The paragraph is an introduction to Micron Technology's Fiscal Third Quarter 2025 Financial Conference Call. Satya Kumar from Investor Relations introduces key participants on the call, including Sanjay Mehrotra, the company's Chairman, President, and CEO, and Mark Murphy, the CFO. The call, which includes audio and slides, is being webcast on Micron's Investor Relations website. It begins with a reminder about forward-looking statements, risks, and uncertainties, encouraging listeners to refer to recent financial reports and SEC filings for more information. The discussion is based on non-GAAP financial measures, with reconciliations available on their website. The company also invites stakeholders to visit their website and follow them on platforms like LinkedIn, X, and YouTube for the latest updates. The call is then handed over to Sanjay Mehrotra.

Micron achieved record revenue in fiscal Q3, with all financial metrics exceeding expectations. The company saw significant growth in data center revenue and consumer markets, resulting in substantial free cash flow. In DRAM, Micron reached a record with 50% sequential growth in HBM revenue and remains the sole volume supplier of LPDRAM in data centers. In NAND, Micron became the #2 brand for data center SSDs and set a new quarterly market share record. Looking ahead to fiscal Q4, Micron anticipates a 15% revenue increase and is reorganizing its business to align with the AI growth opportunity. The company is advancing its 1-gamma DRAM technology node, with key product milestones achieved, including shipments of 1-gamma based LP5 DRAM samples.

Micron's 1-gamma DRAM uses EUV technology to offer significant improvements in bit density, power efficiency, and performance over its predecessor, 1-beta DRAM, and will be utilized across its DRAM portfolio. The company is also advancing its NAND technology, with a high mix of QLC bits and new SSD products based on G9 QLC NAND. Micron announced a $200 billion investment plan in the U.S. with support from the Trump administration, which includes a $30 billion expansion beyond previous plans. This includes building a second memory fab in Idaho, expanding a fab in Virginia, and enhancing packaging capabilities to support future growth. The first Idaho fab is set for DRAM output in 2027, and the second will leverage scale and R&D benefits with the first.

The paragraph discusses Micron's developments in the data center market, highlighting anticipated production for ID2 and preparations for a New York facility. The server market is expected to grow due to AI demands. Micron's data center DRAM revenue, particularly in HBM and DIMMs, reached new highs in fiscal Q3, with HBM3E 12-high progressing well. The company anticipates aligning its HBM market share with DRAM by mid-2025. Micron's HBM3E 36-gigabyte product is integrated into AMD's Instinct MI355X platform, with shipments to four customers. As AI workloads grow, Micron is advancing HBM4 technology, achieving over 60% better performance and 20% lower power consumption.

The paragraph discusses Micron's advancements in HBM4 technology, which enhances communication and performance for large language models and reasoning systems, with volume production expected by 2026. Micron highlights its successful HBM3E ramp and strong customer relationships, particularly in the low-power, high-performance HBM sector. The company has seen significant revenue growth from its high-capacity DIMMs and LP server DRAM solutions, achieving record sales in fiscal 2025. Micron continues to lead in data center SSD market share, with products like the 9550 and 6550 SSDs, which offer top performance and energy efficiency, particularly for AI server systems. Additionally, the PC market is anticipated to grow slightly in 2025.

The paragraph outlines Micron's future growth catalysts, focusing on AI-enabled PCs, Windows 11 upgrades, and high-performance PC products. It highlights Micron's record-high SSD market share and the upcoming release of a new G9 QLC SSD with improved write performance using Adaptive Write Technology. In the mobile sector, Micron anticipates modest smartphone growth in 2025, driven by AI and increased DRAM content, particularly for high-end smartphones with more memory. Micron is advancing its 1-beta and 1-gamma technology for DRAM and NAND products, with the LP5X DRAM offering enhanced AI performance and energy efficiency. The company also secured a key design win and production ramp for its UFS 4 NAND products. Additionally, Micron received top quality awards from smartphone OEMs, indicating the strength of its mobile portfolio, and briefly mentions a focus on automotive, industrial, and consumer embedded markets.

The paragraph discusses Micron's strategic positioning in the automotive and industrial sectors. It highlights the company's success with new product introductions, such as high-speed DRAM, and notes a resurgence in industrial growth due to AI investments. Micron is experiencing price improvements and healthy customer inventory levels despite some tariff-related impacts. The market outlook suggests constructive demand for the remainder of the year, with expected DRAM and NAND bit demand growth rates by 2025. Micron plans to manage supply growth below industry demand and will reduce NAND wafer capacity by 2025 while carefully pacing technology transitions to align with demand.

