Micron Technology, Inc. (MU) Q4 2026 Earnings Report, Transcript and Summary

Hello, everyone. Thank you for joining us, and welcome to Micron's Fourth Quarter Post-Earnings Analyst Call. [Operator Instructions] I will now hand the conference over to Satya Kumar, Corporate Vice President, Investor Relations and Treasury. Satya, please go ahead.

Thank you, and welcome to Micron Technology's Fiscal Fourth Quarter 2026 Post-Earnings Analyst Call. On the call with me today are Manish Bhatia, President and Chief Operating Officer; Dr. Scott DeBoer, President and Chief Technology and Product Officer; and Mark Murphy, our Chief Financial Officer. As a reminder, the matters we're discussing today include forward-looking statements regarding market demand and supply, market trends and drivers, and our expected results and guidance and other matters. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today. We refer to the documents that we filed with the SEC, including our most recent Form 10-K and upcoming 10-Q for a discussion of risks that may affect our results. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements to conform these statements to actual results. We can now open up the call for Q&A.

[Operator Instructions] Your first question comes from the line of Ben Reitzes from Melius.

Congrats on the promotion, Scott. I'm not sure if Manish is on, but congrats. So I wanted to ask about -- congrats, so wanted to talk about 2028, new commentary here regarding '28 and you guys felt compelled to kind of say you see things tighter in '28 than this year as well as '27. I wanted to know a little bit more about what changed and what that means for margins. You gave more margin commentary than you usually do around '27, which was great, by the way, but I just don't see any reason why margins would change in '28 from the level you implied for '27. So just a little more comment around '28 would be great.

Sure, Ben. I can start, and then if Mark wants to add anything, and thank you for the shout-out. In terms of 2027 and 2028 in our commentary, we are seeing stronger demand drivers than we've seen before. We commented about the server units continuing to grow into '27. And of course, I think everybody is talking about how agentic AI is really growing fast, and that's creating a CPU-driven demand stream as well. And so as we've gone through working on our fiscal year '27 and we commented that we have more than 75% of our shipments committed for the year that shows a strengthening demand and allows us to shift our conversations on allocation with our customers out to 2028. And so that's one element of our confidence is that '27 is shaping up with stronger demand than maybe we had seen before. And then, of course, as we also have now more SCA conversations with customers, including extensions that we've now negotiated that gives us more confidence in the long term as well. And so the combination of those two things gives us very strong outlook for demand through 2028. And then on the supply side, there's still the same structural constraints on supply growth that we've talked about before, which is diminishing returns from technology transitions versus past technology transitions. HBM growing faster than conventional DRAM through 2028, which means that as a portion of the industry's output capability, HBM is growing in terms of that share. And of course, the trade ratio, not just today's trade ratio for HBM, but future more complex HBM having higher trade ratios, that's also going to be constraining supply. And then it just takes a long time for these new clean rooms that the whole industry is working on to be able to build and then qualify and then equip and it takes -- even from the time they open, it takes a few quarters for meaningful shipments to come. So that really gave us the combination of that demand outlook and this supply outlook. We made the statement that we really don't have line of sight to when supply and demand balances.

Yes, Ben, I would maybe just add to Manish's comments that as you noted in '27, we had indicated for the balance of the year that we would see margin expansion relative to Q1 a function of continued price increases, albeit at a more moderate pace. And we've said that for some time that eventually price increases would moderate. And then at that point, in addition to just price increases at a lower rate, we would -- we have a better mix of products, and we would work our mix based on our technology and product leadership. And the market conditions, as we said, we would expect to remain tight, and that would be supportive through '28. And of course, the partial offset to price and favorable mix would be start-up costs. But these are all things we're managing. We've been managing them, and we would expect to be able to sustain strong financial performance.

Great. And if I could just sneak one other in. I mean, Sanjay had a great seat at the Trump, I guess, lunch, dinner, whatever, lunch. And just wondering, did he come away feeling good about the industry's ability to grow and self-regulate and the future coming out of that meeting, did that lend a hand any of the upbeat guidance he gave? Or just any color out of that and how he felt coming out and even if memory came up a lot at the meetings.

Well, Ben, Sanjay is not here, but I'll give you what conversations I am aware of. For sure, we're very happy to participate in that forum. And it does show the importance of memory that Micron was invited there along with the model companies as well as the accelerator companies. I think that the framework that in the white paper or the -- that was published out of that, that many of the model companies have already signed is that, that framework is constructive towards continuing to have advancement in AI infrastructure and AI, in particular, AI hardware infrastructure. And I know that one of the concepts that got discussed quite a bit was that the way to manage some of the security aspects is to actually have security solutions, which will require more advanced hardware, including higher performance memory, lower latency memory, as part of those security solutions, higher bandwidth memory because if you can imagine, setting up a gateway to be able to manage much of the security aspects that could be proposed in the future, those -- the responsiveness of those gateways are going to depend a lot on the availability of performance and low latency memory.

