Micron's Q4 2025 Earnings Call: Contradictions in HBM TAM, DRAM/NAND Dynamics, and Gross Margin Outlook

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $11.3B, up 22% sequentially and up 46% YOY
• EPS: $3.03 non-GAAP diluted EPS, up 59% sequentially and up 157% YOY
• Gross Margin: 45.7%, up 670 basis points sequentially
• Operating Margin: 35%, up 820 basis points sequentially and up 12 percentage points YOY

Guidance:

• Fiscal Q1 revenue expected at $12.5B ± $300M.
• Fiscal Q1 gross margin expected at 51.5% ± 100 bps.
• Fiscal Q1 operating expenses approx. $1.34B ± $20M.
• Fiscal Q1 EPS expected at $3.75 ± $0.15 (non-GAAP).
• FY26 tax rate around 16.5%.
• FY26 capex higher than FY25; baseline ~$4.5B per quarter.
• Expect Q1 free cash flow to strengthen; FY26 FCF significantly higher YOY.
• Expect gross margin to improve sequentially into Q2 on tight DRAM, improving NAND, mix, and cost.
• FY26 is a 53-week year; Q4 OPEX impacted by extra week.
• Potential new tariff impacts not included in guidance.

Business Commentary:

* Record Revenue and Growth: - Micron Technology reported record revenue of $37.4 billion for fiscal 2025, up 49% year-over-year. - The growth was driven by pricing execution and strong performance across end markets, particularly in data center products and high-value DRAM.

• Data Center Performance:
• Micron's data center business reached 56% of total company revenue, with gross margins of 52%.

• This performance was supported by the ramp of high-value data center products and robust demand for DRAM and HBM products.

• Tight DRAM Supply and Pricing:

• DRAM revenue was a record $9 billion for fiscal Q4, up 69% year-over-year, with prices increasing in the low double-digit % range.

• The tight industry DRAM supply, constrained node migration, and strong demand across end markets contributed to this trend.

• HBM Market Growth:

• The combined revenue from HBM, high-capacity DIMMs, and LP server DRAM reached $10 billion, more than a five-fold increase compared to the prior fiscal year.

• Growth in the HBM market is driven by increased demand for advanced memory solutions in data centers and AI applications.

• AI-driven Demand and Productivity:

• AI is contributing to a more than 30% to 40% productivity uplift in select AI use cases, such as code generation and design simulation.
• The increasing adoption of AI and AI-driven demand from data centers and smartphones is a key driver for Micron's product demand.

Sentiment Analysis:

• Record Q4 revenue, GM, and EPS above guidance. FY25 revenue $37.4B, up ~50%, GM up 17 pts to 41%. Q1 outlook calls for record revenue and EPS with GM 51.5%. Management expects GM to improve further from Q1 to Q2, citing tight DRAM supply, improving NAND, and favorable mix/cost. Data center drove 56% of FY25 revenue with 52% GM; HBM revenue nearly $2B in Q4 and share rising.

Q&A:

• Question from Timothy Arcuri (UBS): Can you split the sequential Q1 revenue increase between DRAM and NAND and discuss gross margin puts/takes?
  Response: Q1 growth is more DRAM-heavy; margin expansion driven by mix, pricing, and cost reductions amid tight DRAM and improving NAND supply-demand.

• Question from Timothy Arcuri (UBS): Update on HBM TAM (earlier $100B) and outlook for next year?
  Response: HBM TAM still seen reaching ~$100B by 2030; HBM bits grow faster than DRAM; HBM4 leadership and tight supply underpin strong 2026 demand and profitability.

• Question from Vivek Arya (BofA): How does the transition from HBM3E to HBM4 look, pricing direction for 2026, and share outlook?
  Response: HBM4 first production in CQ2’26 with ramp in H2; share to grow vs 2025; HBM3E 2026 pricing agreements set with most customers; supply tight, pricing constructive.

• Question from Vivek Arya (BofA): Is 51.5% GM a baseline, and how much further expansion is possible, especially in cloud margins?
  Response: Not guiding out-quarters, but expect GM to improve from Q1 to Q2 on tight DRAM, improving NAND, favorable mix, and costs; margins to be healthy in 2026 for HBM and non-HBM.

• Question from CJ Muse (Cantor Fitzgerald): Is DRAM demand inflecting and how should we think about seasonality into the February quarter?
  Response: AI training/inference is broadening demand across data center, smartphones, and PCs; supply remains tight; expect healthy 2026 backdrop (no specific FQ2 guidance).

• Question from CJ Muse (Cantor Fitzgerald): Capex breakdown (equipment vs cleanroom) and implied FY26 net capex?
  Response: FY26 net capex framework ~ $18B, majority DRAM for construction/fab and tools; won’t detail gross vs net; FY25 was $15.8B gross with $2B incentives ($13.8B net).

• Question from Harlan Sur (JPMorgan): Inventory trajectory, lead times, and visibility; will DRAM DIO decline further?
  Response: Expect DRAM DIO to remain below target and NAND DIO to decrease; DRAM inventories are very tight; supply supported by 1-gamma (non-HBM) and 1-beta (HBM).

• Question from Harlan Sur (JPMorgan): Did HBM4 performance require base-die redesign, any schedule impact, and is power still superior?
  Response: In-house CMOS base die plus DRAM design deliver >2.8 TB/s and >11 Gbps with best-in-class power; ramp remains on track.

• Question from Krish Sankar (TD Cowen): Can you quantify 2026 HBM supply and flex if sold out?
  Response: No volumes disclosed; most 2026 HBM3E volumes fixed; finalizing HBM4; will flex HBM vs non-HBM mix using 1-beta front-end and A&T capacity, prioritizing ROI.

• Question from Krish Sankar (TD Cowen): HBM4 in-house base die vs HBM4E custom with TSMC—expected mix and flexibility?
  Response: HBM4 uses Micron base die (2026); HBM4E (2027) will offer standard and customized (with TSMC) options; customization expected to carry higher margins.