Thank you for standing by and welcome to Micron's post- earnings analyst call. At this time, all participants are in listen- only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, Satya Kumar, Corporate Vice President, Investor Relations and Treasury. Please go ahead, sir. Thank you and welcome to Micron Technology's Fiscal Second Quarter 2025 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 you to documents we have filed with the SEC, including our most recent Form 10-Q and upcoming 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 results, levels of activity, performance and achievements. We are under no duty to update any of the forward -looking statements to conform these statements to actual results. We can now open the call up f or Q & A. Certainly. Our first question comes from the line Vivek Arya from Bank of America. Your question please. Thanks for taking my questions. I had two of them. First on this HBM sales increase to $35 billion. Is that unit or content driven? Like do you see more GPU units versus before or is it, you know, more content, faster move to 12 -high or whatnot? And is there flexibility to raise this number further? Yeah, in terms of the. Hi Vivek, this is Sumit here. I'll take this question. In terms of the HBM TAM, yes, this is the second time we have increased this TAM and 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. Obviously that comes at a higher ASP due to the higher content and the overall level of demand for HBM continues to be very robust and we feel very good about our own HBM trajectory as well. That is all part of our own shipments have been ahead of forecast ahead of our own internal plans. That is also contributing to the demand increase. Thanks so much. For my follow up on gross margins, I think Mark, you mentioned some startup cost headwinds in Q4 if I recall. Can you help us quantify and do they persist beyond Q4 into Q1, et cetera. Kind of related question on gross margins, are you shipping bits from higher cost inventory? When does that headwind go away? Yeah. In your second question, was it presuming it was kind of a DRAM NAND question or doesn't matter. That's right. On the startup costs, they're relatively, you know, modest, you know, kind of an under, yeah, 30-40 basis point depending on what the revenue is effect as we sort of exit the year, and then that, you know, those costs will increase as we, you know, as we increase the level of activity, particularly in Idaho and around our, you know, newest, you know, DRAM node. Those costs will increase through 2026. We will talk more about that as we get closer to fiscal year 2026. We begin to see those increases as we exit this year. On the inventories, as you recall, we did the write -down of the inventories, and those inventories have cleared, and the inventories that we have now are, we've been performing well on cost down. So there are competitive inventories in NAND. As I mentioned our underutilization, those costs are reflected in inventories and result in some higher cost inventories, and those begin to pass through in the fourth quarter and into 2026. Thank you. Thank you. Our next question comes from the line of Srini Pajjuri from Raymond James. Your question please. Thank you. I have a couple as well. You talked about price premium as we go from 8 -high to 12 -high. Can you clarify if it's like for like price premium? Obviously you'll get better price because of higher capacity. Also on the same topic as we go from 3E to 4, can you talk about at a high level, can you discuss the differences and similarities of that transition versus, you know, when you went from 3 to 3E? And 3E, I think, you know, you went from 8 to 12. I'm just curious how difficult of a transition HBM4 is going to be from a manufacturing standpoint. Yeah. In terms of 8 -high to 12 -high, as you can imagine, 12 -high is a more complex product. It has also tax for all suppliers as they move to higher number of layers, and consequently the price is higher. Not just because of the 50% extra capacity, but the price per bit is also higher because of all of those reasons. That is the pricing related issue. In terms of manufacturing, I'll let Manish address the manufacturing aspect. Yeah, so your manufacturing has been around moving from HBM3E to HBM4 and, you know, a number of new technologies that are going to be coming together to be able to provide the significant increase in, you know, performance that HBM4 will provide that all our customers are really, really thirsty for. There are manufacturing elements that we're integrating together on the front end to be able to really deliver that higher performance as well as new technologies we'll be implementing in process flow for assembly and test, which will enable us to deliver the high volumes of integrated HBM cubes beginning in calendar year 2026. We feel very good about where we are right now with HBM 8-high, having outperformed our prior plans. That manufacturing experience and base bodes well for the 3E 12 -high ramp that is coming in the rest of calendar 2025 and into 2026. We think that will provide really strong baseline fundamental learning for us with HBM4. Okay, got it. On the TAM, you know, you raised it last quarter and this quarter as well. At the same time you're maintaining your market share exiting this year, even though I guess you've been, at least you've been talking about getting sold out for the year. I'm just trying to reconcile those three items because is it because of better yields that you're able to kind of maintain your market share targets exiting the year or is there, I'm just trying to, I guess, reconcile that. The follow up to that is that as you go into next year, obviously one of your competitors is still struggling to qualify at NVIDIA. If an opportunity arises, if more market share is