Q1 2026 Micron Technology Inc Post-Earnings Call

December 17, 2025

Satya Kumar: and cues for discussion of risks that may affect our results. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, and achievements. We are under no duty to update any of the forward-looking statements to conform these statements to actual results. We can now open the call up for Q&A.

Risks that may affect our results, although we believe that the expectations reflected in the forward looking statements are reasonable we cannot guarantee future results levels of activity performance and achievements.

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

We can now open the call up for Q&A.

Uh huh.

Operator: As a reminder to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Aaron Rakers of Wells Fargo. Your line is open, Aaron.

As a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue. You May press Star one again, please standby, while we compile the Q&A roster.

Our first question comes from the line of Aaron Rakers of Wells Fargo. Your line is open to Erin.

Aaron Rakers: Yeah, thanks. Thanks for taking the question and doing the group call. I guess my first question is, you know, Mark, you, you talked a lot about being constrained and, and unable to meet some of the demand out there. I know in the quarter you talked about kind of a slight increase in bit shipments of DRAM this quarter. I, I guess as part of that, did, did the non-HBM DRAM bits grow sequentially in this quarter? And how, you know, how has your guide, you know, factored in bit shipments between NAND and FLASH in this current quarter? Thank you.

Yeah. Thanks, Thanks for taking the question and doing a group call I guess my first question is Mark you talked a lot about being constrained and unable to meet some of the demand out there I know in the quarter, you talked about kind of a slight increase in bit shipments of DRAM. This quarter I guess as part of that did the non H b M DRAM bit.

It's grow sequentially in this quarter and how.

How is your guide you know factored in between bits.

Shipments between NAND flash into this current quarter. Thank you.

Mark Murphy: So I think, Aaron, one thing I wanted to mention was, you know, we are doing all we can to increase bit supply now. And we, you know, we're able to provide additional bits to do 20% bit shipment growth in our fiscal 2026. And, you know, we're doing that through, you know, efforts within existing footprint and just efficiencies in the fabs. We're doing that with node transitions, as we've said, you know, 1-beta and, or I'm sorry, 1-gamma and G9 to get additional bits for DRAM and NAND. And, you know, we're pulling in what we can on construction that will help us, largely in 2027, but we are able to provide growth that we think will be in line with the market in fiscal 2026 or calendar 2026.

So I I think Aaron one thing I wanted to mention was.

We are doing.

Doing all we can to increase that supply.

Now and we were able to.

Provide additional beds to do 20%.

That shipment growth in our fiscal 'twenty six.

We're doing that through.

You know efforts within an existing footprint and just efficiencies in the Fabs were doing that with no transition.

As we've said one.

160, <unk> and.

Or I'm, sorry, one gamma and.

G nine to get additional bets for DRAM and NAND.

And.

We're pulling in what we can on construction that will help us largely in 'twenty seven, but but we are able to provide growth for what we think will be in line with the market.

In 'twenty and fiscal 'twenty or calendar 'twenty six.

Mark Murphy: You know, I think we did have very modest bit shipment growth sequentially in Q1. We expect a little bit more in Q2, but it's again a quarter primarily driven by price, as it relates to revenue growth.

You know, I think we did have very modest bit shipment growth sequentially in Q1. We expect a little bit more in Q2, but it's again a quarter primarily driven by price, as it relates to revenue growth.

Yeah, I think we did have a very modest.

That shipment growth sequentially in the first quarter.

We expect a little bit more in the second quarter, but we.

Again, a quarter primarily driven by.

Price.

As it relates to revenue growth.

Aaron Rakers: Yep. That's helpful, Mark. And then as a real quick follow-up, you know, I, as we look forward, I know you, you mentioned the 14-week period for fiscal Q4, but how would you have us think about the OpEx trajectory from here over the next couple of quarters? Thank you.

Yeah, that's helpful Mark.

A real quick follow up.

As we look forward I know you mentioned the 14 week period for fiscal <unk>, but how would you have us think about the opex trajectory from here over the next couple of quarters. Thank you.

Mark Murphy: Yeah. You know, I mean, we've guided the second quarter. It'll be sort of flat-ish in the third quarter relative to the second. Then it'll be up in the fourth quarter, and up, plus the additional week.

Yes.

We've guided the second quarter it'll be sort of.

Flattish in the third quarter relative to the second that'll be up in the fourth quarter and op and plus.

Additionally.

Aaron Rakers: Yep. Thanks, Mark.

Yes.

Thanks Mark.

Yeah.

Operator: Thank you. Our next question comes from the line of Vijay Rakesh of Mizuho. Please go ahead, Vijay.

Thank you. Our next question comes from the line of Vijay Rakesh with Mizuho. Please go ahead P. J.

Vijay Rakesh: Yeah. Hi, thanks. Great quarter. So just a quick question, Sumit, Mark, and Manish, on when you look at the, you know, DRAM pricing has up pretty nicely, 20% sequentially, and NAND has up pretty nicely too. I was just wondering how, when you look at the demand side, how do you decide to allocate capacity versus conventional DRAM versus HBM? Because it looks like, you know, conventional DRAM profitability is improving very significantly. So just wondering how that reasoning, how you look at that as you look through 2026, 2027. Thanks. Follow-up.

Yeah, Hi, thanks, great.

Great quarter.

Quick question.

So with the market.

On the when you look at the.

DRAM pricing was up pretty nicely, 20% sequentially.

And that was up pretty nicely too I was just wondering when you look at the demand side, how do you decide to allocate capacity versus conventional DRAM versus <unk> because it looks like the conventional DRAM profitability is improving very significantly so just wondering how.

That.

I mean, all you look at that as we look to 'twenty six 'twenty seven thanks.

I have a follow up.

Sumit Sadana: Yeah. Yeah. So, good question. I mean, we are in a very interesting environment where the aggregate demand for both DRAM and NAND is substantially higher than the ability to supply it, not just from a Micron perspective, but, you know, even at an aggregate industry level. So, we are not really able to meet the demand for customers across any segment. So all segments are short in terms of what they need from us versus what we are able to supply. And, we are also short on the HBM side, non-HBM side, you know, all parts of the market. There is a mismatch between supply and demand, and that, that continues for the foreseeable future because over the course of the last few months, there has been a very significant and pervasive step-up in demand across the data center customer base.

Yes, so with.

Good question I mean, we are and waiting.

Very interesting environment, where the.

Aggregate demand.

For both DRAM and NAND is substantially higher.

Then the ability to supply to it not just from a micron perspective, but even that the aggregate industry level.

So we are not really.

<unk> to meet the demand.

For our customers.

Any segment. So all segments are short in terms of what they need from us versus.

What we are able to supply them.

And we are.

Also saw it on the HCM side non HBM side in all parts of the market.

There is a mismatch between supply and demand and.

That that continues for the foreseeable future because the over the course of the last.

A few months there has been a very significant.

Pervasive.

Pervasive step up in demand across the data center customer base and.

Sumit Sadana: So it has created a set of challenges in being able to meet the demand from our customers, on a very broad level. So in terms of allocation, I can't get into too much specifics, but suffice to say that we are working very hard to find the threshold level of supply for all of our customers, to minimize the impact to their businesses, due to lack of adequate supply. And we are working hard to ensure, you know, adequate level of diversification in our business across segments, across customers, and focus on our strategic customers when it comes to, you know, doing some of these longer-term strategic deals that can improve foundationally our business model. So those are some of the things that we are attempting to do.

So it has created a set of challenges in being able to meet the demand from our customers, on a very broad level. So in terms of allocation, I can't get into too much specifics, but suffice to say that we are working very hard to find the threshold level of supply for all of our customers, to minimize the impact to their businesses, due to lack of adequate supply. And we are working hard to ensure, you know, adequate level of diversification in our business across segments, across customers, and focus on our strategic customers when it comes to, you know, doing some of these longer-term strategic deals that can improve foundationally our business model. So those are some of the things that we are attempting to do.

So it is it has created a set of challenges in being able to meet the demand from our customers.

On a very broad level, so in terms of allocation.

Can't get into too much specifics, but suffice to say that we are working very hard to find the threshold level of supply for all of our customers.

To minimize the impact to their businesses.

Due to lack of adequate supply.

And we are.

Working hard to ensure adequate level of diversification in our business across segments across customers and.

Focus on our strategic customers when it comes to.

Doing some of these longer term strategic deal.

Can improve foundation really our business model. So those are some of the things that we are.

Sumit Sadana: In the course of all of this, our mix over time will tilt more towards the data center, but we're also trying to remain focused on having diversification across all the other segments of the market as well.

Attempting to do in the course of all of this our mix over time.

In the course of all of this, our mix over time will tilt more towards the data center, but we're also trying to remain focused on having diversification across all the other segments of the market as well.

Tilt more towards the data center.

But we're also trying to remain focused on.

Having diversification across all the other segments of the market as well.

Aaron Rakers: Got it. And then on the ESSD side, you know, you're seeing a very strong pickup with your QLC. It's in nine ESSDs, as you mentioned, 122 terabyte, 245 terabyte. Is there a way to kind of look at what is the attach rate that you're seeing now, with ESSDs on AI servers, versus last year, especially as some of these, inferencing vectors with, reasoning and answer and, you know, all that stuff to pick up? How do you see that attach rate growing year on year? Thanks.

Vijay Rakesh: Got it. And then on the ESSD side, you know, you're seeing a very strong pickup with your QLC. It's in nine ESSDs, as you mentioned, 122 terabyte, 245 terabyte. Is there a way to kind of look at what is the attach rate that you're seeing now, with ESSDs on AI servers, versus last year, especially as some of these, inferencing vectors with, reasoning and answer and, you know, all that stuff to pick up? How do you see that attach rate growing year on year? Thanks.

Got it and then on the <unk> side.

Seeing a really strong pickup could be at we'll see.

<unk>, you mentioned 100 going to care about $2 per terabyte.

Instead of a way to kind of look at what is the attach rate that you're seeing now with <unk> on <unk>.

This last year, especially with some of these.

Inferencing, Victor slipped up loosening and answer them all that start to pick up.

How do you see that it's actually growing year on year.

Sumit Sadana: The attach rate is certainly growing, and these AI servers do need more high-capacity SSDs. They also need a significant amount of high-performance SSDs. This is where our Gen 6 SSDs have come into the picture. So we have been the first company to supply qualified Gen 6 SSDs to the market. So that is gaining rapid market traction and contributing to our improved share position in the data center SSD space. And then these high-capacity SSDs that you mentioned, Micron has the leadership position in QLC workloads. And so, overall, QLC bit mix is higher than the rest of the industry. So that's an additional capability that we have. And, if you look at workloads like AV cache, they do require a lot of higher-capacity SSDs.

The attach rate is certainly growing and these AI servers do need more.

High capacity.

Ssds, they also need <unk>.

Significant.

Amount of high performance SSD and this is where our gen. Six ssds have come into the picture. So we have been the first company to supply.

Qualified gen six ssds to the market. So that is gaining rapid market traction and contributing to our improved.

Share position in the datacenter SSD space and then these high capacity Ssds that you mentioned John has the leadership position and we'll see.

Workloads and so our overall qf's EBIT mix is higher than the rest of the industry. So that's an additional.

Capability that we have and if you look at.

Workloads like Avi cash.

They do require.

Lot of higher capacity Ssds now one additional thing that has happened.

Sumit Sadana: Now, one additional thing that has happened is that, beyond the underlying growth trend of AI servers using more of these SSDs, we've also had our customers not have adequate amounts of HDDs, as well. And because of that, there has been a lot of demand coming towards SSDs. And consequently, the ability to supply NAND to our customers has also been oversubscribed, due to a combination of all of these trends.

Now, one additional thing that has happened is that, beyond the underlying growth trend of AI servers using more of these SSDs, we've also had our customers not have adequate amounts of HDDs, as well. And because of that, there has been a lot of demand coming towards SSDs. And consequently, the ability to supply NAND to our customers has also been oversubscribed, due to a combination of all of these trends.

That.

Beyond the underlying growth trend of AI servers using more of these.

<unk>, we have also had a.

Customers not have adequate amount of hdds.

As well and because of that there has been a lot of demand coming towards ssds.

And consequently the.

Ability to.

Supply NAND.

To our customers has also been oversubscribed due to a combination of all of these trends.

Aaron Rakers: Great. Thank you.

Vijay Rakesh: Great. Thank you.

Great. Thank you I do want to note that on.

Mark Murphy: I do want to note that on SSDs, that if you remember, our business was over $1 billion in Q1 2025. And in Q1 2026, the business did clear that. And, as Sumit mentioned, sort of the industry's able to get on top of the supply chain-related issues, we expect, and given the demand in that business, we expect that growth to accelerate through the year.

Ssds that if you remember our business was over $1 billion in the first quarter of of 25.

And in the first quarter of 2006, the business did clear of that.

As Sumit mentioned is as sort of the.

Industry is able to get on top of the supply chain related issues, we expect and given the demand in that business, we expect that gross to accelerate through the year.

Aaron Rakers: All right. Thanks, Mark.

Vijay Rakesh: All right. Thanks, Mark.

Alright, Thanks Mark.

Okay.

Operator: Our next question comes from the line of Vivek Arya of Bank of America Securities. Your line is open, Vivek.

Our next question.

Comes from the line of Vivek Arya Bank of America Securities. Your line is open.

Vivek Arya: Thank you. I actually had two questions. First, back on the gross margin, I think you, you know, are at 68%. Is there a reasonable way to think about, you know, what can be the, you know, path forward? Like, is it 70%? Is it 75%? I know you have not given a specific number, but Mark, is there a way to logically think about where your margins can go in this, you know, in this cycle? Because this is well above the prior peak, so is there a certain business model you have in mind? And the reason I ask the question is because, you know, you have, you know, close to 70% gross margins. You're right. Your customers, NVIDIA, AMD, are also talking about, you know, very high gross margins or expanding gross margins for their, for their business.

Thank you.

Actually I had two questions first back on the gross margin.

