Micron Technology - Earnings Call - Q3 2025 Post Call

Executive Summary

• Micron delivered record fiscal Q3 2025 revenue of $9.30B, up 15% sequentially and 37% YoY, with non-GAAP EPS of $1.91; data center revenue more than doubled YoY and HBM revenue grew ~50% sequentially, driving all-time-high DRAM revenue.
• Gross margin reached 39.0% (non-GAAP), above guidance midpoint, as pricing improved across DRAM/NAND despite a heavier consumer mix; adjusted free cash flow rose to $1.95B.
• Initial FQ4 guidance called for $10.7B revenue and 42% non-GAAP GM; Micron later raised FQ4 guidance to $11.2B revenue and 44.5% non-GAAP GM, citing stronger DRAM pricing and execution; non-GAAP EPS lifted from $2.50 to $2.85 (raised).
• Liquidity stood at $15.7B and net debt fell to ~$3B, providing flexibility to invest in HBM capacity and 1-gamma DRAM while maintaining dividends and opportunistic buybacks.

What Went Well and What Went Wrong

What Went Well

• Record quarter with revenue $9.30B and non-GAAP EPS $1.91; “Micron delivered record revenue in fiscal Q3… we are on track to deliver record revenue with solid profitability and free cash flow in fiscal 2025” — Sanjay Mehrotra.
• HBM momentum: HBM revenue rose nearly 50% sequentially; DRAM non-GAAP gross margin expanded, with steady HBM pricing and strong yield ramp on 12‑high HBM3E; HBM run-rate surpassed $6B based on Q3 performance.
• Cash generation and balance sheet: operating cash flow $4.61B; adjusted FCF $1.95B; liquidity $15.7B; net debt ~$3B, enabling continued investment and capital returns — CFO.

What Went Wrong

• Consumer mix weighed blended DRAM ASPs; DRAM prices were up like-for-like but the higher consumer-oriented mix lowered blended ASPs sequentially; NAND pricing declined high single digits amid more challenging market backdrop.
• Legacy DRAM (DDR4) shortages amid EOL transition; DDR4 is low single-digit % of revenue in the second half and on allocation; LPDDR4+DDR4 combined ~10% revenue; customers face tightening supply near term.
• Tariff-related customer pull-ins added modest noise to order timing, though management emphasized overall impact was small and demand signals remain constructive.

Transcript

Operator (participant)

Thank you for standing by, and welcome to Micron's Post-Earnings Analyst Call. I'd now like to introduce your host for today's program, Satya Kumar. Please go ahead, sir.

Satya Kumar (Corporate VP of Investor Relations and Treasury)

Yeah, thank you, Jonathan, and welcome to Micron Technology's Fiscal Third Quarter 2025 Post-Earnings Analyst Call. On the call today with me 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 10Q and upcoming 10Q, 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 for Q&A.

Operator (participant)

Certainly, and our first question for today comes from the line of Karl Ackerman from BNP Paribas. Your question, please.

Karl Ackerman (Managing Director of Semiconductors and IT Hardware)

Yes, thank you. I have two, please. This quarter, you raised your DRAM bit-to-man outlook for calendar 2025 to high teens from mid-teens. Is that only coming from your outlook on HBM, or do you believe excluding tariff pull-ins from certain customers that the man outlook for non-HBM DRAM has also improved? Another follow-up, please.

Sumit Sadana (Chief Business Officer)

Yeah, hi Karl, this is Sumit here. This is a small change to our DRAM outlook for calendar 2025. We upgraded our view to the level you mentioned. Now, there is no impact of pull-ins in this assessment because whatever modest amount of pull-in there might have been, for example, in CQ2 from CQ3 or FQ3 from FQ4, etc., that kind of pull-in activity is net neutral for the full calendar year view. The improvement is not impacted by any kind of pull-in activity. The strength in our view of the AI business, i.e., the data center growth, continues to be pretty robust, and our view of the AI demand is certainly supportive of the forecast that we have provided you for bit growth in calendar 2025.

The other positive thing that has happened over the last three months is that we are seeing, after many, many quarters of very challenging environments in the broad distribution markets, industrial markets, and some parts of the automotive market, we are now starting to see really good improvements in demand in these broad distribution and industrial markets, and that is also providing a tailwind to the overall calendar 2025 bit growth estimates.

