Micron Technology, Inc. (MU) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us, and welcome to Micron's Fourth Quarter Post-Earnings Analyst Call. After today's prepared remarks, we will host a question-and-answer session. [Operator Instructions] I will now hand the conference over to Satya Kumar, Corporate Vice President, Investor Relations and Treasury. Satya, please go ahead.

Thank you, and welcome to Micron Technologies Fiscal Fourth Quarter 2026 Post Earnings Analyst Call. On the call with me today are Manish Bhatia, President and Chief Operating Officer; Dr. Scott DeBoer, President and Chief Technology and Product Officer; and Mark Murphy, our Chief Financial Officer. 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 the statements made today. We refer to the documents that we filed with including our most recent Form 10-K 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 or achievements. We are under no duty to update any of the forward-looking statements to confirm these statements to actual results. We can now open up the call for Q&A.

We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Ben Reitzes from Melius.

Congrats on the promotion, Scott, I'm not sure if Manish is on, but congrats. So I wanted to ask about Congrats. So wanted to talk about 2028, new commentary here regarding and you guys felt compelled to kind of say you see things tighter in '28 than this year as well as '27. I wanted to know a little bit more about what changed and what that means for margins. You gave more margin commentary than you usually do around '27, which was great, by the way. but I just don't see any reason why margins would change in '28 from the level you implied for '27. So just a little more comment around '28 would be great.

Sure, Ben. I can start, and then if Mark wants to add anything, and thank you for the shout out. In -- in terms of 2027 and 2028 in our commentary, we are seeing stronger demand drivers than we've seen before. We commented about the server units continuing to grow into '27. And of course, I think everybody is talking about how agentic AI is really growing fast, and that's creating a CPU-driven demand stream as well. And so as we've gone through working on our fiscal year '27 and we commented that we have more than 75% of our shipments committed for the year that shows a strengthening demand and allows us to shift our conversations on allocation with our customers out to 2028. And so that's one element of our confidence is that '27 is shaping up with stronger demand than maybe we had seen before. And then, of course, as we also have now more SCA conversations with customers, including extensions that we've now negotiated that gives us more confidence in the long term as well. And so the combination of those two things is a very strong outlook for demand through 2028. And then on the supply side, there's still the same structural constraints on supply growth that we've talked about before, which is diminishing returns from technology transitions versus past technology transitions. HBM growing faster than conventional DRAM through 2028, which means that as a portion of the industry's output capability, HBM is growing in terms of that share. And of course, the trade ratio, not just today's trade ratio for HBM, but future more complex HBM having higher trade ratios that's also going to be constraining supply. And then it just takes a long time for these new clean rooms that the whole industry is working on to be able to build and then qualify and then equip and it takes -- even from the time they open, it takes a few quarters for meaningful shipments to come. So that really gave us the combination of that demand outlook and this supply outlook. We made the statement that we really don't have line of sight to when supply and demand balances.

Yes, Ben, I would maybe just add to Manish's comments that as you noted in '27, we had indicated for the balance of the year that we would see margin expansion relative to Q1 a function of continued price increases, albeit at a more moderate pace. And we've said that for some time that eventually price increases would moderate. And then at that point, in addition to just price increases at a lower rate, we would -- we have a better mix of products, and we would work our mix based on our technology and product leadership. And the market conditions, as we said, we would expect to remain tight, and that would be supportive through '28. And of course, the partial offset to price and favorable mix would be start-up costs. But these are all things we're managing. We've been managing them, and we would expect to be able to sustain strong financial performance.

Great. And if I could just sneak one other in. I mean, Sanjay had a great seat at the Trump, I guess, launch dinner, whatever, lunch. And just wondering, did you come away feeling good about the industry's ability to grow and self-regulate and the future coming out of that meeting, did that lend a hand any of the upbeat guidance he gave? Or just any color out of that and how we felt coming out and even if memory came up a lot at the meetings.

Well, Ben, Sanjay is not here, but I'll give you what conversations I mean, for sure, we're very happy to participate in that forum. And it does show the importance of memory that Micron was invited there along with the model companies as well as the accelerator companies. I think that the framework that in the white paper or the -- that was published out of that, that many of the model companies have already signed is that, that framework is constructive towards continuing to have advancement in AI infrastructure and AI, in particular, AI hardware infrastructure. And I know that one of the concepts that got discussed quite a bit was that the way to manage some of the security aspects is to actually have security solutions, which will require more advanced hardware, including higher performance memory, lower latency memory, as part of those security solutions, higher bandwidth memory because if you can imagine, setting up a gateway to be able to manage much of the security aspects that could be proposed in the future, those -- the responsiveness of those gateways are going to depend a lot on the availability of performance and low latency members.

Your next question comes from the line of Melissa Weathers from Deutsche Bank.

My congrats as well to the 2 new promotes. On the -- and -- in past quarters, you've given us a view on where you think the HBM total TAM could be by 2028, 2030. Clearly, the pricing environment has changed since those updates. I don't know if you want to give us an official new number for where you think HBM TAM could go. But like directionally, can you help us sort of try to size like how much is coming from bets and how much is coming from pricing? And just any updated views on how big you think that market could be?

Sure, Melissa, thank you again. We are not updating that TAM outlook right now. But what we have said is that HBM shipments, we expect to grow faster than conventional DRAM. That means that HBM will continue to gain -- to grow as a portion of the industry's capacity year through 2028. And the pricing for HBM, at least for us, we did comment that we have increased that pricing significantly for calendar year '27, which will reset at the beginning of the calendar year to narrow the profitability gap with conventional DRAM. But beyond that, we haven't made any comments on the specific outlook for the HBM TAM. It continues to grow, it continues to be a very important enabler. HBM deployments continue to be an important enabler of much of the rest of the to be able to reach its potential as well. So it's an important part of the market.

