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    MU
    Earnings call· Feb 2025(Q2 FY25)

    MICRON TECHNOLOGY INC MU

    Mar 20, 2025 Source

    Executive summary

    Micron Q2 FY25 — Record Data Center DRAM and HBM Revenue, Strong AI Demand

    Micron delivered strong Q2 FY25 results, driven by record data center DRAM and HBM revenue, underscoring its leadership in AI memory solutions. The company is strategically ramping HBM capacity and advancing its technology nodes, while navigating a challenging NAND market through disciplined supply management. Micron anticipates continued revenue growth and improved profitability, leveraging AI-driven demand across data center and edge devices.

    Highlights

    5

    • Data center DRAM revenue reached a new record in Q2 FY25.

    • HBM revenue grew over 50% sequentially to a new milestone of over $1 billion in Q2 FY25.

    • Micron's 1-gamma node, incorporating EUV, achieved 20% lower power, 15% better performance, and over 30% bit density improvement.

    • Volume production of HBM3E 12-high has begun, designed into NVIDIA's GB300, with multibillion dollars in HBM revenue expected in FY25.

    • Increased HBM TAM estimate for calendar 2025 to over $35 billion, with Micron's HBM output sold out for calendar 2025.

    Concerns

    4

    • NAND revenue decreased 17% sequentially in Q2 FY25, with prices decreasing in the high teens percentage range.

    • Consolidated gross margin for Q2 FY25 was 37.9%, down 160 basis points sequentially, due to pricing and mix shift to consumer-oriented NAND.

    • Fiscal Q2 ending inventory was $9 billion or 158 days, an increase of 9 days from the prior quarter.

    • NAND underutilization continues to weigh on gross margins, with wafer output down mid-teens percentage from prior levels.

    Guidance & targets

    21
    CategoryTargetConfidence
    Revenue
    $8.8 billion, plus or minus $200 million
    high materiality
    High
    Gross Margin
    36.5%, plus or minus 100 basis points
    high materiality
    High
    Operating Expenses
    approximately $1.13 billion, plus or minus $15 million
    medium materiality
    High
    Tax Rate (Non-GAAP)
    approximately 14%
    low materiality
    High
    EPS (Non-GAAP)
    $1.57 per share, plus or minus $0.10
    high materiality
    High
    Operating Expenses
    increase by over 10%
    medium materiality
    High
    Capital Expenditures
    approximately $14 billion
    high materiality
    High
    HBM Revenue
    multibillion dollars
    high materiality
    High
    HBM TAM
    over $35 billion
    high materiality
    High
    HBM Share
    similar to our overall DRAM supply share on a run rate basis
    high materiality
    High
    PC Market Unit Growth
    mid-single digits
    medium materiality
    High
    Smartphone Unit Volume Growth
    low single-digit percentages
    medium materiality
    High
    DRAM Bit Demand Growth
    mid- to high teens percentage range
    high materiality
    High
    NAND Bit Demand Growth
    low double-digit percentage range
    high materiality
    High
    DRAM Bit Demand Growth (Medium Term)
    mid-teens CAGR
    high materiality
    High
    NAND Bit Demand Growth (Medium Term)
    mid-teens CAGR
    high materiality
    High
    Micron Supply Growth (DRAM and NAND)
    lower than industry demand growth
    high materiality
    High
    NAND Wafer Capacity
    over 10% structural reduction
    high materiality
    High
    DRAM All-in Costs
    flattish
    medium materiality
    High
    NAND All-in Costs (Front-End)
    low double digits
    medium materiality
    High
    Gross Margin
    up somewhat from third quarter
    high materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Compute and Networking Business Unit (CNBU)
    Reached a new quarterly record for the third consecutive quarter, driven by a more than 50% sequential increase in HBM revenue.
    Percentage of total revenue: 57%
    		$4.6 billion—4%—
    Storage Business Unit (SBU)
    Decline driven primarily by lower storage investments from data center customers after several quarters of very strong growth and overall NAND industry pricing.
    		$1.4 billion—-20%—
    Mobile Business Unit (MBU)
    Lower revenue as mobile customers continued to improve their inventory positions.
    		$1.1 billion—-30%—
    Embedded Business Unit (EBU)
    Lower sequential revenue primarily due to inventory improvement initiatives at automotive customers.
    		$1 billion—-3%—

    Operational metrics

    33
    Non-GAAP Gross Margin
    37.9%down 160 bps sequentially
    Q2 FY25

    Due primarily to pricing and consumer-oriented segments of the market, especially in NAND, and NAND mix shift to consumer-oriented products, partially offset by high-value mix shift in DRAM.

