Q3 2026 Micron Technology Inc Post-Earnings Call

June 24, 2026

Speaker #1: Ladies and gentlemen, thank you for joining us, and welcome to Micron's post-earnings analyst call. After the speaker presentation, we will host a question-and-answer session.

Speaker #1: I will now hand the conference over to Sacha Kumar, Corporate Vice President of Investor Relations and Treasury. Sacha, please go ahead.

Speaker #2: Thank you, and welcome to Micron Technologies' fiscal Q3 2026 post-earnings analyst call. On the call with me today are Sumit Sadhana, Micron's Chief Business Officer; Manish Bhatia, EVP of Global Operations; and Mark Murphy, our CFO.

Speaker #2: 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, and other matters.

Speaker #2: These forward-looking statements are subject to risks and uncertainties, that may cause actual results to differ materially from statements made today. We refer to documents we have filed with, including our most recent Form 10-K and upcoming Form 10-Q, for a discussion of risks that may affect our results.

Speaker #2: 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

Speaker #3: We under no duty to update any of the forward-looking statements that conform these statements to actual results. We can now open up the call for Q&A.

Speaker #1: We will now begin the question-and-answer session. If you would like to ask a question, press star 1 to raise your hand. To withdraw your question, press star 1 again.

Speaker #1: Your first question comes from the line of Ben Reitz's "Amelius Research." Your line is open. Please go ahead.

Speaker #3: Hey, thanks a lot. It's great to be speaking with you. Mark, looking at the numbers here for the next quarter, right, and free cash flow is going to be somewhere around $30 billion plus.

Speaker #3: I just want to make sure we're really the buy side and investors understand what you're saying here with regard to cash return. So you're saying 100% will go back to shareholders.

Speaker #3: I assume the vast majority of that is in buyback. I mean, if you go from $30 billion in free cash flow and grow it, you could buy back 10% of the company next calendar year.

Speaker #3: Just basically, if we say something close to this quarter is what you do next year. Are you prepared to do that and buy back at that level?

Speaker #3: I just want to have you kind of react to the math and the commentary. At a 1.2 trillion dollar market cap, that's where it is.

Speaker #3: 10% of the company. And I just want to make sure that you can react to that. Thanks.

Speaker #4: Sure, Ben. And thanks for the question. We're really pleased with the financial trajectory of the business. The combination of memory being so important to so many markets, AI data center the edge, enabling this or helping enable this technology revolution we have underway.

Speaker #4: When we've got between our technology products and manufacturing performance, we are delivering record cash flow numbers. The last two quarters, we've generated as much as in much of the company's history.

Speaker #4: And we expect as you point out, that that cash flow growth will increase in the fourth quarter. We're going to we've paid down quite a bit of debt over the past year, and there's cash flow build.

Speaker #1: Ladies and gentlemen, thank you for joining us, and welcome to Micron's post-earnings analyst call. After the speaker presentation, we will host a question-and-answer session.

Operator: Ladies and gentlemen, thank you for joining us, and welcome to Micron's post-earnings analyst call. After the speaker presentation, we will host a question and answer session. I will now hand the conference over to Satya Kumar, Corporate Vice President of Investor Relations and Treasury. Satya, please go ahead.

Speaker #4: And we will maintain levels of cash that we feel comfortable that we can invest through all seasons in the business. But as you heard today, we feel good about the durability of the performance of the business, given the secular growth demand drivers, the need for more and higher performance memory, the structural supply challenges that we've talked about, the last couple of years.

Speaker #1: I will now hand the conference over to Satya Kumar, Corporate Vice President of Investor Relations and Treasury. Satya, please go ahead.

Speaker #2: Thank you, and welcome to Micron Technology's fiscal third 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.

Satya Kumar: Thank you, and welcome to Micron Technology's fiscal Q3 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, 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 to documents we have filed with, including our most recent Form 10-K and upcoming Form 10-Q 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 levels of activity, performance, and achievement.

Speaker #2: As a reminder, the matters we're discussing today include forward-looking statements regarding market demand and supply, market trends and drivers, our expected results and guidance, and other related matters.

Speaker #4: Slower node migration or node migration yielding less, HBM soaking up more wafers and the need for greenfield for incremental wafer capacity. So and then we have these strategic customer agreements, which we announced today, a meaningful number of these.

Speaker #2: These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer to documents we have filed with, including our most recent Form 10-K and upcoming Form 10-Q, for a discussion of risks that may affect our results.

Speaker #2: 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: Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future levels of activity, performance, and achievement.

Speaker #4: So and we expect more. So we will hold what we believe is appropriate excess cash, and then we've always said that we intend to grow the dividend over time.

Speaker #4: You saw us do a 30% increase recently. But the principal capital return we have will be share repurchase. I said today in the prepared remarks that we intend to increase our capital return from December 9th, which is the second anniversary of our chips agreement signature.

Speaker #3: We are under no duty to update any of the forward-looking statements or to conform these statements to actual results. We can now open up the call for Q&A.

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

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

Speaker #1: We will now begin the question-and-answer session. If you would like to ask a question, press star one to raise your hand. To withdraw your question, press star one again.

Operator: We will now begin the question and answer session. If you would like to ask a question, press star one to raise your hand. To withdraw your question, press star one again. Your first question comes from the line of Ben Reitzes of Melius Research. Your line is open. Please go ahead.

Speaker #4: And the rate and pace from there will be we'll determine based on a number of factors. But absolutely committed to capital return.

Speaker #1: Your first question comes from the line of Ben Reitzes of Melius Research. Your line is open. Please go ahead.

Speaker #3: Thanks. Do you think I can sneak in one more? And just with regard to and we're really pleased to see 40% and eventually half of your business on SCAs.

Speaker #3: Hey, thanks a lot. It's great to be speaking with you. Mark, I'm looking at the numbers here for the next quarter, right? And free cash flow is going to be somewhere around $30 billion-plus.

Ben Reitzes: Hey, thanks a lot. It's great to be speaking with you. Mark, looking at the numbers here for the next quarter, free cash flow is going to be somewhere around $30 billion plus. I just want to make sure, really, the buy side and investors understand what you're saying here with regard to cash return. You're saying 100% will go back to shareholders. I assume the vast majority of that is in buyback. If you go from $30 billion in free cash flow and grow it, you could buy back 10% of the company next calendar year. Just basically if we say that something close to this quarter is what you do next year. Are you prepared to do that and buy back at that level? I just want to have you react to the math and the commentary.

Speaker #3: But I cover Apple and they've never made a comment that they're basically that they're willing to pay full price for a component and pass it through to customers, ever publicly.

Speaker #3: I just want to make sure we're really the buy-side, and investors understand what you're saying here with regard to cash return. So you're saying 100% will go back to shareholders?

Speaker #3: And to me, it was an advertisement that they are open for business for full price DRAM. Let's put it that way. Are you tempted to do a lot more in DRAM, given these conditions?

Speaker #3: I assume the vast majority of that is in buybacks. I mean, if you go from $30 billion in free cash flow and grow it, you could buy back 10% of the company next calendar year.

Speaker #3: Just basically, if we say that something close to this quarter is what you do next year, are you prepared to do that and buy back at that level?

Speaker #3: Do we think that there's an appetite for a much maybe a higher mix than expected of DRAM? Which obviously would then keep maybe some of the SCAs lower.

Speaker #3: I just want to have you kind of react to the math and the commentary. At a $1.2 trillion market cap, that's where it is.

Speaker #3: But for very good reason. Thanks.

