C J Muse

C.J. Muse followed up on CapEx, noting that the relative growth seems conservative given current market conditions and questioned if Micron is constrained by cleanroom space or being overly judicious with capacity additions. He also asked about gross margin trends beyond the February quarter, specifically regarding cost reductions across DRAM and NAND, and potential temporary higher costs or yield impacts during the HBM3E to HBM4 transition.

Answer

CFO Mark Murphy explained that supply issues have been ongoing, with node transitions being the primary source of fiscal 2026 supply growth, and that cleanroom space takes time, leading to an industry-wide supply shortage. CEO Sanjay Mehrotra added that Micron is investing in technology transitions, greenfield capacity, and maximizing existing cleanroom output, but still only meets 50% to two-thirds of key customer demand in the medium term. Regarding gross margins, Mark Murphy indicated that while not guiding beyond Q2, margins are expected to strengthen through the year, albeit with more gradual expansion. Sanjay Mehrotra noted strong cost execution, good yields, and that HBM4 is progressing well with an expected faster yield ramp than HBM3E.

C.J. Muse from Cantor Fitzgerald followed up on CapEx, questioning if the relative growth was conservative given market conditions and if Micron was constrained by cleanroom space, asking for clarification on the company's philosophy regarding capacity additions. He also inquired about cost down trends for DRAM and NAND through calendar 2026 and potential temporary cost impacts from HBM3E to HBM4 transitions.

Answer

CFO Mark Murphy acknowledged supply issues for several quarters and that cleanroom space takes time, emphasizing that the industry is expected to be short on demand. He stated Micron is accelerating construction and tool installations within existing footprints and near-term expansions, with 2026 bit growth being supply-constrained. CEO Sanjay Mehrotra added that investments are being made in technology transitions and greenfield capacity, noting that in the medium term, Micron can only meet 50% to two-thirds of demand from key customers. Mark Murphy also highlighted strong cost execution, good yields, and that 1-gamma DRAM and G9 NAND ramps are proceeding well, expecting HBM4 to have a faster yield ramp than HBM3E.

C.J. Muse asked about the evolution of customer engagement in an allocation environment, drawing parallels to the HD world's shift to long-term agreements, and inquired about Sandisk's visibility and bit allocation strategy. He also sought clarity on bit shipment growth opportunities for calendar years 2025 and 2026, considering current inventory levels and the BiCS8 ramp.

Answer

Chairman and CEO David Goeckeler noted two phases of customer engagement: multi-quarter deals for supply certainty and proactive discussions extending to calendar year 2027 for long-term demand alignment, especially from Data Center customers. EVP and CFO Luis Visoso added that Sandisk prioritizes strategic customers for bit allocation and aims to maintain market share while growing the Data Center business through innovation like BiCS8, with capital plans supporting mid to high teens long-term demand growth.

C.J. Muse asked about the evolution of customer engagement and the emergence of long-term agreements (LTAs) in the NAND market, similar to trends seen in the HD world. He also inquired about SanDisk's visibility, bit allocation strategies, and bit shipment growth opportunities for calendar years 2025 and 2026, considering current inventory levels and the BICS8 ramp.

Answer

Chairman and CEO David Goeckeler noted two phases of customer engagement: multi-quarter volume and price deals for certainty of supply, and proactive outreach from large data center customers seeking visibility and supply alignment through calendar year 2027. He emphasized that this is a welcome development for long-term CapEx decisions. EVP and CFO Luis Visoso added that SanDisk prioritizes strategic customers for allocation, focusing on growth and value creation, and aims to maintain market share while expanding in the data center segment through innovation like BICS8.

C J Muse asked for a gross margin framework for calendar year 2026, considering the MI355 to MI400 transition and the shift towards full rack-scale solutions. He also sought more detail on AMD's growth expectations through 2026 and beyond, specifically regarding the breadth of customer penetration for OpenAI and other large customers, aiming for tens of billions in 2027.

Answer

Jean Hu, EVP, CFO, and Treasurer, stated that data center GPU gross margins typically improve with new product ramps after an initial transition, with a focus on expanding top-line revenue and gross margin dollars. Dr. Lisa Su, Chair and CEO, reiterated excitement for the roadmap and strong traction with major customers like OpenAI and OCI, confirming deep engagements with multiple customers expected to achieve significant scale in the MI450 generation.