The paragraph introduces Micron Technology's Fiscal Second Quarter 2025 Financial Conference Call. Satya Kumar, the Corporate Vice President of Investor Relations and Treasury, hosts the call alongside Sanjay Mehrotra, the CEO, and Mark Murphy, the CFO. The call is webcast on Micron's Investor Relations website, where the press release and prepared remarks are available. The financial results are presented on a non-GAAP basis, with a GAAP to non-GAAP reconciliation on the website. The discussion includes forward-looking statements about market demand, supply, product demand, pricing, manufacturing plans, AI technologies, investment plans, expected results, and regulatory issues, all of which are subject to risks and uncertainties.

The paragraph discusses Micron's strong competitive position and success in gaining market share in high-margin product categories. It highlights record revenue achievements in data center DRAM and HBM, with HBM shipments surpassing expectations. Micron is noted as the sole company shipping low-power DRAM in high volume to data centers, emphasizing its innovation and strong customer partnerships. The company anticipates continued growth and record revenue in fiscal Q3, driven by increased DRAM and NAND shipments. Additionally, AI data center demand and HBM ramp are expected to create a tight supply for non-HBM DRAM, while actions in the NAND market should improve dynamics.

Micron is advancing its industry leadership with the launch of its 1-gamma DRAM node, which uses EUV technology to achieve improved power efficiency, performance, and bit density over its 1-beta node. The company's Gen9 NAND technology is the fastest TLC-based NAND, and Micron is strategically managing its production to maintain market supply-demand balance. Micron is investing in its growth opportunities driven by AI by focusing on expanding HBM capacity and building advanced packaging facilities, including a new HBM facility in Singapore and a DRAM fab in Idaho set to begin production in fiscal 2027. Improvements in computation hardware and algorithms are lowering the costs associated with generative AI models, expanding applications, and increasing demand in the AI sector, which Micron aims to capitalize on.

The paragraph discusses Micron's advancements and leadership in HBM (High Bandwidth Memory) technology, emphasizing substantial demand and growth opportunities. Micron projects substantial growth in HBM demand, estimating the total addressable market to exceed $35 billion in 2025, with expectations of aligning their HBM market share with their overall DRAM share by Q4 2025. The company has sold out its HBM output for 2025 and is engaging with customers for 2026 demand. Micron's HBM3E technology offers significant power and capacity advantages, with the 12-high variant expected to dominate shipments in late 2025. The company is progressing in customer qualifications, supplying its HBM technology to customers like NVIDIA's GB200 and GB300 systems, and plans to expand its customer base.

Micron anticipates substantial revenue from High Bandwidth Memory (HBM) in fiscal 2025, with plans to launch HBM4 in 2026, offering a bandwidth improvement of over 60% compared to HBM3E. The company's strategic alignment with customer needs and focus on power efficiency, quality, and performance position it well for the transition to HBM4 and HBM4E. Micron is also leading in Low Power (LP) memory for data centers, reducing power consumption in AI servers significantly. Collaborating with NVIDIA, Micron has developed the SOCAMM form factor to improve server manufacturability and serviceability, helping drive LP adoption in the server market. They aim to generate substantial revenue from high-capacity D5 modules and LP products by fiscal 2025. In the data center NAND market, despite short-term demand fluctuations, Micron achieved a record market share in SSDs with revenue growth across all categories and completed qualifications for its high-performance 9550 SSD across several customers.

During the quarter, Micron announced the qualification of its G8 QLC-based NAND components for production in high-capacity DirectFlash modules, advancing the shift from HDD to NAND in data centers. They anticipate significant revenue growth in data center NAND by 2025 and expect a mid-single-digit growth in the PC market, driven by the Windows 10 end-of-life and demand for AI-capable PCs requiring higher DRAM capacities. Micron sampled 16-gigabit D5 products and launched the world's fastest Gen9 SSDs. In the mobile sector, despite low single-digit growth expectations for smartphones in 2025, there is increased demand for mobile DRAM, fueled by AI adoption and the development of flagship phones with higher DRAM capacities.