Ben Reitzes: At a $1.2 trillion market cap, that's where it is, 10% of the company, I just want to make sure that you can react to that. Thanks.

Speaker #5: Yeah. So Ben, when you say higher mix of DRAM, you mean versus what?

Speaker #3: 10% of the company. And I just want to make sure that you can react to that. Thanks.

Speaker #3: Well, versus HBM versus NAND. Whatever you're making decisions around. I mean, and DRAM commodity DRAM to consumer would certainly not be on SCAs as much as a hyperscaler would, I would think.

Speaker #4: Sure, Ben, and thanks for the question. We're really pleased with the financial trajectory of the business. The combination of memory being so important to so many markets—AI, data center, the edge—enabling this, or helping enable this technology revolution we have underway.

Mark Murphy: Sure, Ben, thanks for the question. We're really pleased with the financial trajectory of the business. The combination of memory being so important to so many markets, AI data center, the edge, helping enable this technology revolution we have underway. When we've got between our technology products and manufacturing performance, we are delivering record cash flow numbers. The last two quarters, we've generated as much as in much of the company's history. We expect, as you point out, that that cash flow growth will increase in Q4. We've paid down quite a bit of debt over the past year. Cash will build, and we will maintain levels of cash that we feel comfortable that we can invest through all seasons in the business.

Speaker #5: Yeah. So just a couple of thoughts around that. So as you know, our mix in our business of DRAM versus NAND, DRAM inclusive of HBM, tends to be oscillating between the 80% DRAM, 20% NAND to maybe 75% DRAM, 25% NAND kind of is in that type range.

Speaker #4: With our technology products and manufacturing performance, we are delivering record cash flow numbers. In the last two quarters, we've generated as much as in much of the company's history.

Speaker #5: And we are pretty comfortable with that mix of DRAM versus NAND. We intend to obviously focus on and service customers in both of those product categories.

Speaker #4: And we expect, as you point out, that that cash flow growth will increase in the fourth quarter. We've paid down quite a bit of debt over the past year.

Speaker #5: And as it relates to HBM, we have made a strategic decision that we have also communicated over time that our goal is to have our HBM share consistent over time with our DRAM share.

Speaker #4: And there's cash flow build, and we will maintain levels of cash that we feel comfortable with, so that we can invest through all seasons in the business.

Speaker #5: And so our intention is that we support our customers on HBM and also support our customers on the non-HBM portion of the DRAM business across all market segments, right?

Speaker #4: But as you heard today, we feel good about the durability of the performance of the business, given the secular growth demand drivers, the need for more and higher-performance memory, and the structural supply challenges that we've talked about over the last couple of years.

Mark Murphy: As you heard today, we feel good about the durability of the performance of the business, given the secular demand drivers, the need for more and higher performance memory, the structural supply challenges that we've talked about the last couple of years, node migration yielding less, HBM soaking up more wafers, and the need for greenfield for incremental wafer capacity. We have these Strategic Customer Agreements, which we announced today, a meaningful number of these, and we expect more. We will hold what we believe is appropriate excess cash. We've always said that we intend to grow the dividend over time. You saw us do a 30% increase recently. The principal capital return we have will be share repurchase.

Speaker #5: We definitely believe in the strength of diversity and if you look at the AEBU business and the NCBU business, both of which are non-data center businesses in our business unit structure, that's almost like 40% of our company revenue.

Speaker #4: Slower node migration, or node migration yielding less, HBM soaking up more wafers, and the need for greenfield for incremental wafer capacity. And then we have these strategic customer agreements, which we announced today—a meaningful number of these.

Speaker #5: So we like that diversity. And we continue to focus on ensuring that we are servicing customers and their demand and supporting their growth across all of the market segments, including non-HBM DRAM, HBM, as well as NAND.

Speaker #4: So, and we expect more. So, we will hold what we believe is appropriate excess cash. And then we've always said that we intend to grow the dividend over time.

Speaker #3: Got it. Thanks a lot. Great core.

Speaker #5: Thank you.

Speaker #1: If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Please limit yourself to one question and one follow-up.

Speaker #4: You saw us to a 30% increase recently. But the principal capital return we have will be share repurchase. I said today in the prepared remarks that we intend to increase our capital return from December 9, which is the second anniversary of our CHIPS agreement signature.

Speaker #1: Your next question comes from the line of Harlan Suhr with JP Morgan. Your line is open. Please go ahead.

Mark Murphy: I said today in the prepared remarks that we intend to increase our capital return from December 9th, which is the second anniversary of our CHIPS agreement signature. The rate and pace from there we'll determine based on a number of factors. Absolutely committed to capital return.

Speaker #6: Good afternoon. Thanks for hosting this callback. I think it was September of last year when the Micron team said that they were booked out through calendar 26 on HBM 3, HBM 3E.

Speaker #4: And the rate and pace from there will be determined based on a number of factors. But we are absolutely committed to capital return.

Speaker #6: Obviously, at that time, the team was still in qual and eval on HBM 4. But if you fast forward to now and with a stronger especially XPU ASIC demand profile, is the team already booked up volume and pricing for HBM 3E and HBM 4 for calendar 27?

Speaker #3: Thanks. Do you think I can sneak in one more? And just with regard to—we're really pleased to see 40%, and eventually half, of your business on SCAs.

Ben Reitzes: Thanks. Do you think I can sneak in one more? We're really pleased to see 40% and eventually half of your business on SCAs. I cover Apple, and they've never made a comment, basically, that they're willing to pay full price for a component and pass it through to customers ever publicly. To me, it was an advertisement that they are open for business for full price DRAM. Let's put it that way. Are you tempted to do a lot more in DRAM? Given these conditions, do we think that there's an appetite for maybe a higher mix than expected of DRAM, which obviously would then keep maybe some of the SCAs lower, but for very good reason? Thanks.

Speaker #3: But I cover Apple, and they've never made a comment that they're basically willing to pay full price for a component and pass it through to customers ever publicly.

Speaker #6: Obviously, understand you still need to go through qual on HBM 4E, but are you booked up on current gen HBM 3E and 4 for calendar 27?

Speaker #3: And to me, it was an advertisement that they are open for business for full-price DRAM. Let's put it that way. Are you tempted to do a lot more in DRAM, given these conditions?

Speaker #5: Yeah. Hi, Harlan. The demand that we have for HBM, our HBM products, HBM 3E, HBM 4, and of course, even ahead of the HBM 4E quals, the asks from our customers for volume not just in 27, but as you know, due to these SCA agreements, we have been discussing one huge advantage of these SCA agreements is we have been discussing these demand requests from customers for multi-year time horizon.

Speaker #3: Do we think that there's an appetite for maybe a much higher mix than expected of DRAM, which obviously would then keep maybe some of the SCAs lower?

Speaker #3: But for very good reason. Thanks.

Speaker #5: Yeah. So, Ben, when you say higher mix of DRAM, you mean versus what?

Sumit Sadana: Yeah. Ben, when you say higher mix of DRAM, you mean versus what?

Speaker #3: Well, versus HBM, versus NAND—whatever you’re making decisions around. I mean, and DRAM, commodity DRAM to consumer would certainly not be on SCAs as much as a hyperscaler would, I would think.

Ben Reitzes: Well, versus HBM, versus NAND, whatever you're making decisions around. Commodity DRAM to consumer would certainly not be on SCAs as much as a hyperscaler would, I would think.

Speaker #5: So if we look at this multi-year time horizon, even going beyond 2027, into 2028, etc., we are able to get very high confidence demand from our customers that is far in excess of our ability to support using our supply.

