Memory leader Micron opened semiconductor earnings season. FY24Q4 corresponds to June through August 2024, following a long wait for the 10-K filing.
Micron FY24Q4 Earnings:
Revenue $7.75B, up 93% year over year and 14% sequentially. Revenue has grown year over year for four consecutive quarters. Guides FY25Q1 revenue $8.7B, up 84% year over year and 12% sequentially, an all-time high (prior peak was FY18Q4 at $8.4B).
GAAP gross margin 35.3%, up 8.4 percentage points sequentially. Guides FY25Q1 gross margin 38.5%, up 3.2 percentage points sequentially (peak gross margin was FY18Q4 at 61%).
GAAP operating income $1.522B, up 112% sequentially. Operating margin 20% (peak operating income was FY18Q4 at $4.3B).
Operating cash flow $3.405B, up 37% sequentially (peak operating cash flow was FY18Q4 at $5.2B). Free cash flow positive for two consecutive quarters.
GAAP net income $887M, positive for three consecutive quarters. Non-GAAP net income $1.342B, positive for three consecutive quarters. Guides FY25Q1 GAAP net income $1.733B, Non-GAAP net income $1.958B (peak net income was FY18Q4 at $4.3B).
Resumed buybacks this quarter, repurchasing $300M.
FY24 revenue mix: US 52%, Taiwan 19%, Mainland China 12%, Hong Kong 4%, Japan 3%, Europe 3%.
Business Segments:
DRAM revenue $5.326B, up 93% year over year, growing for four consecutive quarters, 69% of revenue. DRAM bit shipments flat sequentially; ASP up mid-teens% sequentially.
NAND revenue $2.365B, up 96% year over year, growing for four consecutive quarters, 31% of revenue. NAND bit shipments up high-single digits sequentially; ASP up high-single digits sequentially.
Guides next quarter DRAM bit shipments up sequentially, NAND bit shipments flat sequentially. Data center remains the primary growth driver: HBM, high-density DIMMs, data center SSDs.
By End Market:
FY24 data center revenue hit a record. Guides FY25 data center revenue to grow significantly on that base. 2025 data center demand remains strong. Guides 2024 server unit shipments up mid-high single digits year over year (unchanged). AI servers up sharply; traditional servers up low-single digits. Expects similar trends in 2025. Core data center products are HBM, high-density D5/LP5, and data center SSDs. Guides each category to contribute billions in FY25 revenue.
HBM contributed hundreds of millions this quarter (last quarter $100M; SK hynix Q2 HBM revenue ~$1.2B). Gross margin above DRAM (DRAM gross margin above corporate average). Guides FY25 HBM revenue to reach billions. Projects HBM TAM growing from near $4B in 2023 to over $25B in 2025. HBM share of DRAM bits rising from 1.5% in 2023 to 6% in 2025.
12-high 36GB HBM3E expected to begin ramping in early 2025, with shipment mix rising sharply thereafter. Guides 2025 company HBM share to match its DRAM share (~20%). 2024/2025 HBM volume and pricing are locked in. HBM4 to launch in 2026.
High-density 1-beta 128GB server D5 DIMM penetration rising. Data center SSD revenue exceeded $1B this quarter, a new record. Data center SSD demand remains strong in both AI and traditional compute/storage. Company share continues to rise.
Guides 2024 PC unit shipments up low-single digits year over year (unchanged). With seasonal PC strength in H2, expects PC inventory to be healthier by spring 2025.2025 full-year PC shipments continue to grow, weighted to H2, driven by Win10 end-of-life, Win12 launch, and AI PC refresh wave.
MBU operating margin 27% this quarter, positive for two consecutive quarters. Guides 2024 smartphone unit shipments up low-mid single digits year over year (unchanged), with continued growth in 2025. First phone customers validated 1-beta LP5x DRAM + 2nd-gen G8 NAND UFS4.0 this quarter.
Auto revenue set a record for the fourth consecutive year. Due to auto industry inventory correction, expects growth to resume in FY25 H2. First auto customers validated 1-beta 16Gb LP5 DRAM this quarter. Industrial and consumer retail not mentioned this time.
Earnings Call Highlights:
Guides 2024 DRAM bit demand growth high-teens% (raised), NAND bit demand growth mid-teens% (unchanged). Both guided mid-teens% in 2025. Expects healthy DRAM and NAND supply/demand in 2025.
Guides ex-HBM DRAM front-end cost down mid-high single digits in FY25. NAND front-end cost down low-to-mid teens% in FY25.
1-beta DRAM, G8 (232-layer)/G9 NAND in volume production; FY25 mix to keep rising. 1-gamma EUV DRAM 2025 volume production on track.
Next quarter capex is expected at $3.5B; FY25 capex will increase significantly to the mid-30s% of revenue, driven primarily by greenfield fab investments and HBM investments. The new Idaho fab is under construction, and the new New York fab is seeking government approval; neither is expected to begin production before FY25 and FY26, respectively. The India assembly and test facility is under construction, the Xi'an backend fab is being expanded, and the acquired Taiwan LCD plant is being prepared for conversion into a DRAM production line.
HBM3E consumes 3x the wafers of DDR5, and HBM4 will consume even more, constraining non-HBM DRAM capacity.
DIO was 158 days this quarter, up 3 days sequentially; by end of FY25, excluding strategic inventory, it is expected to fall to 120 days.
FY25 revenue is expected to reach a new record high, with profitability improving significantly.
Overall, Micron's report modestly beat expectations, mainly due to optimistic FY25 guidance, continued margin recovery, and the company's indication that 2025 DRAM and NAND supply-demand dynamics will be healthy (Morgan Stanley has been bearish on SK Hynix citing oversupply).
The previous quarter's report flagged the wide range in the FY25 HBM revenue guidance. This quarter, using Micron's stated $250B+ TAM and 20% market share target, the implied figure is roughly $5B. Since FY25 HBM volumes and pricing are already locked in, the main variables affecting Micron's FY25 results are the PC and smartphone markets (Morgan Stanley has also cited weak PC and smartphone demand to be bearish on SK Hynix).
Micron currently trades at 2.5x P/B, at the very top of its historical valuation range.