Karl Ackerman (Managing Director of Semiconductors and IT Hardware)

Thanks for that, Sumit. Mark, given your expectations for another quarter of healthy free cash flow in the August quarter, I was hoping you could discuss how you might prioritize improving net leverage versus share buybacks, just given you look to not repurchase stock in the quarter. Thank you.

Mark Murphy (CFO)

Yeah, Carl, as I mentioned in the earnings call, we're pleased with the deleveraging that's happened. We're down now to a net debt of $3 billion, substantially down from the prior quarter, and I said on the call that we expect to generate free cash flow in the fourth quarter. I would add that we stand at record levels of cash and record levels of liquidity for the company. We're at $15.7 billion in liquidity, including our untapped facility. We're in a great position to first continue to invest in the priorities of the business, maintaining our technology leadership, investing in needed capacity in DRAM to serve HBM and other high-value, high-return markets, and then do return capital shareholders through our routine dividend, which we hope to grow over time, and then opportunistic repurchase.

I think the balance sheet is in a great spot now, and we have a lot of flexibility. On a covenant basis, I would add that we're actually basically at no leverage on a covenant basis.

Karl Ackerman (Managing Director of Semiconductors and IT Hardware)

Thank you.

Operator (participant)

Thank you, and our next question comes from the line of Aaron Rakers from Wells Fargo. Your question, please.

Aaron Rakers (Managing Director and Technology Analyst)

Yeah, thanks for taking the question and doing the call. Two, if I can as well. I think, Mark, first of all, I appreciate the gross margin guidance. I think last quarter, we talked a little bit about startup costs and the potential for underutilization flowing through inventory in the NAND flash business. Obviously, demand dynamics have improved. I'm just curious, how should we think about those inputs of gross margin over the next couple of quarters? I will just ask my second question right out of the gate. The LPDDR business in the data center side, we've talked for several quarters about you being predominantly the sole provider of those solutions into some of the AI silicons. I guess, how do we think about that business as it progresses to a billion dollars plus of quarterly revenue?

I think you've alluded to in the past as far as diversity of customer base there. Has that expanded? Do you see a broadening market for that solution in data center? Thank you.

Mark Murphy (CFO)

Yeah, I'll start, Aaron. As it relates to underload utilization-related period costs, we brought those up. I think it was on the December call. Over the past six months, we sort of worked last call, the March call, we talked about how the structural capacity had come down and that we were not incurring those period costs. They would end up being absorbed in inventories and passed through. That is what is happening. We have structurally lower capacity in NAND, and those costs all now just pass through on inventories. The NAND volumes were very strong, so we are benefiting from some more loading there. Still, we are very careful about capacity in that market because that part of the business is the market environment is challenging.

Again, we talk about low CapEx levels, careful about node transition, where our bits are going, and premium products in that market, and watching inventories carefully. Inventories improved in NAND, actually, in the quarter, but they remain less healthy than DRAM, which DRAM we actually expect to be below target by the end of the year. As it relates to, yeah, as it relates to the startup costs that I mentioned last quarter, we do see those beginning to increase and very modestly now, but through 2026, we'll see some increase related to, as you know, we're building Idaho One, and we'll begin to see those beginning to increase in 2026. We also see some FX-related costs. I mean, everybody knows that the dollar's been weakening, and so we're seeing a bit more of that.

Since we made those comments, the revenue outlook that we have is much higher. Those effects are on a basis point less than what we talked about on the last call. I think that will have me reinforce what is important, which is, are we growing? We are positioning our bits in the right place, and we serve a market that is growing, and we are getting leverage on those costs. Our price performance is critical. We have done a great job of pricing in this market that is turning, becoming more constructive, which is why we have a strong guide in the fourth quarter, a 42, and we feel positive about the trajectory of the business beyond that.

Sumit Sadana (Chief Business Officer)

In terms of your question about LPDDR in the data center, yeah, we continue to be very excited about our sole source position in that market. It has become quite a large market and, of course, pioneered by one large company in the data center. Of course, as you know, the power consumption in the data center continues to be an important driver of decisions and designs and architectural choices by our customers. Overall availability of power is an important driver of many decisions, including location of these data centers. Certainly, the interest in more broadly deploying LPDRAM in the data center amongst customers of scale continues to be high. We do expect, based on our interaction with customers as the pioneer of LPDRAM in the data center in the world, we have multiple interactions going on with customers of different types and scale.