Sumit Sadana: Yeah. Just a couple of thoughts around that. As you know, our mix in our business of DRAM versus NAND, DRAM inclusive of HBM, tends to be oscillating between the 80% DRAM, 20% NAND, to maybe 75% DRAM, 25% NAND. It kind of is in that type range. We are pretty comfortable with that mix of DRAM versus NAND. We intend to obviously focus on and service customers in both of those product categories. As it relates to HBM, we have made a strategic decision that we have also communicated over time that our goal is to have our HBM share consistent over time with our DRAM share. Our intention is that we support our customers on HBM and also support our customers on the non-HBM portion of the DRAM business across all market segments, right? We definitely believe in the strength of diversity.

Speaker #5: So the demand continues to be well above our supply. Even when we do these SCAs, for multiple years, these SCAs contain volumes that are less than customers would actually like to sign up for.

Speaker #5: And we are pretty comfortable with that mix of DRAM versus NAND. We intend to obviously focus on and service customers in both of those product categories.

Speaker #5: And in fact, in a lot of these negotiations, we spend a lot of time helping customers understand that this is all we can do in this time frame.

Speaker #5: And so absolutely, our demand for HBM, not just in 27, but even 28, is well above our ability to supply. Across all the different HBM flavors.

Speaker #5: And as it relates to HBM, we have made a strategic decision that we have also communicated over time: our goal is to have our HBM share consistent over time with our DRAM share.

Speaker #5: And it's also true the same thing is also true, by the way, for non-HBM DRAM. As well. It's in the same category.

Speaker #5: And so our intention is that we support our customers on HBM and also support our customers on the non-HBM portion of the DRAM business across all market segments, right?

Speaker #7: Hey, Harlan. It's Mark. Maybe just something to add while we're on HBM. So today, we indicated that we expected market tightness to continue beyond 27.

Speaker #5: We definitely believe in the strength of diversity, and if you look at the AEBU business and the MCBU business, both of which are non-data center businesses in our business unit structure, that's almost 40% of our company revenue.

Speaker #7: And part of that reason is we did see the HBM TAM increase. We saw that. We had said previously that it would cross 100 billion in 28.

Sumit Sadana: If you look at the AEBU business and the NCBU business, both of which are non-data center businesses in our business unit structure, that's almost, like, 40% of our company revenue. We like that diversity, and we continue to focus on ensuring that we are servicing customers and their demand, and supporting their growth, across all of the market segments, including non-HBM DRAM, HBM, as well as NAND.

Speaker #7: We see that now. The HBM TAM easily crossing 100 billion in 27.

Speaker #5: So we like that diversity, and we continue to focus on ensuring that we are servicing customers and their demand and supporting their growth across all of the market segments, including non-HBM DRAM, HBM, as well as NAND.

Speaker #6: That's great color. No, thank you for that. The other thing I wanted to ask is it's actually been over a year since the team has given us an update.

Speaker #6: On your midterm to long-term view on industry DRAM and NAND bit demand growth, obviously, much has changed over the past 12 months, influencing workloads, have crossed over training workloads, influencing workloads themselves.

Speaker #3: Got it. Thanks a lot. Great quarter.

Ben Reitzes: Got it. Thanks a lot. Great quarter.

Speaker #6: Continue to evolve. And become more complex. And then on the server CPU side, your CPU customers are now forecasting like 30, 40 percent per year CAGRs given agentics like higher CPU intensity.

Speaker #5: Thank you.

Speaker #2: If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Please limit yourself to one question and one follow-up.

Sumit Sadana: Thank you.

Operator: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. Please limit yourself to one question and one follow-up. Your next question comes from the line of Harlan Sur with J.P. Morgan. Your line is open. Please go ahead.

Speaker #6: I'm sure the mid to long-term bit demand CAGR is also sort of guiding your discussions on these multi-year SCAs. So could you guys just give us an update on your midterm views on DRAM and NAND bit demand CAGRs over the next call a few years?

Speaker #2: Your next question comes from the line of Harlan Sur with JP Morgan. Your line is open. Please go ahead.

Speaker #6: Good afternoon. Thanks for hosting this callback. I think it was September of last year when the Micron team said that they were booked out through calendar '26 on HBM3, HBM3E.

Harlan Sur: Good afternoon. Thanks for hosting this call back. I think it was September of last year when the Micron team said that they were booked out through calendar 2026 on HBM3, HBM3E. Obviously at that time, the team was still in qual and eval on HBM4. If you fast-forward to now, and with a stronger, especially XPU ASIC demand profile, is the team already booked up volume and pricing for HBM3E and HBM4 for calendar 2027? Obviously, understand you still need to go through qual on HBM4E, but are you booked up on current gen HBM3E and 4 for calendar 2027?

Speaker #5: So that's a good question. We have provided some updates to you on how we see 2026 bit demand. Forecasts change versus what we had provided earlier, with DRAM forecasts up a little bit, NAND relatively similar.

Speaker #6: Obviously, at that time, the team was still in qual and eval on HBM 4. But if you fast forward to now and with a stronger, especially XPU ASIC demand profile, is the team already booked up volume and pricing for HBM 3E and HBM 4 for calendar 27?

Speaker #6: Obviously, I understand you still need to go through qual on HBM 4E, but are you booked up on current-gen HBM3E and HBM4 for calendar 2027?

Speaker #5: The thing the reason we are not really providing a lot of forward-looking views on the CAGRs is because, for the foreseeable future, the bid demand the shipment growth for bits is not really determined by demand anymore.

Sumit Sadana: Yeah. Hi, Harlan. The demand that we have for our HBM products, HBM3E, HBM4, and of course, even ahead of the HBM4E quals,

Sumit Sadana: Yeah. Hi, Harlan. The demand that we have for our HBM products, HBM3E, HBM4, and of course, even ahead of the HBM4E quals, asks from our customers for volume, not just in 2027, but as you know, due to these SCA agreements, one huge advantage of these SCA agreements is we have been discussing these demand requests from customers for multiyear time horizon. If we look at this multiyear time horizon, even going beyond 2027, into 2028, et cetera, we are able to get very high confidence demand from our customers that is far in excess of our ability to support using our supply. The demand continues to be well above our supply.

Speaker #5: It's actually more determined by the supply. Because the demand is so much above the industry's ability to supply that the supply growth, in fact, is going to determine how the shipment growth occurs.

Sumit Sadana: asks from our customers for volume, not just in 2027, but as you know, due to these SCA agreements, one huge advantage of these SCA agreements is we have been discussing these demand requests from customers for multiyear time horizon. If we look at this multiyear time horizon, even going beyond 2027, into 2028, et cetera, we are able to get very high confidence demand from our customers that is far in excess of our ability to support using our supply. The demand continues to be well above our supply. Even when we do these SCAs for multiple years, these SCAs contain volumes that are less than customers would actually like to sign up for. In fact, in a lot of these negotiations, we spend a lot of time helping customers understand that this is all we can do in this timeframe.

Speaker #5: Far less. So the demand growth, because of its relative position versus supply. So because of that, we are trying to point out what kind of growth trajectory we believe we give you some kind of data points here and there around how we think this year's supply growth or demand growth is going to be next year.

Speaker #5: So if we look at this multi-year time horizon, even going beyond 2027 into 2028, we are able to get very high-confidence demand from our customers that is far in excess of our ability to support using our supply.