available in the market, I guess how quickly can you ramp up supply if there's an opportunity for you to capture more market share? Thank you. Maybe just in terms of the production question, I'll just say that we're very pleased with our progress on being able to provide more supply, greater supply than what our prior plans were. We do expect that that does play into our projections of what we're able to do for the rest of the year and in particular into this, you know, this target helping us achieve that target that we've set, which is to get to, you know, our natural market share by the end of the calendar year. Yeah, in terms of the TAM increase, it has been a combination of more robust 12-high. Rapid and robust shift to 12-high earlier in the year. As we have said now, most of the second half calendar year will be 12-high. That comes with the higher ASPs. Of course, our own shipments beyond our own plan that we have been articulating over the last few months, including what Manish said, is all contributing to the TAM increase and the higher shipments from us are enabling us to continue to keep our share goal despite the higher TAM. Now, as we think longer term, we are making substantial investments in HBM capacity to drive our opportunity. We see the HBM market continuing to expand over the years. We have even told you about $100 billion trajectory to 2030. It is a multi-year growth opportunity. We also want to remain disciplined about our investments. Of course we have substantial CapEx that we have committed that we have told you about. We are also mindful of ensuring that we are being responsible in how much supply we bring online. At the same time as there are opportunities in the market in terms of how we do and how we mix the shift of our business, the mix of our business and our portfolio of shipments, we will continue to look for opportunities, focus on all of the more profitable portions of the industry profit pool. That will remain ongoing portion of our strategy. Thank you. Thank you. Our next question comes to the line of Aaron Rakers from Wells Fargo. Your question please. Yeah, thanks for taking the question and doing the call, I guess. Mark, I want to double click on one of the comments that you made. In the Q & A around. I think some of the gross margin impacts, I think you had mentioned that you expect all in DRAM costs down to be more or less flat this year. I think your last kind of description was more of like a mid to high single digit, albeit only the front end cost structure of DRAM. Just a point of clarification, is the new flat number a projection based on inclusive of HBM. Just if you can help us understand that. Yeah, that's right, Aaron, it's correct. Okay, and then as a quick follow-up, you know a lot of focus on HBM, but I think one of. The other areas that you guys have. Done very well in is LPDDR5X on these AI servers. As we move to the SOCAMM architecture with the GB300, do you guys envision yourself maintaining your strong share position? Is there an ASP uplift that comes with moving to a module relative to the soldered -down solution in the GB200 cycle. Thank you. Yeah, so we're not going to be able to comment on the ASPs between the solder ed-down version and the module. However. Aaron, you're absolutely right. Our LP solution for the data center has been a stellar success for Micron. We are the only company, remain till today the only company in the world to be shipping LPDRAM in volume. We will be the first ones to have volume production of SOCAMM, which we have been working on for some time in deep partnership with NVIDIA. We are very excited about the SOCAMM opportunity. It will be a very big product for us and over time there may be others who will productize and ship in volume. We maintain a very sizable lead in time and shipments and experience in productizing LP in the data center and continue to look forward to that roadmap to produce really good results for us. As we mentioned, the high -cap DIMMs plus LPDRAM also reached, you know, crossed that billion dollar milestone for quarterly revenue this quarter in FQ2. That was also very exciting for us besides the billion dollar milestone for HBM in the quarter. Thank you. Thank you. Our next question comes from the line of Vijay Rakesh from Mizuho. Your question please. Yeah, hi guys, thanks for doing this call. Just going back on the HBM, I think your market share has almost doubled. From the beginning of the year by, I guess, if you're exiting it in. A DRAM market share in HBM. As you look at 2026 as HBM4 ramps and given that market share, your revenues in 2026 could probably double. Is that fair? Is your capacity on HBM going up similarly in 2026? Yeah, I mean of course we are ramping our HBM capacity throughout calendar 2025 and our goal is obviously to continue to have our HBM share be approximately the same range as our DRAM share. As HBM TAM grows, we definitely intend to ensure that our HBM capacity also keeps growing. Now, in terms of our ramp of HBM throughout 2025, you're right, I mean we expect robust ramp of our quarterly revenue through calendar 2025 as we get to that target share at the end of this calendar year. That does mean that our 2026 revenue in HBM should be significantly higher than the 2025 revenue. In the 2025 revenue, of course, you know, we will have every quarter being higher than the previous quarter. It's a pretty, pretty good trajectory. We feel very good about that overall business prospect. Thanks. On the NAND side, I thought you guys were a little cautious on the NAND side. As you look at the AI servers, are you seeing a faster pull through on your QLC SSD versus hard disk drive? I guess. Faster uptake, I should say. Sorry, I didn't quite hear that question. Can you just repeat it faster on. The AI server side? Yeah. On the AI server