in LP for server as it transitions from soldered components to a sole cam are small outline compression attached memory module form factor.
Speaker Change: Micron. So cam was developed in collaboration with Nvidia to support the GBP 300.
Speaker Change: LTE DRAM in a <unk> form factor enables easier server manufacture ability and serviceability and helps drive broader LTE adoption in the server market.
Speaker Change: We're on track to deliver multi billion dollars in revenue in fiscal 2025 from our portfolio of higher capacity five modules and LP products for the data center.
Speaker Change: In data center NAND demand moderated in fiscal Q2 due to short term customer inventory driven impacts and we see a return to bit shipment growth in the months ahead.
Speaker Change: In calendar Q4, 2024 based on industry analyst reports.
Speaker Change: <unk> achieved yet another record higher market share in data center ssds with revenue growth in each category, including performance mainstream and capacity Ssds.
Speaker Change: Our high performance $95 50, SSD, which is an <unk> 200, and we have 72 approved vendor list completed qualifications at multiple customers.
Speaker Change: During the quarter, we announced that micron's datacenter class GE at TLC <unk> NAND components are qualified for production and pure storage is high capacity 150, terabyte direct flash module.
Speaker Change: Micron's datacenter class NAND components give customers the ability to leverage our industry, leading NAND design and process technology and their custom storage solutions.
Speaker Change: Micron's leadership in <unk> NAND supports the transition from HDD to NAND solutions in the data center.
Speaker Change: We expect to generate multiple billions of dollars in data center NAND revenue and once again grow our data center NAND market share in calendar 2025.
Speaker Change: We expect the PC market to grow mid single digits in unit terms in calendar 2025.
With growth weighted to the second half of calendar 2025.
Speaker Change: The Windows 10 end of life in October 2025, combined with an aging installed base and the desire amongst customers to ensure that their PC hardware specs can support compelling applications in the future our key catalyst that drive this growth.
Speaker Change: <unk> has acquired a minimum of 16 gigabyte of DRAM with many models, requiring even higher memory versus the average 12 gigabyte BC content last year.
Speaker Change: During the quarter, we sampled our 16 gigabit <unk> gamma based <unk> products to PC clients.
Speaker Change: In NAND, we launched our Gen nine days to 4600 performance Ssds the fastest in the world for the client market and completed qualifications of our $26 50 mainstream ssds at multiple PC Oems.
Speaker Change: Turning to mobile our expectations for smartphone unit volume growth in calendar 2025 remain at low single digit percentages.
Speaker Change: Smartphone customer inventory dynamics have played out as anticipated leading to mobile DRAM and NAND bit shipment growth in our fiscal Q3.
Speaker Change: AI adoption continues to be a significant driver for the increased mobile DRAM demand.
Speaker Change: AI capable flagship phones increasingly feature DRAM capacities of 12 gigabyte are higher compared to the eight gigabyte and last year's models.
Speaker Change: Smartphone Oems are using micron's industry, leading nine six gigabit per second <unk> DRAM to improve AI performance delivering up to 20% more tokens for second than those using legacy speed grades on the same Soc.
Speaker Change: During the quarter, we announced that our LP <unk> DRAM and <unk> NAND were featured in the high end of the Samsung Galaxy <unk> 35 cities.
Speaker Change: Microns mobile DRAM and Uff's storage solutions are in high demand and we'll continue to launch in flagship and high end smartphones throughout the year.
Speaker Change: Additionally, we are now sampling the industry's first mobile G. Nine managed NAND base Uff's for one solution and densities up to one terabyte.
Speaker Change: Automotive Oems industrial and consumer embedded customers are in the later stages of adjusting their inventory levels.
Speaker Change: In automotive, which comprises the largest portion of our <unk> revenue memory and storage content per car continues to increase as AI enabled in vehicle infotainment systems become more interest in driver assistance functions become more capable.
Speaker Change: Advanced Robo taxi platform today contained over 200 gigabyte of DRAM are 20 to 30 times higher than the amount of DRAM and the average car.
Speaker Change: Micron is well positioned to capitalize on this trend with our industry leading portfolio of automotive products.
Speaker Change: During the quarter, we announced the production readiness of the industry's first automotive LP <unk> DRAM product that supports a nine six gigabit per second speed grid addressing the increasing performance requirements of AI driven applications in vehicles.
Speaker Change: Additionally, our $41 50, SSD became the industry's first enterprise SSD product that is automotive qualified and is now sampling at target customers further reinforcing our commitment to innovation and leadership in this important market.
Speaker Change: Now turning to our market outlook.
Speaker Change: Calendar 2020 for DRAM bit demand growth was in the high teens consistent with our prior expectations.
Speaker Change: Calendar 2020 for NAND bit demand growth was approximately 10% slightly below our previous view of low double digits.