    Operating Expenses
    $1 billionflat sequentially
    Q2 FY25

    R&D expenses were lower than planned due to earlier product qualification and timing of certain R&D projects.

    Non-GAAP Operating Margin
    24.9%down 260 bps sequentially, up 21 percentage points YoY
    Q2 FY25

    Resulted in operating income of $2 billion.

    Adjusted EBITDA
    $4.1 billionup 10 bps sequentially, up $2 billion YoY
    Q2 FY25

    Resulted in an EBITDA margin of 50.7%.

    Effective Tax Rate
    10.7%
    Q2 FY25

    Lower than guidance due to the effects of one-time items in the quarter.

    Non-GAAP Diluted EPS
    $1.56vs $1.79 in prior quarter, vs $0.42 YoY
    Q2 FY25

    Above the high end of the guidance range.

    Capital Expenditures
    $3.1 billion
    Q2 FY25

    Net of proceeds from government incentives.

    Cash and Investments Balance
    $9.6 billion
    Q2 FY25 end

    Held at quarter end.

    Total Liquidity
    $12.1 billion
    Q2 FY25 end

    Includes untapped credit facility.

    Total Debt
    $14.4 billion
    Q2 FY25 end

    Ended the quarter with low net leverage.

    Weighted Average Maturity on Debt
    2032
    Q2 FY25 end

    Extended through a $1 billion 10-year senior note offering and a $1.7 billion term loan.

    Revolving Credit Facility
    $3.5 billion
    Post Q2 FY25

    Renewed and increased in size, providing an additional $1 billion of liquidity.

    DRAM Revenue
    $6.1 billionup 47% YoY
    Q2 FY25

    Sequentially decreased 4%.

    DRAM Bit Shipments
    high single-digit percentagedecreased sequentially
    Q2 FY25

    Sequentially decreased.

    DRAM Prices
    mid-single-digit percentageincreased sequentially
    Q2 FY25

    Increased as a result of improving portfolio mix.

    NAND Revenue
    $1.9 billionup 18% YoY
    Q2 FY25

    Sequentially decreased 17%.

    NAND Bit Shipments
    modestly highersequentially
    Q2 FY25

    Above expectations, driven by higher consumer-oriented shipments.

    NAND Prices
    high teens percentagedecreased sequentially
    Q2 FY25

    Sequentially decreased.

    HBM Revenue
    over $1 billionup >50% sequentially
    Q2 FY25

    Reached a new milestone, shipped ahead of plans.

    High-capacity DRAM modules and LPDRAM revenue
    exceeded $1 billion
    Q2 FY25

    Micron remains the only company to ship low-power DRAM into the data center in high volume.

    NAND Wafer Output
    mid-teens percentagedown from prior levels
    Current

    Fabs continue to be underutilized.

    DRAM All-in Costs
    flattish
    FY25

    Expected for the full fiscal year.

    NAND All-in Costs (Front-End)
    low double digits
    FY25

    Expected cost reductions for the full fiscal year.

    LP4 and D4 Revenue
    approximately 10%
    Remainder of FY25

    Expected to become smaller over time.

    AI PCs DRAM Content
    minimum 16 gigabytesvs 12 gigabyte average last year
    Current

    Many models requiring even higher memory.

    AI Smartphones DRAM Content
    12-gigabyte or highervs 8-gigabyte last year
    Current

    Increasingly featured in AI-capable flagship phones.

    Automotive DRAM Content (Advanced Robo-Taxi)
    over 200 gigabytes20x to 30x higher than average car
    Current

    Reflects increasing memory and storage content per car.

    HBM3E Power Reduction
    30%compared to the competition
    Current

    Micron's industry-leading HBM3E.

    HBM3E 12-high Power Advantage
    20%over competing 8-high products
    Current

    While providing 50% higher memory capacity.

    HBM3E 12-high Memory Capacity Advantage
    50%over competing 8-high products
    Current

    While providing a 20% power advantage.

    HBM4 Bandwidth Increase
    over 60%compared to HBM3E
    Future

    Expected when HBM4 ramps in volume in calendar 2026.