We do expect that LP will grow in its penetration in the data center over time. We are very excited by our position, and we'll be able to leverage that position as that growth unfolds.

Aaron Rakers (Managing Director and Technology Analyst)

Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Brian Chin from Stifel. Your question, please.

Brian Chin (Director of Applied Technologies)

Hi, good afternoon. Thanks for letting us ask a few questions. I know you indicated on the call in the slides that DDR4 will be a low single-digit percent revenue exposure in fiscal second half of 2025. Is there a way to quantify how much of the 300 basis point sequential higher gross margin guide for fiscal 4Q maybe is attributed to DDR4 pricing? I think that is a question that we're getting sort of post-call here.

Mark Murphy (CFO)

Yeah, I'll take that. Yeah, the DDR4 pricing is a that market has gotten tight, as was talked about in our prepared remarks. Customers are beginning to see increasing shortages for DDR4. As you mentioned, it's a smaller part of our business and on a volume basis getting smaller. The DDR4 pricing is a positive Q3 results and Q4 guide, but it's one of the many factors contributing to the positive results. It's not a driver of that margin expansion. I would leave it at that.

Brian Chin (Director of Applied Technologies)

Got it. That's sort of, I know previously you'd said 10% revenue could be sort of DDR4, and now it's lower. Maybe part of that's because of strengthening in other DDR5 and other areas of mix. I guess, is this pretty consistent with where your production is and is going, as well as your finished good inventory in terms of DDR4 being at sort of like a sub-10% kind of exposure?

Sumit Sadana (Chief Business Officer)

Yeah, just to clarify, right? I mean, our earlier comment about the 10% of revenue was a combination of DDR4 and LPDDR4. The comments that Mark made and what we provided in the prepared remarks as well relate to DDR4 only, which is a low single-digit percent of our revenue. LPDDR4 and DDR4 together is around 10% of revenue. DDR4 alone is a low single-digit percent of revenue. A lot of the things that you see on the spot market in terms of pricing relate to DDR4 only. That part is a very small part of our overall business.

Brian Chin (Director of Applied Technologies)

Got it. Maybe just one quick follow-up. It sounds like mixed, less consumer orientation in terms of the bit shipments in fiscal 4Q. Is there any reason not to—I know you want to guide fiscal 1Q, November gross margins per se, but it would seem seasonal and kind of reasonableness that that mix should only continue to get less consumer oriented into fiscal 1Q. Is there any reason not to think that would not be a bit of a tailwind on top of sort of shipping more 12-high HBM3E into the fiscal first quarter in terms of gross margins?

Mark Murphy (CFO)

Yeah, Brian, we did not guide—we are not going to guide first quarter. To your point, in the fourth quarter, we do see two forms of favorable mix. One at a high level. One is just more DRAM growth relative to NAND, and so mixing more DRAM, and then more data center relative to consumer. You have those positive mix effects. To your point on what is the trajectory into the November quarter, the market, we have talked about our inventories are very lean. We are bit constrained as we look out to that quarter. We are focused on the best pricing decisions. We are continuing to work for a favorable mix. That is why on this call earlier, we said that we can expand gross margins in November quarter, we believe.

Brian Chin (Director of Applied Technologies)

Great. Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Krish Sankar from TD Cowen. Question, please.

Eddy Orabi (Analyst)

Hey, guys. This is Eddy for Krish. Congrats on the strong results. If we go back to June of last year, you guys did give us some color about 2025 demand for HBM. I think you mentioned multiple billion-dollar opportunity, and you gave us some color about that pricing was being negotiated. This time, you guys chose not to. I wonder, are there any specific reasons? Are lead times different for HBM, or is customer behavior different, or the competitive environment? Any color would be great. On that note, I wonder when you guys are expecting to hear from your customer about 2026 demand? That's it for me. Thank you.

Sumit Sadana (Chief Business Officer)

Yeah. In terms of 2026 HBM, we do expect that HBM bit growth in 2026 over 2025 calendar year will be significantly faster than the overall DRAM bit growth. HBM will continue to outrun the DRAM bit growth. Now, when it comes to the actual discussions with customers, compared to this time last year, of course, we provided you a lot of details about 2025 expectations and a lot of updates on color every quarter on what kind of milestones we were reaching on HBM and what kind of capacity ramp and yield improvements and percentage growth rates on quarters and billion-dollar quarter, 50% growth after that in FQ3, from that billion-dollar quarter in FQ2, etc., billion-plus quarter in FQ2.