I. Thank you.

168% is that reason.

The reasonable way to think about.

What can be the path forward like is it 70% is at 75% I know you have not given a specific number but market is there a way to logically think about where your margins can go in there.

And the cycle because this is well above the prior peak.

Business model you have in mind and the reason I ask the question is because you.

You have no.

Close to 70% gross margins Youre right. Your customers' Nvidia AMD are also talking about you know very high gross margins are expanding gross margins for their for their business.

Vivek Arya: I'm just curious to know how you think conceptually about the path forward for your gross margins.

I'm just curious to know how you think conceptually about the path forward for your gross margins.

So I'm just curious to know how you think conceptually about the path forward for your gross margins.

Mark Murphy: You know, we're at record-setting levels, and that's positive. We guided to that. There are a lot of favorable factors in that that are driving that. You know, first is the demand driven by this, you know, generational change in tech, with AI. And, you know, that's a multi-year build-out, done by well-capitalized companies. We think that's sustainable. And fortunately, you know, AI needs more and better memory to perform better. So, you know, the underlying, you know, secular driver for memory is positive. You know, we're just in a fantastic position with leadership technology, best products in memory and storage, and then we're operating really well, yielding quickly. Cost performance is good. Capital discipline is good. Then you've got these general structural supply constraints.

Yes, they're there.

Yeah, we're at record setting levels and that's positive we guided to that.

And there are.

A lot of favorable factors in that that are driving that.

First is the.

Yeah the <unk>.

A demand driven by this generational change in Tac.

With AI.

And that's a multi year build out.

Done by well capitalized companies.

So we think thats.

Sustainable and Fortunately.

AI needs more and better memory to perform better so.

The underlying.

Secular driver for memory is positive.

Yes.

Just in a fantastic position with leadership technology, best products, and memory and storage and our operating really well yielding quickly cost performance is good.

Capital discipline is good.

And then you've got these general structural.

Supply constraints.

Mark Murphy: So when combined with the demand from AI, data center to the edge, actually, you know, we've got this supply shortfall, and you see the price movement associated with that. And that this is a supply gap that's not easy to address in the near term, given, you know, we can do a node transition, but you've got, you know, greenfield capacity needs to be put in place. You've got increasing HBM and the capital intensity associated with that or silicon intensity associated with that. And these are, you know, putting on Earth the most, you know, some of the largest and most complex factories, you know, on the planet. So we need partnership to do that, and we're gonna do it carefully.

So when combined with the demand from AI, data center to the edge, actually, you know, we've got this supply shortfall, and you see the price movement associated with that. And that this is a supply gap that's not easy to address in the near term, given, you know, we can do a node transition, but you've got, you know, greenfield capacity needs to be put in place. You've got increasing HBM and the capital intensity associated with that or silicon intensity associated with that. And these are, you know, putting on Earth the most, you know, some of the largest and most complex factories, you know, on the planet. So we need partnership to do that, and we're gonna do it carefully.

Combined with the demand.

From AI.

Data center to the edge actually.

We've got the supply shortfall in and you see the price movement.

Associated with that.

This is a.

Not in.

Supply gap.

GAAP, it's not easy to address in the near term.

Given.

We can do it node transition.

But.

But you've got.

Greenfield capacity needs to be put in place you've got increasing HBM and the capital intensity associated with that are silicon intensity associated with that.

And these are putting on on Earth. The most.

Some of the largest and most complex.

Factories.

On the planet so.

So we need partnership but to do that and we're going to do a carefully so.

Mark Murphy: So, you know, with all that, we do expect that margin can go up from Q2. It'll go up on the basis of, we believe, market conditions that should remain, you know, positive beyond 2026. We believe it's possible based on our ability to deploy bits to premium products in which we're best positioned. And we believe that our cost performance is such that it will help us sustain or expand these margins. Now, just the math of being at these levels for a, you know, equivalent increase in price, we're gonna get less gross margin expansion. So, you know, there can be, you know, as we mentioned on the call, on the primary earnings call, there's, you know, the increase from here would be more gradual than you've seen in, you know, Q4 to Q1 or Q1 to Q2 guide.

So, you know, with all that, we do expect that margin can go up from Q2. It'll go up on the basis of, we believe, market conditions that should remain, you know, positive beyond 2026. We believe it's possible based on our ability to deploy bits to premium products in which we're best positioned. And we believe that our cost performance is such that it will help us sustain or expand these margins. Now, just the math of being at these levels for a, you know, equivalent increase in price, we're gonna get less gross margin expansion. So, you know, there can be, you know, as we mentioned on the call, on the primary earnings call, there's, you know, the increase from here would be more gradual than you've seen in, you know, Q4 to Q1 or Q1 to Q2 guide.

With all that we do expect that margin can go up.

From second quarter It will go up.

On the basis of we believe.

Market conditions it should remain.

Positive beyond 'twenty six.

We believe it's possible based on our ability to deploy bits to premium products and which we're best positioned.

And we believe that our cost performance is such that it will help us sustain or expand these margins now just the math of being at these levels.

For yeah.

You know equivalent increase in price, we're going to get less gross margin expansion. So.

There can be.

We mentioned on the call.

On the primary earnings call there.

Increase from here would be more gradual than you've seen in <unk>.

<unk> the first our first and second quarter guide, but we do believe that that margins can go up.

Mark Murphy: But we do believe that margins can go up.

But we do believe that margins can go up.

Aaron Rakers: Got it. For my follow-up, you know, every time the customer, right, or the, whether it's NVIDIA or Broadcom or AMD, every time they report, they seem to be upsiding numbers for next year. When you say you're sold out for HBM, does it mean that you don't have an ability to upside your production or, you know, does it mean that you're sold out based on the current level of forecast and you have kind of unit and ASP certainty around that? I'm just trying to understand, you know, what scenarios let them continue to upside the numbers unless it's just a sheer shift between you and your peers. Like, if they continue to upside the numbers, you know, can you help them, you know, do that? How much more flex is there in your production for HBM? Thank you.

Vivek Arya: Got it. For my follow-up, you know, every time the customer, right, or the, whether it's NVIDIA or Broadcom or AMD, every time they report, they seem to be upsiding numbers for next year. When you say you're sold out for HBM, does it mean that you don't have an ability to upside your production or, you know, does it mean that you're sold out based on the current level of forecast and you have kind of unit and ASP certainty around that? I'm just trying to understand, you know, what scenarios let them continue to upside the numbers unless it's just a sheer shift between you and your peers. Like, if they continue to upside the numbers, you know, can you help them, you know, do that? How much more flex is there in your production for HBM? Thank you.

Alright and for my follow up.

Every time the customer.

But it's in video and Broadcom at MB have you done the report they seem to be upside in numbers for next year. So when you say youre sold out for <unk> does it mean that you don't have an ability to upsize your production or does it mean that youre sold out based on the current level of forecast.

And you have kind of unit and ESP.

Certainly around back I'm, just trying to understand what scenarios, let them continue to upside the numbers unless it's just a share shift between you and your peers like they continue to upside the numbers can you help them do that how much more flex is that in your production for HBM. Thank you.

Sumit Sadana: Yeah. So I think the way to read what we are saying is that, you know, we have visibility to our supply. And of course, we're always trying to improve that. But we have a good understanding of what our supply is. The current situation, you know, when we say sold out for HBM, for example, the HBM supply for 2026, we have reached agreements on volume and price with our customers. Of course, if there are upsides to supply, we are able to very quickly be able to place that upside supply at our customers at, you know, good terms. But when it comes to the overall aggregate business, the demand on us is so much higher than the supply that even, you know, small increases in supply are not going to be able to make a dent in that demand.

Yes, so I think the way to read what we are saying is that.

We have.

Stability to our supply and of course.

We're always trying to improve that.

But we have.

Good understanding of what it is.

Is.

The current situation, let me say sold out for <unk> for example.

HBM supply.

For 2026.

Agreements on volume and price with our customers of course, if there are upsides to supply we are able to.

Very quickly be able to place that upside supply at our customers.

Good Tom.

But when it comes to the overall aggregate business.

The.

Demand on US is so much higher than the supply that even small increases in supply are not going to be able to make a dent in that demand. So we are more than sold out I mean behalf.

Sumit Sadana: So we are, you know, more than sold out. I mean, we have a significant amount of unmet demand in our models. And this is just consistent with an environment where the demand is substantially higher than supply for the foreseeable future.

So we are, you know, more than sold out. I mean, we have a significant amount of unmet demand in our models. And this is just consistent with an environment where the demand is substantially higher than supply for the foreseeable future.

A significant amount of unmet.

Demand in our models and this is just consistent with an environment where.

The demand is substantially higher than supply for the foreseeable future.

Manish Bhatia: Vivek, I'll just add on, you know, HBM and DRAM, because the whole market is short, and, you know, HBM, you know, production in, fab output is shared with DRAM production, right, all on our 1-beta node. So, you know, this constraint is kind of across the entire DRAM market, as Sumit mentioned, and as we said, before, which is, you know, incredibly constrained. So we are working hard to try to increase supply for, you know, DRAM, HBM, and NAND, you know. Yields have come up really well for both our 1-gamma and our G9. And those are gonna be, as we gave colors, majority of the big growth for next year is coming from those transitions.

And Vivek I will just add on.

H B M in DRAM, because the whole market is sure and.

HBM.

Production in our fab.

Fab output is shared with DRAM production right on our one beta node. So this constraint of is kind of across the entirety of the market as some had mentioned and as we said before.

Which is incredibly constrained. So we are working hard to try to increase supply for.

DRAM H P M and Dan.

Yields or yields have come up really well for both our one gamma and our gen nine and those are going to be if we gave color. The majority of the bit growth for next year is coming from those transitions.

Manish Bhatia: And we're also, you know, gonna have the majority of those of our DRAM bits on 1-gamma in the second half of next year. And gen nine, as we go through the year, will become the highest volume node for us in NAND. So, you know, technology transitions are moving aggressively. We're optimizing and looking to maximize production where we can. And I just wanna point out that we've also said that we expect HBM4 yield ramp to be faster than our HBM3E 12-high yield ramp was, which was already faster than our HBM3E 8-high yield ramp. So we're gaining confidence in our HBM capability at scale.

And we're also, you know, gonna have the majority of those of our DRAM bits on 1-gamma in the second half of next year. And gen nine, as we go through the year, will become the highest volume node for us in NAND. So, you know, technology transitions are moving aggressively. We're optimizing and looking to maximize production where we can. And I just wanna point out that we've also said that we expect HBM4 yield ramp to be faster than our HBM3E 12-high yield ramp was, which was already faster than our HBM3E 8-high yield ramp. So we're gaining confidence in our HBM capability at scale.

And we're also.

Got to have the majority of those of our DRAM bits on one gamma in the second half of next year.

Amgen nine as we go through the year will become our highest volume node for us and that so you know technology transitions are moving aggressively we're optimizing and looking to maximize production where we can.

And I just want to point out that we've also said that we expect HBM for yield ramp to be faster than our H B M 312 high yield drop was which was already faster than our H B M. Eight three to eight high yogurt. So we're we're gaining confidence in our H b.

Capability at scale.

Manish Bhatia: So, you know, all those are things that we're continuing to work on, but just the demand environment is such that it's really, you know, way over supply, whatever we can or what the rest of the industry can supply.

So, you know, all those are things that we're continuing to work on, but just the demand environment is such that it's really, you know, way over supply, whatever we can or what the rest of the industry can supply.

No.

All those are things that we're we're continuing to work on but if the demand environment is such that it's it's really way oversupply whatever the whatever we can with what the rest of the industry.

Aaron Rakers: Thank you.

Vivek Arya: Thank you.

Thank you.

Okay.

Operator: Comes from the line of Kevin Cassidy of Rosenblatt Securities. Your line is open, Kevin.

Come from the line of.

Kevin Cassidy.

Of Rosenblatt Securities. Your line is open Kevin.

Kevin Cassidy: Thank you very much. My question, you know, along those lines of you saying the HBM4 yield is better than HBM3, what, how does this work with the process node, with the qualification time taking so much longer with HBM? Does this change your cadence for process technology? You know, do they stay in production longer?

Thank you very much.

My question along those lines have you seen him HBM for yield is better than the atrium three.

How does this work with the process node with the qualification time, taking so much longer with HBM.

Has this changed your cadence for process technology.

Stay in production longer.

Manish Bhatia: I'm not quite sure. I mean, I think both our HBM3E and HBM4 are on our one beta process technology. They both use the similar assembly, architecture, and process that we've had now from HBM3E 8 high, 12 high, and now at HBM4. So the reason I said that we expect our HBM4 yields to ramp faster than HBM3E 12 high did once we go to production, you know, in the early part of calendar year 2026 and start shipments in calendar Q2, is because of being able to leverage the learnings that we have both on one beta for HBM as well as on the packaging and test side, because we have common architectures between those products.

I'm not quite sure, but I think the.

Both our <unk> and he's from for our on our one beta process technology. They both use.

Similar assembly.

<unk> architecture and profit that we've had now four of atrium create high 12 buying nowadays imports. So the reason I said that we expect our HBM for yields to ramp faster than <unk> 12, I did once we go to production.

In the early part of calendar year, 'twenty, six and start shipments in Cowen and co.

Our second quarter.

Is because of being able to leverage the learnings that we have both on one data for H B M as well as on the packaging and test side, because we have common architectures between those products.

Kevin Cassidy: Yeah. My question was more, in a bigger picture of, will 1-gamma get qualified for HBM4 or will it always be 1-beta?

Okay.

My question was more.

Bigger picture.

One gamma they're qualified for HBM four will always be.

One data.

Manish Bhatia: HBM4 is on 1-beta. And, you know, we, you know, we haven't given specific guidance on, you know, how future generations will be, but HBM4 will be on 1-gamma. And, you know, the cadence of.

Atrium for Oregon, one data and I know, we we haven't.

Given specific.

Guidance on.

How future generations will be bought atrium for will be on one gamma and.