Speaker #5: But we are not providing sort of a outlook too much further down because how the supply conditions change we are continuing to constantly evaluate with our expectations that the supply growth will continue to remain short of what is needed to meet the demand.

Sumit Sadana: Even when we do these SCAs for multiple years, these SCAs contain volumes that are less than customers would actually like to sign up for. In fact, in a lot of these negotiations, we spend a lot of time helping customers understand that this is all we can do in this timeframe. Absolutely, our demand for HBM, not just in 2027 but even 2028, is well above our ability to supply across all the different HBM flavors.

Speaker #5: We don't really see when the supply is going to be able to meet demand. That is not something we are able to project at this time.

Speaker #5: And in fact, in a lot of these negotiations, we spend a lot of time helping customers understand that this is all we can do in this time frame.

Speaker #6: Got it. No, thank you.

Speaker #1: Your next question comes from the line of Tom O'Malley, with Barclays. Your line is open. Please go ahead.

Speaker #5: And so, absolutely, our demand for HBM—not just in '27, but even '28—is well above our ability to supply, across all the different HBM flavors.

Sumit Sadana: absolutely, our demand for HBM, not just in 2027 but even 2028, is well above our ability to supply across all the different HBM flavors.

Speaker #4: Question. I just wanted to go back to the long-term agreements that you were signing and just is there any way to kind of walk us through what happens if a customer was to cancel the agreement?

Speaker #5: And it's also true—the same thing is also true, by the way, for non-HBM DRAM as well. It's in the same category.

Speaker #4: What financial hooks do you have in it? Do you get to keep all of the cash from the agreement? Just any color that you can add there would be helpful.

Harlan Sur: All right. Appreciate it.

Sumit Sadana: The same thing is also true, by the way, for non-HBM DRAM as well. It's in the same category.

Speaker #5: Sure. So I'll start by saying that these strategic customer agreements or SCAs cannot be canceled. Now, there is no provision in this agreement to enable the customer or allow a customer to walk away from this agreement.

Speaker #7: Hey, Harlan, it's Mark. Maybe just something to add while we're on HBM. So, today we indicated that we expect market tightness to continue beyond '27.

Mark Murphy: Hey, Harlan, it's Mark.

Mark Murphy: Hey, Harlan, it's Mark.Hi.Maybe just something to add while we're on HBM. Today we indicated that we expected market tightness to continue beyond 2027. Part of that reason is we did see the HBM TAM increase. We saw that. We had said previously that it would cross $100 billion in 2028. We see that now, the HBM TAM easily crossing $100 billion in 2027.

Harlan Sur: Hi.

Mark Murphy: Maybe just something to add while we're on HBM. Today we indicated that we expected market tightness to continue beyond 2027. Part of that reason is we did see the HBM TAM increase. We saw that. We had said previously that it would cross $100 billion in 2028. We see that now, the HBM TAM easily crossing $100 billion in 2027.

Speaker #7: And part of that reason is we did see the HBM TAM increase. We saw that. We had said previously that it would cross $100 billion in '28.

Speaker #5: These are designed to be take-or-pay agreements. Outside of automotive, generally, these are five-year agreements. There are annual volume commitments for each of those years.

Speaker #7: We see that now. The HBM TAM is easily crossing $100 billion in '27.

Speaker #6: That's great color. No, thank you for that. The other thing I wanted to ask is, it's actually been over a year since the team has given us an update.

Harlan Sur: That's great color. No, thank you for that. The other thing I wanted to ask is, it's actually been over a year since the team has given us an update on your midterm to long-term view on industry DRAM and NAND bit demand growth. Obviously, much has changed over the past 12 months. Influencing workloads have crossed over training workloads, influencing workloads themselves continue to evolve and become more complex. On the server CPU side, your CPU customers are now forecasting 30% and 40% per year CAGRs given dynamics like higher CPU intensity. I'm sure the mid to long-term bit demand CAGR is also sort of guiding your discussions on these multi-year SCAs. Could you guys just give us an update on your midterm views on DRAM and NAND bit demand CAGRs over the next, call it, few years?

Speaker #5: And the take-or-pay means that whether they want to purchase the bits or not, they are obligated to pay for the price times the volume.

Speaker #6: On your midterm to long-term view on industry DRAM and NAND bit demand growth, obviously, much has changed over the past 12 months. Influencing workloads have crossed over—training workloads, influencing workloads themselves.

Speaker #5: The price itself for a lot of these large agreements has a price band. There is a price ceiling and a price floor. The price gets negotiated every quarter.

Speaker #6: Continue to evolve and become more complex. And then, on the server CPU side, your CPU customers are now forecasting like 30–40% per year CAGRs given agentics, like higher CPU intensity.

Speaker #5: Based on market conditions, the price cannot exceed the ceiling no matter what. Cannot go below the floor no matter what. And consequently, the value of these agreements can be readily determined there are also premiums in the agreement for products that may be more sophisticated, higher performance, higher capacities.

Speaker #6: I'm sure the mid- to long-term bit demand CAGR is also sort of guiding your discussions on these multi-year SCAs. So, could you guys just give us an update on your mid-term views on DRAM and NAND bit demand CAGRs over the next, call it, a few years?

Speaker #5: That's a good question. We have provided some updates to you on how we see 2026 bit demand. Forecasts have changed versus what we had provided earlier, with DRAM forecasts up a little bit and NAND relatively similar.

Sumit Sadana: That's a good question. We have provided some updates to you on how we see 2026 bit demand forecasts change versus what we had provided earlier, with DRAM forecast up a little bit, NAND relatively similar. The reason we are not really providing a lot of forward-looking views on the CAGRs is because for the foreseeable future, the shipment growth for bits is not really determined by demand anymore. It's actually more determined by the supply. Because the demand is so much above the industry's ability to supply, that the supply growth, in fact, is going to determine how the shipment growth occurs, far less so the demand growth because of its relative position with the supply. Because of that, we are trying to point out what kind of growth trajectory we believe.

Speaker #5: On newer products, like for example, when we do LP6 versus LP5 or DDR6 versus DDR5 or a new version of HBM, then there are provisions for those products to be priced differently at a premium to the existing products.

Speaker #5: The thing the reason we are not really providing a lot of forward-looking views on the CAGRs is because for the foreseeable future, the bid demand the shipment growth for bits is not really determined by demand anymore.

Speaker #5: So we have all of those provisions, but the one provision that doesn't exist is any customer's ability to walk away from these agreements. Now, beyond the take-or-pay related obligations that exist in these agreements and its financial obligations that are price times volume, there is also this upfront cash deposit that these agreements entail where customers have provided in the form of upfront cash deposit and related financial commitments like a letter of credit, for example, for a minority of the total.

Speaker #5: It's actually more determined by the supply, because the demand is so much above the industry's ability to supply that the supply growth, in fact, is going to determine how the shipment growth occurs.

Speaker #5: Far less. So, the demand growth—because of its relative position versus supply—so because of that, we are trying to point out what kind of growth trajectory we believe. We give you some data points here and there around how we think this year's supply growth or demand growth is going to be next year.

Speaker #5: That even for the agreements we have already signed, these 16 agreements, aggregates to 22 billion dollars plus in terms of total cash and related financial commitments, of which the cash alone is almost 18 billion dollars.

Sumit Sadana: We give you some kind of data points here and there around how we think this year's supply growth or demand growth is going to be next year.

Sumit Sadana: We give you some kind of data points here and there around how we think this year's supply growth or demand growth is going to be next year. We are not providing sort of outlook too much further down. Because how the supply conditions change, we are continuing to constantly evaluate. Our expectation is that the supply conditions will continue to remain short of what is needed to meet the demand. We don't really see when the supply is going to be able to meet demand. That is not something we are able to project at this time.