side, are you seeing much faster uptake on your QLC SSD? Yeah. So definitely the high capacity SSDs. I mean some of these are depending on the SKU and performance requirements, some of these are QLC based, some of these are TLC based. As we get to higher and higher capacities over time, more definitely focused on QLC. Yes, there is a clear move to higher capacities over time in AI servers and there is a separate, just stepping back and looking at the data center, there is a desire from the large hyperscalers to find opportunities to reduce HDD usage over time. Because HDDs are just so much more difficult in many ways. They are just not able to use the entirety of the capacity. Because these large capacity HDDs have severe limitations in using the part of the platter that's not on the edge. There are challenges related to reliability as well, power consumption challenges. If you think about the trajectory of NAND, the density of storage that we can provide through the roadmap over the next few years, the power consumption benefits, the server consolidation benefits, and then you look at the overall TCO in very power constrained data centers, there will be a substantial desire by more and more customers to minimize the amount of HDDs they have to deploy and that when we get closer to that tipping point will become another tailwind for the NAND industry. The TCO benefits are very substantial. Just looking at the per bit cost of NAND and comparing it to the per bit cost of HDDs is not how our customers are looking at it. I think that that attempt to dramatically reduce HDDs is already started at the most leading customers. You have seen some announcements from Pure Storage and we are suppliers to them and we're also working directly with the end customers who are wanting to deploy very large capacity SSDs and remove some of those HDDs from their future infrastructure deployments. It is an exciting opportunity. It'll take some time to develop, but once it gets going it will definitely have a snowball effect in terms of deployments. All Right. Thank you. Thank you. Our next question comes from the line of Brian Chin from Stifel. Your question please. Hi there. Thanks for letting me ask a few questions. Could you maybe expand a little bit more on what you're seeing in the enterprise SSD market currently? I think customers clearly digested some in fiscal 2Q but your guidance fiscal 3Q I thought stated that data center NAND shipments do improve QonQ so are you starting to see that tick up some and is that helped by Blackwell shipments also began to pick up for all the discussion this week? Sure. Brian, at the end of last calendar quarter, which is CQ4 2024, there were some large deals that were being bid upon that caused some customers to purchase SSDs and those got purchased by multiple customers and eventually some of those deals did not go through in terms of deployment at the cloud companies. There was some inventory at customers for data center SSD across multiple suppliers of data center SSD and that is part of what was the digestion period in CQ1 as more demand on the AI server side continued to use some of that inventory. I think in CQ2 much of that would have been depleted, that inventory would be mostly depleted and the run rates would start to pick up again in terms of ordering patterns. We do expect that as AI server growth continues, data center SSD TAM should start to improve again on a sequential basis starting from the months ahead and strengthen into the second half of this calendar year versus the first half where there has been some inventory digestion related issues. In FQ3 we do expect our data center revenue to hit another record, but I'm talking about all of data center. We are not parsing out, you know, what part of the data center is the record versus a bigger record, smaller record, et cetera. We are not really parsing out different aspects of the data center, but we do expect that the aggregate data center revenue will be a record in FQ3. Okay, that's helpful. Maybe a question about sort of the China memory supply that clearly negatively impacted pricing on legacy DDR5 DRAM as well as NAND kind of in the second half last year. As more consumer bits or bit demand crosses over to DDR5, are you seeing that immediate supply and pricing risk from China start to tail off given the bigger technology and quality hurdles posed by the more advanced products? I'll just make a couple of clarifications. The supply from Chinese headquarter companies that comes to the market has been mostly in DRAM, DDR4 and LP4 focused for last year. The timeframe that you are referencing has been more DDR4 LP4 type of supply. Now, as Chinese customers stayed on these older technologies longer, some of the consumer products in China did reduce their what would have been DDR5 LP5 consumption because they just stayed with the richer mix of DDR4 LP4 to consume local China supply. Just the general inventory environment that we had been describing over the past many months for both PCs and smartphones for CQ4, CQ1 has been impacting the DDR4 DDR5 pricing environment. We had mentioned to you that the inventory consumption would be in a much healthier place, the inventories would be in a much healthier place by spring of 2025. As we are in that time frame now, we do see that those inventories have become healthier as we had expected. That is part of why in our FQ3 you have heard us say that our consumer mix has increased because particularly in smartphones, the orders have bounced back not just driven by improving inventories and sell through, but also the average capacities going from 8 GB to 12 GB. Those are some of the dynamics that have been taking shape. The supply in the past months has been from China, mostly DDR4, LP4 where, you know, looking ahead, only about 10% of our revenue