Speaker Change: We forecast calendar 2025, DRAM bit demand growth in the mid to high teens percentage range and NAND in the low double digit percentage range.
Speaker Change: Over the medium term, we expect industry bit demand growth of mid teens CAGR for both DRAM and NAND.
Speaker Change: As we have previously discussed NAND technology transitions provided a significant increase in overall bit output.
Speaker Change: Sustained NAND industry supply demand balance can result from increasing the time between no transitions along with sustained reductions in NAND industry, Capex and wafer capacity.
Speaker Change: NAND industry wafer capacity Underutilization can help to improve the near term dynamics in the NAND market.
Speaker Change: We expect micron's supply growth in calendar 2025 to be lower than industry demand growth for both DRAM and NAND.
Speaker Change: We expect our inventory days to decline as we move through calendar 2025.
Speaker Change: We expect to maintain our bit share in DRAM and NAND in calendar 2025.
Speaker Change: In DRAM, we expect a strong ramp of HBM throughout calendar 2025.
As noted before <unk> consumes three times, the amount of silicon compared to <unk> five to produce the same number of beds.
Speaker Change: Looking ahead, we expect the trade ratio to increase with <unk> four and then again with <unk> when we expect it to exceed four to one.
Speaker Change: The sustained and significant increase in silicon intensity for the foreseeable future contributes to tightness for industry, leading edge nodes supply and constrained capacity for non HBM products.
Speaker Change: In NAND, we continue to Underutilize, our fabs and our wafer output is down mid teens percentage from prior levels.
Speaker Change: We plan to use a portion of our underutilized NAND equipment to support capital efficient conversion to leading edge nodes.
Speaker Change: This strategy results in over 10% structural reduction of NAND wafer capacity exiting fiscal 2025 compared to levels exiting fiscal 2024.
Speaker Change: We will continue to prudently manage our NAND supply, including the levels of our capital investment the pace of ramp up of our new technology node.
Speaker Change: Fab capacity and utilization consistent with our demand growth.
Speaker Change: Our capital spending plans remain unchanged at approximately $14 billion for fiscal 2025.
Speaker Change: Significant portion of our capital investments are focused on multiyear facility investments to support our DRAM and HBM manufacturing, including our Idaho Fab, Singapore to HBM advanced packaging facility and Taiwan DRAM test facility.
Speaker Change: Micron will remain disciplined with our overall equipment investments to manage our supply growth consistent with demand.
Speaker Change: On tariffs micron served as the U S importer of record for a very limited volume of products that would be subject to newly announced at us on Canada, Mexico and China.
Speaker Change: We continue to monitor the possibility of future tariffs and are prepared to work with our customers and suppliers to understand future tariff effects and supply chain options that may arise.
Speaker Change: <unk> do have an impact we intend to pass those costs along to our customers.
Speaker Change: With that I will now turn it over to Mark for our financial results and outlook.
Mark: Thank you Sanjay and good afternoon, everyone.
Mark: Micron delivered fiscal Q2, EPS above the guidance range and revenue and gross margin within the range.
Mark: Total fiscal Q2 revenue was approximately $8 1 billion down 8% sequentially and up 38% year over year.
Mark: Fiscal Q2, DRAM revenue was $6 1 billion up 47% year over year and represented 76% of total revenue.
Mark: Sequentially DRAM revenue decreased 4% with pet shipments decreasing in the high single digit percentage range and prices increasing in the mid single digit percentage range as a result of improving portfolio mix.
Mark: Fiscal Q2, NAND revenue was $1 9 billion.
Mark: Up 18% year over year.
Mark: Represented 23% of Micron's total revenue.
Mark: Sequentially net revenue decreased 17% with pet shipments modestly higher and prices decreasing in the high teens percentage range.
Mark: Fiscal Q2 bit NAND bit shipments were above our expectations.
Mark: Driven by higher consumer oriented shipments.
Mark: Now turning to revenue by business unit.
Mark: Compute and networking business unit revenue was up 4% sequentially to $4 6 billion.
Mark: And reached 57% of our total revenue.
Mark: For the third consecutive quarter <unk> revenue reached a new quarterly record driven by a more than 50% sequential increase in <unk> revenue.
Mark: Revenue for the storage business unit was $1 4 billion.
Mark: Down 20% sequentially.
Mark: Decline in SBU revenue was driven primarily by lower storage investments from data center customers. After several quarters of very strong growth and overall NAND industry pricing.
Mark: Mobile business unit revenue was $1 1 billion down 30% sequentially as mobile customers continued to improve their inventory positions.
Embedded business unit revenue was $1 billion down.
Mark: Down 3% sequentially.
Mark: Lower sequential revenue was primarily due to inventory improvement initiatives at automotive customers.
Mark: The consolidated gross margin for fiscal Q2 was 37, 9% down 160 basis points sequentially, due primarily to pricing and consumer oriented segments of the market, especially in NAND.