Speaker #5: But we are not providing sort of an outlook too much further down, because, as the supply conditions change, we are continuing to constantly evaluate, with our expectation that the supply growth will continue to remain short of what is needed to meet the demand.

Sumit Sadana: We are not providing sort of outlook too much further down. Because how the supply conditions change, we are continuing to constantly evaluate. Our expectation is that the supply conditions will continue to remain short of what is needed to meet the demand. We don't really see when the supply is going to be able to meet demand. That is not something we are able to project at this time.

Speaker #5: So you can imagine that when we get to our target number of agreements, which will go from the roughly 20% DRAM bits roughly a third of NAND bits all the way to roughly accounting for half of the company's revenue, which is what we are likely to end up at or somewhat more, you can imagine that the cash associated with all of those will significantly increase from the current 22 billion dollar number.

Speaker #5: We don't really see when the supply is going to be able to meet demand. That is not something we are able to project at this time.

Speaker #6: Got it. No, thank you.

Harlan Sur: Got it. No, thank you.

Speaker #5: So that cash is our customers' commitment to this new business model and so it's that's how the structure of these agreements are.

Speaker #4: Your next question comes from the line of Tom O'Malley with Barclays. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Thomas O'Malley with Barclays. Your line is open. Please go ahead.

Speaker #2: Question. I just wanted to go back to the long-term agreements that you were signing, and just— is there any way to kind of walk us through what happens if a customer was to cancel the agreement?

Thomas O'Malley: Question. I just wanted to go back to the long-term agreements that you were signing. Is there any way to kind of walk us through what happens if a customer was to cancel the agreement? Like what financial hooks do you have in it? Do you get to keep all the cash from the agreement? Just any color that you can add there would be helpful.

Tom O'Malley: Question. I just wanted to go back to the long-term agreements that you were signing. Is there any way to kind of walk us through what happens if a customer was to cancel the agreement? Like what financial hooks do you have in it? Do you get to keep all the cash from the agreement? Just any color that you can add there would be helpful.

Speaker #4: Thank you. That's helpful. And just for my follow-up question, just I wanted to clarify on the cash deposits. It was my understanding that towards the end of the agreement, you end up returning those back to the customers.

Speaker #2: What financial hooks do you have in it? Do you get to keep all of the cash from the agreement? Just any color that you can add there would be helpful.

Speaker #4: So I'm just the general question is, any strategic rationale for receiving those upfront and being able to use that at will? Any plans with that cash?

Speaker #5: Sure. So, I'll start by saying that these strategic customer agreements, or SCAs, cannot be canceled. There is no provision in this agreement to enable the customer, or allow a customer, to walk away from this agreement.

Sumit Sadana: Sure. I'll start by saying that these Strategic Customer Agreements or SCAs cannot be canceled. Now, there is no provision in this agreement to enable a customer or allow a customer to walk away from this agreement. These are designed to be take or pay agreements. Outside of automotive, generally these are five-year agreements. There are annual volume commitments for each of those years. The take or pay means that, whether they want to purchase the bits or not, they are obligated to pay for the price times the volume. The price itself for a lot of these large agreements has a price band. There is a price ceiling and a price floor. The price gets negotiated every quarter based on market conditions. The price cannot exceed the ceiling no matter what, cannot go below the floor no matter what.

Speaker #4: And just any way to think through why it ends up getting returned back to customers instead of just being recognized as part of the revenue that you end up selling them in the agreements?

Speaker #4: Thank you.

Speaker #5: Yeah. I mean, our customers are going to, as per the terms of the agreement, they're going to be purchasing the volumes over the years and the cash is sort of a contingency.

Speaker #5: These are designed to be take-or-pay agreements. Outside of automotive, generally these are five-year agreements. There are annual volume commitments for each of those years.

Speaker #5: And a show of good faith and confidence in this new business model from our customers. Meaning, in the unlikely event that a customer is unable to purchase or does not purchase the volume at the price as determined by the terms of the agreement, then we do have the right to be able to decrement the cash balance that ultimately will get returned to them as one available remedy, but not the only available remedy.

Speaker #5: And the take-or-pay means that whether they want to purchase the bits or not, they are obligated to pay for the price times the volume.

Speaker #5: The price itself for a lot of these large agreements has a price band. There is a price ceiling and a price floor. The price gets negotiated every quarter based on market conditions.

Speaker #5: The price cannot exceed the ceiling, no matter what. It cannot go below the floor, no matter what. And consequently, the value of these agreements can be readily determined. There are also premiums in the agreement for products that may be more sophisticated, higher performance, or have higher capacities.

Sumit Sadana: Consequently, the value of these agreements can be readily determined. There are also premiums in the agreement for products that may be more sophisticated, higher performance, higher capacities, on newer products like, for example, when we do LP6 versus LP5 or DDR6 versus DDR5 or a new version of HBM, there are provisions for those products to be priced differently at a premium to the existing products. We have all of those provisions, but the one provision that doesn't exist is any customer's ability to walk away from these agreements.

Speaker #5: None of this ultimately relieves the customers of the liability of having to purchase the volumes over the term of the agreement that they agreed upon prices.

Speaker #5: But the cash is just one of the elements of the overall transaction. The cash doesn't get returned all in one shot at the end of the term.

Speaker #5: On newer products, like, for example, when we do LP6 versus LP5, or DDR6 versus DDR5, or a new version of HBM, then there are provisions for those products to be priced differently, at a premium to the existing product.

Speaker #5: It gets returned over a period of time with the return of the cash weighted towards the second half of the term of the agreement.

Speaker #5: So we have all of those provisions, but the one provision that doesn't exist is any customer's ability to walk away from these agreements. Now, beyond the take-or-pay related obligations that exist in these agreements, and these financial obligations that are price times volume, there is also this upfront cash deposit that these agreements entail, where customers have provided—in the form of an upfront cash deposit—and related financial commitments, like a letter of credit, for example, for a minority of the total.

Speaker #4: Thank you.

Speaker #3: Your next question comes from the line of Melissa Weathers of Deutsche Bank. Your line is open. Please go ahead.

Sumit Sadana: Now, beyond the take or pay related obligations that exist in these agreements and its financial obligations that are price times volume, there is also this upfront cash deposit that these agreements entail where customers have provided, in the form of upfront cash deposit and related financial commitments, like a letter of credit, for example, for a minority of the total, that even for the agreements we have already signed, these 16 agreements aggregates to $22 billion plus in terms of total cash and related financial commitments. Of which, the cash alone is almost $18 billion. You can imagine that when we get to our target numbers of agreements, which will go from the roughly 20% demand bids, roughly a third of NAND bits all the way to roughly accounting for half of the company's revenue, which is what we are likely to end up at, or somewhat more.

Speaker #2: Hey there. Thank you for taking my questions. I wanted to ask on the non-HBM side of DRAM within the data center. So you guys have talked a lot about SOCAM and using low-power DRAM for data center applications.

Speaker #2: And especially as we see the mix of server CPUs increase with agentic AI, I was hoping you could give an update on how you guys are seeing the growth in demand for SOCAM attach and what kind of trends are you seeing in adoption there.

Speaker #5: That even for the agreements we have, agreements aggregate to $22 billion plus in terms of total cash and related financial commitments, of which the cash alone is almost $18 billion.