    LPDRAM in server power reduction
    over 2/3compared to D5
    Current

    Micron's LP lowers memory power consumption.

    LP5X DRAM performance
    up to 20% more tokens per secondthan those using legacy speed grades
    Current

    Used by smartphone OEMs to improve AI performance.

    Industry KPIs

    7
    MetricValueDetails
    Backlog order bookSold out (HBM output)
    Ai data center revenueOver $1 billion (HBM); Over $35 billion (HBM TAM); Multibillion dollars (HBM FY25); Multiple billions of dollars (Data Center NAND CY25)USD
    Fab capacity utilizationUnderutilized (NAND fabs)
    Design wins socket pipelineHBM3E 8-high; HBM3E 12-high; 9550 SSD; G8 QLC-based NAND; 4150 SSD
    Inventory channel inventory$9 billion or 158 daysUSD / days
    Node platform ramp schedule1-gamma node; Gen9 NAND technology; HBM4
    End market segment revenue mixData Center DRAM revenue: new record; HBM revenue: >$1 billion; High-capacity DRAM modules and LPDRAM (data center): exceeded $1 billion; Data center SSDs market share: record high; PC market unit growth: mid-single digits; Smartphone unit growth: low single-digit percentages

    Orderbook & backlog

    2
    HBM outputSold outCalendar 2025

    Micron has sold out of its HBM output for calendar 2025.

    HBM demandStrong demand2026

    Micron is in discussions with customers on agreements for their calendar 2026 HBM demand.

    Product announcements

    7
    ProductTypeDetails
    1-gamma-based D5 productslaunch
    Gen9 based 4600 performance SSDslaunch
    2650 mainstream SSDsmilestone
    Data center class G8 QLC-based NAND componentsmilestone
    Mobile G9 managed NAND-based UFS 4.1 solutionlaunch
    Automotive LP5X DRAM productlaunch
    4150 SSDlaunch

    Deals & partnerships

    4
    NVIDIACollaboration on SOCAMM development

    Micron's SOCAMM was developed in collaboration with NVIDIA to support the GB300, enabling easier server manufacturability and serviceability for LPDRAM adoption.

    SamsungSupply of LP5X DRAM and UFS 4.0 NAND

    Micron's LP5X DRAM and UFS 4.0 NAND were featured in the high end of the Samsung Galaxy S25 Series.

    Pure StorageQualification of QLC-based NAND components

    Micron's data center class G8 QLC-based NAND components are qualified for production in Pure Storage's high-capacity 150-terabyte DirectFlash module.

    Third large HBM3E customerVolume shipments of HBM3E

    Micron initiated volume shipments to its third large HBM3E customer in fiscal Q2, with additional customers anticipated over time.

    Capital programs

    2
    HBM advanced packaging facilityunderway
    Start: January 2025

    Benefit: meaningfully expand total advanced packaging capacity

    Broke ground in Singapore. This investment allows for significant expansion of advanced packaging capacity.

    DRAM fab constructionunderway
    Funding: CHIPS grant

    Benefit: meaningful DRAM output

    New Idaho fab completed an important construction milestone that enabled the receipt of the first disbursement of funding from the CHIPS grant.

    Risks & headwinds

    4
    NAND underutilization and pricing pressureNear-term, impacting Q3 FY25 and Q4 FY25

    NAND revenue decreased 17% sequentially; prices decreased high teens percentage sequentially in Q2 FY25. Wafer output down mid-teens percentage from prior levels. Underutilization continues to weigh on gross margins.

    Mitigation: Continued fab underutilization, structural reduction of over 10% in NAND wafer capacity exiting FY25 compared to FY24 levels, prudent management of capital investment and new technology node ramp, driving price inflection in CQ2.

    Tariff uncertaintyOngoing

    Limited volume of products subject to newly announced tariffs on Canada, Mexico, and China.

    Mitigation: Monitoring possibility of future tariffs, prepared to work with customers and suppliers to understand effects and supply chain options, intend to pass costs along to customers where tariffs have an impact.

    Data center NAND demand moderationQ2 FY25, expected to improve in months ahead

    Demand moderated in fiscal Q2 due to short-term customer inventory-driven impacts.

    Mitigation: Expect a return to bit shipment growth in the months ahead.

