MICRON TECHNOLOGY INC Q4 FY2024 earnings call

Micron delivered a strong finish to fiscal year 2024 with Q4 revenue at the high end of guidance, gross margins and EPS above guidance ranges. It achieved record-high revenues in NAND and the storage business unit in Q4. Fiscal 2024 revenue grew over 60%. Gross margins were expanded by over 30 percentage points and revenue records were achieved in the data center and automotive. Micron is ramping production of 1-beta DRAM and G8, G9 NAND nodes. The 1-gamma DRAM pilot production using extreme ultraviolet lithography is progressing well. Fiscal 2024 DRAM front-end cost reductions were at the high end of the outlook, and NAND cost reductions were consistent with the forecast. It expects fiscal 2025 DRAM front-end cost reductions excluding HBM to be in the mid-to-high single-digit percentage range and NAND cost reductions to be in the low-to-mid teens percentage range. Progress is being made on the new fab in Idaho, the permitting process for the New York site, the assembly and test facility in India, and the Xi'an back-end expansion. Micron acquired an LCD factory in Taiwan to enable DRAM production testing. Memory is essential for AI, with multiple vectors driving AI memory demand. Data center demand is strong and customer inventories are healthy. Industry server unit shipments are expected to grow in the mid-to-high single digits in 2024. Micron is well positioned in the data center with its portfolio of HBM, high-capacity D5, LP5 solutions, and data center SSD products. HBM had several hundred million dollars of revenue in 2024, and it expects HBM market share to align with DRAM share in 2025. The HBM total addressable market (TAM) is expected to grow from $4 billion in 2023 to over $25 billion in 2025. There is strong demand for high-capacity D5 and LP5 solutions. Data center SSD demand is driven by AI and traditional compute/storage, and it achieved a quarterly revenue record in Q4 2024. PC customers built inventories, and it is expected that PC OEMs will have healthier inventories by spring 2025. AI PCs require higher memory and storage capacity, and Micron is well positioned for AI PCs with its client LPDRAM, DRAM, and SSD products. Smartphone unit volumes are on track to grow in 2024 and 2025, and AI smartphones have increased DRAM. The automotive infotainment and ADAS are driving long-term memory and storage content growth, and Micron achieved a fiscal year revenue record in 2024.

Fiscal Q4 revenue was approximately $7.8 billion. Fiscal Q4 DRAM revenue was $5.3 billion, representing 69% of total revenue, up 93% year-over-year. Fiscal Q4 NAND revenue was $2.4 billion, representing 31% of total revenue, up 96% year-over-year. For fiscal 2024, total revenue was $25.1 billion, up 62% year-over-year. DRAM revenue was $17.6 billion, representing 70% of total revenue, up 60% year-over-year. NAND revenue was $7.2 billion, representing 29% of total revenue, up 72% year-over-year. Compute and Networking Business Unit revenue was $3 billion, up 17% sequentially. Mobile Business Unit revenue was $1.9 billion, up 18% sequentially. Storage Business Unit revenue was $1.7 billion, up 24% sequentially, led by data center SSD which reached a quarterly revenue record. Embedded Business Unit revenue was $1.2 billion, down 9% sequentially. The automotive segment achieved a new fiscal year revenue record for the fourth consecutive year in 2024.

Fiscal Q1 revenue is projected to be $8.7 billion plus or minus $200 million. Gross margin is expected to improve sequentially primarily due to better pricing and portfolio mix. Operating expenses are flat to slightly up in the fiscal first quarter compared to the fiscal fourth quarter levels. For the full fiscal year 2025, operating expenses are expected to grow by a mid-teens percentage versus fiscal 2024. The non-GAAP tax rate is estimated to be in the mid-teens percentage range. Days of inventory outstanding are expected to decline in 2025 and approach the target by the end of 2025. Fiscal Q1 capital expenditures are expected to increase sequentially to approximately $3.5 billion. The 2024 DRAM industry demand outlook has been upgraded to a high-teens percentage range growth, the 2024 NAND industry bit demand growth remains in the mid-teens percentage range, and both DRAM and NAND industry bit demand growth are expected to be around the mid-teens percentage range in 2025.

Industry capacity changes may affect the supply-demand balance. Intensified competition may impact market share. Improper inventory management may bring risks.

Q: Timothy Arcuri from UBS asked about assumptions in guidance, specifically bit growth for DRAM and NAND.

A: Mark Murphy responded that DRAM bits are expected to be up higher than prior, NAND bits are sequentially flattish, with a healthy supply-demand environment and a favorable mix.

Q: C.J. Muse from Cantor Fitzgerald asked about HBM revenue in fiscal Q4 and CapEx prioritization.

A: Sanjay Mehrotra said that specific HBM Q4 revenue is not disclosed but several hundred million dollars of revenue was achieved in 2024, and CapEx is focused on HBM investment and long-term construction.

Q: Krish Sankar from TD Cowen asked about HBM road map cadence and inventory.

A: Sanjay Mehrotra said that the HBM3E yield ramp is going well, and Mark Murphy said that inventories went up because customers bought ahead, and it is expected to draw down inventories in 2025.

Q: Joseph Moore from Morgan Stanley asked about HBM market share.

A: Sanjay Mehrotra said that Micron is well positioned with the best product and expects to reach a market share in line with DRAM share in 2025.

Q: Vivek Arya from Bank of America Securities asked about HBM supply-demand and gross margin.

A: Sanjay Mehrotra said that it is focused on HBM goals, and Mark Murphy said that the supply-demand setup is good for fiscal 2025.

Q: Toshiya Hari from Goldman Sachs asked about HBM upside and gross margin.

A: Sanjay Mehrotra said that it is focused on HBM goals, and Mark Murphy said that gross margin is supported by the differentiated portfolio.

Q: Toshiya Hari also asked about DRAM industry bit growth decel.

A: Sanjay Mehrotra said that it is due to a higher base in 2024 and inventory factors, and the 2025 outlook is in the mid-teens.