Memory leader Micron opened semiconductor earnings season. FY25Q2 corresponds to December 2024 through February 2025.
Micron FY25Q2 Earnings:
Revenue $8.05B, up 38% year over year, down 8% sequentially; Revenue up year over year for 6th consecutive quarter; Guiding FY25Q3 revenue $8.8B, up 29% year over year, up 9% sequentially, record high;
GAAP gross margin 36.8%, down 1.6 percentage points sequentially; Guiding FY25Q3 gross margin 35.5%, down 1.3 percentage points sequentially (gross margin peak was 61% in FY18Q4);
GAAP operating income $1.77B, down 18% sequentially; Operating margin 22% (operating income peak was $4.3B in FY18Q4);
Operating cash flow $3.94B, up 22% sequentially (operating cash flow peak was $5.2B in FY18Q4); Free cash flow positive for 4th consecutive quarter;
GAAP net income $1.58B, positive for 5th consecutive quarter; Non-GAAP net income $1.78B, positive for 5th consecutive quarter; Guiding FY25Q3 GAAP net income $1.54B, Non-GAAP net income $1.76B (net income peak was $4.3B in FY18Q4);
No share repurchases this quarter.
Business Segments:
DRAM revenue $6.1B, up 47% year over year, 6th consecutive quarter of growth, down 4% sequentially, 76% of revenue; DRAM bit shipments down high single digits sequentially; ASP up mid-single digits sequentially; Guiding FQ3 bit shipments up sequentially;
NAND revenue $1.9B, up 18% year over year, 6th consecutive quarter of growth, 23% of revenue; NAND bit shipments up slightly sequentially; ASP down high-teens% sequentially; Guiding FQ3 bit shipments up sequentially;
Data center DRAM and NAND diverged sharply this quarter; CNBU operating income $1.9B, up 12% sequentially, 6th consecutive quarter of sequential growth; SBU operating income $24M, down 93% sequentially, consumer electronics and auto/industrial demand remain weak; MBU operating income $60M, down 82% sequentially, 3rd consecutive quarter of sequential decline; EBU operating income $3M, down 73% sequentially, 2nd consecutive quarter of sequential decline; Auto business is now the largest portion of EBU;
By End Market:
Guiding 2025 server shipments up mid-single digits year over year (reduced); both AI and non-AI servers growing; Key data center products: HBM, high-density D5/LP5, and data center SSD; LP in AI servers reduces power by 2/3 vs. traditional D5; SOCAMM LP DRAM for GB300; High-density D5 and LP product revenue surpassed $1B this quarter; Guiding FY25 each major product category to contribute billions in revenue (unchanged);
HBM revenue up >50% sequentially this quarter, first time surpassing $1B; for comparison, SK hynix Q4 HBM revenue ~$4.1B; Guiding FY25 HBM revenue to reach billions (unchanged); Guiding 2025 HBM TAM raised from >$30B to >$35B;
HBM3E 12H for GB300 entered volume production, expected to become H2 HBM shipment driver; Began shipping to third major HBM customer this quarter; Guiding 2025 Q4 company HBM share to match company DRAM share (20%+); Guiding 2026 HBM4 ramp;
Data center SSD demand slowing this quarter due to prior customer pull-ins leaving high inventory;
Guiding 2025 PC shipments up mid-single digits year over year (unchanged), concentrated in H2 due to Windows 10 EOL next October; 16Gb 1-gamma based D5 product sampling to PC customers this quarter;
MBU product operating margin 6% this quarter, down 15 percentage points sequentially; Guiding 2025 smartphone shipments up low single digits year over year (unchanged); Industry-first G9 process UFS 4.1 mobile NAND product sampling;
Auto/industrial inventory correction nearing completion;
Earnings Call Highlights:
Guiding 2025 DRAM bit demand growth mid-to-high teens% (raised); NAND bit demand growth low-teens% (unchanged); Guiding mid-term DRAM/NAND bit demand CAGR mid-teens%;
Guiding DRAM front-end cost including HBM flat in FY25 (reduced); NAND front-end cost down low-teens% (unchanged);
HBM3E consumes 3x wafers vs. D5; HBM4 will consume more; HBM4E will consume >4x wafers;
Guiding FQ3 capex >$3B; FY25 capex $14B (unchanged), mostly HBM-related; Guiding gross margin to improve in FQ4;
DIO 158 days this quarter, up 9 days sequentially; Guiding DIO to gradually decline, below 120 days by FY25Q4;
Guiding FY25 full-year LP4 and DDR4 related global revenue exposure ~10%;
Overall, Micron's earnings were mediocre, mainly due to weak consumer electronics and auto, plus near-term data center SSD oversupply concerns.
This quarter Micron again lifted its 2025 HBM TAM by $5B to $35B; at a 20% share target that implies $7B, another roughly $1B increase, though it may be offset by weakness in other businesses.
Micron currently trades at 2.2x P/B, one standard deviation above its historical valuation range, while global HBM leader SK hynix is at 2.1x P/B (24Q4) and laggard Samsung Electronics at 0.96x P/B (24Q4).