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    MU
    Earnings call· Feb 2025(Q2 FY25)

    MICRON TECHNOLOGY Q2 FY25 earnings call MU

    Mar 20, 2025 Source

    Executive summary

    Micron Q2 FY25 — HBM Market Expansion and Strong AI-Driven Demand

    Micron reported a strong Q2 FY25, driven by significant HBM and LPDRAM revenue milestones, reflecting robust AI-driven demand. The company is strategically positioning its portfolio towards high-margin areas, despite facing some start-up costs and inventory digestion in certain segments. Management remains optimistic about future demand broadening beyond AI and disciplined capital allocation.

    Highlights

    5

    • HBM TAM increased to $35 billion, driven by robust shipments and a faster shift to 12-high products.

    • HBM revenue reached a $1 billion milestone in Q2 FY25.

    • High-capacity DIMMs plus LPDRAM achieved $1 billion in quarterly revenue in Q2 FY25.

    • Data center SSD market share hit a new record in C Q4, reflecting strong positioning.

    • Aggregate data center revenue is expected to hit another record in F Q3 FY25.

    Concerns

    3

    • Start-up costs for the newest DRAM node are expected to impact gross margins by under 30-40 bps in Q4 FY25, increasing through FY26.

    • Higher-cost NAND inventories, resulting from underutilization, will pass through in Q4 FY25 and into FY26.

    • Enterprise SSD market experienced inventory digestion at customers in C Q1, though expected to deplete by C Q2.

    Guidance & targets

    9
    CategoryTargetConfidence
    HBM 12-high volume
    overwhelming amount of volume
    high materiality
    High
    Start-up costs for new DRAM node
    increase
    medium materiality
    High
    HBM market share
    approximately in the same range as our DRAM share
    high materiality
    High
    HBM revenue
    significantly higher than the 2025 revenue
    high materiality
    High
    HBM revenue
    every quarter being higher than the previous quarter
    high materiality
    High
    Overall inventory levels
    decrease
    medium materiality
    High
    DRAM inventory levels
    below our target levels
    high materiality
    High
    Data center SSD TAM
    improve again on a sequential basis
    medium materiality
    High
    Data center revenue
    another record
    high materiality
    High

    Operational metrics

    20
    HBM TAM
    $35Bincreased
    future

    Second time TAM has been increased.

    Start-up costs impact
    under 30-40
    Q4 FY25

    Costs will increase through FY26.

    HBM 8-high performance
    outperformed
    Q2 FY25

    Positive performance contributing to HBM TAM increase.

    All-in DRAM costs
    flatvs. prior guidance of mid-to-high single digit down
    FY25

    Clarification that this includes HBM.

    High-capacity DIMMs + LPDRAM revenue
    $1B
    Q2 FY25

    Milestone achieved.

    HBM revenue
    $1B
    Q2 FY25

    Milestone achieved.

    HBM market share target
    approximately in the same range as DRAM share
    ongoing

    Strategic goal.

    HBM revenue growth
    significantly higher
    FY26 vs FY25

    Driven by robust ramp.

    HBM sequential revenue growth
    higher
    Q3 FY25, Q4 FY25

    Strong sequential growth expected.

    Data center SSD market share
    new record share
    C Q4

    Based on analyst and third-party reports.

    Revenue exposure to China DDR4/LP4 supply
    10%
    current

    Refers to older technologies from Chinese suppliers.

    HBM trade ratio
    3:1
    current

    HBM bits vs. non-HBM DRAM bits.

    HBM trade ratio
    past 4:1
    future

    Expected future trade ratio.

    Micron supply growth vs. demand growth
    less than
    FY25

    Expected to result in inventory reduction.

    Overall inventory levels
    decrease
    ongoing

    Mechanical result of supply growth being less than demand growth.

    DRAM leading edge capacity
    constrained
    current

    Due to HBM demand.

    Smartphone average capacity
    8GB to 12GB
    current trend

    Driving increased demand in smartphones.

    HBM market size
    $100B+
    2030

    Long-term market opportunity.

    Second HBM manufacturing facility
    operational
    2027

    Investments happening to get to this point.

    EPS
    $15+
    CY18

    Historical peak earnings referenced by analyst.

    Industry KPIs

    6
    MetricValueDetails
    Ai data center revenue—
    Fab capacity utilization—
    Design wins socket pipeline—
    Inventory channel inventory—
    Node platform ramp schedule—
    End market segment revenue mix—

    Product announcements

    2
    ProductTypeDetails
    SOCAMMmilestone
    HBM4roadmap

    Deals & partnerships

    1
    NVIDIADeep partnership for SOCAMM development and volume production.

    Micron is working with NVIDIA on SOCAMM architecture and will be the first to achieve volume production.