Mark: And NAND mix shift to consumer oriented products as mentioned earlier.
Mark: Our ongoing high value mix shift in our DRAM portfolio, partially offset some of these factors.
Mark: Operating expenses in fiscal Q2 were $1 billion flat sequentially.
Mark: R&D expenses were lower than planned due to earlier product qualification and timing of certain R&D projects.
Mark: We generated operating income of $2 billion in fiscal Q2, resulting in an operating margin of 24, 9%.
Mark: Which was down approximately 260 basis points sequentially and up 21 percentage points from a year ago quarter.
Mark: Fiscal Q2, adjusted EBITDA was $4 1 billion.
Mark: Resulting in an EBITDA margin of 57%.
Mark: Up 10 basis points sequentially and up 14 percentage points are $2 billion from the year ago quarter.
Mark: Fiscal Q2 taxes were $214 million on an effective tax rate of 10, 7%.
Mark: Sure than our guidance due to the effects of one time items in the quarter.
Mark: non-GAAP diluted earnings per share in fiscal Q2 was $1 56.
Mark: Above the high end of the guidance range.
Mark: Compared to $1 79 per share in the prior quarter and 42.
Mark: In the year ago quarter.
Mark: Turning to cash flows and capital spending in fiscal Q2, our operating cash flows were over $3 $9 billion and our capital expenditures were $3 $1 billion net.
Mark: Net of proceeds from government incentives.
Mark: As a.
Mark: Free cash flows in the quarter were $857 million.
Mark: Our fiscal Q2, ending inventory was $9 billion or 158 days.
Mark: As communicated previously.
Mark: And an increase of nine days from the prior quarter.
Mark: On the balance sheet, we held $9 6 billion of cash and investments at quarter end and maintain $12 $1 billion of liquidity, when including our untapped credit facility.
Mark: During fiscal Q2, we extended our debt maturities through a $1 billion 10 year senior note offering and a $1 $7 billion term loan with proceeds principally used to pay down notes maturing in 2026 and the previous term loan balance.
Mark: We ended the quarter with $14 4 billion in total debt.
Mark: Low net leverage and a weighted average maturity on our debt of $2 32.
Mark: Following quarter end, we renewed and increased the size of our five year revolving credit facility to $3 5 billion.
Mark: This provides an additional $1 billion of liquidity and further improves our financial flexibility.
Mark: Now turning to our outlook for the third fiscal quarter.
Mark: We forecast growth in DRAM and NAND bit shipments in fiscal Q3.
Mark: We forecast sequentially lower fiscal Q3 gross margin, which includes the effects of higher consumer oriented volumes.
Mark: NAND Underutilization continues to weigh on gross margins.
Mark: We project operating expenses in fiscal Q3 to be approximately $1, one $3 billion in fiscal 2025, opex to increase by over 10%.
Mark: Afflicting planned increases to support our portfolio of high value products, including HBM.
Mark: We expect <unk> to decrease in the third fiscal quarter on higher bit shipments.
We continue to project ending fiscal 2025 with tight DRAM inventories.
Mark: Our fiscal Q3, and Q4, we estimate our non-GAAP tax rate to be approximately 14%.
Mark: In fiscal Q3, we forecast capex to be over $3 billion.
Mark: Our capex projection for fiscal 2025 remains approximately $14 billion.
Mark: The overwhelming majority of the fiscal 2025 Capex is to support HBM as well as facility construction backend manufacturing and R&D investments.
Mark: Impacts from potential new tariffs are not included in our guidance given the uncertainty around tariff timing nature and implementation.
Mark: With all these factors in mind, our non-GAAP guidance for fiscal Q3 is as follows.
Mark: We expect revenue to be $8 $8 billion, plus or minus $200 million.
Mark: Gross margin to be in the range of 36, 5% plus or minus 100 basis points.
Mark: And operating expenses to be approximately $1 3 billion plus or minus $15 million.
Mark: As mentioned, we expect our fiscal Q3 tax rate to be around 14%.
Mark: Based on a share count of approximately 114 billion shares we expect EPS to be $1 57 per share plus or minus 10.
Mark: In fiscal Q2.
Mark: Micron delivered earnings above guidance range.
Mark: Achieve record revenues again in data Center DRAM.
Mark: Ramped, our leading HBM and.
Mark: And released the industry's most advanced DRAM process technology.
Mark: For fiscal Q3, we project record quarterly revenue at the midpoint of our guidance.
Mark: We are focusing our R&D resources exercising capital discipline, and maintaining a strong balance sheet as we extend our leadership and tap into substantial growth opportunities ahead.
Sanjay: I will now turn it back over to Sanjay.
Sanjay: Thank you Mark Micron is uniquely positioned to capitalize on the transformative growth is driven by AI from data center to edge devices, and we are on track for a record revenue and significantly improve profitability in fiscal 2025.