is exposed to that portion. Hope that makes sense. Great, thanks. It sounds like the tail end of that question was just that you're seeing less of that direct competitive overlap in DDR5. Yeah, I mean DDR5 has not been in volume production in the time frame that you had outlined. More of the impact in the last couple of quarters has been things other than DDR5 supply from China. Thank you. Thank you. Our next question comes from the line of Karl Ackerman from BNP Paribas. Your question please. Yes, thank you. I have two. I'm curious why you believe the industry will ship below end. Market demand for DRAM and NAND this year. Given your commentary about shipping below demand. Not losing share, I guess, does. Should we assume that higher mix of? HBM is helping offset some of the competitive dynamics from Chinese players for consumer DRAM and NAND? Not a follow up please. The industry will ship below demand. I don't believe that's what we have been trying to indicate. What we have said is that our supply growth is going to be less than the demand growth, our meaning Micron's, and that's going to result in a reduction in our inventory mechanically. That is what we have been trying to communicate. In terms of HBM, of course, as HBM mix has been increasing in the demand because of the trade ratio that is three to one now and as we have described in the prepared remarks, over time will go to past four to one with HBM4E. Those factors do cause the non-HBM portion of the DRAM supply to be constrained and more investments than needed to expand wafer capacity to prevent that portion from getting too constrained. That is really the dynamic that is playing out on the DRAM side. That is the reason why we have said that the DRAM leading-edge capacity is constrained in the industry for us. Looking ahead, we expect that the trajectory is going to be healthier driven by ongoing HBM increases and the broadening of the demand drivers beyond just AI that have been driving demand for the last few quarters. Other aspects of the demand will start to come back. Smartphones is already improving and over time with the Windows EOL or Windows 10, Windows PCs, AI PCs will start to improve, average capacity will start to improve and at some point the industrial and automotive inventories will also have improved enough to kick start that portion of the market. We see a broadening of the demand drivers looking ahead and a more constructive environment which gives us optimism about the future. Got it. Just as a quick follow up to that because it's related. I suppose if the industry supply is being restrained by overall capital investment and the HBM trade ratio continues to increase as you indicated, does capital investment. Need to increase from this $14 billion. Annual rate to support your market share. Goals on HBM into fiscal 2026? Do those two factors limit margin upside from a growing mix of HBM sales? Thank you. Yeah, I mean we are not obviously giving any CapEx forecast for 2026 right now. We're just in 2025, early 2025 calendar year. We will obviously provide CapEx guidance later in the year as we approach 2026 fiscal year. There is no doubt that the growth in HBM, the multi-year growth in HBM and the types of forecasts that our customers are placing on us in terms of the consumption of HBM that they expect over the years is going to require more HBM capacity. Even that HBM capacity will constrain more and more the non-HBM portion of the industry and will require some level of investment to ensure that the non-HBM portion of the demand, which is obviously the overwhelming majority of the bit demand from a bit perspective at least, is non-HBM and that portion will need to be supplied and we'll obviously continue to focus on the right balance between the two. Thank you, Karl. Just a little color. Sumit's right. We're not providing any guidance on CapEx. We have announced that we have broken ground and that we will be adding a second HBM manufacturing facility that will be operational and providing output in 2027. There will be investment that will be happening to get us to that point. That just speaks to the opportunity that we've talked about. The north star of $100 billion+ market in 2030. We do have to make HBM-specific investments primarily on the back end on assembly and test to be able to meet the market requirements for the volume growth as well as the technology requirements as HBM goes from HBM3E to HBM4 and then future generations. In terms of the spending on core DRAM wafer manufacturing technology and equipment, that's one where we'll continue to be disciplined and continually reacting to market demands in terms of the market signals we see in terms of how much the bit supply requirements are. Yeah. Thank you. Thank you. Our next question comes from the line of Mehdi Hosseini from SIG. Your question please. Thank you. A couple of follow ups from my end. The first one is for the team. Sanjay has been talking about how Micron is currently best positioned in terms of competitive advantage. I want to better understand the underlying assumption especially as we look at the historical earning trend. Back in calendar 2018, Micron had the best earning. For calendar year 2018, Micron was able to recognize more than $15 of EPS. When Sanjay talks about and refers to best competitive positioning, should we assume that the earning opportunities could be double digit, setting a new record and any color there would be appreciated. I have a follow up. Yeah. Let me start and we'll ask Mark to jump in to add some thoughts. In terms of that comment that Sanjay made about Micron's competitive positioning, it's really referring to our product and technology capabilities as it relates to the competition. We have mentioned to you before that Micron is gaining share in all of the high margin areas of the