The paragraph highlights Micron's advancements and market presence in mobile and automotive memory and storage solutions. Their LP5X DRAM and UFS 4.0 NAND have improved AI performance in smartphones, particularly in the Samsung Galaxy S25 Series. Micron's mobile DRAM and UFS solutions are increasingly sought after for high-end devices. They are also sampling a groundbreaking mobile G9 UFS 4.1 solution. In the automotive sector, Micron is benefiting from increased memory demand due to advanced in-vehicle infotainment and driver assistance systems. They introduced the industry's first automotive LP5X DRAM and an enterprise SSD qualified for automotive use. DRAM bit demand growth is projected to be in the high teens for 2024, while NAND growth is slightly below previous expectations.

The paragraph discusses Micron's expectations and strategies for 2025 in the DRAM and NAND markets. It forecasts DRAM bit demand growth in the mid- to high-teens percentage range and NAND in the low double-digits. Micron anticipates its supply growth will be lower than industry demand growth, and it aims to maintain its market share. The company plans for reduced inventory days and highlights a strong ramp-up of HBM, which requires more silicon and tightens supply for non-HBM products. In NAND, Micron is underutilizing its fabs and plans to repurpose some equipment to support transitions to leading-edge nodes, resulting in a structural reduction of wafer capacity by over 10% by the end of fiscal 2025. Overall, it will manage its supplies prudently with regard to capital investment, technology ramp pace, and fab utilization to align with demand growth.

The paragraph discusses Micron's unchanged capital spending plans of approximately $14 billion for fiscal 2025, focusing on investments in DRAM and HBM facilities in Idaho, Singapore, and Taiwan. Micron monitors potential tariffs and plans to pass any tariff-induced costs to customers. Financially, Micron's fiscal Q2 saw EPS above guidance, with revenue at $8.1 billion, down 8% sequentially but up 38% year-over-year. DRAM revenue was $6.1 billion (76% of total), up 47% annually but down 4% sequentially. NAND revenue was $1.9 billion (23% of total), up 18% annually but down 17% sequentially, with increased consumer shipments affecting bit shipments and prices.

In fiscal Q2, the Compute and Networking Business Unit (CNBU) saw a 4% sequential revenue increase to $4.6 billion, constituting 57% of the company's total revenue, achieving another quarterly record driven by over 50% growth in HBM revenue. Meanwhile, the Storage Business Unit (SBU) revenue fell 20% sequentially to $1.4 billion, primarily due to reduced data center investments and NAND pricing. The Mobile Business Unit revenue dropped 30% sequentially to $1.1 billion as customers managed their inventories, and the Embedded Business Unit saw a 3% sequential drop to $1 billion due to inventory adjustments in the automotive sector. The consolidated gross margin was 37.9%, declining 160 basis points due to pricing and consumer market dynamics in NAND. Operating expenses remained flat at $1 billion, while R&D costs were lower than expected. The company posted a $2 billion operating income, a 24.9% margin, and a slight sequential decline. Adjusted EBITDA rose to $4.1 billion, a 50.7% margin. Taxes were $214 million with a 10.7% effective tax rate, lower than expected due to onetime items.

In fiscal Q2, the company reported a non-GAAP diluted earnings per share of $1.56, surpassing guidance expectations but down from the previous quarter's $1.79. Operating cash flows were over $3.9 billion, while capital expenditures net of government incentives were $3.1 billion, resulting in free cash flows of $857 million. Inventories increased, totaling $9 billion or 158 days. The company's balance sheet showed $9.6 billion in cash and investments and $12.1 billion in liquidity, including an untapped credit facility. A $1 billion 10-year senior note offering and a $1.7 billion term loan were used to refinance maturing notes and loans, leaving $14.4 billion in total debt with a weighted average maturity of 2032. A renewed and expanded 5-year revolving credit facility adds $1 billion in liquidity. Looking ahead to fiscal Q3, the company anticipates growth in DRAM and NAND shipments but expects lower gross margins due to higher consumer volumes and NAND underutilization. Operating expenses are projected to rise to approximately $1.13 billion, with fiscal 2025 OpEx growing by over 10% to support high-value products. The company expects decreased inventories by the end of the fiscal year.