The cadence of what platform and data I'm, sorry, one data.

Kevin Cassidy: What?

Manish Bhatia: Platform.

Vivek Arya: One beta.

Kevin Cassidy: One beta.

Manish Bhatia: I'm sorry. 1-beta. The cadence of our customers' platforms continues to be, you know, rapid every 12 months. So we are just gonna be focused on delivering new high bandwidth memory solutions for our customers on an approximately 12-month cadence. So, you know, that's not slowing down.

And the cadence of our customers' platforms continues to be rapid every 12 months. So we're just going to be focused on delivering new memory, new hybrid memory solutions for our customers on an approximately 12 month cadence so that's not slowing down.

Kevin Cassidy: Okay. Maybe another question, just, how quickly can you change your wafer allocation, you know, from HBM to low power to high performance? You know, I guess, how, how far into the process technology, process, can you change what the, final product is?

Okay.

Maybe another question just.

How quickly can you change your wafer allocation from HBM, two low power to high performance.

I guess, how far into the process technology process.

Can you change.

The final product is.

Manish Bhatia: So they are shared process between the two, between the various different designs that we have on a given DRAM technology node. But the design itself is unique. So when you start one design, whether it's a low power design, a DDR design, or an HBM design, obviously, that's gonna be the timeframe. So the real time, the answer to your question is that basically it's one process cycle time that we can change between any of these different products.

So they are shared process.

Between the two.

Between the various different designs that we have on a given DRAM technology node, but the design itself is unique so when you start one design, whether it's a low power design, a DVR design or HBM design, obviously, that's going to be the timeframe. So the real the.

The answer to your question is that basically it's one process cycle time that we can change between any of these different products.

Vivek Arya: I think, Kevin, I just want to make sure it's clear that we, you know, we have extensive planning that we do around all the products and the product roadmaps and, you know, what products go on what node at what time. You know, there are a lot of factors that go into that. Cost is not the only factor. And in fact, in HBM, it's such a complex product that stability and, you know, turning quickly with the customer is an important factor. So there is some value in 1-beta and as stable and strong a node as that is. And then, you know, when 1-gamma's available, at the right time, you know, that we can use that node. Otherwise, you know, we have plenty of other beta requirements that 1-gamma we're ramping that as quickly as we can to get that supply.

Mark Murphy: I think, Kevin, I just want to make sure it's clear that we, you know, we have extensive planning that we do around all the products and the product roadmaps and, you know, what products go on what node at what time. You know, there are a lot of factors that go into that. Cost is not the only factor. And in fact, in HBM, it's such a complex product that stability and, you know, turning quickly with the customer is an important factor. So there is some value in 1-beta and as stable and strong a node as that is. And then, you know, when 1-gamma's available, at the right time, you know, that we can use that node. Otherwise, you know, we have plenty of other beta requirements that 1-gamma we're ramping that as quickly as we can to get that supply.

I think Kevin I, just want to make sure. It's clear that we have extensive planning that we do around all of the products in the product Roadmaps.

What products gone what.

What time and yes.

There are a lot of factors that go into that.

Cost is not the only factor and in fact in HBM is such a complex product that stability and turning quickly with the customer is an important factor. So there is there is some value in one beta and is stable and strong I know does that is and then one gamma is available.

At the right time.

We can use that note otherwise we have plenty of other debt requirements that <unk> gamma we're ramping as quickly as we can to get that supply.

Sumit Sadana: I mean, generally speaking, we tell our customers that it takes us five months if they want to make changes that use different data in the fab, three months, three and a half months to get to the front end, and six to eight weeks depending on the complexity of the product on the back end. So roughly speaking, five plus months of lead time. Our customers understand that. They, they know that these things take a long time.

Generally speaking, we tell our customers that it takes us five months, if they want to make changes that use different die in the fab three months.

Months to get to the front end and.

Six to eight weeks, depending on the complexity of the products on the backend so roughly speaking five plus months.

Our fee guidance.

And our customers understand that they know that these things take a long time.

Kevin Cassidy: Okay. Great. Thank you.

Okay, great. Thank you.

Operator: Thank you. Our next question comes from the line of Stephen Fox of Fox Advisors LLC. Your line is open. Stephen.

Operator: Thank you. Our next question comes from the line of Steven Fox of Fox Advisors LLC. Your line is open. Steven.

Thank you.

Our next question.

Comes from the line of Steven Fox of Fox Advisors LLC. Your line is open Steven Hi.

Stephen Fox: Hi. Good afternoon. I just had one question. On the CapEx spending that you talked about on the call, are you giving any sort of sense for the breakdown between facilities, equipment, construction, all of that, say, from how and how it might change between 2026 and 2027? That mix? Thanks.

Steven Fox: Hi. Good afternoon. I just had one question. On the CapEx spending that you talked about on the call, are you giving any sort of sense for the breakdown between facilities, equipment, construction, all of that, say, from how and how it might change between 2026 and 2027? That mix? Thanks.

Hi, Good afternoon, I just had one question on the Capex.

Spending that you talked about on the call are you.

Any sort of sense for the breakdown between facilities equipment construction all of that say from how it and how it might change between 26 and 27 that mix. Thanks.

Vivek Arya: Yeah. We've not indicated, you know, anything about 2027 other than, other than it will be, 2027 total CapEx will be up versus 2026. I did on the call, I believe, indicate that, you know, 2025 to 2026, the plans to, you know, our fiscal or plans to roughly double, you know, the construction CapEx. And so that gives you sort of an indication on direction of travel. Now, we've got, you know, 2027 we'll have, you know, Idaho 1 finishing. We've got Idaho 2. We've got Japan. We've got, you know, we've got a lot of construction sites. So, you know, those are gonna contribute to that, sequential, you know, 2026 to 2027 CapEx increase. And Manish, I don't.

Mark Murphy: Yeah. We've not indicated, you know, anything about 2027 other than, other than it will be, 2027 total CapEx will be up versus 2026. I did on the call, I believe, indicate that, you know, 2025 to 2026, the plans to, you know, our fiscal or plans to roughly double, you know, the construction CapEx. And so that gives you sort of an indication on direction of travel. Now, we've got, you know, 2027 we'll have, you know, Idaho 1 finishing. We've got Idaho 2. We've got Japan. We've got, you know, we've got a lot of construction sites. So, you know, those are gonna contribute to that, sequential, you know, 2026 to 2027 CapEx increase. And Manish, I don't.

Yeah, we've not we've not indicated.

Yes, anything about 27 other than other than it will be 27, total capex will be up versus 2006.

I did on the call I believe indicate that.

25% to 26 the plans the RFS.

Our fiscal our plans to roughly double.

Yes, the construction Capex and so that gives you sort of an indication on direction of travel now we've got.

Yeah, 27 will have yeah, Idaho, one, finishing we've got Idaho too with that.

Japan, We've got we've got a lot of construction site. So those are kind of contribute to that.

<unk>.

Sequential 26% to 27 <unk>.

Capex increase and many shallow.

Manish Bhatia: Yeah. I mean, we'll be.

Vivek Arya: HBM and NAND.

Mark Murphy: HBM and NAND.

At <unk>, and saying well, we do have a considerable auto construction that was going to say, yes, Singapore as well, where we've got that and we're gonna be equipping our India Assembly site, which is just now going from pilot production for production ramp in the beginning of calendar 'twenty six.

Manish Bhatia: We do have a considerable amount of construction, I was gonna say.

Vivek Arya: Yeah.

Mark Murphy: Yeah.

Manish Bhatia: In Singapore as well where we've got that. We're gonna be equipping our India assembly site, which is just now going from pilot production to production ramp in the beginning of calendar 2026. So, yeah, there's gonna be a mix of growth in terms of construction CapEx to fund the midterm and long-term equipment CapEx into, you know, existing clean room that we have right now. Then, of course, assembly investments for both HBM as well as conventional packaging that we'll be making as well.

Yes.

There's going to be a mix of growth in terms of.

Construction Capex to fund the midterm and long term equipment capex into existing clean room do we have right now and then of course assembly investments for block H B M as well as conventional.

Packaging that we'll be making as well.

Vivek Arya: Yeah. I'll just maybe add to this point, you know, Tim asked about capital intensity on the earlier call. You know, we had CapEx as a percent of sales in Q1 was, you know, below 35% that we talked about. And then on Q2, basically where our guide is to the both on the revenue and the CapEx guidance we gave you, you could tell it's in the mid-20s on CapEx as a percent of sales. And, you know, we've talked about strengthening free cash flow. So we're, you know, not only increasing investment in order to get the bit supply, we are generating a lot more cash. We had, you know, near 30% free cash flow margin in Q1. And we talked about free cash flow increasing through the year.

Mark Murphy: Yeah. I'll just maybe add to this point, you know, Tim asked about capital intensity on the earlier call. You know, we had CapEx as a percent of sales in Q1 was, you know, below 35% that we talked about. And then on Q2, basically where our guide is to the both on the revenue and the CapEx guidance we gave you, you could tell it's in the mid-20s on CapEx as a percent of sales. And, you know, we've talked about strengthening free cash flow. So we're, you know, not only increasing investment in order to get the bit supply, we are generating a lot more cash. We had, you know, near 30% free cash flow margin in Q1. And we talked about free cash flow increasing through the year.

Yes, I'll, just maybe maybe add to this point.

Yes, Tim.

Tim asked about cash.

Capital intensity on the earlier call.

Yes, we had we had.

Capex as a percent of sales in the first quarter was below 35% that we talked about and then on the on the second quarter base.

Basically where our guide is.

Two the both on the revenue and the Capex guidance. We gave you could tell us in the mid twenties.

Capex as a percent of sales.

Yes, and we've talked about strengthening free cash flow. So we're.

Sure.

Not only in increasing investment in order to get the best supply.

We are generating a lot more cash we had you know.

Near 30% free cash flow margin.

In the first quarter and.

And we talked about free cash flow increasing through the year.

Vivek Arya: We paid down debt, you know, $2.7 million of debt in Q1, bought back $300 million of shares, and went to net cash, all in the quarter. It was a record-setting free cash flow in Q1.

We paid down debt, you know, $2.7 million of debt in Q1, bought back $300 million of shares, and went to net cash, all in the quarter. It was a record-setting free cash flow in Q1.

We paid down debt $2 $7 billion of debt in the first quarter.

Bought back $300 million shares and went to net cash.

All in all in all in the quarter and it was a record setting free cash flow in the first quarter.

Kevin Cassidy: Got it. That's all very helpful. Thank you.

Steven Fox: Got it. That's all very helpful. Thank you.

Got it Thats all very helpful. Thank you.

Operator: Thank you. Our next question comes from the line of Jim Snyder of Goldman Sachs. Your line is open, Jim.

Operator: Thank you. Our next question comes from the line of Jim Schneider of Goldman Sachs. Your line is open, Jim.

Thank you.

Our next question.

Come from the line of Jim Schneider of Goldman Sachs. Your line is open Jim.

Stephen Fox: Good evening. Thanks for taking my questions. First one would be, just in terms of the capacity allocation question that came up earlier, maybe to put it a different way, I know you're, you know, sort of a key supplier in many embedded and other kind of mission-critical applications, automotive and the like. You know, can you give us a sense about, like, a floor level, a minimum floor level that some of those sort of legacy or embedded applications would reach or not below in terms of production, kind of giving your importance in that market? Or conversely, can we maybe talk a little bit about sort of, you know, what is the maximum level of data center capacity or data center exposure you feel comfortable having?

Jim Schneider: Good evening. Thanks for taking my questions. First one would be, just in terms of the capacity allocation question that came up earlier, maybe to put it a different way, I know you're, you know, sort of a key supplier in many embedded and other kind of mission-critical applications, automotive and the like. You know, can you give us a sense about, like, a floor level, a minimum floor level that some of those sort of legacy or embedded applications would reach or not below in terms of production, kind of giving your importance in that market? Or conversely, can we maybe talk a little bit about sort of, you know, what is the maximum level of data center capacity or data center exposure you feel comfortable having?

Hi, good evening, thanks for taking my questions.

First one would be.

Just in terms of the the capacity allocation question that came up earlier, maybe to put it a different way could you maybe I know you're sort of a key supplier in many embedded another kind of mission critical applications automotive and alike.

Can you give us a sense about like.

A floor level of minimum floor level from the sort of legacy or embedded.

Applications would reach or not below in terms of production kind of given your importance in that market or Conversely can you maybe talk a little bit about sort of what is the maximum level of data center capacity or data center exposure or do you feel comfortable having.

Sumit Sadana: Yeah. I mean, I think there are a couple of things to keep in mind. First of all, the overall TAM is also shifting more towards data center. That's just how the dynamics of the industry are playing out. So certainly our portfolio and our mix is shifting towards data center. Our whole goal over time is to keep mixing our products within each segment and across segments towards, you know, higher ROI type of homes for our bits and for our output. And that just means that, for some time now, the portfolio mix has been an important tailwind for Micron and continues to be a driver of our longer-term financial performance because we have over time shifted more and more of our revenue towards higher margin products and taken a bigger share of the industry profit pool based on that initiative. So that will continue.

Yeah, I mean, I think there are a couple of things to keep in mind first of all the.

Overall Tam.

Is also shifting more towards data center.

How the dynamics of the industry playing out so certainly our portfolio and our mix is shifting towards data center. Our whole goal overtime is to keep mixing our products within the segments and across segments.

Our ROI.

Both forms for our bids for our output and that just means that.

For some time now the portfolio mix has been an important tailwind.

For Micron and continues to be a driver of our.

Longer term financial performance, because we have over time shifted more and more of our.

Revenue towards higher margin products and taken a bigger share of the industry.

Based on that initial.

Initiatives. So that will continue with that said Youre right, we do have <unk>.