Sanjay: We are confident in our ability to navigate the current market dynamics with disciplined investment and a focus on our high value portfolio of mix shift.
Sanjay: This is the most exciting time I have seen for memory and storage and <unk> innovations are at the forefront of this evolution.
Sanjay: We are excited about the opportunities ahead and remain committed to delivering value for all our stakeholders.
Sanjay: Thank you for joining us today, we will now open for questions.
Sanjay: Okay.
Speaker Change: Certainly and our first question for today comes from the line of Harlan sur from Jpmorgan. Your question. Please.
Harlan Sur: Yes. Good afternoon, thanks for taking my question.
Harlan Sur: Back in mid February at an Investor Conference I noted the team had walk us through the dynamics on a weaker gross margin profile here in the may quarter.
Harlan Sur: That's playing out but you did anticipate an improved gross margin profile beyond this quarter fiscal Q3.
Harlan Sur: That's still the case that we should see gross margin improvements, maybe starting in fiscal Q4 and potentially beyond.
Speaker Change: Is that a possible data center in your consumer related products was that across total DRAM and NAND segments any color here would be great.
Marc: Sure Harlan this is Marc I'll take that.
Harlan Sur: So let me just.
Harlan Sur: Make some comments about the third quarter.
Harlan Sur: It is down sequentially as we had indicated in the conference.
Harlan Sur: And again as we've said in the conference down primarily due to <unk>.
Harlan Sur: Higher mix of consumer oriented volumes.
Harlan Sur: Lower CQ, one pricing on consumer oriented.
Harlan Sur: Markets.
Harlan Sur: Industry Yadkin just generally.
Harlan Sur: All of that partially offset by higher HBM.
Harlan Sur: Yes, we do we do see.
While down conditions have improved since those public comments.
Harlan Sur: And the updated view is reflected in the guide today now we're not.
Harlan Sur: We're not providing.
Harlan Sur: Guidance on the fourth quarter.
Harlan Sur: However, we do we do expect gross margin to be up somewhat.
Harlan Sur: There's always yes.
Harlan Sur: <unk> and headwinds as you know on <unk>, we do expect market conditions to improve.
Harlan Sur: We do expect HBM and other high value.
Harlan Sur: Products to grow and.
Harlan Sur: Contribute to mix improvement.
Harlan Sur: Some headwinds.
Harlan Sur: We do see.
Harlan Sur: NAND Underutilization as we talked about.
Harlan Sur: And actually.
Harlan Sur: Since arps capacity has come down structurally we're going to see lots of those costs in the third quarter on period and see more of those costs hit us as inventory clears in the fourth quarter.
Harlan Sur: Yeah.
Harlan Sur: Yes, it's still we've taken actions.
Harlan Sur: To manage the NAND supply and Thats important in that top part of the business is still getting its legs back under it but we intend to.
Harlan Sur: Take price action in the second quarter.
Harlan Sur: Calendar and just maintain some are to maintain supply discipline.
Harlan Sur: And then yes.
We are going to see in fourth quarter.
Harlan Sur: Beginning of some startup costs related to.
Harlan Sur: Construction activities and.
Harlan Sur: New node.
Harlan Sur: In DRAM that we're working so.
Harlan Sur: Hi.
Harlan Sur: In short, we would expect fourth quarter margins to be up somewhat from third quarter.
Speaker Change: I appreciate that and then Sanjay you increased your industry bit demand outlook from mid teens last earnings mid to high teens this quarter.
Speaker Change: Calendar 'twenty slides for DRAM I assume part of it is <unk> related.
Speaker Change: <unk> dynamics as you increase your Tam outlook for HTML sure Budd.
Speaker Change: Has the team seen any other segments looking DRAM that are driving the better industry bit demand profile as the year unfolds.
Speaker Change: We had projected that customer inventories will get in a better place by spring timeframe in the in.
Speaker Change: In the consumer side of the business and it's turning out to be the way, we had projected and of course.
Speaker Change: Smartphone and PC markets are also seeing more and more devices that have AI.
Speaker Change: Painted that drive content growth.
Speaker Change: As customer inventories got closer to health.
Speaker Change: Healthier levels, we are seeing resumption of purchases by our customers and all of that plays into our guide for 2025 bed demand and as you noted of course data center continues to be strong and then data center.
Speaker Change: Of course, HBM is strong contributor toward revenue growth in terms of bit demand growth for data center of course high density dams.
Speaker Change: As well as LTE, where micron leads the industry all of these actually contributing towards the demand increase in 2025 as well.
Speaker Change: Thank you Sanjay Thank you Mark.
Thank you.
Speaker Change: Our next question.
Speaker Change: It comes from the line.
Speaker Change: Okay.
Speaker Change: Timothy Arcuri from UBS Your question please.
Speaker Change: Thanks, a lot.