In fiscal Q3 and Q4, Micron forecasts a non-GAAP tax rate of about 14%. They expect CapEx to exceed $3 billion in fiscal Q3, with a projection of approximately $14 billion for fiscal 2025, mainly supporting HBM, construction, manufacturing, and R&D. Potential new tariffs are not considered in these projections due to uncertainty. For fiscal Q3, they anticipate $8.8 billion in revenue, a gross margin of 36.5%, operating expenses around $1.13 billion, and an EPS of $1.57, all with minor variances. Micron reported earnings above guidance in fiscal Q2 and project record revenue for Q3. They emphasize R&D focus, capital discipline, and strong financial management to leverage AI-driven transformative growth. The company aligns its strategy to achieve record revenue and significant profitability improvements by fiscal 2025.

The paragraph features a Q&A session where Harlan Sur from JPMorgan questions Mark Murphy about Micron's gross margin outlook. Despite a weaker gross margin in the third quarter, as previously anticipated, Murphy indicates that conditions have improved and expects some improvement in gross margin in the fourth quarter, though specific guidance is not provided. He notes tailwinds such as better market conditions and growth in high-value products like HBM, while also acknowledging the headwind from NAND underutilization.

The paragraph discusses the company's financial projections and market dynamics. The company expects reduced costs in the third quarter and increased costs in the fourth quarter due to inventory clearing and start-up costs in DRAM construction. Fourth-quarter margins are expected to improve from the third quarter. The company has raised its industry bit demand outlook for DRAM for 2025, influenced by increasing demand in smartphones, PCs, and data centers, particularly due to AI integration and HBM growth. Customer inventories are stabilizing, leading to resumed purchases. The data center market remains strong, with high-density DIMMs and LP also driving demand.

In the article paragraph, during a Q&A session, Timothy Arcuri from UBS asks Mark Murphy for further details on the fiscal Q3 guidance, specifically regarding revenue growth from DRAM versus NAND and the increase in bits for both. Mark Murphy explains that they've provided consolidated revenue figures and year-to-date data for DRAM and NAND, and they expect bit growth in both sectors for the third quarter. Arcuri also inquires about revenue growth in DRAM and NAND, and Murphy indicates that DRAM, particularly with HBM and data center exposure, will experience growth. Arcuri raises concerns about low margins into fiscal Q4 and questions when margins will improve due to cost reductions and HBM benefits. Murphy does not provide specific guidance for Q4 but notes that margins are expected to improve somewhat from the third quarter.

The paragraph discusses the company's strong position in technology, market exposure, and manufacturing efficiency. For fiscal year '25, they expect DRAM costs to remain flat and NAND costs to decrease in low double digits. They are implementing supply actions for NAND, including underloading and delaying node transitions, and observe improvements in this area. In DRAM, there's growth in HBM and data centers, with projected inventory levels below their target. Sanjay Mehrotra emphasizes focusing on high-profit revenue streams and notes a positive DRAM demand trend influenced by AI, while maintaining strong positions in technology, product, and cost. Lastly, Krish Sankar from TD Cowen asks about recent memory price improvements, distinguishing between genuine demand and tariff-related pull-ins, and questions the sustainability of current pricing dynamics.

In the paragraph, Sanjay Mehrotra discusses the improving demand for DRAM and NAND in the consumer market, especially in smartphones and PCs, driven by the rise of AI technologies that require greater DRAM content. He notes that AI PCs and smartphones are increasingly integrating higher DRAM capacities, in line with projected trends. Additionally, demand in the data center sector remains strong, while the supply of leading-edge DRAM is tight. The supply dynamics are also improving due to actions by NAND players. This overall improvement in demand and supply is creating a more favorable industry environment, and the focus is on driving higher pricing and maximizing business opportunities.

In the paragraph, Krish Sankar asks Sanjay Mehrotra about potential gross margin impacts from transitioning from HBM3E 8-high to HBM4 12-high technology, questioning if lower yields could negatively affect margins. Sanjay responds by expressing satisfaction with the execution and yield ramp of HBM3E 8-high and highlights that the experience will aid in ramping up the 12-high, which is already in volume production. Although there are initial yield challenges with complex products like HBM, he expects the 12-high to be more premium and beneficial for DRAM margins. They aim to shift most of their production to 12-high in the second half of the year, improving yields and aligning with industry DRAM share by year-end. Joseph Moore then enquires about inventory targets, noting a current inventory of 153 days, with expectations to decrease below the target of 120 days in two quarters.