Your next question comes from the line of Melissa Weathers from Deutsche Bank.

My congrats as well to the 2 new promotees. On the -- and -- in past quarters, you've given us a view on where you think the HBM total TAM could be by 2028, 2030. Clearly, the pricing environment has changed since those updates. I don't know if you want to give us an official new number for where you think HBM TAM could go. But like directionally, can you help us sort of try to size like how much is coming from bits and how much is coming from pricing? And just any updated views on how big you think that market could be?

Sure, Melissa. Thank you again. We are not updating that TAM outlook right now. But what we have said is that HBM shipments, we expect to grow faster than conventional DRAM. That means that HBM will continue to gain -- to grow as a portion of the industry's capacity here through 2028. And the pricing for HBM, at least for us, we did comment that we have increased that pricing significantly for calendar year '27, which will reset at the beginning of the calendar year to narrow the profitability gap with conventional DRAM. But beyond that, we haven't made any comments on the specific outlook for the HBM TAM. It continues to grow. It continues to be a very important enabler. HBM deployments continue to be an important enabler of much of the rest of the AI to be able to reach its potential as well. So it's an important part of the market.

Got it. Maybe following up on that, from a market share perspective, any updated view on how you guys are targeting market share for HBM? In the past, you said you want to get it to within the corporate average, kind of low 20s percent market share. So is that still the case? And then I noticed in the prepared remarks, your comments on HBM4E and the engagements with NVIDIA there. So just any more color on 2027, and HBM4E the progress that you're making there with customers would be great.

Sure. Sure. I'll take the first and then maybe Scott can take the HBM4E since he is driving that product development. In terms of the HBM market share, about a year ago, we had achieved the milestone that we talked about that our HBM market share reached our broader DRAM market share. And at that time, we said that our goals would then move around based on various different factors. And we haven't really updated exactly our HBM share target other than to say that we do expect our HBM share to be around our broader DRAM market share, but we're not necessarily targeting one number or the other. It will move around based on various different factors there. But as I mentioned on the prior question, it's a really important part of the market. It allows us to be very close to the leading edge of the accelerator platforms that many of our customers are designing and then deploying, and it's a key enabler for all the rest of AI to be able to deliver on its promise and its potential.

And then I can just add a little bit about the work with NVIDIA on what really will be the first major custom HBM product out in the market. And we've been working with NVIDIA for over a year on HBM4E, what's called NV HBM. And we see substantial opportunity there for us in the co-design of that product with obviously a key customer to have this be a product that delivers really substantial value beyond standard HBM4E. And I think it will be a real impact on industry showing where future system and would optimize their products.

Your next question comes from the line of Atif Malik from Citi.

The first one on the 26 SCAs, 35% of sales by 2030. Are these for both DRAM and NAND? And if you can just split them out?

Atif, yes. We're not splitting those out, but the SCA agreements do cover both DRAM and NAND. And it is through 2030, but we're not breaking it out specifically. I can tell you that the DRAM volume is a little bit less than that, approximately 35%, and the NAND bit volume is a little bit more. And as we think about these going forward, we are -- we have more availability. As we said, that this number could get up to be higher in the future as we continue negotiations for SCA.

Understood. And then on the impact of China competition, firstly, if you can confirm that your China sales exposure is fairly minimal. And if Scott can comment on how should we see kind of China competitors kind of closing the gap on technology? If you can provide any color?

So on the first question, yes, our exposure to China has been reducing over the last couple of years in the last several quarters, and we expect the exposure will be in the single-digit range in fiscal '27.

Then I could comment a little on the technology side. Currently, our technology leadership is at least 2 nodes ahead of the China competition. I think it's important to say that our focus is on maintaining technology leadership and having true differentiation in our products in how we compete. We're -- as Manish, I think, mentioned earlier and as it was mentioned in the call, our 1-gamma DRAM technology is already the majority of our bits, and it's set up to be the largest node in the company's history. It is dependent on EUV technology. The next-generation 1-delta is well underway, and we're focused on the ramp of that in the second half of next year. EUV technology is critical to all advanced DRAM nodes going forward. And our expertise in that, both from the technology side in partnership with our supplier there as well as mask technology and other things is -- continues to be a key differentiator for Micron.