We have provided you a lot of these data points over the last several quarters because we were still in the process of ramping our capacity and ramping our revenue and ramping our scale in HBM. Of course, HBM is now over a $6 billion run rate business for us based on the last quarter's reported numbers. We are now at a place where we can not only offer customers with our HBM products, world's best technology, most based on our very mature capability in 1-beta node, but also the best power consumption capabilities. We have not only that, which we also had last year, but we also now have the capacity in place and the scale in place to be able to meet their growing demand. We have earned the trust of our customers.

We have terrific engagements with all of the major HBM consumers in the world. We are deeply embedded in their roadmaps, not just for HBM4, which we have just sampled, but also for HBM4E, where we have multi-year R&D engagements to do co-design work that relate to the custom base die that HBM4E will have. We are very excited about the growth opportunity. We are very confident about our place in the competitive landscape. We are very happy and glad to see the contributions of our team on the execution front, from ramping the high-quality output to getting the financial benefits of growing this business in our portfolio. In terms of the discussions with the customers, our customers are going through a lot of rapid transitions. We're going from 8-high to 12-high. That is in progress right now on HBM3E.

HBM4 has been sampled to them by us, and they are considering the timing of their platform transitions that will leverage HBM4. Most of our customers are still in the process of finalizing their plans for 2026 in terms of the transition timelines of their key platforms, which will then determine the mix of products they have to purchase. HBM products, as you know, come with very different types of lead times than the rest of the business. We like to ensure that when we start these wafers, we have very good visibility to the demand and good agreement and understanding with our customers on what volumes they will take and what time frame. Consequently, our customers have a higher bar in terms of providing those forecasts to us, a higher bar of fidelity, of quality of those forecasts.

They have to go through the assessment of what their platform transition timings will be, what their volumes by product will be. That business, as it has scaled, has become much more complex due to its scale. We are just going through those discussions with those customers. As and when we have the full visibility to all of these numbers and the agreements fall in place, we have confidence that we will end up with a terrific trajectory of our HBM business.

Eddy Orabi (Analyst)

That's very helpful. Thank you, Sumit.

Sumit Sadana (Chief Business Officer)

Sure.

Operator (participant)

Thank you. Our next question comes from the line of CJ Muse from Cantor Fitzgerald. Your question, please.

CJ Muse (Senior Managing Director)

Yeah. Thank you for taking the question. I was hoping you could hit on, I guess, where you think you are seeing tariff-related pull-ins, and if you can kind of comment between both DRAM and NAND and kind of consumer, non-consumer. You did take up your DRAM bit outlook for the year. Can you also discuss what's driving the uptick there? Thanks so much.

Sumit Sadana (Chief Business Officer)

Yeah. I think I had mentioned earlier in the call—I will take your second part of the question first. I had mentioned in the earlier part of the call that the improvement in the DRAM outlook for the calendar year 2025 has nothing to do with any kind of tariff-related movement that may have occurred for some customers. It has a lot to do with the fact that we continue to see robust demand driven by AI in the data center. This is not just HBM demand, but all data center-related DRAM demand. We are seeing improvements from the CQ1 levels of data center SSD type of demand there as well. Really, the other area of improvement beyond the data center and DRAM has come from our improved view of what is happening in the industrial and broad distribution markets. These markets have not grown much for many quarters.

You have seen that view across the semiconductor industry. These markets seem to be improving their growth trajectory, forming up their growth forecast. That is helping the 2025 view of DRAM growth. As it relates to the tariffs and what some customers may have done, first, I just wanted to reiterate that whatever impact tariffs may have had on customer order patterns, we think that overall impact is fairly modest in our SQ3 numbers. We actually are not too concerned about what the tariff-related impact has been because our customers' aggregate demand signals for the remainder of calendar 2025 continue to be healthy. We feel like we are in a constructive demand environment for the remaining part of calendar 2025. Of course, there is uncertainty related to tariffs and whatever may hence happen to the macro environment.