    Capital programs

    1
    Second HBM manufacturing facilityunderway
    Start: broken ground

    Benefit: increased HBM capacity

    Investment to meet market requirements for HBM volume growth and technology, with output expected in 2027.

    Risks & headwinds

    4
    Start-up costs for new DRAM nodeQ4 FY25 and through FY26

    under 30-40 bps impact on gross margin in Q4 FY25, increasing through FY26

    Mitigation: Implied by strategic investment for future growth, but no explicit mitigation stated.

    Higher-cost NAND inventoriesQ4 FY25 and into FY26

    impacting gross margins due to underutilization

    Mitigation: Company is actively pursuing a three-pronged strategy for NAND health (underutilization, lower CapEx, lengthening nodes).

    Enterprise SSD inventory digestion at customersC Q1, resolving by C Q2

    impacted C Q1, mostly depleted by C Q2

    Mitigation: Demand on AI server side continues to use inventory; run rates expected to pick up.

    Competitive dynamics from Chinese players (DDR4/LP4)Last year, ongoing

    affecting pricing environment, but only ~10% of Micron's revenue exposed

    Mitigation: Micron's portfolio focus on higher-margin, advanced products.

    What to watch in Q3 FY25

    5

    Start-up costs impact on gross margin

    FY26
    Currentunder 30-40 bps
    Targetdirection of increase in FY26

    Why it matters

    These costs will impact future profitability as new DRAM nodes ramp up.

    on the start-up costs, so they're relatively modest, kind of an under 30, 40 basis points depending on what the revenue is effect as we sort of exit the year. And then that -- those costs will increase as we increase the level of activity, particularly in Idaho and around our newest DRAM node. Those costs will increase through '26.

    Q&A highlights

    6

    Is the HBM sales increase to $35B unit or content driven? Is there flexibility to raise it further?

    The HBM TAM increase is driven by robust shipments, a faster move to 12-high products (which have higher ASPs due to content), and overall strong HBM demand. Micron's own shipments are ahead of internal plans.

    “it's coming from a combination of more robust shipments, faster move to 12-high. As we mentioned, we expect most of the overwhelming amount of volume in the second half of the calendar year to be 12-high. And obviously, that comes at a higher ASP due to the higher content.”

    asked by Vivek Arya · answered by Sumit Sadana

    2 min read5 chapters

    Detailed Narrative

    01

    HBM Market Dynamics and Growth

    Micron highlighted a significant increase in the HBM Total Addressable Market (TAM) to $35 billion, marking the second such increase. This expansion is attributed to robust shipments, a rapid shift to 12-high HBM products (expected to dominate H2 CY25 volume with higher ASPs), and strong overall demand. The company achieved a $1 billion HBM revenue milestone in Q2 FY25 and projects a multi-year growth trajectory for the HBM market, potentially exceeding $100 billion by 2030.

    02

    LPDRAM and SOCAMM Leadership

    Micron emphasized its pioneering role and leadership in LPDRAM for data centers, being the only company shipping it in volume. The company is also set to be the first to achieve volume production of SOCAMM, developed in deep partnership with NVIDIA, which is expected to be a significant product. The combined high-capacity DIMMs and LPDRAM segment reached a $1 billion quarterly revenue milestone in Q2 FY25, underscoring its success in innovative data center solutions.

    03

    NAND Market and Data Center SSDs

    The NAND market continues to face challenges, with Micron implementing a three-pronged strategy involving short-term underutilization, lower medium-term CapEx, and longer-term node lengthening to improve market health. Despite inventory digestion for enterprise SSDs in C Q1, data center SSD market share reached a new record in C Q4, and aggregate data center revenue is expected to hit another record in F Q3 FY25, driven by AI server growth and a strategic shift away from HDDs due to TCO benefits.

    04

    Competitive Positioning and Portfolio Strategy

    Micron asserts a strong competitive position, gaining share in high-margin areas such as HBM, high-capacity DIMMs, LPDRAM in data centers, and data center SSDs. The company's strategy involves maintaining overall bit share while focusing on profitable segments with strong product and technology capabilities, including being the first in the industry with 1-gamma node utilizing EUV.

    05

    Industry Outlook and Broadening Demand Drivers

    Management expressed optimism for a more constructive market environment, anticipating demand drivers to broaden beyond AI. Improvements are noted in smartphone orders, driven by increased average capacity (8GB to 12GB). Future tailwinds are expected from AI PCs (following Windows 10 end-of-life) and eventual inventory improvements in industrial and automotive segments, contributing to a healthier demand trajectory.

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