Sumit Sadana: With that said, you're right. I mean, we do have a large share in automotive, industrial, and several mission-critical applications. So we are making investments in our Manassas, Virginia fab, in the US, to modernize it, bring 1-alpha technology, DRAM technology into that fab. And so that is going to be an important initiative to continue the support of long lifecycle, legacy products. We intend to continue to support them. Of course, we also support a lot of these products and customers and segments from our high-volume fabs. And certainly the demand environment, and the structural challenges on supply, for us as well as for the industry just make it very difficult to meet all of the demand for customers across different segments.

With that said, you're right. I mean, we do have a large share in automotive, industrial, and several mission-critical applications. So we are making investments in our Manassas, Virginia fab, in the US, to modernize it, bring 1-alpha technology, DRAM technology into that fab. And so that is going to be an important initiative to continue the support of long lifecycle, legacy products. We intend to continue to support them. Of course, we also support a lot of these products and customers and segments from our high-volume fabs. And certainly the demand environment, and the structural challenges on supply, for us as well as for the industry just make it very difficult to meet all of the demand for customers across different segments.

Large share in automotive and industrial and February mission critical applications. So we are making investments in.

The masses, Virginia fab.

And the U S too.

To modernize that bring one alpha technology technology into that.

And so that is going to be an important initiatives to continue the support of long lifecycle legacy product.

And we intend to continue to support them.

Of course, we also support a lot of these products some customers and segments from a high volume fab.

And certainly the demand environment.

These structural challenges on supply.

For us as well as for the industry just make it very difficult to meet all of the demand or customers across different segments. So a lot of work that we're doing is to align with that.

Sumit Sadana: So a lot of work that we are doing is to try and assess the threshold level of supply that each of our customers need, encourage them to also, you know, figure out other sources of supply in this environment where we may not be able to meet all of the demand. Of course, we also continue to make sure that our commitments towards our customers are kept. We are certainly very big on that. So, it's a delicate balancing act. It's a difficult environment to meet all of our customers' needs. We're working very, very hard to do the best we can on that front across the different segments of the market, including the ones that you mentioned.

So a lot of work that we are doing is to try and assess the threshold level of supply that each of our customers need, encourage them to also, you know, figure out other sources of supply in this environment where we may not be able to meet all of the demand. Of course, we also continue to make sure that our commitments towards our customers are kept. We are certainly very big on that. So, it's a delicate balancing act. It's a difficult environment to meet all of our customers' needs. We're working very, very hard to do the best we can on that front across the different segments of the market, including the ones that you mentioned.

The threshold level of supply that.

Each of our customers need.

<unk> to also think about other sources of supply in this.

Environment, where we may not be able to meet all of the demand.

Of course.

We also continued to make sure that our commitment towards our customers are capped we are certainly very big on that so it's a delicate balancing act.

Difficult environment to meet all of our customers' needs.

We are working very very hard to do the best we can on that front across the different segments of the market, including the ones that you mentioned.

Stephen Fox: Thank you. And then just a quick clarification relative to the Hiroshima clean room expansion you referenced on the call. Can you talk about when that kind of would turn into volume production capability? Thank you.

Jim Schneider: Thank you. And then just a quick clarification relative to the Hiroshima clean room expansion you referenced on the call. Can you talk about when that kind of would turn into volume production capability? Thank you.

Thank you and then just a quick clarification relative to the Hiroshima.

Clean room expansion you referenced on the call can you talk about when that kind of turn into volume production capability. Thank you.

Manish Bhatia: Sure, Jim. You know, what we've said is that, you know, we are working to develop and deploy next-generation DRAM technologies there with the support of METI and, you know, our Boise R&D team working with our Hiroshima R&D team. So it will be future generations of technology we'll be deploying. And the clean room space will support those future technologies. So, it will be timed to be able to support those, the space needed for those new nodes.

Sure Jim.

What we've said is that you know.

We are working to develop and deploy next generation DRAM technologies.

There with the support of meta and our Boise R&D team working with our Hirsch from R&D team. So it will be future generations of technology will be deploying in the clean room space will support those future technology. So.

It will be timed to be to be able to support those.

The space needed for those those new notes.

Stephen Fox: But not in 2026, to be fair.

Jim Schneider: But not in 2026, to be fair.

But not in 2020, thanks to be fair not in perfect. Okay. Thank you.

Manish Bhatia: No, not in 2026.

Stephen Fox: Okay. Thank you.

Jim Schneider: Okay. Thank you.

Operator: Thank you. Our next question comes from the line of Joseph Moore of Morgan Stanley. Please go ahead, Joseph.

Thank you.

Our next question comes from the line of Joseph Moore of Morgan Stanley. Please go ahead Joseph.

Joseph Moore: Great. Thank you. Along the same lines, you had talked about the PC market could be limited by DRAM availability. How do you make those kinds of allocation decisions? You know, is it kind of just highest gross margin is the focus? And, you know, how do you make sure that the mid-tier PC companies kind of have enough that their customers, when you need them down the road? Just how are you kind of thinking about balancing the allocation across these different markets?

Great. Thank you along the same lines you had talked about piece the PC market could be limited by DRAM.

Availability.

How do you make those kinds of allocation decisions is it kind of just highest gross margin is the focus in how are you.

You make sure that the mid tier PC companies kind of have enough that their customers. When you need them down. The road just how are you kind of thinking about balancing the allocation across these different markets.

Sumit Sadana: With a lot of difficulty. Certainly there are competing requirements. We are not just focused on optimizing gross margin. Of course, when we think about pricing in different markets, we try to ensure that the pricing reflects the value of the product that we are selling. And so a lot of the margin performance of different segments starts to get very close to each other in situations like this. With that said, we have had customers of different sizes across different parts of the world for a number of years, decades sometimes. And so we are very mindful of our responsibility to them.

We have a lot of difficulty.

Certainly.

There are competing.

Requirements.

We are not just focused on optimizing gross margin.

Of course, when we think about pricing in different markets.

To ensure that.

The pricing reflects the value of the product that we are selling and so a lot of the margin performance of.

Different segments.

Starts to.

Get very close to each other.

Situations like this.

With that said.

We have had customers.

In different sizes sizes.

Across different parts of the world.

A number of years decades, sometimes and so we are very mindful of our responsibility to them and.

Sumit Sadana: And we try to do our best to manage the allocation in an appropriate way to ensure diversity across segments, ensure that we are supporting our strategic customers, and doing the best to maximize our supply towards these customers in times like this, as well as to minimize any impact that could occur to our customers' business due to lack of adequate DRAM on that, as the case may be.

And we try to do our best to manage the allocation in an appropriate way to ensure diversity across segments, ensure that we are supporting our strategic customers, and doing the best to maximize our supply towards these customers in times like this, as well as to minimize any impact that could occur to our customers' business due to lack of adequate DRAM on that, as the case may be.

Try to do our best to <unk>.

Managed the allocation.

In an appropriate way to ensure diversity across segments and ensure that we are supporting our strategic customers and doing the best to <unk>.

<unk>.

Our.

Supply towards these customers in times like this as well is to minimize any impact.

Darker.

Our customers.

Business due to lack of.

Peter.

On that aggregates maybe.

Joseph Moore: That's helpful. Thank you. And then just my follow-up. You mentioned a few minutes ago, you know, paying down some debt. I mean, it seems like you're gonna generate a really large amount of cash here in the next few quarters if your view that gross margins continue to improve comes true. Just what are the priorities for that cash over time, you know, just what between dividend, buybacks, you know, or other uses of cash that you might think about?

That's helpful. Thank you and then just my follow up you mentioned, a few minutes ago paying down some debt. It seems like youre going to generate a really large amount of cash here in the next few quarters. If you do that gross margins continued to improve comes true.

Just what are the priorities for that cash over time.

Just between dividend buybacks or other uses of cash that you might think about.

Vivek Arya: Yeah, Joe, the priority for our cash generation is always to reinvest in the business. So we're gonna make sure that we're, you know, investing in this case the capacity we need to support the market and ensure that we're getting a clear line of sight to return on that. And, you know, that includes in this case now looking to strike commercial arrangements with customers that reflect the value of our products and our assurance on supply. So that's priority. And also with that, you know, maintaining, you know, the technology leadership that we enjoy today and that we tend to maintain. You know, the balance sheet also will always be a priority. And, you know, that's moving in the right direction. It was already strong and getting stronger every day. In fact, today, on this call, we have record liquidity.

Mark Murphy: Yeah, Joe, the priority for our cash generation is always to reinvest in the business. So we're gonna make sure that we're, you know, investing in this case the capacity we need to support the market and ensure that we're getting a clear line of sight to return on that. And, you know, that includes in this case now looking to strike commercial arrangements with customers that reflect the value of our products and our assurance on supply. So that's priority. And also with that, you know, maintaining, you know, the technology leadership that we enjoy today and that we tend to maintain. You know, the balance sheet also will always be a priority. And, you know, that's moving in the right direction. It was already strong and getting stronger every day. In fact, today, on this call, we have record liquidity.

Yes, Joe the priority for our cash generation is always to reinvest in the business. So we're going to make sure that we're.

Investing in this case the capacity, we need to support the market and ensure that we're getting.

Clear line of sight to return on that end.

And that includes in this case now looking too.

Sorry, commercial arrangements with customers that reflect the value of our products and our assurance on supply.

So that's priority and also with that maintaining.

Yes technology leadership that we enjoy today and that we.

10 two.

Maintain.

Yes.

The balance sheet also will always be a priority and that's moving the right direction. There was already strong are getting stronger every day in fact today on this call were record liquidity.

Vivek Arya: You know, we recently got put on positive watch by one of the agencies. You know, we effectively have no net leverage now. In fact, we're positive cash, net cash. Our gross leverage is very low. Now, we do have, on an absolute basis, more debt than we've had historically. So we would expect to bring that down some. And then, you know, we would, as we've said before, intend to grow the dividend over time. And then, you know, repurchase shares with excess liquidity that we believe we have. Now, we repurchased $300 million in the first quarter. If you recall, I mentioned a couple quarters ago, I believe, that when we signed the definitive agreement for the CHIPS program, our repurchases have some limitations. You know, for the first two years, we've ended that first year.

And.

You know, we recently got put on positive watch by one of the agencies. You know, we effectively have no net leverage now. In fact, we're positive cash, net cash. Our gross leverage is very low. Now, we do have, on an absolute basis, more debt than we've had historically. So we would expect to bring that down some. And then, you know, we would, as we've said before, intend to grow the dividend over time. And then, you know, repurchase shares with excess liquidity that we believe we have. Now, we repurchased $300 million in the first quarter. If you recall, I mentioned a couple quarters ago, I believe, that when we signed the definitive agreement for the CHIPS program, our repurchases have some limitations. You know, for the first two years, we've ended that first year.

We recently got put on positive watch by one of the agencies and.

We effectively have no net leverage now and in fact, we're positive cash net cash.

And.

And our gross leverage is very low now we do have on an absolute basis more debt that we've had historically so we would we would.

Back to bring that down some and then we would as we've said before.

Intend to grow the dividend over time.

And then.

Repurchase shares with excess liquidity.

That we believe we have now we repurchased $300 million.

In the first quarter.

You'll recall I mentioned, a couple of quarters ago, I believe that when we sign the definitive agreement for the chips program.

Our repurchases have some limitations.

For the first two years, we've ended that first year, where in that limitation period, the second year.

Vivek Arya: We're in that limitation period, the second year. We are able to buy back some stocks this year a little bit more than what we bought back in the first quarter. But then we're this time next year, we're largely unconstrained. I mean, there are some requirements on CapEx and R&D, which we'll, you know, we believe we'll easily be able to surpass those. So I think that's the rough cut of the capital allocation.

We're in that limitation period, the second year. We are able to buy back some stocks this year a little bit more than what we bought back in the first quarter. But then we're this time next year, we're largely unconstrained. I mean, there are some requirements on CapEx and R&D, which we'll, you know, we believe we'll easily be able to surpass those. So I think that's the rough cut of the capital allocation.

We are able to buy back some stocks this year, a little bit more than what we bought back and.

In the first quarter.

But then more this time next year, where we're largely unconstrained I mean, there are some requirements on capex and R&D, which we believe will easily be able to.

To surpass those so.

So I think thats the.

Rough cut of the capital allocation.

Joseph Moore: Thanks so much.

Thanks, so much.

Operator: Our next question comes from the line of Tom O'Malley of Barclays. Please go ahead, Tom.

Our next question.

Comes from the line of Tom O'malley of Barclays. Please go ahead Tom.

Tom O'Malley: Hey, guys. I just have one. Could you remind us as a mix of your CapEx this year, how much was construction CapEx? Or if you haven't given that, where it trends on a normalized basis? Thanks.

Hey, guys I just have one could you remind us of the mix of your Capex. This year, how much was construction capex or if you haven't given that our trends on a normalized basis.

Manish Bhatia: Yeah, Tom. So we haven't, but we did say, I think Mark did say that from fiscal year 2025 to 2026, we're doubling our construction CapEx. That gives you some sense. We got, you know,

Yeah. So we haven't but we did say I think market say that from a fiscal year 'twenty five 'twenty six we're doubling our our construction capex that gives you some sense.

Got you.

Tom O'Malley: Yeah. Just looking for the base.

Yes, just looking for the base hire Goodyear.

Manish Bhatia: Yeah. Higher.

Tom O'Malley: All good.

Manish Bhatia: Yeah. Yeah.

Yeah.

Okay.

Operator: Thank you. Ladies and gentlemen, we have reached the end of our time. That does conclude today's conference call. Thank you for participating. You may now disconnect. Thank you for standing by, and welcome to Micron's post-earnings analyst call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to Satya Kumar and investor relations. Please go ahead.

Thank you and ladies and gentlemen, we have reached the end of our time. So that does conclude today's conference call. Thank you for participating you may now disconnect.

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Post earnings analyst call at this time, all participants are in a listen only mode.

After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone to remove yourself from the queue. You May Press Star one one again I would now like to hand, the call over to Satya Kumar Investor Relations. Please go ahead.