We are mindful of that uncertainty, but we also know that we are one of the most agile businesses out there in responding to any changes that may occur. With that said, the tariff-related movement from certain customers may have mainly been to stage inventory of their own finished goods in different parts and different geographies. That may have created some need for memory products in terms of pull-in effect. Again, the overall impact is fairly modest.

CJ Muse (Senior Managing Director)

Thank you.

Sumit Sadana (Chief Business Officer)

Sure.

Operator (participant)

Thank you. As a reminder, ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. Our next question comes from the line of Vijay Rakesh from Mizuho. Your question, please.

Vijay Rakesh (Manging Director)

Yeah. Hi, just a quick follow-up. When you look at your HBM4, I think you guys mentioned the CMOS logic die. Can you talk to how that compares to—I think some of your peers have talked about FinFET as well—and how that could drive higher ASPs on your HBM4, I guess, versus HBM3E? Thanks.

Sumit Sadana (Chief Business Officer)

Yeah. The HBM4 cost and price is expected to be higher than HBM3. We do expect that the product itself has remarkably better specs, as you have seen from our press release as well on HBM4. In terms of value that it creates at the system level, it is also very robust value for our customers. We do expect that the pricing on HBM4 on a per-bit basis will be higher than that of HBM3E. We definitely will look forward to the tailwind from that growth as well.

Manish Bhatia (EVP of Global Operations)

Vijay, I think Sanjay made this point. This is Manish. I think Sanjay made this point on the call. Maybe everyone knows this, but the JEDEC standard die size for HBM4 is larger than it is for HBM3E for all players. That is why the trade ratio, the cost with HBM4 will be higher. Just to reiterate, we're building our HBM4 on our now two-years-old one-beta technology, very, very proven, very strong-performing product. Similarly, our logic die is going to be built internally. The integration between the memory and the logic is also proven from our HBM3E processes. The advanced packaging process, we're leveraging all the learning. We feel very good about the roadmap decisions that we've made relative to HBM4 in order to intersect the market as soon as our customers are ready with a terrific-performing product as well.

Vijay Rakesh (Manging Director)

Got it. Just one quick last one on the pull-in. Sorry to be the dead horse. I know you said still seeing second-half strong data center, but is there any pull-in from Q1 into Q4? Should we be concerned about that? How can you frame that a little bit? Thanks.

Sumit Sadana (Chief Business Officer)

Yeah. We think that any kind of pull-in activity in aggregate, whether it is Q3, FQ3, FQ4, is a modest amount of impact. We continue to feel that the overall demand environment beyond the FQ4 time horizon, which is the rest of the calendar year beyond FQ4, remains in a healthy place in terms of our customer signals. This is part of the reason why we also feel good about driving the pricing of our products. Our inventories are in a good place. We expect the pricing to improve in FQ4. We do not see that as just a very much tariff-related or pull-in-related effect. It is more of an overall market environment impact. That is why we have also provided you a view of DRAM bit growth in calendar 2025, which is now improved versus what we mentioned to you just a quarter ago.

Vijay Rakesh (Manging Director)

Sounds good. Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Timothy Arcuri from UBS. Your question, please.

Timothy Arcuri (Managing Director)

Thanks. I'm trying to figure out just the pricing modeling on HBM. So nearly half of the dollar revenue growth in DRAM came from HBM, where we know that the price is many multiples of non-HBM. I don't know. Most would say it's probably four and a half to five X. I get that the HBM ASP—or sorry, that the non-HBM ASP would have come down because of the mixed-to-consumer. Why would the HBM ASP have come down? Because it had to come down a lot for overall DRAM pricing to be down if half of the dollar growth came from HBM. Pricing had to be down on HBM. Why would that have been the case? Is this product transition-related? I guess I'm just asking, is the pricing noisy on a sequential basis? Yeah. Thanks.

Sumit Sadana (Chief Business Officer)

Yeah. I mean, the HBM pricing is not noisy, and it's not going up and down in the way you're describing. I think if you look at our results, and particularly, I'll point you to the growth in our mobile business, which has been very significant. The price points in mobile tend to be quite low compared to data center. Definitely, when you look at the overall mix, and the mobile business is a pretty sizable business. It's not a trivial business. It's a large part of the TAM as well. When you look at the overall effect, on a like-for-like basis, we have improved pricing, but we have growth in HBM happening, but we also have fairly significant increase in consumer-oriented mix in FQ3. We had highlighted when we provided guidance for FQ3 last quarter.