And Manish, well-deserved promotion.

Thank you, Atif. And can I just clarify that the response in terms of DRAM and NAND was actually a bit comment. Just to make sure that, that was clear. I'm not sure I specified. So making sure it's clear.

Your next question comes from the line of Karl Ackerman from BNP Paribas.

Yes. You are seeing robust demand across much of your portfolio, but this quarter does appear to be the second quarter in a row that mobile and client segment saw bit shipments decline. Are higher memory prices reducing demand in this area of the market? And while this area of the market has been slow to adopt SCAs, I'm curious if your growth in SCAs is coming from this cohort?

Thanks, Karl. We did see sequential bit decline in our mobile and client business unit, but we did see revenue growth, obviously, with both higher pricing and favorable mix. I think what's important to note is that the premium segments of the both clients as well as the flagship smartphones do see robust demand for higher content, higher performance solutions. And that's a segment that, of course, we're -- those are the segments that, of course, we're very focused on. And with that wind at their back, we see the PC and mobile industry revenue to be growing even though we do see unit volumes declining. And in terms of SCAs, I'll just comment that we do have SCAs across all of our business units, including the mobile and client business unit. And we're not specifically breaking them out, but I will tell you that we have SCAs because it's important for us to be maintaining diversified supply to all our end markets.

Got it. Yes. Maybe a question for Scott, if I could. How do you view the competitiveness of your in-house optimized base die on HBM4E versus peers? Certainly, some of these customers are seeing custom solutions. Does the complexity and economic value flow primarily through the compute customers or to the HBM providers?

So maybe just a little clarification first. On HBM4E, we have co-designed with NVIDIA, but not in-house base die like we use on HBM4. So I think just to be clear on your question, I just wanted to be sure I was answering it in the right way. On HBM4E, this co-design is on a foundry process, both for the customized product and for the JEDEC-specified product. Okay, so the -- and then I think maybe to add a little color to that. The differentiation, just as we have demonstrated in the past on HBM, prior HBM products, winds up being in the power and the ultimate speed performance and the margin of the product working with our customers. That, in all previous generations hasn't been the same between different suppliers and that we think will continue to be a strength of Micron in terms of quality of the product and the capabilities that we're able to put out.

And then, Karl, in terms of your question on economic value, HBM is a premium product. And as Scott mentioned, as we look at the NV HBM with customization, we do expect that to be a high-value product as well. And we're confident that HBM will continue to contribute and be a strong ROI product for us.

Your next question comes from the line of Jim Schneider from Goldman Sachs.

Congratulations, Manish and Scott. I just wanted to maybe get a sense about -- of the 10 new customer SCAs you signed in the quarter, maybe give us a little bit of color on what customers are asking for? Obviously, they want supply, and they want longer-dated supply. But is there any kind of change in the pricing construct either you or they are asking for? Sort of given -- the reason I ask the question is kind of given the expectation about tightness through calendar '27 and '28. Are you maybe a little bit less inclined to call for the fixed ceiling and floor pricing if you think you can capture a little bit more upside over the next couple of years?

Yes, yes. Well, thanks, Jim. And thanks for the shout out. I would say that the framework of the SCAs that we have is similar. But what's different is that the negotiations reflect current market conditions and outlook for market pricing, right? And so the direction of travel has been for higher pricing. And so those are now factored into the discussions that we're having with customers versus the prior ones, which we had talked about that were set at CQ2 kind of market conditions. And as I think we gave color that about 3/4 of the SCA have this -- of the SCA revenue has a defined pricing framework and about 1 quarter is open to periodic negotiations or pricing that move with market dynamics. Of the -- so I guess I would answer that in terms of the overall framework, similar. The majority of the pricing frameworks have floor and ceiling bands, but the newer ones are negotiated with an eye towards the current market conditions and the future market tightness that we see.

Got it. I mean just to be clear, does that mean all the pricing ceilings and floors just reset to the higher market conditions you're seeing today? Or is the nature of the pricing condition is actually different, too? And then maybe just to ask, just curious as to whether -- I don't think you've disclosed signing initial hyperscale customers. I'm wondering if those are included in the TAM.

Yes. So I mean there are multiple different frameworks. What I commented on is that the majority of the frameworks that have pricing are set with floor and ceiling, but there are multiple different frameworks that we're continuing to use. And since the last call in these new 10, we've signed a range of agreements from small to large SCA customers. We're not commenting specifically, even in the previous question, not specifically breaking out which one, just commenting that we now have SCAs across all of our business units, and we have SCAs ranging from small to large, even in the last 10 that we signed. And of course, in the total 26.