Satya Kumar: Thank you, and welcome to Micron Technology's fiscal first quarter 2026 post-earnings analyst call. On the call with me today are Sumit Sadana, Micron's Chief Business Officer, Manish Bhatia, EVP of Global Operations, and Mark Murphy, our CFO. As a reminder, the matters we're discussing today include forward-looking statements regarding market demand and supply, market trends and drivers, and our expected results and guidance in other matters. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer you to documents we have filed with the SEC, including our most recent Form 10-Q and our upcoming Form 10-Qs for discussion of risks that may affect our results. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, and achievements.

Thank you and welcome to Micron technologies fiscal first quarter 2026 post earnings analyst call on the call with me today are somewhat Sedona, Micron's, Chief business Officer, Manish Bhatia EVP of global operations and Mark Murphy, our CFO as a reminder, the matters. We're discussing today include forward looking statements regarding market.

And supply market trends and drivers and unexpected results and guidance and other matters. These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today.

We refer you to the documents, we have filed with the FCC, including our most recent Form 10-Q and our upcoming form.

10, Qs for a discussion of risks that may affect our results. Although we believe that the expectations reflected in the forward looking statements are reasonable we cannot guarantee future results levels of activity performance and achievements.

Satya Kumar: We are under no duty to update any of the forward-looking statements to conform these statements to actual results. We can now open the call up for Q&A.

We are under no duty to update any of the forward-looking statements to conform these statements to actual results. We can now open the call up for Q&A.

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

We can now open the call up for Q&A.

Uh huh.

As a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue. You May press Star one again, please standby, while we compile the Q&A roster.

Our first question comes from the line of Aaron Rakers of Wells Fargo. Your line is open to Erin.

Aaron Rakers: Yeah, thanks. Thanks for taking the question and doing the group call. I guess my first question is, you know, Mark, you talked a lot about being constrained and unable to meet some of the demand out there. I know in the quarter you talked about kind of a slight increase in bit shipments of DRAM this quarter. I guess as part of that, did the non-HBM DRAM bits grow sequentially in this quarter? And how, you know, how has your guide, you know, factored in between bit shipments between NAND and flash in this current quarter? Thank you.

Yeah. Thanks, Thanks for taking the question and doing a group call. I guess my first question is you know Mark you talked a lot about being constrained and unable to meet some of the demand out there I know in the quarter, you talked about kind of a slight increase in bit shipments of DRAM. This quarter I guess it was part of that did did the non H b M DRAM bit.

It's grow sequentially in this quarter and how.

How is your guide factored in between bit shipments between NAND flash into this current quarter. Thank you.

Mark Murphy: So I think, Aaron, one thing I wanted to mention was, you know, we are doing all we can to increase bit supply now. And we, you know, we're able to provide additional bits to do 20% bit shipment growth in our fiscal 2026. And, you know, we're doing that through, you know, efforts within existing footprint and just efficiencies in the fabs. We're doing that with node transitions, as we've said, you know, 1-beta and 1-gamma and G9 to get additional bits for DRAM and NAND. And, you know, we're pulling in what we can on construction that will help us largely in 2027, but we are able to provide growth, what we think will be in line with the market in fiscal 2026 or calendar 2026. You know, I think we did have very modest bit shipment growth sequentially in the first quarter.

So I I think Aaron one thing I wanted to mention was yes, we are.

Doing all we can to increase that supply.

Now.

And we were able to.

Provide additional beds to do 20%.

<unk> bit shipment growth in our fiscal 'twenty six.

We're doing that through.

You know efforts within an existing footprint and just efficiencies in the Fabs were doing that with no transition.

As we've said one.

160 and.

Or I'm, sorry, one gamma and.

G nine to get additional bets for DRAM and NAND.

And you know where were.

We're pulling in what we can on construction that will help us largely in 2007, but but we are able to provide growth to what we think will be in line with the market.

And in 'twenty and fiscal 'twenty or calendar 'twenty six.

Yeah, I I think we did have a very modest.

That.

Bit shipment growth sequentially in the first quarter.

Mark Murphy: We expect a little bit more in Q2, but it's, again, a quarter primarily driven by price as it relates to revenue growth.

We expect a little bit more in Q2, but it's, again, a quarter primarily driven by price as it relates to revenue growth.

We expect a little bit more in the second quarter, but we.

Again quarter, primarily driven by <unk>.

Price.

As it relates to revenue growth.

Satya Kumar: Yeah, that's helpful, Mark. And then, as a real quick follow-up, you know, as we look forward, I know you mentioned the 14-week period for fiscal Q4, but how would you have us think about the OpEx trajectory from here over the next couple of quarters? Thank you.

Aaron Rakers: Yeah, that's helpful, Mark. And then, as a real quick follow-up, you know, as we look forward, I know you mentioned the 14-week period for fiscal Q4, but how would you have us think about the OpEx trajectory from here over the next couple of quarters? Thank you.

Yeah, that's helpful Mark.

Real quick follow up.

As we look forward I know you mentioned the 14 week period for fiscal <unk>, but how would you have us think about the opex trajectory from here over the next couple of quarters. Thank you.

Mark Murphy: Yeah, I mean, we've guided Q2. It'll be sort of flattish in Q3 relative to the second. Then it'll be up in Q4 and up and plus the additional week.

Yes.

We've guided the second quarter it'll be sort of.

A flattish in the third quarter relative to the second that it'll be up in the fourth quarter and up and plus Additionally.

Satya Kumar: Yep. Thanks, Mark.

Aaron Rakers: Yep. Thanks, Mark.

Yes.

Mark.

Yes.

Yeah.

Operator: Thank you. Our next question comes from the line of Vijay Rakesh of Mizuho. Please go ahead, Vijay.

Thank you. Our next question comes from the line of Vijay Rakesh with Mizuho. Please go ahead to P. J.

Vijay Rakesh: Yeah, hi, thanks. Great quarter. So just a quick question, Sumit, Mark, and Manish. When you look at the, you know, DRAM pricing, it was up pretty nicely, 20% sequentially, and NAND was up pretty nicely too. I was just wondering, when you look at the demand side, how do you decide to allocate capacity versus conventional DRAM versus HBM? Because it looks like conventional DRAM profitability is improving very significantly. So just wondering how that reasoning, how you look at that as you look through 2026, 2027. Thanks. I have a follow-up.

Yeah, Hi, there thanks.

Great quarter. So just a quick question.

So with the Mako monies.

When you look at the.

DRAM pricing was up pretty nicely, 20% sequentially.

And that was up pretty nicely too I was just wondering when you look at the demand side, how do you decide to allocate capacity versus conventional DRAM versus <unk>, because it looks like the conventional DRAM.

Profitability is improving very significantly so just wondering how.

That oh.

I mean, all you look at that as we look to 'twenty six 'twenty seven thanks.

I have a follow up.

Sumit Sadana: Yeah, so good question. I mean, we are in a very interesting environment where the aggregate demand for both DRAM and NAND is substantially higher than the ability to supply to it, not just from a Micron perspective, but, you know, even at an aggregate industry level. So we are not really able to meet the demand for customers across any segment. So all segments are short in terms of what they need from us versus what we are able to supply. And we are also short on the HBM side, non-HBM side, you know, all parts of the market. There is a mismatch between supply and demand, and that continues for the foreseeable future because over the course of the last few months, there has been a very significant and pervasive step-up in demand across the data center customer base.

Yes, so with.

Good question I mean, we are.

And.

Very interesting environment, where the.

Aggregate demand.

For both DRAM and NAND.

Essentially higher.

Then the ability to supply to it not just from my perspective, but even that the aggregate industry level.

So we are not maybe.

To meet the demand.

Or are customers of course any segment. So all segments are short in terms of what they need from us versus what.

What we are able to supply them.

And we are.

Also saw on the HCM side non HBM side in all parts of the market.

There is a mismatch between supply and demand and.

But that continues for the foreseeable future because the over the course of the last.

A few months there has been a very significant.

And.

Pervasive step up in demand across the data center customer base.

Sumit Sadana: So it has created a set of challenges in being able to meet the demand from our customers on a very broad level. So in terms of allocation, I can't get into too much specifics, but suffice to say that we are working very hard to find the threshold level of supply for all of our customers to minimize the impact to their businesses due to lack of adequate supply. We are working hard to ensure, you know, an adequate level of diversification in our business across segments, across customers, and focus on our strategic customers when it comes to, you know, doing some of these longer-term strategic deals that can improve foundationally our business model. So those are some of the things that we are attempting to do.

And.

So it has created a set of challenges in being able to meet the demand from our customers on a very broad level. So in terms of allocation, I can't get into too much specifics, but suffice to say that we are working very hard to find the threshold level of supply for all of our customers to minimize the impact to their businesses due to lack of adequate supply. We are working hard to ensure, you know, an adequate level of diversification in our business across segments, across customers, and focus on our strategic customers when it comes to, you know, doing some of these longer-term strategic deals that can improve foundationally our business model. So those are some of the things that we are attempting to do.

So it is it has created a set of challenges in being able to meet the demand from our customers.

On a very broad level, so in terms of allocation.

I can't get into too much specifics, but suffice to say that we are working very hard to find the threshold level of supply for all of our customers.

To minimize the impact to their businesses.

Due to lack of adequate supply.

And we are.

We're working hard to ensure adequate level of diversification in our business across segments across customers.

And our focus on our strategic customers when it comes to.

I'm doing some of these longer term strategic deals.

Ken improves foundation of our business model. So those are some of the things that we are.

Attempting to do in the course of all of this our mix over time.

Independent more towards the data center.

But we are also applying to remain focused on.

Having diversification across all the other segments of the market as well.

Satya Kumar: Got it. Then on the ESSD side, you know, you're seeing a very strong pickup with your QLC. It's in 9 ESSDs, as you mentioned, 122 TB, 245 TB. Is there a way to kind of look at what is the attach rate that you're seeing now with ESSDs on AI servers versus last year, especially as some of these inferencing vectors with reasoning and answer and all that stuff to pick up? How do you see that attach rate growing year on year? Thanks.

Vijay Rakesh: Got it. Then on the ESSD side, you know, you're seeing a very strong pickup with your QLC. It's in 9 ESSDs, as you mentioned, 122 TB, 245 TB. Is there a way to kind of look at what is the attach rate that you're seeing now with ESSDs on AI servers versus last year, especially as some of these inferencing vectors with reasoning and answer and all that stuff to pick up? How do you see that attach rate growing year on year? Thanks.

Got it and then on the SSD side.

We're seeing a really strong pickup criccieth TLC.

<unk> you mentioned <unk> looked at about $2 per terabyte.

Instead of a way to kind of look at what does that say that they're seeing now.

<unk> on <unk> versus last year, now, especially as some of these.

In pricing Victor slipped up loosening and uncertain that start to pick up.

How do you see that it's actually growing year on year.

Sumit Sadana: The attach rate is certainly growing, and these AI servers do need more high-capacity SSDs. They also need a significant amount of high-performance SSDs. This is where our Gen 6 SSDs have come into the picture. So we have been the first company to supply qualified Gen 6 SSDs to the market. So that is gaining rapid market traction and contributing to our improved share position in the data center SSD space. And then these high-capacity SSDs that you mentioned, Micron has the leadership position in QLC workloads. And so overall, QLC bit mix is higher than the rest of the industry. So that's an additional capability that we have. And if you look at workloads like AV cache, they do require a lot of higher-capacity SSDs.

The attach rate is certainly growing and these AI servers do need more.

High capacity.

And so these they also need.

Significant.

Amount of high performance SSD and this is where our gen. Six ssds has come into the picture. So we have been the first company to supply.

Qualifying Gen six ssds to the market. So that is gaining rapid market traction and contributing to our improved.

Share position in the datacenter SSD space and then these high capacity Ssds that you mentioned micron has the leadership position and you will see.

Workloads and so our overall qos EBIT mix is higher than the rest of the industry. So that's an additional <unk>.

Capability that we have and if you look at.

Workloads like Avi cash.

They do require.

A lot of higher capacity Smbs now one additional thing that has happened.

Sumit Sadana: Now, one additional thing that has happened is that beyond the underlying growth trend of AI servers using more of these SSDs, we've also had our customers not have an adequate amount of HDDs as well. And because of that, there has been a lot of demand coming towards SSDs. And consequently, the ability to supply NAND to our customers has also been oversubscribed due to the combination of all of these trends.

Now, one additional thing that has happened is that beyond the underlying growth trend of AI servers using more of these SSDs, we've also had our customers not have an adequate amount of HDDs as well. And because of that, there has been a lot of demand coming towards SSDs. And consequently, the ability to supply NAND to our customers has also been oversubscribed due to the combination of all of these trends.

That.

Beyond the underlying growth trend of AI servers using modest means.

<unk>, we have also had.

Are customers not have adequate amount of hdds.

And because of that there has been a lot of demand coming towards ssds.

And consequently, the <unk>.

Ability to.

Supply NAND.

To our customers has also been oversubscribed due to a combination of all of these trends.

Satya Kumar: Great. Thank you.

Vijay Rakesh: Great. Thank you.

Great. Thank you I do want to note that on.

Mark Murphy: I do want to note that on SSDs, that if you remember, our business was over $1 billion in Q1 2025. In the first quarter of 2026, the business did clear that. As Sumit mentioned, as sort of the industry is able to get on top of the supply chain-related issues, we expect, and given the demand in that business, we expect that growth to accelerate through the year.

Ssds that yeah. If you remember our business was over $1 billion in the first quarter of of 25.

And in the first quarter of 2006, the business did clear that and as Sumit mentioned is as sort of the.

Industry is able to get on top of the supply chain related issues, we expect and given the demand in that business, we expect that growth to accelerate through the year.

Satya Kumar: All right. Thanks, Mark.

Vijay Rakesh: All right. Thanks, Mark.

Alright, Thanks Mark.

Okay.

Operator: Our next question comes from the line of Vivek Arya of Bank of America Securities. Your line is open, Vivek.

Our next question.

Comes from the line of Vivek Arya Bank of America Securities. Your line is open.

