Micron signals high teens DRAM bit demand growth for 2025 amid expanding AI and industrial markets
Jun. 25, 2025 8:37 PM ET
AI-Generated Earnings Calls Insights
Earnings Call Insights: Micron Technology, Inc. (MU) Q3 2025
Management View- Sumit Sadana, Chief Business Officer, announced an upgrade to the company’s DRAM bit demand outlook for calendar 2025, stating, "we upgraded our view to the level you mentioned" and attributing the improvement to "strength in our view of the AI business, i.e., the data center growth, continues to be pretty robust" as well as "really good improvements in demand in these broad distribution and industrial markets."
- CFO Mark J. Murphy highlighted Micron's financial flexibility and deleveraging progress: "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." Murphy also emphasized prioritizing investment in technology leadership and capacity for DRAM to serve HBM and high-value markets, while maintaining the routine dividend and opportunistic share repurchases.
- Murphy addressed gross margin dynamics, referencing "structurally lowered capacity in NAND," strong volumes, and careful inventory management. He noted start-up costs beginning to increase as Idaho 1 comes online, and some FX-related costs, but stressed that "the revenue outlook that we have is much higher."
- Sadana spoke to Micron's position in LPDDR for data centers, stating, "we continue to be very excited about our sole source position in that market...We do expect that LP will grow in its penetration in the data center over time."
Outlook- Management indicated that the DRAM bit growth estimate for calendar 2025 has moved to the "high teens" percentage, reflecting both AI-driven data center demand and improvements in industrial and distribution markets. This is an increase from the "mid-teens" outlook previously stated.
- Murphy guided for a fourth quarter gross margin of 42%, up from 39% in the third quarter, noting "the majority of that is driven by favorable mix effects."
- Sadana projected that HBM bit growth in 2026 will be "significantly faster than the overall DRAM bit growth," underlining expectations for ongoing strong demand.
Financial Results- Murphy detailed a reduction in net debt to $3 billion and reported record liquidity of $15.7 billion.
- Murphy noted structural improvements in NAND volumes and careful capacity management, with inventories in NAND "improved in NAND actually in the quarter, but they remain less healthy than DRAM."
- The gross margin for Q3 was reported at 39%, and guidance for Q4 was set at 42%.
- Sadana shared that HBM is now "over a $6 billion run rate business for us based on the last quarter's reported numbers."
Q&A- Karl Ackerman, BNP Paribas, asked about the DRAM outlook and tariff-related customer pull-ins. Sadana responded, "there is no impact of pull-ins in this assessment...The strength in our view of the AI business...continues to be pretty robust," and improvements in industrial markets are also contributing.
- Aaron Rakers, Wells Fargo, inquired about gross margin influences and LPDDR data center business. Murphy explained that careful capacity management and a favorable revenue outlook are offsetting cost pressures, with positive mix effects into Q4. Sadana highlighted the anticipated growth of LPDDR in data centers.
- Brian Chin, Stifel, pressed for details on DDR4 revenue exposure and gross margin attribution. Murphy stated, "D4 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."
- Hadi Orabi (TD Cowen) asked about HBM pricing and customer timelines. Sadana shared that HBM4 pricing per bit is expected to be higher than HBM3E, and customer engagement around HBM4 and HBM4E is ongoing.
- Timothy Arcuri, UBS, questioned HBM pricing trends and cost reductions. Sadana explained that "the HBM pricing is steady" and the observed pricing effect is due to mix changes, not sequential HBM price declines. Murphy and Bhatia attributed cost improvements to mix and operational performance.
Sentiment Analysis- Analysts focused on sustainability of demand, HBM pricing, gross margin drivers, and inventory dynamics, displaying a tone that was neutral to slightly positive but probing for clarity on mix, pricing, and margin outlook.
- Management maintained a confident stance during the call, using phrases such as "we are very excited by our position" and "we feel very good about the road map decisions that we've made," though acknowledged ongoing market and inventory challenges, especially in NAND.
- Compared to the prior quarter, management's tone was more constructive due to improvements in end-market demand and stronger liquidity, while analysts remained focused on sustainability and risks in the evolving memory market.
Quarter-over-Quarter Comparison- The DRAM bit demand outlook for 2025 was raised from "mid-teens" to "high teens" percentage growth.
- Management's guidance for Q4 gross margin increased from 39% (Q3 actual) to 42%.
- HBM was previously described as a multi-billion opportunity; it is now confirmed as a $6 billion run rate business.
- The focus has shifted from ramping HBM capacity and market share to executing on scale and technology leadership, with continuing strong customer engagement on HBM4 and HBM4E.
- Analysts' questions moved from concerns about inventory digestion and industry profitability to focusing on mix, pricing, and margin sustainability.
Risks and Concerns- Management cited continued challenges in the NAND market, with inventories "remain less healthy than DRAM" despite improvements.
- There is recognition of "uncertainty related to tariffs and whatever may hence happen to the macro environment," though management believes the overall impact is modest.
- FX-related costs and start-up costs at new facilities are expected to increase but are offset by higher revenue outlooks.
- Management acknowledged that HBM4 customer demand forecasting is complex due to platform transitions and longer lead times, impacting visibility.
Final Takeaway
Micron’s management underscored improved market conditions for both DRAM and HBM, raising the 2025 DRAM bit growth outlook to the high teens percent, driven by robust AI and strengthening industrial demand. Record liquidity and a strong balance sheet provide significant flexibility to invest and return capital, while the company projects a Q4 gross margin of 42% and continues to expand its leadership in high-value memory segments. Management remains confident in navigating market uncertainties and capitalizing on ongoing growth in data center and AI-related memory solutions.
Read the full Earnings Call Transcript |