Speaker Change: Mark can you give us a little detail on the fiscal Q3 guidance.
Harlan Sur: Youre guiding revenue up about $750 million, how much of that is coming from DRAM versus NAND and I know you said that bits are up in both but can you give us a sense of how much bits are up in each of those two markets.
Speaker Change: And then I had another question as well.
Harlan Sur: Yes, Tim.
Tim: <unk> provided you.
Tim: The consolidated revenue number you have the.
Tim: The year to date figures on both revenue DRAM, our revenue and <unk> growth and price for both DRAM and NAND and then we've provided you.
Tim: Hey.
Tim: A.
Tim: Demand demand growth for the year.
Tim: And bits. So I think we've provided you.
Tim: Yes, the contours of of of the business and.
Tim: You should be able to make some <unk>.
Tim: Volume and price.
Tim: Assumptions on the revenue outlook, we do expect.
Tim: That growth in both DRAM and NAND and.
Tim: In third quarter.
Speaker Change: Okay, but I guess Mark can you say that you expect revenue growth in both DRAM and NAND as well.
Speaker Change: DRAM with the with the HBM.
Speaker Change: Data center exposure will be the bias of growth will be there.
Speaker Change: Okay. Thanks, and then.
Speaker Change: And then so mark I mean, obviously everything youre doing here is great.
Speaker Change: I think the bugaboo, obviously as margins are still a bit low certainly into the fiscal Q4. So I guess I had like a two part question. One I know you don't want to guide fiscal Q4 margins, but do you think you can get back to what you just did in in fiscal Q2 in fiscal Q4, and I guess broadly when does this stuff.
Speaker Change: Clear and sort of we begin to see the true goodness flowing through from HBM and from all the cost downs youre doing on that on the non H.
Speaker Change: HBM DRAM side, so sort of when do we start to get kind of a clean gross margin number if you will.
Speaker Change: At <unk>, we're not going to provide a fourth quarter number we have indicated that fourth quarter gross margins would be up somewhat.
Speaker Change: From from third quarter.
Speaker Change: I think as Sanjay mentioned in prepared remarks, we're in the best position, we've ever been in on technology and market exposure of products.
Speaker Change: Manufacturing is operating very well on the cost side and maybe to help you with the modeling are.
Speaker Change: All in DRAM costs for fiscal year, 'twenty, five we expect to be flattish or all in NAND costs for FY 'twenty five.
Speaker Change: In line with front end cost reductions in the low double digits.
Speaker Change: So.
Speaker Change: Yes, we are.
Speaker Change: We are taking supply actions on the on the NAND side.
Speaker Change: Consists of under loading reducing capex delaying node transitions as we talked about.
Speaker Change: And we're beginning to see.
Speaker Change: Yes, some signs of improvement on that part of the business on the DRAM side of the business.
Speaker Change: No the continued <unk> growth and broader data center and then the lead edge on DRAM is.
Speaker Change: Is tight and we are again projecting are.
Speaker Change: <unk> levels to be below our target by the end of the fiscal year.
Speaker Change: Tim I'll just add that of course, we continue to be focused on increasing the mix of our revenue towards higher profit pools of the industry, both in DRAM and NAND.
Speaker Change: So in terms of our product portfolio as we have said it is best positioned so continue to drive the product portfolio and mix focusing on really.
Speaker Change: The strength and profitability.
Speaker Change: And demand trends, we have talked about I mean, we feel good about DRAM demand trend and of course in NAND.
Speaker Change: Supply discipline will be important we of course.
Speaker Change: We're extremely focused on that MDI is benefiting our DRAM demand across data center and edge as well.
Speaker Change: Of course, our technology position, our product position and our cost position continues to be.
Speaker Change: <unk>.
Speaker Change: Okay. Thank you to you both.
Speaker Change: Thank you and our next question comes from the line of Chris Tinker from TD Cowen Your question. Please.
Speaker Change: That's all thank you for your question.
Speaker Change: Thank you Sanjay Ahmad you've seen some of the memory prices.
Speaker Change: MTA also late I'm, just wondering how much of that is.
Speaker Change: And demand was actually.
Speaker Change: Related.
Speaker Change: And how sustainable do you think industry pricing dynamics today on.
Speaker Change: So of course as we have indicated.
Speaker Change: DRAM.
Speaker Change: Demand drivers as well as NAND on the consumer side of the business.
Speaker Change: In smartphones, particularly in smartphones.
Speaker Change: As well as in Pcs are improving as the customers.
Speaker Change: Getting closer to their normal inventory levels in the consumer markets again, along the lines of what we had projected VC probably more second half of this year that we start seeing greater demand trend with respect to <unk> and increasing penetration of <unk> <unk>.
Speaker Change: Wired greater DRAM content then.
Speaker Change: <unk>.
Speaker Change: What was in the past we have talked about that last year.
