Release Date: December 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Micron Technology Inc (MU, Financial) achieved record revenue in fiscal Q1 2025, with revenue, gross margins, and EPS all at or above the midpoint of guidance.
- Data center revenue grew over 400% year over year and 40% sequentially, reaching a record level with data center revenue mix surpassing 50% of total revenue.
- HBM shipments were ahead of plan, with more than a sequential doubling of HBM revenue, and the company expects robust growth in the HBM market over the next few years.
- Micron finalized an agreement with the US Department of Commerce for an award of up to $6.1 billion under the CHIPS and Science Act to support advanced DRAM manufacturing.
- The company is on track to achieve its HBM targets and expects to deliver a substantial record in revenue, significantly improved profitability, and positive free cash flow in fiscal 2025.
Negative Points
- Fiscal Q2 bit shipment outlook is weaker than previously expected due to more pronounced customer inventory reductions.
- NAND revenue decreased 5% sequentially, with bit shipments and prices both decreasing in the low single-digit percentage range.
- The PC refresh cycle is unfolding more gradually, with expectations for flattish PC unit volume growth in calendar 2024.
- Lower-than-expected automotive unit production and a shift toward value-trim vehicles have slowed memory and storage content growth.
- NAND industry conditions are expected to impact fiscal Q2 gross margins, with underloading affecting fiscal Q3 gross margins.
Q & A Highlights
Q: Could you speak to what gives you the confidence that we're going to see a seasonal or cyclical pickup across both DRAM and NAND?
A: Sanjay Mehrotra, President and CEO, explained that the outlook for CQ2 is impacted by inventory adjustments in consumer markets and typical seasonality. However, they expect customer inventories to improve by spring, driving shipment growth in the fiscal second half. Data center SSD demand, which can be lumpy, is also expected to return to growth in the fiscal second half.
Q: Can you provide more granularity on the impact from NAND underloadings and the tailwind from increasing HBM mix in revenues?
A: Mark Murphy, CFO, noted that the Q2 guide is down due to weaker NAND market conditions and moderated data center SSD volumes. Underload charges will begin affecting margins in Q3. However, beyond Q3, they expect business volume growth and favorable mix effects, including HBM, to drive margin expansion.
Q: What has changed to increase the HBM TAM estimate, and why is the target share expected more in the second half of 2025?
A: Sanjay Mehrotra stated that the HBM TAM estimate increased due to higher demand and volume requirements for 2025. The target share is expected in the second half of 2025 due to ongoing capacity and yield improvements. Micron is focused on ramping up HBM capacity and achieving its share target in line with DRAM industry share.
Q: How do you think about market share in HBM over the long term, and is premium pricing still achievable?
A: Sanjay Mehrotra emphasized that Micron is focused on achieving HBM share in line with DRAM industry share. The company is leveraging its product's performance and power efficiency to maintain premium pricing. Micron plans to continue this momentum with future products like HBM4 and 4E.
Q: What are your thoughts on China competition in DDR5 and LP5 over the next 18-24 months?
A: Sanjay Mehrotra noted that China competition is more focused on lower performance products in the consumer market. As the market shifts towards higher performance products, especially in data centers, Micron is well-positioned with its advanced technology and product roadmap to address these higher-end market needs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