Got it. Maybe following up on that, from a market share perspective, any updated view on how you guys are targeting market share for HBM. In the past, you said you want to get it to within the corporate average, kind of low 20s present market share. So is that still the case? And then I noticed in the prepared remarks, your comments on HBM 4E and the engagements with NVIDIA there. So just any more color on 2027 and HBM 4E the progress that you're making there with customers would be great. .

Sure. Sure. I'll take the first and then maybe Scott can take the HBM 4E since his team is driving that product development. In terms of the HBM market share, about a year ago, we had achieved the milestone that we talked about that our HBM market share reached our broader DRAM market share. And at that time, we said that our goals would then move around based on various different factors. And we haven't really updated exactly our HBM share target other than to say that we do expect our HBM share to be around our broader DRAM market share, but we're not necessarily targeting 1 number or the other. It will move around based on various different factors there. But as I mentioned on the prior question, it's a really important part of the market. It allows us to be very close to the leading edge of the accelerator platforms that many of our customers are designing and then deploying, and it's a key enabler for all the rest of AI to be able to deliver on its promise and its potential.

And then I can just add a little bit about the work with NVIDIA on what really will be the first major custom HBM product out in the market. And we've been working with NVIDIA for over a year on HBM 4E, what's called NV HBM. And we see substantial opportunity there for us in the co-design of that product with obviously a key customer to have this be a product that delivers really substantial value beyond standard HBM 4E. And I think it will be a real impact on industry showing where future system with optimized.

Your next question comes from the line of Atif Malik from Citi.

The first one on the 26 35% of sales by 2030. Are these for both DRAM and NAND? And if you can just split them out?

It, we're not splitting those out, but the SCA agreements do cover both DRAM and NAND. And it is through 2030, but we're not breaking it out specifically. I can tell you that the DRAM volume is a little bit less than that, approximately 35% and the NAND bit volume is a little bit more. And as we think about these going forward, we are -- we have more availability. As we said, that this number could get up to be higher in the future as we continue negotiations for SCA.

Understood. And then on the impact of China competition, firstly, if you can confirm that your China sales exposure is fairly minimum. And if Scott can comment on how should we see kind of China competitors kind of closing the gap on technology? If you can provide any color?

So on the first question, Yes, our exposure to China has been reducing over the last couple of years in the last several quarters, and we expect the exposure will be in the single-digit range in fiscal '27.

Then I could comment a little on the technology side. Currently, our technology leadership is at least 2 nodes ahead of of the China competition. I think it's important to say that our focus is on maintaining technology leadership and having true differentiation in our products in how we compete. We're -- as Manish, I think, mentioned earlier and as it was mentioned in the call, our 1-gamma DRAM technology is already the majority of our bids, and it set up to be the largest node in the company's history. It is dependent on EUV technology. The next-generation One Delta is well underway and we're focused on the ramp of that in the second half of next year. EV technology is critical to all advanced DRAM nodes going forward. And our expertise in that, both from the technology side in partnership with our supplier there as well as mass technology and other things is -- continues to be a key differentiator for Micron.

And then .

Thank you, -- and can I just clarify that the response in terms of DRAM and NAND was actually a bit common just to make sure that, that was clear. I'm not sure I specified. So making sure it's clear. .

Your next question comes from the line of Karl Ackerman from BNP Paribas.

Yes. Thank you, Tara. You are seeing robust demand across much of your portfolio, but this quarter does appear to the second quarter row that mobile and client segment saw bit shipments decline. Are higher memory prices reducing demand in this area of the market. And while this area of the market has been slow to adopt SCA, I'm curious if your growth in SCA is coming from this cohort.

Thanks, Karl. We did see sequential bit decline in our mobile business unit, but we did see revenue growth, obviously, with both higher pricing and favorable mix. I think what's important to note is that the premium segments of the both clients as well as the flagship smartphones do see robust demand for higher content, higher performance solutions. And that's a segment that, of course, we're -- those are the segments that, of course, we're very focused on. And with that wind at their back, we see the PC and mobile industry revenue to be growing even though we do see unit volumes declining. And in terms of SCAs, I'll just comment that we do have SCAs across all of our business units, including the Mobile Client business unit. And we're not specifically breaking them out, but I will tell you that we have SCAs because it's important for us to be maintaining diversified supply to all our end markets.

Got it. Yes. Maybe a question for Scott, if I could. How do you view the competitiveness of your in-house optimized base die on HBM 4E versus peers? Certainly, some of these customers are seeing custom solutions. Does the complexity and economic value flow primarily through the compute customers or the HBM providers?

So maybe just a little clarification first. On HBM 4E, we have co-designed with NVIDIA, but not in-house-based like we use on HBM 4. So I think just to be clear on your question, I just wanted to be sure I was answering it in the right way. On HBM 4E, this codesign is on a foundry process, both for the customized product and for the say get specified product. So the -- and then I think maybe to add a little color to that. The differentiation just as we have demonstrated in the past on HBM prior HBM products winds up being in the power and the ultimate speed performance and the margin of the product working with our customers. That, in all previous generations hasn't been the same between suppliers in that we think will continue to be a strength of Micron in terms of quality of the product and the capabilities that we're able to put out.

And then in terms of your question on economic value, HBM is a premium product. And as Scott mentioned, as we look at the NV HBM with customization, we do expect that to be a high-value product as well. And we're confident that HBM will continue to contribute and be a strong ROI product for us.