Vivek Arya: Thank you. I actually had two questions. First, back on the gross margin, I think you are at 68%. Is there a reasonable way to think about, you know, what can be the path forward? Like, is it 70%? Is it 75%? I know you have not given a specific number, but Mark, is there a way to logically think about where your margins can go in this, you know, in this cycle? Because this is well above the prior peak. So is there a certain business model you have in mind? And the reason I ask the question is because, you know, you have, you know, close to 70% gross margins, right? Your customers, NVIDIA, AMD, are also talking about, you know, very high gross margins or expanding gross margins for their business.

Thank you.

I had two questions first back on the gross margin.

Thank you.

At 68% is dead.

Reasonable way to think about.

What can be the path forward like is it 70% is at 75% I know you have not given a specific number but mark is there no way to logically think about where your margins can go in there.

And the cycle because this is well above the prior peak. So is there a certain business model you have in mind and the reason I ask the question is because you have no clue.

So 70% gross margins your ideal customers Nvidia AMD are also talking about.

Very high gross margins are expanding gross margins for their for their business.

Vivek Arya: So I'm just curious to know how you think conceptually about the path forward for your gross margins?

So I'm just curious to know how you think conceptually about the path forward for your gross margins?

So I'm just curious to know how you think conceptually about the path forward for your gross margins.

Mark Murphy: Yeah, we're at record-setting levels, and that's positive. We guided to that. There are a lot of favorable factors in that that are driving that. You know, first is the, you know, the demand driven by this, you know, generational change in tech with AI. You know, that's a multi-year build-out done by well-capitalized companies. We think that's sustainable. Fortunately, you know, AI needs more and better memory to perform better. You know, the underlying, you know, secular driver for memory is positive. You know, we're just in a fantastic position with leadership technology, best products in memory and storage, and then we're operating really well, yielding quickly, cost performance is good, capital discipline is good, and then you've got these general structural supply constraints.

They're there.

Yeah, we're at record setting levels and that's positive we guided to that.

And there are.

A lot of favorable factors in that that are driving that.

First is the.

Yeah.

The demand driven by this generational change in Tac.

With AI.

Yeah, that's a multi year build out.

Done by well capitalized companies.

So we think that's sustainable.

Sustainable and Fortunately.

You know AI needs more and better memory to perform better.

The underlying.

Secular driver for memory is positive.

Yes.

Okay.

Just in a fantastic position with leadership technology, best products, and memory and storage and our operating really well yielding quickly cost performance is good.

Capital discipline is good.

And then you've got these general structural.

Supply constraints.

Mark Murphy: So when combined with the demand from AI, data center to the edge, actually, you know, we've got this supply shortfall, and you see the price movement associated with that. And this is a not-insignificant, you know, supply gap that's not easy to address in the near term, given, you know, we can do a node transition, but you've got, you know, greenfield capacity needs to be put in place. You've got increasing HBM and the capital intensity associated with that, or silicon intensity associated with that. And these are, you know, putting on earth the most, you know, some of the largest and most complex factories, you know, on the planet. So we need partnership to do that, and we're going to do it carefully. So, you know, with all that, we do expect that margin can go up from Q2.

So when combined with the demand from AI, data center to the edge, actually, you know, we've got this supply shortfall, and you see the price movement associated with that. And this is a not-insignificant, you know, supply gap that's not easy to address in the near term, given, you know, we can do a node transition, but you've got, you know, greenfield capacity needs to be put in place. You've got increasing HBM and the capital intensity associated with that, or silicon intensity associated with that. And these are, you know, putting on earth the most, you know, some of the largest and most complex factories, you know, on the planet. So we need partnership to do that, and we're going to do it carefully. So, you know, with all that, we do expect that margin can go up from Q2.

Combined with with the demand.

From AI.

Data center to the edge actually.

Yes, we've got the supply shortfall and and you see the price movement.

Associated with that.

This is a.

Not in.

Supply gap.

GAAP, it's not easy to address in the near term.

Given.

We can do with node transition.

But.

But you've got.

Greenfield capacity needs to be put in place <unk> got increasing HBM and the capital intensity associated with that are silicon intensity associated with that.

And these are putting on on Earth. The most you know some of the largest and most complex.

Factories, you know.

On the planet so.

So we need partnership but to do that and we're going to do a carefully so.

With all that we do expect that margin can go up.

From second quarter It will go up.

Mark Murphy: It'll go up on the basis of, we believe, market conditions that should remain, you know, positive beyond 2026. We believe it's possible based on our ability to deploy bits to premium products in which we're best positioned. We believe that our cost performance is such that it will help us sustain or expand these margins. Now, just the math of being at these levels for a, you know, equivalent increase in price, we're going to get less gross margin expansion. So, you know, there can be, you know, as we mentioned on the call, on the primary earnings call, there's, you know, the increase from here would be more gradual than you've seen in, you know, Q4 to Q1 or Q1 to Q2 quarter guide. But we do believe that margins can go up.

It'll go up on the basis of, we believe, market conditions that should remain, you know, positive beyond 2026. We believe it's possible based on our ability to deploy bits to premium products in which we're best positioned. We believe that our cost performance is such that it will help us sustain or expand these margins. Now, just the math of being at these levels for a, you know, equivalent increase in price, we're going to get less gross margin expansion. So, you know, there can be, you know, as we mentioned on the call, on the primary earnings call, there's, you know, the increase from here would be more gradual than you've seen in, you know, Q4 to Q1 or Q1 to Q2 quarter guide. But we do believe that margins can go up.

On the basis of we believe.

Market conditions that should remain yes.

Positive beyond 'twenty six.

We believe it's possible based on our ability to deploy bits to premium products and which we're best positioned.

And we believe that our cost performance is such that it will help us sustain or expand these margins now just the math of being at these levels.

Four.

Yeah, well equivalent increase in price, we're going to get less gross margin expansion. So.

There can be.

As we mentioned on the call.

On the primary earnings call. There is the increase from here would be more gradual than you've seen in.

Fourth to first or first or second quarter guide, but we do believe that that margins can go up.

Vivek Arya: Got it. And for my follow-up, you know, every time the customer, right, whether it's NVIDIA, Broadcom, or AMD, every time they report, they seem to be upsiding numbers for next year. So when you say you're sold out for HBM, does it mean that you don't have an ability to upside your production? Or, you know, does it mean that you're sold out based on the current level of forecast and you have kind of unit and ASP certainty around that? I'm just trying to understand, you know, what scenarios let them continue to upside the numbers unless it's just a sheer shift between you and your peers. Like, if they continue to upside the numbers, you know, can you help them, you know, do that? How much more flex is there in your production for HBM? Thank you.

Got it and for my follow up.

Every time the customer right.

But it's in video Broadcom MB have you done the report they seem to be upside in numbers for next year. So when you say youre sold out for <unk> does it mean that you don't have an ability to upsize your production or does it mean that you're sold out based on the current level of forecast and you have.

Unit and ESP uncertainty around back I'm, just trying to understand what scenarios, let them continue to upside the numbers unless it's just a share shift between you and your peers, if they continue to upside the numbers.

When you have them do that and how much more flex is there in your production for <unk>. Thank you.

Yes, so I think the way to read what we are saying is that.

We have Isabel.

Visibility into our supply and of course.

We're always trying to improve that.

But we have.

A good understanding of what is it.

The current situation when we say sold out for <unk> for example.

HBM supply.

Our 2026.

Reached agreements on volume and price with our customers of course, if there are upsides to supply.

<unk> two.

Very quickly be able to place that upside supply at our customers.

Good Tom.

But when it comes to the overall aggregate business.

The demand.

Demand on us is so much higher than the supply.

Even small increases in supply I'm, not going to be able to make a dent in that demand. So we are more than sold out I mean, we have.

A significant amount of unmet.

Demand in our models and this is just consistent with an environment where.

The demand is substantially higher than supply for the foreseeable future.

Aaron Rakers: Vivek, I'll just add on, you know, HBM and DRAM, because the whole market is short, and, you know, HBM, you know, production in fab output is shared with DRAM production, right, all on our 1-beta node. So, you know, this constraint is kind of across the entire DRAM market, as Sumit mentioned, and as we said before, which is, you know, incredibly constrained. So we are working hard to try to increase supply for, you know, DRAM, HBM, and NAND. You know, yields have come up really well for both our 1-gamma and our gen nine. And those are going to be, as we gave colors, the majority of the big growth for next year is coming from those transitions. And we're also, you know, going to have the majority of those of our DRAM bits on 1-gamma in the second half of next year.

Manish Bhatia: Vivek, I'll just add on, you know, HBM and DRAM, because the whole market is short, and, you know, HBM, you know, production in fab output is shared with DRAM production, right, all on our 1-beta node. So, you know, this constraint is kind of across the entire DRAM market, as Sumit mentioned, and as we said before, which is, you know, incredibly constrained. So we are working hard to try to increase supply for, you know, DRAM, HBM, and NAND. You know, yields have come up really well for both our 1-gamma and our gen nine. And those are going to be, as we gave colors, the majority of the big growth for next year is coming from those transitions. And we're also, you know, going to have the majority of those of our DRAM bits on 1-gamma in the second half of next year.

Vivek I'll just add on.

HBM in DRAM, because the whole market is sure and.

HBM.

Production in our fab.

Fab output is shared with DRAM production right all of our one beta node so.

<unk> is kind of.

Across the entirety of the market as somebody mentioned and as we said before.

Which is incredibly constrained. So we are working hard to try to increase supply for <unk>.

DRAM HBM and Dan.

Yields or you will just come up really well for both our one gamma and our Gen nine and those are going to be if we gave color. The majority of the bit growth for next year is coming from those transitions.

And we're also.

Got to have the majority of those of our DRAM bits on one gamma in the second half of next year.

Aaron Rakers: Gen nine, as we go through the year, will become the highest volume node for us in NAND. You know, technology transitions are moving aggressively. We're optimizing and looking to maximize production where we can. I just want to point out that we've also said that we expect HBM4 yield ramp to be faster than our HBM3E 12-high yield ramp was, which was already faster than our HBM3 8-high, HBM3E 8-high yield ramp. We're gaining confidence in our HBM capability at scale. You know, all those are things that we're continuing to work on, but just the demand environment is such that it's really, you know, way over supply, whatever we can or what the rest of the industry can supply.

Gen nine, as we go through the year, will become the highest volume node for us in NAND. You know, technology transitions are moving aggressively. We're optimizing and looking to maximize production where we can. I just want to point out that we've also said that we expect HBM4 yield ramp to be faster than our HBM3E 12-high yield ramp was, which was already faster than our HBM3 8-high, HBM3E 8-high yield ramp. We're gaining confidence in our HBM capability at scale. You know, all those are things that we're continuing to work on, but just the demand environment is such that it's really, you know, way over supply, whatever we can or what the rest of the industry can supply.

Amgen nine as we go through the year will become our highest volume node for us and that so you know the technology transitions are moving aggressively we're optimizing and looking to maximize production where we can.

And I just want to point out that we've also said that we expect HBM for yield ramp to be faster than our HB I'm thinking 12 high yield graph was which was already faster than our HBM.

3% to eight high yield graph.

We're gaining confidence in our H b M capability at scale.

No.

All those are things that we're we're continuing to work on but just the demand environment is such that it's it's really way oversupply whatever to do whatever we can with what the rest of the industry.

Vivek Arya: Thank you.

Thank you.

Okay.

Operator: Comes from the line of Kevin Cassidy of Rosenblatt Securities. Your line is open, Kevin.

Come from the line of.

Kevin Cassidy.

Of Rosenblatt Securities. Your line is open Kevin.

Mark Murphy: Thank you very much. My question, you know, along those lines of you saying the HBM4 yield is better than HBM3, how does this work with the process node? With the qualification time taking so much longer with HBM, does this change your cadence for process technology? You know, do they stay in production longer?

Kevin Cassidy: Thank you very much. My question, you know, along those lines of you saying the HBM4 yield is better than HBM3, how does this work with the process node? With the qualification time taking so much longer with HBM, does this change your cadence for process technology? You know, do they stay in production longer?

Thank you very much.

My question, along those lines would be same HBM for yield is better than HBM three.

How does this work with the process node with the qualification time, taking so much longer with HBM.

Has this changed your cadence for process technology.

I stay in production longer.

Aaron Rakers: I'm not quite sure, but I think both our HBM3E and HBM4 are on our 1-beta process technology. They both use the similar assembly architecture and process that we've had now from HBM3E 8-high, 12-high, and now at HBM4. So the reason I said that we expect our HBM4 yields to ramp faster than HBM3E 12-high did once we go to production in the, you know, early part of calendar year 2026 and start shipments in calendar Q2 is because of being able to leverage the learnings that we have both on 1-beta for HBM as well as on the packaging and test side because we have common architectures between those products.

Manish Bhatia: I'm not quite sure, but I think both our HBM3E and HBM4 are on our 1-beta process technology. They both use the similar assembly architecture and process that we've had now from HBM3E 8-high, 12-high, and now at HBM4. So the reason I said that we expect our HBM4 yields to ramp faster than HBM3E 12-high did once we go to production in the, you know, early part of calendar year 2026 and start shipments in calendar Q2 is because of being able to leverage the learnings that we have both on 1-beta for HBM as well as on the packaging and test side because we have common architectures between those products.

I'm not quite sure, but I think the.

Both our <unk> and ECM for our on our one data process technology. They both use.

Similar assembly.

<unk> architecture and process that we've had now for from atrium create high 12 buying nowadays is important. So the reason I said that we expect our HBM for yields to ramp faster than <unk> 12, I did once we go to production.

In the early part of calendar year, 'twenty, six and start shipments in Cowen and calendar.

Calendar second quarter.

Because of being able to leverage the learnings that we have both on one data for HBO as well as on the packaging and test side.

Because we have common architectures between those products.

Yeah.

Mark Murphy: Yeah. My question was more in a bigger picture. Will 1-gamma get qualified for HBM4, or will it always be 1-beta?

Kevin Cassidy: Yeah. My question was more in a bigger picture. Will 1-gamma get qualified for HBM4, or will it always be 1-beta?

