Q1 2025 Earnings Summary
- Micron expects to generate multiple billions of dollars in HBM revenue in fiscal 2025, driven by strong demand in AI applications; they have already begun shipments to a second large HBM customer and will add a third in CQ1, aiming to achieve HBM market share in line with overall DRAM share by the second half of calendar 2025.
- Leading-edge DRAM nodes like HBM, LP5, and DDR5 are in tight supply, positioning Micron favorably due to expected healthy demand and supply tightness continuing into 2025. This tightness supports higher ASPs and margins for Micron.
- Micron is shifting its product mix towards higher-profit pools, focusing on high-end markets such as data center and AI, reducing exposure to lower-end segments and competition from China-based suppliers. This strategic focus leverages Micron's technology and advanced product roadmap to capture higher margins.
- Micron is experiencing near-term demand weakness due to inventory adjustments in consumer markets and a moderation in data center SSD purchases, impacting its fiscal Q2 outlook.
- Weakness in the NAND market is expected to persist into fiscal Q3, leading to margin pressures. Supply response costs will weigh on third-quarter margins and constrain the ability to expand margins during that period.
- Increased competition from China-based suppliers in lower-end DRAM and NAND products could pose challenges, especially as these suppliers expand their production, though Micron is focusing on higher-end markets.
Metric | YoY Change | Reason |
---|---|---|
Total Revenue | +84% | Driven by strong demand for DRAM and NAND in data center and AI markets, higher average selling prices, and improved market conditions. These factors led to a marked turnaround from weaker pricing in the prior year. |
Compute & Networking | +153% | Fueled by increased cloud server and AI workloads, resulting in higher bit shipments and improved ASPs for products such as HBM and DDR5. Company-specific focus on high-value products also contributed to the surge. |
Mobile | +18% | Benefited from slightly stronger smartphone demand and higher ASPs for mobile DRAM and NAND. However, growth was more moderate than other segments due to ongoing inventory optimization by key mobile customers. |
Storage | +165% | Propelled by record data center SSD revenue and the introduction of innovative SSD solutions (e.g., high-capacity Gen5 drives), which spurred higher shipments and ASPs. The rebound from prior-year lows in NAND pricing also played a significant role. |
Operating Income (EBIT) | Improved from $(1.128)B to $2.174B | Marked recovery supported by substantial revenue growth, better product mix (favoring high-value DRAM like HBM), and ongoing manufacturing cost reductions. Lower underutilization and inventory write-downs compared to the previous year also improved margins. |
Net Income | Improved from $(1.234)B to $1.870B | Reflects stronger operating performance, especially in data center segments, alongside healthier market conditions and disciplined cost management. The prior-year comparison was impacted by weak ASPs and inventory write-downs that did not recur this year. |
Metric | Period | Previous Guidance | Current Guidance | Change |
---|---|---|---|---|
Gross margin | Q2 2025 | 100 basis point decline | 38.5% ± 100 bps | no change (implied) |
DRAM bit shipments | Q2 2025 | Decline sequentially | No current guidance | no current guidance |
NAND bit shipments | Q2 2025 | Decline meaningfully | No current guidance | no current guidance |
Inventory | Q2 2025 | Levels expected to increase | No current guidance | no current guidance |
Revenue | Q2 2025 | No prior guidance | $7.9B ± $200M | no prior guidance |
Operating expenses | Q2 2025 | No prior guidance | $1.1B ± $15M | no prior guidance |
Non-GAAP Tax Rate | Q2 2025 | No prior guidance | Mid-teens | no prior guidance |
EPS | Q2 2025 | No prior guidance | $1.43 ± $0.10 | no prior guidance |
Net CapEx | Q2 2025 | No prior guidance | $3B | no prior guidance |
DRAM bit shipments | FY 2025 | Grow in mid-teens | No current guidance | no current guidance |
Metric | Period | Guidance | Actual | Performance |
---|---|---|---|---|
CapEx | Q1 2025 | $3.5 billion | $3.206 billion | Missed |
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Gross Margin Outlook
Q: Will gross margins improve in fiscal Q3 despite constraints?
