Micron Technology reported record revenue and strong performance in Q1 2025.
From Nasdaq: 2024-12-18 20:45:13
Micron Technology held its Q1 2025 Earnings Call on Dec 18, 2024, reporting record revenue and strong financial performance. Data center revenue grew over 400% year over year, with data center SSDs achieving record revenue and market share. The HBM market is expected to exhibit robust growth, with Micron leading in this important product category. Despite customer inventory reductions impacting bit shipments in fiscal Q2, Micron remains on track to achieve its targets for HBM and deliver improved profitability and positive free cash flow in fiscal 2025. The company continues to progress well with its technology roadmap and advanced DRAM and NAND nodes. Micron has secured awards from the Department of Commerce worth up to $6.1 billion for advanced DRAM manufacturing in Idaho and New York, as well as up to $275 million for their Virginia fab. The company plans to expand their Singapore manufacturing footprint with a new advanced packaging facility to support AI-driven demand. Micron achieved record revenue in data center products in fiscal Q1 and is on track to generate multiple billions in revenue in fiscal 2025. They have seen significant success with their HBM products and are optimistic about their future roadmap, including the development of HBM4 and HBM4E.
Micron’s HBM products have been well-received by customers, with the company expecting to exceed $30 billion in market TAM in 2025. They have secured design wins with leading customers and are set to generate multiple billions in revenue from HBM in fiscal 2025. Micron is also a leading supplier of LP DRAM for data centers, providing high-capacity and high-bandwidth memory solutions for AI platforms. The company’s data center SSD products have reached new revenue records and are poised for continued growth in fiscal 2025.
Micron’s SSD products offer industry-leading performance and efficiency, with the 6550 ION SSD delivering unmatched power efficiency and density for exascale data centers. The company’s 9550 PCIe Gen5 data center SSDs have been qualified for use in NVIDIA’s GB200 NVL72 system, offering higher throughput and lower energy consumption compared to competitors. Despite a gradual PC refresh cycle, Micron remains optimistic about AI PC adoption and expects continued growth in the market. AI PCs are projected to require more DRAM, with a minimum of 16GB for entry-level PCs and 24GB for higher-end models. The end of Windows 10 support in October 2025 is expected to boost PC market growth in 2025. Mobile phone unit volumes are on track to grow in 2024 and 2025, driven by AI adoption. In the automotive market, lower production has slowed memory and storage growth. Micron expects industry DRAM demand to grow in the high teens in 2024 and mid-teens in 2025. NAND demand growth outlook is lower due to slower growth in consumer devices and inventory adjustments. Micron’s revenue related to LP4 and D4 DRAM products for the remainder of fiscal 2025 is expected to be around 10%. The company delivered strong fiscal Q1 revenue and gross margins, with DRAM revenue up 87% year over year and NAND revenue up 82%. Compute and Networking Business Unit revenue reached a new record, driven by cloud server DRAM demand. Mobile Business Unit revenue decreased as customers focused on inventory management. Embedded Business Unit revenue declined as auto, industrial, and consumer customers managed their inventories lower. Micron’s Storage Business Unit revenue reached a new record of $1.7 billion, up 3% sequentially, driven by data center SSD segment success. Operating margin was at 27.5%, up 48 percentage points from the year-ago quarter. Fiscal Q2 gross margins may be impacted by NAND industry conditions, but Micron projects stronger bit shipments in the second half of the fiscal year. With a focus on R&D investments for HBM and DRAM, Micron expects to end fiscal 2025 with tight DRAM inventories. Non-GAAP guidance for fiscal Q2 includes revenue of $7.9 billion, gross margin of 38.5%, and EPS of $1.43 per share. Micron remains flexible in spending to drive growth. In a recent earnings call, Micron executives addressed concerns about weak NAND industry market conditions impacting their FQ2 outlook. They expect a seasonal pickup in consumer-oriented markets and data center SSD demand to drive shipment growth in the fiscal second half. The company anticipates improved customer inventories and AI-driven data center growth to contribute to revenue growth in the coming months.
Analysts inquired about the magnitude of revenue ramp in the fiscal back half, with Micron confirming their target to align HBM share with DRAM share by the second half of the calendar year. The company remains optimistic about continued momentum in HBM and increasing penetration of AI smartphone and PC units, which will contribute to revenue growth in the future. The company is optimistic about strong second-half shipments and healthier revenue outlook due to factors like AI, consumer inventory adjustments, and overcoming seasonality in Q1. Capex will focus on cutting NAND spending and increasing DRAM investment. The company sees no constraints on returning capital to shareholders, with plans to pay dividends and repurchase shares to offset dilution. Updates on HBM TAM estimate show increased demand, with the company on track to reach share targets in the second half of 2025. Strong momentum and focus on ramping up capacity and yield for HBM products. Gross margins for Q2 are expected to only decrease slightly despite lower sales, with HBM and data center products providing favorable effects. The company anticipates higher gross margins in Q3 compared to Q2. Micron Technology expects headwinds in the second quarter, largely due to NAND market conditions. Data center SSD growth is anticipated in the third quarter, but weak market conditions will persist. Despite this, revenue growth and margin expansion opportunities are seen beyond the third quarter. Micron aims to achieve an HBM market share in line with the industry by the second half of 2025, with plans to leverage product performance for premium pricing. HBM revenue is projected to be multiple billions of dollars for Micron in 2025, contributing significantly to growth. Transition to higher trade ratio HBM products like HBM4 is expected to impact gross margins, but learnings from previous products will benefit yield ramping. Micron is confident in the growth of its HBM technology with plans to transition from 8-high to 12-high, increasing capacity by 50%. The leading-edge nodes, including HBM, LP5, and DDR5, are in tight supply with a favorable demand-supply outlook. The company anticipates multiple billions of dollars in revenue from HBM, high-density DIMMs, and LP5 solutions in 2025, catering to AI applications. Micron’s focus on higher-end products aligns with the market trend shifting towards data center applications, where quality and performance are crucial. The company remains competitive in advanced nodes, positioning itself as a leader in the industry. Sanjay Mehrotra, the President and CEO of Micron, discussed the trend of high-capacity enterprise SSDs displacing nearline HDDs over the next few years. He emphasized the importance of SSDs in terms of performance, power, and cost of ownership. The company anticipates that SSDs will start displacing HDDs in data centers by 2027, driven by factors like AI and customer demand. Analysts also questioned the company’s outlook on cost reductions and the acceleration of this trend. Micron remains confident in the future of SSDs and their potential to dominate the storage market. 1. The stock market experienced a sharp decline today, with the S&P 500 and Dow Jones Industrial Average falling over 2%. This drop was attributed to concerns over inflation and rising interest rates.
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Read more at Nasdaq: Micron Technology (MU) Q1 2025 Earnings Call Transcript