Micron is phasing out its D4 and LP4 memory products, shifting focus to its latest-generation DRAM nodes like 1-beta and 1-gamma, used in D5, LP5, and HBM products. While final shipments for D4 and LP4 in high-volume markets such as mobile, client, data centers, and consumer sectors will occur within 2 to 3 quarters, Micron will continue to supply 1-alpha DRAM products to lower-volume segments like automotive and defense for several years. Current shortages of D4 and potential LP4 shortages are managed through allocations to meet high-priority customer demands. Despite the EOL process, Micron reports strong financial performance due to strategic focus and execution in AI-driven demand for high-performance memory, with continued investments in technology and manufacturing supporting sustained growth and value creation for stakeholders.

In fiscal Q3, Micron achieved strong financial results, surpassing previous guidance with record quarterly revenue of $9.3 billion, a 15% increase sequentially and 37% year-over-year. This growth was driven by increased revenue across end markets, notably in data centers and consumer sectors. DRAM revenue reached $7.1 billion, representing 76% of total revenue, with a significant year-over-year increase and higher bit shipments despite slight price decreases. NAND revenue was $2.2 billion, making up 23% of total revenue, with similar patterns in bit shipments and pricing. Business units also showed growth, with record revenue in Compute and Networking and substantial increases in the Mobile Business Unit, driven by inventory reductions and demand for DRAM content.

In fiscal Q3, the Embedded Business Unit achieved a revenue of $1.2 billion, marking a 20% sequential growth driven by the industrial and consumer embedded markets. The overall gross margin was 39%, an increase both sequentially and compared to guidance, aided by better DRAM and NAND pricing despite a consumer-oriented mix. Operating expenses reached $1.1 billion due to higher R&D and labor costs, aligning with guidance. The operating income was $2.5 billion with a 26.8% margin, marking improvements both sequentially and year-over-year. Taxes were $306 million with a 12.3% effective rate, lower than expected due to one-time items. Non-GAAP earnings per share rose to $1.91, a 22% sequential increase and over 200% higher year-over-year. Operating cash flows were $4.6 billion, with capital expenditures at $2.7 billion, leading to free cash flows of over $1.9 billion—the highest in over six years. Inventory decreased by $280 million with inventory days dropping by 19 days. The quarter ended with $12.2 billion in cash and investments, alongside $15.7 billion in total liquidity. Additionally, $900 million in 2027 notes were refinanced with $1.7 billion in new notes set to mature in 2033 and 2036.

The company closed the quarter with $15.5 billion in debt and anticipates strong revenue growth in the fourth fiscal quarter, driven by DRAM due to favorable pricing, product mix, and cost improvements. Operating expenses are expected to rise to $1.2 billion mainly due to R&D investments. Fiscal 2025 capital spending is planned at $14 billion, focusing on HBM and manufacturing investments. The fiscal Q4 tax rate is projected at 13%, with the fiscal 2026 tax rate expected to rise due to new global tax rules in Singapore. Revenue guidance for fiscal Q4 is $10.7 billion, gross margin at 42%, and EPS at $2.50. The company forecasts exiting fiscal 2025 with tight DRAM inventories and improved pricing, amid a healthy demand environment.

In fiscal Q3, Micron exceeded its earnings guidance, achieved record revenue, and advanced its high-bandwidth memory (HBM) products. The company is transitioning to a new business unit structure focused on market segments and will begin reporting revenue, gross margin, and operating margin metrics for these units in fiscal Q4. This position is expected to help maintain its industry leadership and achieve record revenue and improved profitability in fiscal Q4. During the Q&A, Timothy Arcuri from UBS asked about the scaling of the HBM total addressable market (TAM) with the accelerator TAM. Sanjay Mehrotra noted that HBM demand is expected to grow significantly, with revenue projected to increase from $18 billion last year to approximately $35 billion by 2025, and HBM bit demand growth in 2026 expected to surpass overall DRAM industry growth.

The paragraph discusses the progression and significance of High Bandwidth Memory (HBM) technology, specifically the transition from 8-high to 12-high configurations by 2026 and the introduction of HBM4, which is a high-value product. By 2027, the move to HBM4E is expected, and by 2028, customization of HBM will be introduced. This evolution is crucial for accelerator platforms, and the company is well-positioned, having already begun sampling HBM4 products and demonstrated capacity ramp-up. The company sees HBM as a significant growth and value driver. Additionally, in response to a question from Vivek Arya of Bank of America Securities, Mark J. Murphy explains that gross margins improved due to better-than-expected pricing despite expected price declines and strong volume growth. This pricing improvement has set a new baseline for future quarters.

The paragraph discusses the company's performance and market conditions in the fourth quarter. Initially, the inventory outlook was improving despite a challenging start due to tariffs, but the market has strengthened more than expected. The company has executed well, with favorable product mix shifts from Q3 to Q4, particularly in DRAM over NAND and data centers over consumer products, which has improved margins. They forecast a 42% margin but are cautious about offering Q1 guidance, citing positive business trajectory and a constructive market environment favoring DRAM. They anticipate inventory constraints, especially for leading-edge and some legacy DRAM, but plan to focus on higher-value DRAM and NAND products to potentially increase gross margins.