Speaker Change: Average 12, gigabyte, Npcs and <unk> with the NP running at $40 or higher.
Speaker Change: Requires.
Speaker Change: 16, gigabyte OTA higher. So these are good demand trends on the PC side and same thing happening on the smartphone side you have seen several introductions in more of these while smartphones and more of them to be rolling out with EIA smartphones that to have higher.
Speaker Change: DRAM content.
Speaker Change: Greater than 12 gigabyte versus last year at eight gigabyte <unk>.
Speaker Change: And of course data center demand trends in DRAM continues to be strong as well so all of this.
Speaker Change: First of all demand trends.
Speaker Change: In a good place.
Speaker Change: And.
Speaker Change: Of course on the supply side, leading edge supply as we mentioned in the prepared remarks as well is that Mark just mentioned, leading edge DRAM supply is tight.
Speaker Change: And certainly that is happening because of increasing demand for the <unk> ratio.
Speaker Change: And on NAND supply actions by.
Speaker Change: Video is a players.
Speaker Change: Under utilization in the Fabs.
Speaker Change: Certainly is improving the supply picture as well so all of this is improving the demand supply environment in the industry and of course, we are well focused on driving an inflection toward higher pricing in Q2, and we are well positioned.
Speaker Change: Our products across the end market segments.
Speaker Change: And we really look forward to.
Speaker Change: Continuing to maximize the opportunities for our business and continue to increase the mix of our business toward higher profit pools of the industry.
Speaker Change: Got it thanks listen gentlemen, quick question on the gross margin side.
Speaker Change: DMT <unk>.
Speaker Change: Obviously, a mature technology as you move to <unk>.
Speaker Change: The <unk> might be lower than.
Speaker Change: <unk> just kind of curious does the time of any negative impact on gross margins or is it de minimis at this point. Thank you.
Speaker Change: First of all in <unk> very pleased with how our team has executed and you mentioned in the prepared remarks that we actually delivered greater volume of HBV <unk> versus our plans and our FQ2 and exceeded revenue for the first time.
Speaker Change: Major milestone of more than $1 billion in HBM CE continues to do well with a tie.
Speaker Change: Are the yields at capacity ramp is going well, our execution is going well and all of that experience of a tie.
Speaker Change: In terms of capacity ramp as well as yield ramp will of course help us as we ramp our 12 high you know we have announced before that we are now in volume production with our 12 high just like any other new products and these are highly complex products <unk> is the most complex product ever made in the industry.
Speaker Change: We've kind of complex products of course in the early stages. There is a yield ramp we expect 12 high do of course have a premium over over <unk> high and of course, we will continue to be accretive to our DRAM margins nicely as well and we remain very focused in second half.
Speaker Change: Shifting.
Speaker Change: The vast majority of the second half of the calendar year shifting the vast majority of our volume two drove higher and as we ramped that volume of course yields will continue to go up as well.
Speaker Change: And.
Speaker Change: And with that by the end of this calendar year as we shared with you we expect to reach our.
Speaker Change: HBM share to be in line with overall industry DRAM sure.
Speaker Change: Thanks Sanjay.
Speaker Change: Thank you and our next question comes from the line of Joseph Moore from Morgan Stanley. Your question. Please.
Speaker Change: Great. Thank you.
Joseph Moore: I wanted to make sure I got the inventory targets right. So you are at 153 days and you'll be below that target model, which I think is 120 days in two quarters.
Joseph Moore: And I guess, if that's right that seems like a lot of reduction.
Joseph Moore: Can you talk about.
Joseph Moore: How much volume do you need to do that how much is the inventory kind of impacted by some of the HBM supply trends things like that can you just characterize a little bit how you produce that much inventory.
Mark: Yes, Joe it's Mark.
Joseph Moore: So 158 days.
Mark: I think.
Mark: It was there was the deal.
Mark: In the second quarter.
Mark: As we've talked about conditions are tighter in DRAM than NAND, you've heard about the supply actions that we've taken on.
Mark: On NAND.
Mark: We have seen good volume growth there and that is expected to continue but but the.
Mark: But the industry conditions are such that you've heard us talk about underutilization, reducing capex and delaying a node transition.
Mark: On the on the DRAM side, as Sanjay mentioned, AI, driven growth and are related to <unk> and other product sets about particularly HBM with the trade ratio.
Mark: Is creating tightness in that market.
Mark: And the target we have for inventories that we've stated before is 120 days and we would expect to be below that on DRAM.
Mark: In our fiscal fourth quarter.
Mark: Okay, great. Thank you and did you guide inventory for this coming quarter would I assume that starts to come down now.
Mark: We just said that on days that will go down through the year.
Mark: Okay. Thank you very much.
Mark: Thank you.
Speaker Change: Our next question comes from the line of C. J Muse from Cantor Fitzgerald. Your question. Please.