    Consumer-oriented segments pricingQ2 FY25, expected to improve in CQ2

    Contributed to 160 basis points sequential decline in consolidated gross margin in Q2 FY25.

    Mitigation: Supply actions and intention to take price action in calendar Q2 to maintain supply discipline.

    What to watch in Q3 FY25

    5

    Gross Margin Trajectory

    Fiscal Q4 2025
    Current37.9% (Q2 FY25), guided to 36.5% (Q3 FY25)
    TargetUp somewhat from Q3 FY25

    Why it matters

    Key indicator of profitability recovery and effectiveness of mix shift and supply discipline.

    in short, we would expect fourth quarter margins to be up somewhat from third quarter.

    Q&A highlights

    7

    Will gross margins improve beyond Q3 FY25, specifically in Q4 FY25, across DRAM and NAND segments?

    Mark Murphy confirmed that Q4 FY25 gross margins are expected to be 'up somewhat' from Q3. This improvement is anticipated due to improving market conditions, growth in HBM and other high-value products, partially offset by NAND underutilization costs impacting inventory clear-out and some start-up costs for new DRAM nodes.

    “in short, we would expect fourth quarter margins to be up somewhat from third quarter.”

    asked by Harlan Sur · answered by Mark Murphy

    2 min read6 chapters

    Detailed Narrative

    01

    HBM Leadership and AI Monetization

    Micron achieved record HBM revenue of over $1 billion in Q2 FY25, growing over 50% sequentially, and expects multibillion dollars in HBM revenue for the full fiscal year. The company's HBM3E 12-high offers a 20% power advantage and 50% higher memory capacity over competing 8-high products, with volume production initiated and design wins in NVIDIA's GB200/GB300 systems. Micron increased its HBM TAM estimate for calendar 2025 to over $35 billion, with its HBM output sold out for calendar 2025, and is in discussions for 2026 demand.

    02

    Technology Node Advancement

    Micron launched its 1-gamma DRAM node, its first incorporating EUV, achieving 20% lower power, 15% better performance, and over 30% bit density improvement compared to its 1-beta DRAM. The company also introduced its leading-edge Gen9 NAND technology, delivering the industry's fastest TLC-based NAND. Micron is sampling 1-gamma-based D5 products to PC clients and is making progress on HBM4, which will ramp in volume in calendar 2026 with over 60% bandwidth increase compared to HBM3E.

    03

    Data Center and Edge Market Strength

    Data center DRAM revenue reached a new record in Q2 FY25, with high-capacity DRAM modules and LPDRAM exceeding $1 billion. Micron remains the only company shipping high-volume LPDRAM to data centers, with its SOCAMM developed in collaboration with NVIDIA for the GB300. AI PCs are driving increased DRAM content, requiring a minimum of 16GB (vs. 12GB average last year), and AI smartphones are using 12GB or higher (vs. 8GB last year), fueling demand across edge devices.

    04

    NAND Market Dynamics and Supply Discipline

    NAND revenue decreased 17% sequentially in Q2 FY25 due to moderated data center demand and pricing. Despite this, Micron achieved record market share in data center SSDs in calendar Q4 2024. The company continues to underutilize its fabs, with wafer output down mid-teens percentage from prior levels, and plans a structural reduction of over 10% in NAND wafer capacity exiting FY25 compared to FY24 levels to improve market dynamics and pricing.

    05

    Strategic Investments and CHIPS Act

    Micron broke ground on an HBM advanced packaging facility in Singapore, expected to meaningfully expand total advanced packaging capacity starting calendar 2027. The new DRAM fab in Idaho achieved a construction milestone, receiving the first CHIPS grant disbursement, and is projected to provide meaningful DRAM output starting FY27. Fiscal 2025 CapEx remains approximately $14 billion, primarily allocated to HBM and multi-year facility investments.

    06

    Inventory Management and Market Outlook

    Fiscal Q2 ending inventory was $9 billion or 158 days, an increase of 9 days sequentially. Micron expects inventory days to decline through calendar 2025 and to end FY25 with tight DRAM inventories, aiming to be below its 120-day target for DRAM by Q4 FY25. The company forecasts calendar 2025 DRAM bit demand growth in the mid- to high teens and NAND in the low double-digit range, with its own supply growth lower than industry demand.

    AI-generated summary of the company’s earnings call. Not investment advice.