industry. What are those high margin areas? You look at HBM, Micron is gaining share. You look at high capacity DIMMs. We have a super normal share of high capacity DIMMs, more than our DRAM supply share. You look at LPDRAM in the data center, very innovative, robust ROI product that is pioneering achievement by us to be the sole supplier of this and another important product in our portfolio at scale. Look at data center SSDs. We have been hitting new record share quarter after quarter, including in the latest reports for CQ4 that came out from analysts and third parties that again place us at a new record share for that portion of the business. You look at the mobile products for UFS4 for the highest speeds, LP5X automotive products with functional safety features that no one has. Automotive and industrial distribution share, which is a larger portion of the profit pools compared to the other distribution products. We have significantly higher share than our normalized DRAM supply share. We are continuing to drive the portfolio to areas where every large profit pool that is above average, above normal, above the rest of the industry average profit capability, we have the strongest products in the industry and momentum in terms of share gains in those areas even while at an aggregate level we are maintaining our bid share flat. As part of our strategy we are gaining share in all these large profit pools. Now in terms of EPS and operating margins, et cetera, we have spoken about some of the areas where there have been impacts more related to the industry environment. There has been a challenging industry environment in manufacturing and we spoke about and we are probably the first company to speak about the three-pronged strategy that we believe if there is underutilization in the short term, lower CapEx and capacity in the medium term and lengthening of time between nodes in the long term, the industry can get to better health. We are not just talking about that. We are doing that actively ourselves and taking the lead in doing that. Of course, the DRAM industry is in a much better place compared to NAND in terms of balance, health, and profitability and we continue to focus on our technology and portfolio there. If you then, I'll just end with the technology view first in the industry with 1-gamma utilizing EUV for the first time in 1-gamma at a very cost-effective approach. All of those different ways you can see that as the industry environment improves, particularly in NAND, you will see much better trajectory from us from an operating profits perspective. Mark, do you want to. I would just emphasize what Sumit said that our financial potential is certainly shaped by the market conditions and state of the industry, and I think on the supply demand, on the demand side very encouraging trends with the AI driven demand and the GPU ASIC architecture is driving more differentiated memory and very clear demand signals and continued growth as we can see in those markets and content driven growth in some of the more traditional markets. Our technology, products, and manufacturing capability are going to allow us to find the best profit pools. As Sumit mentioned on the supply side also good trends in the case of DRAM where HBM driven trade ratio will constrain supply and we see that on a leading edge and we're very well positioned there. On the NAND side we've talked about quite a bit today about the discipline that we're exhibiting there. I think finally, in addition to the technology, product and manufacturing, we've got a strong balance sheet which we did some activity this past quarter to provide us additional flexibility and pay down near term maturities. We continue to have the capacity to sustain our leadership and exploit what should be a very good market going forward. I appreciate all the details. I guess what we are struggling here given all the secular trends that you detailed here. We're struggling with better understanding the longevity and earning opportunities that these secular trends are offering. Obviously until the mix increases dramatically, you are susceptible to market condition as we have witnessed in the past quarter. We're just trying to understand, okay, as the mix increases to include more secular trend as capacity is allocated to higher margin, how is it going to play out in terms of dollars of operating profit, your revenues have already exceeded prior peak with earning and sustainability of earning would also happen I guess. Would it be fair to say that we just have to wait and see how it plays out because there are also variables that hold you back from providing specific targets. Maybe just to comment Mehdi, so. The m ix transformation that's occurring and the value added content that's being added to certain products, almost a new industry being created and the combination of these AI demand that we're seeing on HBM and low power DRAM and high -cap DIMMs and so forth. That's occurring now and that's having a positive effect. The overall industry profitability while those products are at a premium, the overall industry inventory levels are still elevated from the severe downturn that occurred. Now they have been improving, they ticked up a bit in this last quarter, with volumes being down in DRAM and modest growth in NAND, but that volume growth continues or resumes, bid shipments increase in this third quarter and as we've said, our inventory levels tight on the leading edge but our inventory levels overall decrease. That is why we provide those numbers because that is associated, we believe, with more favorable market conditions. In the case of DRAM, we should be below our target levels of inventory by year end. Got it. Thank you. Thank you. This does conclude the question and answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.