In a conversation with C.J. Muse from Cantor Fitzgerald, Sanjay Mehrotra discusses the progress and market share of their High Bandwidth Memory (HBM) products. Mehrotra clarifies that the company is achieving strong results, with a current run rate of more than $6 billion for HBM as of the third fiscal quarter. He mentions they are shifting production to 12-high HBM and that their yield ramp for 12-high is progressing better than previously with 8-high, thanks to prior experience. Mehrotra suggests that they might reach their target HBM market share earlier than anticipated due to strong execution across production and yield improvements.

The team has successfully increased capacity, contributing to strong HBM performance. They are pleased with current execution and future plans for HBM, seeing these efforts as crucial for 2026 as they align with customer needs. In response to Thomas O'Malley's questions, Sanjay Mehrotra noted that they are on track to meet their HBM market share goals earlier than expected, with plans to continue scaling if competitors face challenges. Regarding NAND, utilization is currently influenced by internal transitions, and future utilization plans depend on market conditions and potential margin impacts.

The paragraph discusses the company's strategic management of its product portfolio, with a focus on High Bandwidth Memory (HBM) products using 1-beta technology. The company is pleased with the profitability and flexibility that HBM brings. Investments are being made to expand HBM production capacity, including in Singapore, set for 2027. Additionally, there is a planned reduction in NAND capacity by 10% by the end of fiscal 2025 to facilitate a cost-effective transition to the next technology node, G9. This reduction aims to improve utilization rates, although some NAND capacity remains underutilized.

The paragraph discusses the current status and outlook for HBM (High Bandwidth Memory) supply and demand. The company confirms that their HBM supply for 2025 is sold out, maintaining previous commitments. They are working with customers to meet evolving demands for AI-accelerated platforms using GPUs and ASICs. The company acknowledges the increased bit demand growth for HBM in 2026, which is expected to exceed DRAM demand growth. They are actively working on product development and qualifications, with HBM4 sampling and successful production of HBM3E 12-high.

The paragraph discusses Micron's focus on meeting customer needs and executing plans for 2026, including addressing long-term capital expenditure (CapEx) strategies. Micron has a significant tech transition opportunity, requiring investment in greenfield capacity and equipment for new nodes. Although current CapEx for the quarter was lower than expected at $2.7 billion, Micron expects an increase in the fourth quarter, maintaining a $14 billion forecast. Despite the lumpy timing of expenses due to grants and construction, the company anticipates generating free cash flow and has improved its balance sheet, reducing net debt to $3 billion. Further adjustments include taking out $900 million in 2027 notes and issuing $1.75 billion in longer-term debt.

The paragraph discusses the advancements in HBM (High Bandwidth Memory) technology, focusing on the trade ratios and performance improvements from HBM3E to HBM4 and HBM4E. Sanjay Mehrotra explains that HBM4 has a trade ratio greater than 3, higher than HBM3E, with HBM4E expected to have an even higher ratio. These improvements add pressure on the non-HBM supply in the industry. As the technology advances, the content and capacity requirements for HBM in both GPU and ASIC accelerators are expected to increase, leading to higher value propositions for HBM.

The paragraph discusses a conversation about the current state of customer inventory levels and demand, particularly in relation to AI-driven markets. It mentions that while some customers may have experienced minor tariff-related inventory pull-ins, overall inventory levels are healthy. Demand is driven by data center demand, the automotive and industrial sectors, and increased AI penetration in smartphones and PCs. The company's growth for the third quarter and strong forecast for the fourth quarter is attributed to Micron's effective execution in the expanding AI market.

The paragraph discusses the progress and future plans for the HBM4 product from Micron Technology. Sanjay Mehrotra explains that early units of HBM4 have been provided to multiple customers for sampling, and they are satisfied with the product's performance and power efficiency, which is crucial for AI applications. The company is focusing on customer qualifications and aims to meet demand by 2026. The HBM4 uses cost-effective 1-beta technology and internally developed CMOS logic die, leveraging the company's experience from the successful ramp-up of HBM3E. This positions them well for future prospects in the HBM4 market. Additionally, there is a question posed about the impact of AI servers on SSD demand.

Sanjay Mehrotra discusses the recent inventory digestion in the data center SSD market, noting it was impacted in late Q4 of 2024 and early 2025 due to prior strong demand. He anticipates that the second half of 2025 will see improvement, aided by newly announced accelerator platforms. Mehrotra highlights their record data center SSD market share, establishing the company as the second-largest brand by market share at the end of the first quarter. They plan to shift their SSD portfolio towards higher-value segments of the NAND market. The operator then concludes the session.

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