Okay.

My question was more.

A bigger picture one gamma they're qualified for HBM four will always be.

One data.

Aaron Rakers: HBM4 is on 1-beta. I know we haven't given specific guidance on, you know, how future generations will be, but HBM4 will be on 1-gamma. You know, the cadence of platform.

Manish Bhatia: HBM4 is on 1-beta. I know we haven't given specific guidance on, you know, how future generations will be, but HBM4 will be on 1-gamma. You know, the cadence of platform.

And for Us on one data in Idaho.

No we haven't.

Given specific.

Guidance on.

How future generations will be but atrium for will be on one gamma and.

The cadence of what platform and data I'm, sorry, one data.

Vivek Arya: One beta.

Kevin Cassidy: One beta.

Aaron Rakers: I'm sorry, 1-beta. The cadence of our customers' platforms continues to be, you know, rapid every 12 months. We are just going to be focused on delivering new memory solutions, new high-bandwidth memory solutions for our customers on an approximately 12-month cadence. You know, that's not slowing down.

Manish Bhatia: I'm sorry, 1-beta. The cadence of our customers' platforms continues to be, you know, rapid every 12 months. We are just going to be focused on delivering new memory solutions, new high-bandwidth memory solutions for our customers on an approximately 12-month cadence. You know, that's not slowing down.

And the cadence of our customers' platforms continues to be.

<unk> every 12 months. So we're just going to be focused on delivering new memory, new high bandwidth memory solutions for our customers on an approximately 12 month cadence so that's not slowing down.

Mark Murphy: Okay. And maybe another question, just how quickly can you change your wafer allocation, you know, from HBM to low power to high performance? You know, I guess how far into the process technology process can you change what the final product is?

Kevin Cassidy: Okay. And maybe another question, just how quickly can you change your wafer allocation, you know, from HBM to low power to high performance? You know, I guess how far into the process technology process can you change what the final product is?

Okay.

Maybe another question just.

How quickly can you change your wafer allocation from HBM, two low power to high performance.

I guess, how far into the process technology process.

Can you change.

The final product is.

Aaron Rakers: So they are shared process between the two, between the various different designs that we have on a given DRAM technology node. But the design itself is unique. So when you start one design, whether it's a low power design, a DDR design, or an HBM design, obviously, that's going to be the time frame. So the real time, the answer to your question is that basically it's one process cycle time that we can change between any of these different products.

Manish Bhatia: So they are shared process between the two, between the various different designs that we have on a given DRAM technology node. But the design itself is unique. So when you start one design, whether it's a low power design, a DDR design, or an HBM design, obviously, that's going to be the time frame. So the real time, the answer to your question is that basically it's one process cycle time that we can change between any of these different products.

So they are shared process.

Between the two.

Between the various different designs that we have on a given DRAM technology node, but the design itself is unique so when you start one design, whether it's the low power design, the DDR design or HBM design, obviously, that's going to be the timeframe. So the real.

Answer to your question is that basically it's one process cycle time that we can change between any of these different products.

Mark Murphy: I think, Kevin, I just want to make sure it's clear that, you know, we have extensive planning that we do around all the products and the product roadmaps, and, you know, what products go on what node at what time. And, you know, there are a lot of factors that go into that. Cost is not the only factor. And in fact, in HBM, it's such a complex product that stability and, you know, turning quickly with the customer is an important factor. So there is some value in 1-beta and as stable and strong a node as that is. And then, you know, when 1-gamma is available at the right time, you know, that we can use that node. Otherwise, you know, we have plenty of other beta requirements that 1-gamma we're ramping that as quickly as we can to get that supply.

I think Kevin I, just want to make sure. It's clear that we have extensive planning that we do around all the products in the product Roadmaps.

Yes, what products gone what at what time and.

There are a lot of factors that go into that.

Cost is not the only factor and in fact in HBM is such a complex product that stability and turning quickly with the customer is an important factor. So there is there is some value in one beta and is stable and strong and noted that edge and then one gamma is available.

At the right time.

We can use that note otherwise we have plenty of other debt requirements that one gamma or ramping that as quickly as we can to get that supply.

Sumit Sadana: I mean, generally speaking, we tell our customers that it takes us five months if they want to make changes that use different data in the fab, three months, three and a half months to get to the front end, and six to eight weeks, depending on the complexity of the product on the back end. So roughly speaking, five plus months of lead time. And our customers understand that. They know that these things take a long time.

Generally speaking when we tell our customers that it takes us five months, if they want to make changes that use different billing the fab three months.

Months to get to the front end and.

Six to eight weeks, depending on the complexity of the products on the backend so roughly speaking five plus months.

Our fee guidance.

And our customers understand that they know that these things take a long time.

Mark Murphy: Okay. Great. Thank you.

Kevin Cassidy: Okay. Great. Thank you.

Okay, great. Thank you.

Operator: Thank you. Our next question comes from the line of Stephen Fox of Fox Advisors LLC. Your line is open, Stephen.

Operator: Thank you. Our next question comes from the line of Steven Fox of Fox Advisors LLC. Your line is open, Steven.

Thank you.

Our next question.

Comes from the line of Steven Fox with Fox Advisors LLC. Your line is open Steven Hi.

Vivek Arya: Hi. Good afternoon. I just had one question. On the CapEx spending that you talked about on the call, are you giving any sort of sense for the breakdown between facilities, equipment, construction, all of that, say, from now and how it might change between 2026 and 2027? That mix? Thanks.

Steven Fox: Hi. Good afternoon. I just had one question. On the CapEx spending that you talked about on the call, are you giving any sort of sense for the breakdown between facilities, equipment, construction, all of that, say, from now and how it might change between 2026 and 2027? That mix? Thanks.

Hi, Good afternoon, I just had one question on the Capex.

Spending that you talked about on the call.

Any sort of sense for the breakdown between facilities equipment construction all of that from how and how it might change between 26 and 27 that mix. Thanks.

Mark Murphy: Yeah. We've not indicated, you know, anything about 2027 other than that 2027 total CapEx will be up versus 2026. I did on the call, I believe, indicate that, you know, 2025 to 2026, the plans to, you know, our fiscal plans to roughly double, you know, the construction CapEx. And so that gives you sort of an indication on direction of travel. Now, we've got, you know, 2027 we'll have, you know, Idaho 1 finishing. We've got Idaho 2. We've got Japan. We've got, you know, we've got a lot of construction sites. So, you know, those are going to contribute to that sequential, you know, 2026 to 2027 CapEx increase. And Manish.

Yeah, we've not we've not indicated.

Yes, anything about 27 other than other than it will be 27, total capex will be up versus 2006.

I did on the call I believe indicate that.

25% to 26 the plans are.

Our fiscal our plans to roughly double.

Yes, the construction Capex and so that gives you sort of an indication on direction of travel now we've got.

'twenty seven will have you know.

Idaho, one, finishing we've got Idaho too.

Japan, we've got.

A lot of construction site. So those are kind of contribute to that.

Sequential 26% to 27.

Capex increase and many shallow yeah, I mean, it will be at <unk>, and saying well, we do have a considerable auto construction that was going to say, Singapore as well, where we've got that and we're gonna be equipping our India Assembly site, which is just now going from pilot production for production ramp in the beginning of calendar 'twenty six.

Aaron Rakers: Yeah. I mean, we'll be.

Manish Bhatia: Yeah. I mean, we'll be.

Mark Murphy: HBM and.

Aaron Rakers: We do have a considerable amount of construction, I was going to say, in Singapore as well, where we've got that. We're going to be equipping our India assembly site, which is just now going from pilot production to production ramp in the beginning of calendar 2026. So, yeah, there's going to be a mix of growth in terms of construction CapEx to fund the midterm and long-term equipment CapEx into, you know, existing clean room that we have right now. And then, of course, assembly investments for both HBM as well as conventional packaging that we'll be making as well.

Manish Bhatia: We do have a considerable amount of construction, I was going to say, in Singapore as well, where we've got that. We're going to be equipping our India assembly site, which is just now going from pilot production to production ramp in the beginning of calendar 2026. So, yeah, there's going to be a mix of growth in terms of construction CapEx to fund the midterm and long-term equipment CapEx into, you know, existing clean room that we have right now. And then, of course, assembly investments for both HBM as well as conventional packaging that we'll be making as well.

Yes.

Theres going to be a mix of growth in terms of.

Construction Capex to fund the midterm and long term equipment capex into existing clean room that we have right now and then of course assembly investments for both <unk> as well as conventional.

Packaging that we'll be making as well.

Mark Murphy: Yeah. I'll just maybe add to this point. You know, Tim asked about capital intensity on the earlier call. You know, we had CapEx as a percent of sales in Q1 was, you know, below 35% that we talked about. And then on Q2, basically where our guide is to the both on the revenue and the CapEx guidance we gave you, you could tell it's in the mid-20s on CapEx as a percent of sales. And, you know, and we've talked about strengthening free cash flow. So we're, you know, we're not only increasing investment in order to get the build supply, we are generating a lot more cash. We had, you know, near 30% free cash flow margin in Q1. And we talked about free cash flow increasing through the year.

Yes ill, just maybe maybe add to this point.

Yes, Tim.

Tim asked about Caf.

Capital intensity on the earlier call.

Yeah, we had we had <unk>.

Capex as a percent of sales in the first quarter was below 35% that we talked about and then on the on the second quarter.

Basically where our guide is.

Two the both on the revenue and the Capex guidance. We gave you could tell us in the mid twenties on.

On Capex as a percent of sales.

And you know and we've talked about strengthening free cash flow. So we're we're we're.

Not only in increasing investment in order to get the best supply we are generating a lot more cash we had.

Near 30% free cash flow margin.

In the first quarter and.

And we talked about free cash flow increasing through the year.

Mark Murphy: We paid down debt, you know, $2.7 billion of debt in Q1, bought back $300 million of shares, and went to net cash all in the quarter. It was a record-setting free cash flow in Q1.

We paid down debt, you know, $2.7 billion of debt in Q1, bought back $300 million of shares, and went to net cash all in the quarter. It was a record-setting free cash flow in Q1.

We paid down debt at $2 $7 billion of debt in the first quarter.

Bought back $300 million shares and went to net cash all in all in all in the quarter and it was a record setting free cash flow in the first quarter.

Mark Murphy: Got it. That's all very helpful. Thank you.

Steven Fox: Got it. That's all very helpful. Thank you.

Got it Thats all very helpful. Thank you.

Okay.

Operator: Thank you. Our next question comes from the line of Jim Snyder of Goldman Sachs. Your line is open, Jim.

Operator: Thank you. Our next question comes from the line of Jim Schneider of Goldman Sachs. Your line is open, Jim.

Thank you.

Our next question.

Come from the line of Jim Schneider of Goldman Sachs. Your line is open Jim.

Sumit Sadana: Good evening. Thanks for taking my questions. First one would be just in terms of the capacity allocation question that came up earlier. Maybe to put it a different way, can we, I know you're, you know, sort of a key supplier in many embedded and other kind of mission-critical applications, automotive and the like. You know, can you give us a sense about, like, a floor level, a minimum floor level that some of those sort of legacy or embedded applications would reach or not below in terms of production, kind of giving your importance in that market? Or conversely, can we maybe talk a little bit about sort of, you know, what is the maximum level of data center capacity or data center exposure you feel comfortable having?

Jim Schneider: Good evening. Thanks for taking my questions. First one would be just in terms of the capacity allocation question that came up earlier. Maybe to put it a different way, can we, I know you're, you know, sort of a key supplier in many embedded and other kind of mission-critical applications, automotive and the like. You know, can you give us a sense about, like, a floor level, a minimum floor level that some of those sort of legacy or embedded applications would reach or not below in terms of production, kind of giving your importance in that market? Or conversely, can we maybe talk a little bit about sort of, you know, what is the maximum level of data center capacity or data center exposure you feel comfortable having?

Hi, good evening, thanks for taking my questions.

First one would be.

Can you give us a sense about like.

A floor level of minimum floor level that some of the sort of legacy or embedded.

Sumit Sadana: Yeah. I mean, I think there are a couple of things to keep in mind. First of all, the overall TAM is also shifting more towards data center. That's just how the dynamics of the industry are playing out. So certainly our portfolio and our mix is shifting towards data center. Our whole goal over time is to keep mixing our products within each segment and across segments with, you know, higher ROI type of homes for our bits and for our output. And that just means that for some time now, the portfolio mix has been an important tailwind for Micron and continues to be a driver of our longer-term financial performance because we have over time shifted more and more of our revenue towards higher margin products and taken a bigger share of the industry profit pool based on that initiative. So that will continue.

Yeah, I mean, I think there are a couple of things to keep in mind first of all the.

Overall Tam.

Also shifting more towards data center.

It's just how the dynamics of the industry playing out so certainly our portfolio and our mix.

Shifting to West data center, our whole goal overtime is to.

Keep mixing our products within the segments and across segments.

Our ROI.

Type of homes for our bids for our output and that just means that.

For some time now the portfolio mix has been an important tailwind.

For Micron and continues to be a driver of our.

Longer term financial performance, because we have over time shifted more and more of our.

Revenue towards higher.

Higher margin products and taken a bigger share of the industry.

Based on that.

Initiatives. So that will continue with that said Youre right, we do have.

Sumit Sadana: With that said, you're right. I mean, we do have a large share in automotive, industrial, and several mission-critical applications. So we are making investments in our Manassas, Virginia fab in the US to modernize it, bring 1-alpha technology, DRAM technology into that fab. And so that is going to be an important initiative to continue the support of long life cycle legacy products. And we intend to continue to support them. Of course, we also support a lot of these products, customers, and segments from our high-volume fabs. And certainly the demand environment and the structural challenges on supply for us as well as for the industry just make it very difficult to meet all of the demand for customers across different segments.