Speaker #5: Sure, Melissa. The agentic AI, as you noted, drives a lot of growth in CPU demand and CPU-based servers. And that is certainly a trend that we are seeing.

Speaker #5: So you can imagine that when we get to our target number of agreements—which will go from roughly 20% of DRAM bits, roughly a third of NAND bits, all the way to roughly accounting for half of the company's revenue, which is what we are likely to end up at or somewhat more—you can imagine that the cash associated with all of those will significantly increase from the current $22 billion number.

Speaker #5: These CPU-based servers are coming from multiple different suppliers. You're seeing a lot of companies announce products targeted towards the data center for CPUs. You have x86-based CPUs.

Speaker #5: You have CPUs from NVIDIA, Qualcomm announced CPU. I mean, there's lots of different possibilities for types of CPUs that could be used in the data center over time to drive the use of agentic AI.

Sumit Sadana: You can imagine that the cash associated with all of those will significantly increase from the current $22 billion number. That cash is our customers' commitment to this new business model. That's how the structure of these agreements are.

Speaker #5: And we have CPUs that use DDR5 as well as plans from our customers to increase the use of LPDRAM in the data center when LPDRAM gets used it will be in the SOCAM form factor.

Speaker #5: So that cash is our customers' commitment to this new business model, and so that's how the structure of these agreements is.

Speaker #5: And as you know, Micron has been a pioneer we were first in the industry to not just drive the usage of LPDRAM and we were, for the longest time, sole-sourced on LPDRAM in the data center, but we were also the pioneers in bringing out new products first to market with the SOCAM form factor.

Speaker #2: Thank you, that's helpful. Just for my follow-up question, I wanted to clarify on the cash deposits. It was my understanding that toward the end of the agreement, you end up returning those back to the customers.

Thomas O'Malley: Thank you. That's helpful. For my follow-up question, I wanted to clarify on the cash deposits. It was my understanding that towards the end of the agreement, you end up returning those back to the customers. The general question is, any strategic rationale for receiving those upfront and being able to use that at will, like any plans with that cash, and any way to think through why it ends up getting returned back to customers instead of being recognized as part of the revenue that you end up selling them in the agreements. Thank you.

Tom O'Malley: Thank you. That's helpful. For my follow-up question, I wanted to clarify on the cash deposits. It was my understanding that towards the end of the agreement, you end up returning those back to the customers. The general question is, any strategic rationale for receiving those upfront and being able to use that at will, like any plans with that cash, and any way to think through why it ends up getting returned back to customers instead of being recognized as part of the revenue that you end up selling them in the agreements. Thank you.

Speaker #2: So, just a general question: Is there any strategic rationale for receiving those upfront and being able to use that at will? Any plans with that cash?

Speaker #2: And just—any way to think through why it ends up getting returned back to customers instead of just being recognized as part of the revenue that you end up selling to them in the agreements?

Speaker #5: So we continue to expect that this is going to be an area of differentiation for us with our customers. We had a recognized leader in this space.

Speaker #2: Thank you.

Speaker #5: Yeah. I mean, our customers are going to, as per the terms of the agreement, they're going to be purchasing the volumes over the years, and the cash is sort of a contingency.

Speaker #5: We have market leadership in all of these products. We have really strong engagement with customers who intend to use LPDRAM as a way of reducing the power consumption, increasing the performance, and even reducing the footprint of memory.

Sumit Sadana: Yeah, our customers are going to be purchasing the volumes over the years. The cash is sort of a contingency. A show of good faith and confidence in this new business model from our customers. Meaning, in the unlikely event that a customer is unable to purchase or does not purchase the volume at the price as determined by the terms of the agreement, we do have the right to be able to decrement the cash balance that ultimately will get returned to them as one available remedy, but not the only available remedy. None of this ultimately relieves the customers of the liability of having to purchase the volumes over the term of the agreement at the agreed upon prices. The cash is just one of the elements of the overall transaction.

Speaker #5: So certainly, these SOCAMs help do all of that. There are RAS-related complications, reliability, availability, and serviceability-related complications that have to be worked through for LPDRAM because LPDRAM was not really designed for data centers.

Speaker #5: And that's where we are bringing in differentiation and helping our customers deal with that. We expect LPDRAM to grow over time as a percent of consumption of DRAM in the data center.

Speaker #5: And we expect to be leaders in that.

Speaker #2: Thank you. And then maybe one for I don't know if it's Manish or Mark, but as we think about Idaho One, Tongluo, Idaho Two, as we think about these greenfield fabs starting to have wafer outs in next year and the year after that, can you remind us or is there how should we think about the impact of startup costs or just the incremental impact on cost per bit that we should be flowing through as those greenfield fabs come online?

Speaker #5: One available remedy, but not the only available remedy. None of this ultimately relieves the customers of the liability of having to purchase the volumes over the term of the agreement, at the prices that we agreed upon.

Speaker #5: But the cash is just one of the elements of the overall transaction. The cash doesn't get returned all in one shot at the end of the term.

Speaker #4: So I'll let Mark handle the technical question on the startup cost accounting. But we did say, Melissa, on this call that given the trend that the industry-wide trend towards higher performance solutions such as HBM and even within the HBM category higher trade ratios expected in the future with HBM, which obviously requires more silicon per bit, versus traditional DRAM, as well as with greenfield build-out, which doesn't get the same leverage on existing capacity as our traditional technology transition models for the industry have.

Sumit Sadana: The cash doesn't get returned all in one shot at the end of the term. It gets returned over a period of time, with the return of the cash weighted towards the second half of the term of the agreement.

Speaker #5: It gets returned over a period of time, with the return of the cash weighted towards the second half of the term of the agreement.

Speaker #2: Thank you.

Thomas O'Malley: Thank you.

Tom O'Malley: Thank you.

Speaker #3: Your next question comes from the line of Melissa Weathers of Deutsche Bank. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Melissa Weathers of Deutsche Bank. Your line is open. Please go ahead.

Speaker #4: Hi there. Thank you for taking my questions. I wanted to ask on the non-HBM side of DRAM within the data center. So, you guys have talked a lot about SOCAM and using low-power DRAM for data center applications.

Melissa Weathers: Hey there. Thank you for taking my questions. I wanted to ask on the non-HBM side of DRAM within a data center. You guys have talked a lot about SO-DIMM, and using low power DRAM for data center applications, and especially as we see the mix of server CPUs increase with agentic AI. I was hoping you could give an update on how you guys are seeing the growth in demand for SO-DIMM attach and what kind of trends are you seeing in adoption there?

Speaker #4: Both of these trends to higher performance and as well as greenfield investments that take time to ramp scale and are not as efficient. Both of these are going to be trends that we expect will actually increase DRAM bit cost here in the near term.

Speaker #4: And especially as we see the mix of server CPUs increase with agentic AI, I was hoping you could give an update on how you guys are seeing the growth in demand for SOCAM attach, and what kind of trends you are seeing in adoption there.

Speaker #5: Sure, Melissa. The agentic AI, as you noted, drives a lot of growth in CPU demand and CPU-based servers, and that is certainly a trend that we are seeing.

Speaker #4: So that was one thing that we did have in the fair remarks. And then Mark, I think you can and that goes for ID1, for Tongluo, for ID2.