Speaker Change: Yes. Good afternoon. Thank you for taking my question I guess first question wanted to follow up on gross margins Mark is there a framework for thinking about <unk>.
Speaker Change: Under utilization charges in the period costs and to kind of maintain August on the NAND side and then is there also a way to think about.
Speaker Change: Rental construction costs as we go into August and November.
CJ: Yeah, So so C J.
CJ: We had less period costs in our third quarter here than we had originally projected in part due to the fact that we do.
CJ: Structurally brought down our capacity.
CJ: And so more of the Underutilization charge will go into inventory and then that will flush through that way versus period cost.
CJ: Yes, those period costs.
CJ: I'd say.
CJ: The under absorption cost do weigh on gross margins and.
CJ: And fourth quarter and into 2006.
CJ: Now even with that the combination of.
CJ: Growth in the business then.
CJ: Improved market conditions, and then mix improvements those those will we believe result in somewhat higher gross margins in the fourth quarter.
As it relates to startup costs.
CJ: The effect is as <unk>.
CJ: Relatively.
CJ: Small on a sequential basis third to fourth quarter.
CJ: But as we approach way.
CJ: Wafer outs in Idaho.
CJ: That number will increase.
CJ: Yes.
CJ: <unk> 26, and so we'll provide more color on that as our plans and timing is finalized.
CJ: Very helpful and a quick follow up.
CJ: You revised your HBM industry revenue outlook tire curious if theres a framework of how youre thinking about kind of first half versus second half for the industry. Thanks, So much.
CJ: Of course.
CJ: The revenue in the second half as you go from <unk> to 12 high.
CJ: <unk> continues to go up because 12 higher will be cutting certain premium over a time so.
CJ: We have projected a more than 35 billion for calendar year, 2025, and a bigger portion of that in second half of calendar 2020 versus first half.
CJ: And at 30 for more than $35 billion of course is the industry Tam for the HBM that'd be a different again.
CJ: Okay.
CJ: And I'll just point out that of course with respect to HBM.
CJ: There is expansion of HBM customer base, taking place micron itself now we are shipping to a third large customer that we have begun shipping our products too. So that also is contributing to the growth.
CJ: In <unk> revenue in the second half as the customer base expense.
CJ: Yes.
CJ: Thank you and our.
Speaker Change: Next question comes from the line of Chris Caso from Wolfe Research Your question. Please.
Speaker Change: Yes. Thank you.
Speaker Change: First question is with regard to the lower end of the market.
Speaker Change: If you could tell us about what the exposure is.
Speaker Change: On DRAM side.
Speaker Change: LP for and DDR, four and I guess as you start to see growth in <unk> and get some normalization in some of the consumer markets. As you go to the second half of the year.
I guess is that going to be kind of habit denman de minimis effect on revenue and margins as you go into the second half.
Speaker Change: So regarding the fall and LP for last quarter, and our earnings call we had shared that.
Speaker Change: That.
Speaker Change: Our revenue from those products LP for 94.
Speaker Change: For the remainder of the fiscal year, we had said at the time corresponds to about 10%.
Speaker Change: Of our total company revenue.
Speaker Change: So we continue to see that for the remainder of the fiscal year.
Speaker Change: And your second question is that.
Speaker Change: Can you repeat the second question.
Speaker Change: Yes.
Speaker Change: Does that.
Speaker Change: We will have a de minimis effect on margins I guess that the point is does that.
Speaker Change: Six being a drag on margins as you go into the second half as other parts of the business grow.
Speaker Change: I mean, it is a smaller part of the overall company revenue.
Speaker Change: And it is I mean, we are of course.
Leading in <unk>, five and HBM, and <unk> and LP fire based product and data center as well as other parts of the consumer markets.
Speaker Change: Now of course Lv forward in deepwater will continue to become smaller.
Speaker Change: Overtime, and just keep in mind that overall.
Speaker Change: Industry conditions in DRAM are improving from the point of view of DRAM.
Speaker Change: Demand drivers and the supply tightness.
Speaker Change: And that can also play some role in the overall dynamics of all parts of the DRAM market.
Speaker Change: Thank you.
Speaker Change: As a follow up on HBM, what you said in the past as you're sold out for the year, but yet you are.
Speaker Change: Your Tam assumptions have.
Speaker Change: Move higher for the past several quarters as we look into next year.
Speaker Change: <unk> believes the higher Cam this year translates to higher Tam assumptions as you go into next year are you still have the capability to increase your capacity to maintain that that market share in <unk>, which is equal to the overall share of DRAM as you go into next year.
Speaker Change: So of course, we have said that as we exit calendar 'twenty five.
Speaker Change: Our share in HBM will correspond.
Speaker Change: Two our industry DRAM share. So if you look at that run rate I mean purely in calendar year 2026, <unk> share would be higher for the full year basis.
Speaker Change: Versus 2025, and we remain very focused on continuing to increase.