We highlighted to you that we would be having a significant increase in our consumer mix. That has been driven by the fact that it took several quarters for the inventories in client and smartphones to get to healthy levels after being heavy in inventory in the second half of calendar 2024. We were shipping into these markets on the consumer side at a very low rate compared to the ship-out rate on these markets because of that inventory level. When that inventory level became normalized, our growth rate in FQ3 has suddenly jumped in a lot of these consumer end markets, which carry lower price points. Even though we have had very steady pricing on the HBM front and like-for-like pricing increases, the mix change has been so sharp that it has caused the impacts on the high-level pricing that we're observing in the numbers.

Timothy Arcuri (Managing Director)

Right. So the message is that HBM price was still up. It's that the non-HBM price was down such that the blended ASP was down low single digits. That's the message, correct?

Sumit Sadana (Chief Business Officer)

Yeah. I mean, the message is that the HBM pricing is steady, and the pricing we have on the DRAM side, like-for-like, has improved sequentially. It is really the mixed change on the consumer side that has done this. Now, we spoke about this on the DRAM side, but of course, on the NAND side, we have some different dynamics, including the fact that the market environment is not as healthy as it is on the DRAM side. It is a more challenging environment on the NAND side. The NAND dynamics are different. I just wanted to make sure that I clarify that the DRAM dynamics are very healthy.

Timothy Arcuri (Managing Director)

Totally. Totally great. Just one last quick one. Just on the cost. Cost had to be down a lot in both DRAM and NAND. It had to be down like mid-single digits in both. Definitely better than what I would have thought. Why was that? I know, Mark, you talked about these NAND headwinds, but it seems like they were not anywhere near as bad as what you thought they would be. How did the cost work so that they were down so much?

Manish Bhatia (EVP of Global Operations)

Yeah. Mark and then I'll add some color.

Mark Murphy (CFO)

Yeah. I would just say, Tim, that I mean, mix affects cost, as you know. And so there's some of those effects. I think just on cost overall, front-end bit cost reductions, HBM and DRAM and for NAND, they're generally on track with the front-end cost reduction ranges that we've talked about before. I think that's if you're looking to model things going forward, I think that's something to keep in mind. Our business is changing to this mix issue. Our business is changing with our focus on the higher performance part of the market. Sometimes that has some higher costs associated with it, but it's higher margin. We get higher value out of that. Again, the mix is really affecting the cost.

You'll see us move away from traditionally what we would do is drill into the cost detail every call because it's becoming a harder metric to follow with the improving mix that we are driving in the business.

Manish Bhatia (EVP of Global Operations)

Yeah. Tim, I'll just add a little—I mean, you mentioned on the call that our HBM 12-high yields are doing better than our initial HBM 8-high ramp was a year ago at this time and better than our expectations. That is overall HBM gave me a little better than our expectations last quarter. There were certain other areas that Mark and Sanjay both commented on a little bit that our cost performance was operationally better. As Mark mentioned, a lot of it is due to mix as well.

Timothy Arcuri (Managing Director)

Cool. Okay. Thank you so much.

Operator (participant)

Thank you. For our final question today, it comes from the line of Chris Danely from Citi. Your question, please.

Hi there. Yeah. This is James filling in for Chris. Just had one question. Last, I think it was probably about a couple of months ago, but you said the August quarter gross margins could be flattest to slightly up compared to this quarter. Was there any major change in that other than some pricing? You talked about the data center mix, but just wanted to dig on that. Thanks.

Mark Murphy (CFO)

Yeah. I think I covered this on the main call that when we provide that guidance, it was in a period of transition. We did know that inventory outlook was improving. We indicated on that call that we intended to work to inflect price. The conditions of the market are just better than we expected when we gave that guidance. Our performance, particularly on price relative to what we thought the market would bear, was better. That is carrying into the fourth quarter. Now, you reset the baseline. We did 39 versus our guide of 36.5. From that baseline of 39, we are seeing still a constructive market environment, particularly in DRAM, or especially in DRAM. We are still focused on price. The 39-42 guide is also—the majority of that is driven by favorable mix effects.

More DRAM growth relative to NAND. And if we cut by markets, more data center than consumer-oriented mix.

Thank you.

Operator (participant)

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.