Sumit Sadana: Sure, Melissa. The agentic AI, as you noted, drives a lot of growth in CPU demand and CPU-based servers. That is certainly a trend that we are seeing. These CPU-based servers are coming from multiple different suppliers. You're seeing a lot of companies announce products targeted towards the data center for CPUs. You have x86 based CPUs, you have CPUs from NVIDIA, Qualcomm announced a CPU. I mean, there's lots of different possibilities for types of CPUs that could be used in the data center over time to drive the use of agentic AI. We have CPUs that use DDR5, as well as plans from our customers to increase the use of LPDRAM in the data center. When LPDRAM gets used, it will be in the SO-DIMM form factor. As you know, Micron has been a pioneer.

Speaker #4: Those are kind of all elements of that greenfield build-out. And that's something that we expect will be an industry-wide phenomenon. And then Mark, you can comment.

Speaker #4: I think you've given some commentary before in terms of timing of the startup costs for facilities and how they'll impact the P&L.

Speaker #1: Yeah. So Melissa as Manish mentioned, there are a number of factors that will bias the cost up in DRAM over time here. Yeah, the trade ratios, as he mentioned, for HBM and actually LP yeah, the greenfield facilities.

Speaker #5: You have CPUs from NVIDIA; Qualcomm announced a CPU. I mean, there are lots of different possibilities for types of CPUs that could be used in the data center over time to drive the use of agentic AI.

Speaker #5: And we have CPUs that use DDR5, as well as plans from our customers to increase the use of LPDRAM in the data center. When LPDRAM gets used, it will be in the SOCAM form factor.

Speaker #1: And to your question on startup, we've talked about this before. We begin to see startup costs more meaningfully begin here in the fourth quarter and then into the first half of next year.

Speaker #1: And so you'll see 27 at elevated levels think about 100, 200 million per quarter effect versus what we had seen previous run rates. And then what that will be over time will just be a function the various RAM profiles of fabs, of which, as you point out, Tongluo and ID1 are the first to go here.

Speaker #5: And as you know, Micron has been a pioneer—we were first in the industry to not just drive the usage of LPDRAM, and we were, for the longest time, sole-sourced on LPDRAM in the data center.

Sumit Sadana: We were first in the industry to not just drive the usage of LPDRAM, and we were, for the longest time, sole sourced on LPDRAM in the data center. We were also the pioneers in bringing out new products first to market with the SO-DIMM form factor. We continue to expect that this is going to be an area of differentiation for us with our customers. We are a recognized leader in this space. We have market leadership in all of these products. We have really strong engagement with customers who intend to use LPDRAM as a way of reducing the power consumption, increasing the performance, and even reducing the footprint of some memory. Certainly these SO-DIMMs help do all of that.

Speaker #5: But we were also the pioneers in bringing out new products first to market with the SOCAM form factor. So, we continue to expect that this is going to be an area of differentiation for us with our customers.

Speaker #5: We are a recognized leader in this space. We have market leadership in all of these products. We have really strong engagement with customers who intend to use LPDRAM as a way of reducing power consumption, increasing performance, and even reducing the footprint of memory.

Speaker #1: We would provide a more color on this, I think it was maybe at the end of maybe '24, beginning of '25, because it was it was a more material effect to the business at that time.

Speaker #5: So, certainly, these SOCAMs help do all of that. There are RAS-related complications—reliability, availability, and serviceability-related complications—that have to be worked through for LPDRAM, because LPDRAM was not really designed for data centers.

Speaker #1: I think I had said at the time maybe a half a point to a point plus of margin effect today with the size of the business, this effect is much reduced.

Sumit Sadana: There are RAS-related complications, reliability, availability, and serviceability related complications that have to be worked through for LPDRAM, because LPDRAM was not really designed for data centers, and that's where we are bringing in differentiation and helping our customers deal with that. We expect LPDRAM to grow over time as a % of consumption of DRAM in the data center, and we expect to be leaders in that trend.

Speaker #1: From before. And obviously, the faster we can get capacity on which we're obviously trying to do for our customers to get much-needed supply, the benefit of that incremental bit is going to outweigh this incremental.

Speaker #5: And we expect to be leaders in that.

Speaker #1: Associated costs at startup.

Speaker #4: Thank you. And then maybe one for—I don't know if it's Manish or Mark—but as we think about Idaho 1, Tongluo, Idaho 2, as we think about these greenfield fabs starting to have wafer outs in next year and the year after that, can you remind us, or is there—how should we think about the impact of startup costs or just the incremental impact on cost per bit that we should be flowing through as those greenfield fabs come online?

Speaker #2: Thank you both.

Melissa Weathers: Thank you. Maybe one for, I don't know if it's Manish or Mark, but as we think about Idaho One, Tonghua, Idaho Two, as we think about these greenfield fabs starting to have wafer outs in next year and the year after that, can you remind us, how should we think about the impact of startup costs or just the incremental impact on cost per bit that we should be following through as those greenfield fabs come online?

Speaker #3: Your next question comes from the line of Vijay Rakesh. With Ms. Yuho, your line is open. Please go ahead.

Speaker #5: Thanks for doing this callback. So just to make Manish and Mark on the 16 ACAs that you announced, the four large customers, does it include any HBM on do they include some of the major CSPs within that, or can you give us some more color?

Speaker #2: So I'll let Mark handle the technical question on the startup cost accounting. But we did say, Melissa, on this call that, given the industry-wide trend towards higher-performance solutions such as HBM, and even within the HBM category, higher trade ratios are expected in the future with HBM, which obviously requires more silicon per bit versus traditional DRAM.

Manish Bhatia: I'll let Mark handle the technical question on the startup cost accounting. But we did say, Melissa, on this call that, given the industry-wide trend towards higher performance solutions such as HBM, and even within the HBM category, higher trade ratios expected in the future with HBM, which obviously requires more silicon per bit, versus traditional DRAM. As well as with greenfield build-out, which doesn't get the same leverage on existing capacity as our traditional technology transition models for the industry have. Both of these.

Speaker #4: Sure. The SCAs that we have signed already do include some hyperscalers. And where the purchasing for those hyperscalers requires HBM, that is part of the overall agreement.

Speaker #5: Got it. And then just a quick follow-up on the 22 billion deposit. Is the intention that you hold it for the five-year contract period, or as the customers buy the product, it's prorated and runs through it?

Speaker #5: If you could just clarify that. Thanks.

Speaker #4: Yeah. I mean, it's not a prorated type of thing. It is a customer cash deposit. And it's not a prepaid revenue or things like that.

Speaker #4: And it gets returned to customers on a predefined schedule. That has been agreed to that X amount will be returned in Y quarter over time.

Speaker #4: And it is back-end loaded in terms of the second half of the agreement term is when the bulk of the return of the customer deposit occurs.

Speaker #4: And of course, the cash would be returned assuming it hasn't been decremented for reasons driven by the term of the year.

Speaker #5: Got it. Thank you.

Speaker #4: Thank you.

Speaker #3: Your next question comes from the line of Jim Schneider with Goldman Sachs. Your line is open. Please go ahead.

Speaker #5: Thanks for taking my question. Just stepping back for a moment, as you've had discussions with your customers about their forecast demand needs, let's say through the end of fiscal '28 or the end of calendar '28, where do you think you will end up in terms of the percentage of the forecasted demand that they have in terms of your ability to supply?

Speaker #5: I mean, is it something that's going to be 70%, 90%? And I guess, how do you expect that to close over time? Clearly, there is a gap between your ability to build facilities and where the demand is.

Speaker #5: But maybe give us a sense at a point in time what percentage that represents.

Speaker #4: Yeah. I mean, that isn't a homogeneous percentage number that we can provide because our strategy is different for each segment of the market. Of course, we try to be very diversified.