Speaker Change: Capacity of HBM I mentioned earlier that we are doing executing quite well in terms of continuing to increase the capacity continuing to shift from <unk> to <unk> 12 higher for very much focused on bringing HBM for into the market next year and of course addressing all of the capacity.
Speaker Change: Needs related to Venezuela, so while we are not projecting 2026.
Speaker Change: Market share at this time, we feel very good about our HBM position, our close relationships with our customer our execution on our technology and <unk>.
Speaker Change: Products and.
Speaker Change: And our manufacturing overall.
Speaker Change: Thank you.
Speaker Change: Thank you and our next question comes from the line of Christine Lee from Citi. Your question. Please.
Speaker Change: Hey, Thanks, guys. So.
Speaker Change: If we look at.
Speaker Change: The may guidance, and then just going back the last three quarters your revenues.
Speaker Change: Between seven eight and $8 $8 billion per year.
Speaker Change: The last time that happened was.
Speaker Change: About.
Speaker Change: Three years ago that was the last upturn.
Speaker Change: But your gross margins were.
Speaker Change: 10 points higher.
Speaker Change: Why are gross margins because depreciation hasn't changed that much why are gross margins like 10 points lower at essentially the same revenue base.
Speaker Change: This means that we can forget about your gross margins ever go into the fifties again, or maybe give us a path to getting them back there or do you think that that's.
Speaker Change: Conceivable.
Speaker Change: Overall, our gross margins in DRAM.
Speaker Change: Have been healthy and again supported by our strong technology and product positions against on our.
Speaker Change: The five products LP five products HBM products.
Speaker Change: NAND is what has weighed down on other margins and of course, we have continued to focus in NAND. It is because of the overall industry environment and overall industry demand supply.
Speaker Change: And balances and.
Speaker Change: So of course, both in DRAM and NAND, it's always a function of demand supply environment, but also very much a focus of ours on increasing the mix of the business toward higher value solutions and Thats, what we continue to do in NAND as well and as we see greater supply discipline.
Speaker Change: Certainly fully expect that NAND fundamentals would improve in the industry as well of course, it's important to maintain the focus on sustained supply discipline there.
Speaker Change: There as well so as we look ahead as we have pointed out that we remain very focused on continuing to strengthen the mix of our revenue mix so far.
Speaker Change: Our products and the business toward higher margin products, both in NAND and DRAM.
Speaker Change: Continue to focus on.
Speaker Change: Portfolio product portfolio strength.
Speaker Change: Managing demand supply very closely and managing our technology development and ramp into production closely to make sure that our.
Speaker Change: Supply and demand is well in line and of course very much focused on overall cost as well and with that we are.
Speaker Change: Certainly.
Speaker Change: Optimistic here that.
Speaker Change: Those structural.
Speaker Change: Overall.
Speaker Change: The industry that the improvements will occur in the business fundamentals.
Speaker Change: Thanks, Sanjay just one brief follow up on that so you talked about increasing the mix to higher value solutions and then in the commentary and also in the press release, you said that part of the reason that the gross margin was lower was this increasing consumer exposure.
Speaker Change: In your NAND actually was down a lot more than DRAM. So are you seeing increased consumer exposure in DRAM.
Speaker Change: Why is that happening and how do we or how do you guys change that.
Speaker Change: Well first of all we are doing well in data center and our mix of business and data center for DRAM as we have pointed out continues to increase.
Speaker Change: Increase and we have leadership products in DRAM with data centers, including not just HBM, but we have also talked about when we just announced.
Speaker Change: So cam products. These are important products, so doing well.
Speaker Change: Back to DRAM on the consumer side of course.
Speaker Change: The last few.
Speaker Change: A few quarters, there was overhang of customer inventory on the consumer side and that was there in DRAM as.
Speaker Change: As well and as that.
Speaker Change: Customer inventories get closer to normalization along.
Speaker Change: Along the lines of what we have said before of course.
Speaker Change: Along with the AI drivers and consumer devices.
Speaker Change: A strong bounce back, particularly in smartphones with respect to demand.
Speaker Change: And thats, causing actually overall HBM trade issue as well as a strong bounce back in that consumer demand is causing tightness in leading edge as well and.
Speaker Change: <unk>.
Speaker Change: Of course these.
Speaker Change: Rentals of demand and supply.
Speaker Change: April is to drive inflection in pricing higher in CQ, two timeframe and same thing on the NAND side.
Speaker Change: Our supply actions that have been taken in the industry as well as consumer inventories.
Speaker Change: On the call.
Speaker Change: Customer consumer inventory is getting normalized is bringing back demand on the NAND side as well.
Speaker Change: And of course, we'll be driving an inflection in pricing higher on the NAND side as well in <unk>.
Speaker Change: Got it thanks.
Speaker Change: Thank you and 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.
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