A: Management is not guiding third-quarter gross margins. Unfavorable items persist into Q3, including NAND market challenges extending into calendar Q1 and underload charges impacting margins by about 100 basis points. However, they expect favorable effects from growth in data center, mix benefits from higher-margin products like HBM, high-capacity DIMMs, and LPDRAM. Volume growth and better market conditions in NAND, and continued growth in data center SSDs, are expected to support margin expansion beyond Q3. -
Incremental Caution and Demand Outlook
Q: What has changed to cause incremental caution in the outlook?
A: The PC refresh cycle has been delayed, leading to a flat PC shipment forecast for calendar 2024. Customer inventories have not reduced as quickly as expected, impacting near-term outlook. There's also moderation in data center SSD demand into CQ1 after significant buying in calendar '24. The impact is mainly limited to consumer-oriented segments, while data center demand remains robust. -
Data Center SSD Growth
Q: Do you expect data center SSD growth to reaccelerate in fiscal Q3?
A: Yes, management expects growth in bit shipments for data center SSDs to restart in fiscal Q3 and continue into future quarters. They anticipate strong AI-driven demand and are confident due to their industry-leading products like the newly announced 60-terabyte PCIe Gen5 SSD. Overall data center CapEx from end customers is expected to remain strong, offering significant opportunities. -
HBM Capacity Impact on DRAM
Q: How will increasing HBM capacity affect conventional DRAM capacity?
A: As they ramp HBM, the trade ratio between HBM3E and conventional DRAM is 3:1, requiring three times more wafer starts for HBM to produce the same number of bits. They aim to maintain DRAM bit share during this transition, expecting overall DRAM bit growth to align with industry demand in calendar 2025. -
Shift to Leading-Edge DRAM Products
Q: Has Micron structurally shifted its DRAM production to leading-edge products?
A: Yes, only about 10% of global DRAM sales will be from DDR4 and LP4 for the remainder of the fiscal year. They have shifted significantly to leading-edge products like DDR5, HBM, and specialty DRAM, dedicating capacity to a rapid HBM ramp. This shift supports growth in data center and flagship smartphones. -
LPDDR5X and Data Center Opportunity
Q: What is Micron's position in the LPDDR5X data center market?
A: Micron is the pioneering supplier of LPDDR5X in the data center, effectively driving the entire market worldwide. They have led innovations allowing data centers to deploy LPDDR5X memory and are partnering with customers to capitalize on this significant opportunity. Combined with their high-capacity DIMMs, these categories are expected to contribute multi-billion dollars, with data center revenue now accounting for over 50% of Micron's revenue. -
Inventory Levels and Customer Demand
Q: When will inventories normalize, and shipments align with consumption?
A: Customer inventories are expected to be healthier by spring. Currently, Micron is shipping less than customers are consuming but expects to start shipping in line with consumption by fiscal Q3. They are confident in demand and anticipate inventories will draw down through the year. -
DRAM Bit Shipments and Market Alignment
Q: Will Micron's DRAM shipments align with industry growth in 2025?
A: Yes, Micron expects to maintain stable bit share and ship in line with industry demand, projecting mid-teens growth in DRAM bit demand for calendar 2025. Despite volume declines in Q2, they anticipate shipping in line with the industry for the year. -
NAND Shipment Expectations
Q: Will Micron's NAND shipments grow in line with industry demand?
A: Yes, Micron expects to maintain stable bit share in NAND, shipping in line with industry demand projected to grow in the low double digits for calendar 2025 . They aim to ship roughly in line for both DRAM and NAND in the calendar year. -
HBM Volume Agreements and Cancellations
Q: Are HBM volume and pricing agreements cancelable?
A: While customers can make changes beyond certain lengthy lead times, once firm orders are placed within those lead times, they are committed. Given strong demand and long lead times, customers have been placing consistent orders, and cancellations are unlikely. -
HBM Ramp and Constraints
Q: What are the prospects and constraints for HBM ramp?
A: Micron is pleased with the HBM ramp and expects solid revenue growth quarter-over-quarter through fiscal 2025 and into calendar 2025. They are adding capacity gradually, installing new equipment, and growing capacity week-over-week. Constraints are being managed, and as they introduce 12-high stacks, a larger portion of their mix will support growth.