Your next question comes from the line of Chris Caso from Wolfe Research.

I guess our first question, if you could address the CapEx and the fab construction CapEx, the construction CapEx as compared to the tool purchases. And what I seem to hear in the comments is that the construction CapEx was increasing faster. And I'm not sure I interpreted that correctly. But understand that there's the clean room space constraints are constraining the ability to bring in tools for this year. But the increase in construction CapEx is obviously interesting because it doesn't result in bit production until at least '29, probably beyond that.

So Chris, I can start and then maybe Mark can add. But I mean, that's exactly right, is that the principal constraint in the industry is on clean room space because we -- the strong growth of AI in this demand vector has come on relatively recently in terms of the time line that it takes to build these clean rooms. So while we're all starting. That's why we're focusing there. And then -- you're right that we did comment that the majority of the construction CapEx increase for fiscal '27 versus our prior plans is for clean rooms that will come online in late '28 and beyond, which shows both how long it takes to build these clean rooms and why we need to get started with the construction investments now. But also shows our confidence in longer-term demand, both through the observation of the demand trends in the near-term market trends that we're seeing as well as the structure of the SCAs and the discussions we're having with SCAs and customers now extending those commitments beyond 2030. I mean these SCAs are transformational for us in terms of being able to match supply with future demand and to be able to invest with confidence.

Yes. Chris, maybe I can just add that, just to make it clear that the majority of the increase is for construction CapEx. Most of that construction increases to accelerate clean room space availability in '28 and beyond. I mean it is a trend that we would expect to continue to beyond '27. And I think you made a very important point that just the spend there doesn't translate into bits and that these fabs will be made -- we put the equipment in the fabs and produce wafers when needed based on our view of the market and these SCAs are a good way for us to keep a pulse on the market and make sure that we get a return on that CapEx.

And I can -- just a couple just one other point. One other point, Chris, is that we will equip the clean rooms and build capacity to the demand trends that we see. So that's just another important point. And we have been executing long-term supply agreements with equipment suppliers to be able to make sure we have access to equipment as needed. But of course, we'll still equip and build the production capacity in those clean rooms in line with demand trends at the time.

Of course. Okay. As a follow-up question, I want to ask a question on the impact of CPU strength. On both overall bit demand and your view of supply-demand balance. And obviously, that's probably been the biggest incremental surprise since the beginning of the year. You don't have the same trade ratio effects on CPU as you do on HBM. But I guess the question is, how significant is that in contribution to the supply-demand imbalance?

I think definitely, the realization that agentic workloads are executed across CPU has been a big driver. There is a large attach rate of both LP as well as DDR memory and SSD to enable those agentic workflows. The -- those agentic workflows are already starting. You're already starting to see multiple ones, whether in the enterprise or consumers being implemented and driving real value. And that's been one of the reasons that server units are growing so strongly, as we noted, in the high teens. And I think the other thing that this shows is that while it's just another vector of logic and logic silicon to grow to be able to take advantage of the AI trends. And so that is driving higher logic silicon and into the overall demand for AI compute and frankly, creating more of a constraint on DRAM and making clear that DRAM is the principal constraint versus logic or power to the data center. I mentioned the new -- there are many different software implementations for enterprise agentic workloads that we're all seeing. But seeing how quickly Meta's Muse just in the last couple of weeks since being released is just an example of how quickly the agentic workloads are realizing -- enabling consumers to realize real value.

Your next question comes from the line of Joseph Moore from Morgan Stanley.

Great. In terms of supply growth decelerating next year, I guess that's a little surprising in the context of the CapEx. And I know you talked about some of the dampening effects of HBM, but I don't think that delta should be changing that much. So I just wonder if you could just kind of explain what the puts and takes are that supply would decelerate given the CapEx that you see.

Sure, Joe. And you're asking for both DRAM and NAND?

Yes, but principally DRAM.

Okay. I mean I think that we gave the color that HBM is growing faster than conventional DRAM. And the trade ratio as you move more of the industry is shifting from HBM3 to HBM4 and then towards later in the year in '27 HBM4E and these are increasing trade ratio. So if you just look at both of those two things happening together, that has a dampening effect on the ability for bit growth to be growing. And keep in mind that both the bit growth for us and other industry participants from new technology nodes, both over time as you make more of your transition, you don't have -- the timing of transitions affect how much bit growth you can have as well as the nature of the diminishing returns of each of those newer nodes. So these are all the factors that are going to be constraining supply. But of course, the principal one is clean room space for everyone. And even though there's -- we're going to be having first wafer output from our Idaho facility mid-calendar '27 and others in the industry as well, maybe opening clean rooms, meaningful supply growth takes a few quarters after that. So I think that's really the -- those are all the reasons why we see that DRAM is reducing supply industry shipments next year.