Mark Murphy discusses inventory management and market conditions in the DRAM and NAND sectors. He notes tighter conditions in DRAM compared to NAND, with industry adjustments like supply actions, reduced capital expenditures, and delayed technology transitions impacting both. DRAM is experiencing AI-driven growth, particularly with HBM products, creating market tightness. The company aims to reduce inventory to 120 days, with expectations to achieve this for DRAM by the fiscal fourth quarter. Joseph Moore inquires about inventory guidance, and Murphy confirms a decrease throughout the year. CJ Muse questions gross margins and period costs, and Murphy explains that lower-than-expected period costs are due to reduced capacity, affecting how underutilization charges are accounted for in inventories.

The paragraph discusses the financial outlook and strategic plans for the company, particularly focusing on cost impacts and growth prospects. The speaker notes that while under-absorption costs are expected to affect gross margins in the fourth quarter and into 2026, growth in the business, improved market conditions, and mix improvements are anticipated to help increase gross margins during the same period. The impact of start-up costs is expected to be small from the third to the fourth quarter, but it will increase significantly as the company ramps up wafer production in Idaho going into 2026. The conversation then shifts to the High Bandwidth Memory (HBM) sector, where the revenue outlook has been revised upwards. The company's projections indicate higher revenue in the second half of 2025, driven by a transition from 8-high to 12-high products, which command higher premiums. Additionally, the expansion of the customer base, including a third large customer for Micron, is contributing to the growth in HBM revenue. The paragraph concludes with a question about the company's exposure in the lower end of the market, specifically concerning DRAM products like LP4 and DDR4.

In this discussion, Sanjay Mehrotra addresses questions about the impact of certain products on revenue and margins. He reiterates that revenue from products D4 and LP4 is expected to make up about 10% of the company's total revenue for the fiscal year and acknowledges that these products will become a smaller portion of the business over time as they focus on newer products like D5 and HBM. He notes improving conditions in the DRAM market, which affects overall dynamics. Chris Caso asks about the company's ability to maintain market share in HBM amid increasing TAM (Total Addressable Market) assumptions. Mehrotra highlights the company's leading position in the HBM market and implies potential to expand capacity if needed to keep up with demand.

In the paragraph, Sanjay Mehrotra discusses the company's focus on increasing its share in high-bandwidth memory (HBM) to align with its overall DRAM market share by the end of 2025. He mentions efforts to boost HBM capacity, advance technology from 8-high to 12-high, and introduce HBM4 next year. Although there's no specific projection for 2026 market share, Mehrotra is optimistic about their HBM position, customer relationships, and technology execution. When asked about lower gross margins, he attributes it to challenges in the NAND market due to industry demand and supply imbalances, while DRAM margins remain healthy.

The paragraph discusses a focus on enhancing the product mix towards high-value solutions in both DRAM and NAND, emphasizing the importance of supply discipline and aligning supply with demand. The goal is to strengthen revenue through higher-margin products, improve product portfolio strength, and carefully manage costs. Sanjay Mehrotra addresses a question from Chris Danely about increased consumer exposure negatively impacting gross margins, particularly in NAND more than DRAM. Mehrotra highlights the company's success in data centers with DRAM, citing leadership products like HBM and recently announced SOCAMM products, which are crucial for their business strategy.

The paragraph discusses the recent normalization of customer inventories in the consumer sector, particularly concerning DRAM and NAND. As consumer inventories stabilize, coupled with increasing demand driven by AI in consumer devices, there's a notable resurgence in demand for smartphones. This surge is causing tightness in leading-edge technologies and enabling price increases in the second quarter (CQ2). Similarly, in the NAND market, industry supply adjustments and normalized inventories are leading to increased demand and anticipated pricing inflections in the same timeframe.

This summary was generated with AI and may contain some inaccuracies.