Speaker #4: And we are very committed to supporting each of the segments of the market. But as you can imagine, if the automotive industry can only do 50 or 70 percent of the units, then that would be a catastrophic problem.

Speaker #4: For that portion of the market. So we can't have a one-size-fits-all kind of an approach. And so there are a number of complex factors that go into the assessment of what kind of fulfillment rate would be appropriate for what kind of customer and what kind of segment and what kind of geography.

Speaker #4: So there are lots of different factors that play into that. With that said, I would say that the general sentiment amongst customers is that we are very short of their demand.

Speaker #4: For some customers, we are extremely, extremely short. Some of our supply numbers are a fraction of what they want. And then in other parts of the market, albeit smaller parts of the market, but are super important sectors of the economy, like automotive, and some critical parts like defense, aerospace, some important industrial markets, including medical equipment and so on, obviously, we try to do our best to minimize the impact I'm not saying that those customers get everything they want, but at least we try to minimize the impact that they are going through in this very challenging environment of tightness.

Speaker #4: So broadly speaking, the overall aggregate supply is substantially below the aggregate demand for both DRAM and NAND. Of course, DRAM is just extremely, extremely constrained.

Speaker #4: HBM is very constrained. All the segments are seeing those challenges.

Speaker #2: So, Jim, it's Mark. If I could just add in this to build on Samit's comments about supply efforts, we are as you heard and you heard Manish talk about, the RAMPS, ID1, and Tongla, we're doing everything we can to bring on supply.

Speaker #2: You heard us today between adding construction and tool installs in the fourth quarter here, where increasing our fiscal '26 capex number to '27 around '27 billion.

Speaker #2: We're also going to increase substantially capex next year. And it will be more than half of that increase will be construction. Now, we did provide some comments last quarter about the increase FY '26, '27.

Speaker #2: Based on our comments, you may have come up with numbers that are sort of in the low to mid-40s. And we will be spending above that level as we look at it today.

Speaker #2: We're exiting we'll do about $10 billion this quarter. And we will step up from there. And do '27.

Speaker #5: Thanks. That was exactly where my next question was, which is given that run rate sort of implies mid-40s, you said you're going to do above that.

Speaker #5: But I guess, what are the chances you're going to do materially above 50? Are we something is something like 55 or 60 even in the cards?

Speaker #2: No. I mean, we I mean, if we were we're not going to give a capex number. But if the number were that order of magnitude, I think we'd owe it to you to update you more specifically yeah.

Speaker #2: We're going to run about $10 billion this quarter. We'll step up from there. We are going to be, I believe, higher than we'll be higher than the mid-40s.

Speaker #2: And we're going to remain extremely disciplined as we always are. I mean, the ops team's been amazing on figuring out how to sweat these assets that we have as much as possible.

Speaker #2: And then accelerating all these greenfield capacity adds that we have.

Speaker #5: And I think the we've mentioned a couple of times that the majority of the fiscal '27 capex, Jim, is for construction, which kind of also gives you some indication of those construction dollars are not going to be producing bits in that time horizon, which is why we also talked about for us in the industry, the kind of greenfield capacity really starts to contribute to bits in calendar '28.

Speaker #5: And that supply and even with that supply improvement, we don't see as Samit was saying earlier, an intercept for supply with demand. Very helpful color.

Speaker #5: Thank you all.

Speaker #3: Your final question comes from the line of Aaron Rakers, of Wells Fargo. Your line is open. Please go ahead.

Speaker #6: Yeah. Thanks for doing this call and taking the questions. I have one and one follow-up as well. On the FDAs, I know it was asked about HBM, but I'm curious about the NAND getting it seems to be further constrained.

Speaker #6: So as you're engaging with your customers on these FDAs, is there a strategic advantage you're finding of having both NAND and DRAM in your portfolio competitively in these engagements?

Speaker #6: Is NAND pervasive across these FDAs, or any context around that, particularly as it relates to enterprise SSDs?

Speaker #4: Sure. Yeah. I mean, our enterprise SSD momentum is exceptionally strong. And we provided you some data points on that with $5 billion quarter in FQ3.

Speaker #4: For enterprises, for data center SSDs outside of the inside of the $25 billion overall data center revenue for the quarter. And so absolutely, we do feel really good about the fact that we have incredibly strong portfolio of products both on the NAND and DRAM side.

Speaker #4: They, of course, stand on their own feet individually. In terms of their capabilities, we have hit record share after record share of data center SSDs over time, due to the strength of that portfolio.

Speaker #4: And you know the strength of our DRAM portfolio, both in terms of HBM and non-HBM products. Now, in terms of the levels of constraint, both DRAM and NAND are very constrained.

Speaker #4: Of course, when we talk to customers across this long horizon of time, through 2030 calendar year, through the end of 2030 calendar year, which is the term of a lot of these large FDAs, I mean, they are definitely interested in getting their hands on NAND.

Speaker #4: But DRAM is certainly far more constrained. And more difficult to supply in the quantities and volumes that our customers need. But like I said, I mean, NAND is very constrained too.

Speaker #4: But the sense of concern and urgency in the minds of our customers around DRAM is very, very high.

Speaker #5: Yeah. Very helpful. And then my final question on the competitive landscape. Always trying to think about what vector could change some of the dynamics in the backdrop that we're talking very constructively about.

Speaker #5: I'm curious how you've evolved your thoughts around China and the competition from either be it CXMP or YMTC? Have you seen any changes on that front or anything you want to share how you view the competitive landscape from that regard?

Speaker #5: Thank you.

Speaker #4: Sure. I mean, certainly, those two companies have grown over the years, in terms of their capabilities and share. Most of their output, the overwhelming majority of their output tends to be sold within China.

Speaker #4: We haven't really seen much by way of their product or competition from them. Outside of China, with that said, we are very focused from a competitive perspective in driving really the highest-performing, most complex products in the portfolios of when you look at NAND, we have focused on data center SSDs in a very single-minded way.

Speaker #4: You have seen us also do really well on QLC across client SSDs, but also in data center SSDs. We have the QLC leader in the world.

Speaker #4: We are leaders in Gen 6, first company to come out with Gen 6 drives and we have ramped them in volume. So when you look at that or you look at the highest capacity, 245 terabyte drives we are a leader there.

Speaker #4: You have seen the strength of our DRAM portfolio as well. Everything from HBM to high-capacity DIMMs to LPDRAM leadership in the data center to mobile and client LP leadership in those markets as well.

Speaker #4: So we could go on and on on that. But our focus is to look for these complex, difficult-to-get-right type of products, get into deep customer engagements, across multiple years, on the roadmap, gain their confidence in terms of being able to have a track record of meeting and beating time-to-market with the best specs in the industry, have a track record of innovation.

Speaker #4: You have seen how many nodes in a row of DRAM and NAND we have been first-to-market on, how many products are first-to-market across the board.

Speaker #4: And of course, I would be remiss to not mention that we have one of the best intellectual property portfolios in the world, almost 65,000 patents.

Speaker #4: And we are very aggressive and have a great track record in defending our IP. Over a number of years, a number of decades, in fact.

Speaker #4: So overall, we feel very good about where we are and the structural foundational changes in our business model that the combination of demand the combination of structural supply challenges in the industry, and the place that AI is creating for memory, and its newfound relevance and importance, and strategic nature.

Speaker #4: And now combined with these FDAs, our completely transformative for others.

Speaker #5: Yeah. Thank you.

Speaker #4: Thank you.

Q3 2026 Micron Technology Inc Post-Earnings Call

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