Okay. That's helpful. And then to the extent that if you end up having been conservative on industry supply and there's more supply next year -- can you talk about -- I mean it seems like there's a lot of pent-up demand. There's a lot of appetite to have more supply. We've seen de-speccing out of necessity for some of these AI racks and things like that? It seems like they'll just re-spec to higher levels if there's more supply, but am I too optimistic there? Just how do you think about that?

Yes. No, I think that's exactly the point that these are and Sanjay mentioned this on the main call, we definitely think that our customers are choosing to maximize the compute silicon shipments they can make with the available memory supply that they have. And as -- that does create latent demand for more memory to attach to those, which would then end up delivering higher system performance and improved performance at the end customers. But -- and so yes, that latent demand, I think, is aligned with your concept that were more memory to become available, it would have -- it would easily get put into use in higher content growth in AI workloads, whether attached to accelerators or CPUs.

Your next question comes from the line of Mehdi Hosseini from Susquehanna International Group.

A couple of follow-ons for me. You did highlight your NAND bit shipment in '26 is tracking below industry average. But what should we expect '27 through '28? Would you be able to be growing NAND bit demand or bit shipment in line with the industry average of 25%?

Mehdi, we're not commenting out that far, frankly, on either DRAM or NAND. We do expect conditions to be tight on NAND overall even as the industry is expected to grow in the mid-20% range in calendar '27 and '28. Some of the factors that account for our supply growth, we did -- we are utilizing some of the clean room space in Singapore now for our advanced R&D line for future NAND growth. We are also preparing for the ramp of our HBM facility in Singapore next year. And so some of the existing clean room with some pilot HBM operations. And so that's some of the reasons why our supply growth grew less than the industry this year. But we feel confident in our technology, and we do expect that our continued ramp to G9 will provide good, very high ROI, cost-effective supply for us as we move forward. And then, of course, we do have the new clean room that we broke ground on earlier this year that will come online in the second half of calendar year '28.

Mehdi, just maybe if I can interject just because of time here. And then if you've got additional -- well, why don't you start with your question and then second question, I'll make a comment after that.

Sorry, Mark. I didn't mean to interrupt you. But very quickly, I just want to get the team's opinion. When I look at DRAM, especially at the wafer level, the devices are all the same. And I argue that there is a fungibility of DRAM at the wafer level. And then there are some differentiation in the back end. And this fungibility at a wafer level hasn't been seen before because in the past, the cycles were driven by just one product, and there was a significant concentration of customers. So am I right with this assumption that fungibility of the DRAM at the wafer level gives you a better way of managing DRAM costs? Does that make any sense to you?

Maybe start with one thing. I think there's a bit of what you say, but I actually probably would have gone the other direction. And if you look at the front end variability or what we do differently on the DRAM processes between optimizing for HBM, optimizing for high-performance SOCAMM, LPDRAM and optimizing for DDR6. There's, at this moment in time, probably more difference than ever in the history of DRAM. And the same node, the different kinds of products that we have to build on it and a lot more differentiation built into those. I don't know what you would add, Manish?

Yes, I mean, I would say that it really helps us with in the near term, the fact that we do run the different products in the same manufacturing lines, it does help us adjust mix. We don't have to run products in different fabs. We can run them on the same lines. But as Scott mentioned, each product has its own vector that it is trying to optimize. Obviously, in HBM, it's bandwidth with the TSVs and that requires unique process steps. In DDR and LP, they each have their own as well process steps that are unique. And so I think the most important part of the fungibility is that we do have the ability to flex wherever demand is or even mix adjustments to try and meet our customers' requirements. I think that's probably the -- all within the same fab, that's probably the most important part. But I wouldn't say that it helps necessarily with cost.

Yes. I think, Mehdi, just I think we're at the end of the call. And I am really happy to hear the nature of the questions being focused on technology and the longer-term strong foundation and performance of the business. And I just -- I thought there'd be a question that let me just do a couple of housekeeping things that I thought would come up earlier. Our first quarter guidance factors in a single-digit sequential bit growth and double-digit for cost for both DRAM and NAND and I wanted to make sure you had that for your modeling. And then also, excluding the incentive comp effects, the year-over-year R&D increase is going to be more than the $1 billion that we said last quarter, will be over $1 billion in '27 as we have added additional R&D activities. So again, I wanted to just make sure we got that out for your modeling.

This concludes the Q&A and today's call. Thank you for attending. You may now disconnect.