With that said, you're right. I mean, we do have a large share in automotive, industrial, and several mission-critical applications. So we are making investments in our Manassas, Virginia fab in the US to modernize it, bring 1-alpha technology, DRAM technology into that fab. And so that is going to be an important initiative to continue the support of long life cycle legacy products. And we intend to continue to support them. Of course, we also support a lot of these products, customers, and segments from our high-volume fabs. And certainly the demand environment and the structural challenges on supply for us as well as for the industry just make it very difficult to meet all of the demand for customers across different segments.

Large share in automotive and industrial and February mission critical applications. So we are making investments.

The masses, Virginia fab.

And the U S too.

To modernize and bring one alpha technology technology into that.

And so that is going to be an important initiatives to continue the support of long lifecycle of legacy products.

And we intend to continue to support them.

Of course, we also support a lot of these products some customers and segments from high volume.

Certainly.

The demand environment.

And these structural challenges on supply.

For us as well as for the industry just make it very difficult to meet all of the demand or customers across different segments.

Sumit Sadana: So a lot of work that we are doing is to try and assess the threshold level of supply that each of our customers need, encourage them to also, you know, figure out other sources of supply in this environment where we may not be able to meet all of the demand. Of course, we also continue to make sure that our commitments towards our customers are kept. We are certainly very big on that. So it's a delicate balancing act. It's a difficult environment to meet all of our customers' needs. We're working very, very hard to do the best we can on that front across the different segments of the market, including the ones that you mentioned.

So a lot of work that we are doing is to try and assess the threshold level of supply that each of our customers need, encourage them to also, you know, figure out other sources of supply in this environment where we may not be able to meet all of the demand. Of course, we also continue to make sure that our commitments towards our customers are kept. We are certainly very big on that. So it's a delicate balancing act. It's a difficult environment to meet all of our customers' needs. We're working very, very hard to do the best we can on that front across the different segments of the market, including the ones that you mentioned.

A lot of work that we're doing is to try and lift that threshold.

Threshold level of supply that.

Each of our customers need.

<unk> to also think about other sources of supply.

Environment, where we may not be able to meet all of the demand.

Of course.

We also continued to make sure that our commitment towards our customers.

Certainly very big on that so.

Delicate balancing act.

Difficult environment to meet all of our customers' needs.

We are working very very hard to do the best we can on that front across the different segments of the market, including the ones that you mentioned.

Sumit Sadana: Thank you. And then just a quick clarification. Relative to the Hiroshima clean room expansion you referenced on the call, can you talk about when that kind of would turn into volume production capability? Thank you.

Jim Schneider: Thank you. And then just a quick clarification. Relative to the Hiroshima clean room expansion you referenced on the call, can you talk about when that kind of would turn into volume production capability? Thank you.

Thank you and then just a quick clarification relative to the Hiroshima.

Clean room expansion you referenced on the call can you talk about when that kind of would turn into volume production capability. Thank you.

Aaron Rakers: Sure, Jim. You know, what we've said is that, you know, we are working to develop and deploy next-generation DRAM technologies there with the support of METI and, you know, our Boise R&D team working with our Hiroshima R&D team. So it will be future generations of technology we'll be deploying. And the clean room space will support those future technologies. So it will be timed to be able to support those, the space needed for those new nodes.

Manish Bhatia: Sure, Jim. You know, what we've said is that, you know, we are working to develop and deploy next-generation DRAM technologies there with the support of METI and, you know, our Boise R&D team working with our Hiroshima R&D team. So it will be future generations of technology we'll be deploying. And the clean room space will support those future technologies. So it will be timed to be able to support those, the space needed for those new nodes.

Sure Jim.

What we've said is that.

We are working to develop and deploy next generation.

<unk> DRAM technologies.

There with the support of met T and our Boise R&D team working with our Hirsch from R&D team. So it will be future generations of technology will be deploying in the clean room space will support those future technology. So.

It will be timed to be to be able to support those.

Space needed for those those new notes.

Sumit Sadana: But not in 2026, to be fair.

Jim Schneider: But not in 2026, to be fair.

But not in 2020, thanks to be fair not okay. Thank you.

Aaron Rakers: No, not in 2026.

Manish Bhatia: No, not in 2026.

Sumit Sadana: Okay. Thank you.

Jim Schneider: Okay. Thank you.

Operator: Thank you. Our next question comes from the line of Joseph Moore of Morgan Stanley. Please go ahead, Joseph.

Thank you.

Our next question comes from the line of Joseph Moore of Morgan Stanley. Please go ahead Joseph.

Sumit Sadana: Great. Thank you. Along the same lines, you had talked about the PC market could be limited by DRAM availability. How do you make those kinds of allocation decisions? You know, is it kind of just highest gross margin is the focus? And, you know, how do you make sure that the mid-tier PC companies kind of have enough that their customers, when you need them down the road, just how are you kind of thinking about balancing the allocation across these different markets?

Joseph Moore: Great. Thank you. Along the same lines, you had talked about the PC market could be limited by DRAM availability. How do you make those kinds of allocation decisions? You know, is it kind of just highest gross margin is the focus? And, you know, how do you make sure that the mid-tier PC companies kind of have enough that their customers, when you need them down the road, just how are you kind of thinking about balancing the allocation across these different markets?

Great. Thank you along the same lines you had talked about piece the PC market could be limited by DRAM.

Availability.

How do you make those kinds of allocation decisions is it kind of just highest gross margin is the focus in how are you.

You make sure that the mid tier PC companies kind of have enough that their customers. When you need them down the road just how are you thinking about balancing the allocation across these different markets.

Sumit Sadana: With a lot of difficulty. Certainly, there are competing requirements. We are not just focused on optimizing gross margin. Of course, when we think about pricing in different markets, we try to ensure that the pricing reflects the value of the product that we are selling. And so a lot of the margin performance of different segments starts to get very close to each other in situations like this. With that said, we have had customers of different sizes across different parts of the world for a number of years, decades sometimes. And so we are very mindful of our responsibility to them.

We have a lot of difficulty.

Certainly.

There are competing.

Decline.

We are not just focused on optimizing gross margin.

Of course, when we think about pricing in different markets, we try to ensure that.

The pricing reflects the value of the products that we are selling and so a lot of the margin.

<unk> so.

Defense segment.

Starts to.

You get very close to each other in situations like this.

That said.

We have had customers.

<unk> of different sizes sizes.

Across different parts of the world.

Number of years decades, sometimes and so we are very mindful of our responsibility to them.

Sumit Sadana: We try to do our best to manage the allocation in an appropriate way to ensure diversity across segments, ensure that we are supporting our strategic customers, and doing the best to maximize our supply towards these customers in times like this, as well as to minimize any impact that could occur to our customers' business due to lack of adequate DRAM on that, as the case may be.

We try to do our best to manage the allocation in an appropriate way to ensure diversity across segments, ensure that we are supporting our strategic customers, and doing the best to maximize our supply towards these customers in times like this, as well as to minimize any impact that could occur to our customers' business due to lack of adequate DRAM on that, as the case may be.

Try to do our best to <unk>.

Manage the allocation.

In an appropriate way to ensure diversity across segments and ensure that we are supporting us.

Strategic customers and doing the best too.

Maximize.

Our supply.

Supply towards these customers in times like this as well is to minimize any impact.

Darker.

Our customers.

Due to lack of.

Yes.

On NAND applications.

Okay.

Sumit Sadana: That's helpful. Thank you. And then just my follow-up. You mentioned a few minutes ago, you know, paying down some debt. I mean, it seems like you're going to generate a really large amount of cash here in the next few quarters if your view that gross margins continue to improve comes true. Just what are the priorities for that cash over time, you know, just between dividend, buybacks, you know, or other uses of cash that you might think about?

Joseph Moore: That's helpful. Thank you. And then just my follow-up. You mentioned a few minutes ago, you know, paying down some debt. I mean, it seems like you're going to generate a really large amount of cash here in the next few quarters if your view that gross margins continue to improve comes true. Just what are the priorities for that cash over time, you know, just between dividend, buybacks, you know, or other uses of cash that you might think about?

That's helpful. Thank you and then just my follow up you mentioned, a few minutes ago paying down some debt.

Seems like Youre going to generate.

Really large amount of cash here in the next few quarters. If you do the gross margins continued to improve comes true.

Just what are the priorities for that cash over time.

Just what between dividend buybacks or other uses of cash that you might think about.

Mark Murphy: Yeah, Joe, the priority for our cash generation is always to reinvest in the business. So we're going to make sure that we're, you know, investing in this case the capacity we need to support the market and ensure that we're getting a clear line of sight to return on that. And, you know, and that includes in this case now looking to strike commercial arrangements with customers that reflect the value of our products and our assurance on supply. So that's priority. And also with that, you know, maintaining, you know, the technology leadership that we enjoy today and that we intend to maintain. You know, the balance sheet also will always be a priority. And, you know, that's moving the right direction. It was already strong and getting stronger every day. In fact, today on this call, we're record liquidity.

Yes, Joe.

The priority for our cash generation is always to reinvest in the business. So we're going to make sure that we're.

Investing in this case the capacity, we need to support the market and ensure that we're getting.

Clear line of sight to return on that end.

And that includes in this case now looking too.

Strike commercial arrangements with customers that reflect the value of our products and our assurance on supply.

So that's priority and also with that maintaining.

Yes, the technology leadership that we enjoy today and that we.

10 two.

Maintain.

Yes, the balance sheet also will always be a priority and that's moving the right direction. There was already strong are getting stronger every day in fact today on this call were record liquidity.

Mark Murphy: You know, we recently got put on positive watch by one of the agencies. You know, we effectively have no net leverage now. In fact, we're positive cash, net cash. Our gross leverage is very low. Now, we do have on an absolute basis more debt than we've had historically. So we would expect to bring that down some. Then, you know, we would, as we've said before, intend to grow the dividend over time and then, you know, repurchase shares with excess liquidity that we believe we have. Now, we repurchased $300 million in Q1. If you recall, I mentioned a couple of quarters ago, I believe that when we signed the definitive agreement for the CHIPS program, our repurchases had some limitations. You know, for the first two years, we've ended that first year. We're in that limitation period the second year.

And.

You know, we recently got put on positive watch by one of the agencies. You know, we effectively have no net leverage now. In fact, we're positive cash, net cash. Our gross leverage is very low. Now, we do have on an absolute basis more debt than we've had historically. So we would expect to bring that down some. Then, you know, we would, as we've said before, intend to grow the dividend over time and then, you know, repurchase shares with excess liquidity that we believe we have. Now, we repurchased $300 million in Q1. If you recall, I mentioned a couple of quarters ago, I believe that when we signed the definitive agreement for the CHIPS program, our repurchases had some limitations. You know, for the first two years, we've ended that first year. We're in that limitation period the second year.

We recently got put on positive watch by one of the agencies and.

We effectively have no net leverage now and in fact, we're positive cash net cash.

And.

And our gross leverage is very low now we do have on an absolute basis more debt that we've had historically so.

We would.

To bring that down some and then yes, we would as we've said before.

Intend to grow the dividend over time.

And then.

Yeah.

Repurchase shares with excess liquidity.

We believe we have now we repurchased $300 million.

In the first quarter.

If you recall I mentioned, a couple of quarters ago, I believe that when we signed the definitive agreement for the chips program are.

Our repurchases have some limitations.

For the first two years, we've ended that first year, where in that limitation periods the second year.

Mark Murphy: We are able to buy back some stocks this year a little bit more than what we bought back in Q1. But then we're this time next year, we're largely unconstrained. I mean, there are some requirements on CapEx and R&D, which we'll, you know, we believe we'll easily be able to surpass those. So I think that's the rough cut of the capital allocation.

We are able to buy back some stocks this year a little bit more than what we bought back in Q1. But then we're this time next year, we're largely unconstrained. I mean, there are some requirements on CapEx and R&D, which we'll, you know, we believe we'll easily be able to surpass those. So I think that's the rough cut of the capital allocation.

We are able to buy back some stocks this year, a little bit more than what we bought back and.

In the first quarter.

But then more this time next year, where we're largely unconstrained I mean, there are some requirements.

On Capex, and R&D, which we believe will easily be able to.

To surpass the so.

So I think thats the.

Rough cut of the capital allocation.

Sumit Sadana: Thanks so much.

Joseph Moore: Thanks so much.

Thanks, so much.

Okay.

Operator: Our next question comes from the line of Tom O'Malley of Barclays. Please go ahead, Tom.

Our next question.

Comes from the line of Tom O'malley of Barclays. Please go ahead Tom.

Vijay Rakesh: Hey, guys, I just have one. Could you remind us as a mix of your CapEx this year how much was construction CapEx? Or, if you haven't given that, where it trends on a normalized basis? Thanks.

Tom O'Malley: Hey, guys, I just have one. Could you remind us as a mix of your CapEx this year how much was construction CapEx? Or, if you haven't given that, where it trends on a normalized basis? Thanks.

Hey, guys I just have one can you remind us of the mix of your Capex. This year, how much was construction capex or if you haven't given that our trends on a normalized basis.

Aaron Rakers: Yeah, Tom. So we haven't, but we did say, I think Mark did say that from fiscal year 2025 to 2026, we're doubling our construction CapEx. That gives you some sense. We got, you know.

Yes, Tom So we haven't but we did say I think market say that from a fiscal year 'twenty five 'twenty six we're doubling our our construction capex that gives you some sense.

Got it.

Okay.

Vijay Rakesh: Yeah. Just looking for the base.

Tom O'Malley: Yeah. Just looking for the base.

Yes, just looking for the base hire good Yep Yep.

Aaron Rakers: Yeah. Higher. Yeah. Yeah.

Manish Bhatia: Yeah. Higher. Yeah. Yeah.

Okay.

Operator: Thank you. And ladies and gentlemen, we have reached the end of our time. So that does conclude today's conference call. Thank you for participating. You may now disconnect.

Thank you and ladies and gentlemen, we have reached the end of our time. So that does conclude today's conference call.

Thank you for participating you may now disconnect.

Q1 2026 Micron Technology Inc Post-Earnings Call

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