MU Q2 Call Highlights: HBM Boom, Margin Gains, and AI-Driven Growth!

March 21, 2025 4 min read

Micron Technology Inc., an American producer of computer memory and data storage solutions, including DRAM, flash memory, and SSDs, in its Q2 earnings call projected improved gross margins in Q4 despite Q2 declines and aiming to reduce inventory from 158 days to below 120 days by fiscal Q4. Management increased its DRAM industry bit demand outlook to mid-to-high teens for 2025 and revised High-Bandwidth Memory (HBM) industry revenue forecast upward to over $35 billion, with higher revenue expected in the second half as the company transitions to premium-priced 12-high chips. Management noted that DRAM inventories are tightening faster than NAND due to AI-driven demand, with HBM Q2 revenue exceeding $1 billion, while explaining that lower-end products (LP4 and DDR4) represent about 10% of company revenue. MU emphasized that NAND’s underperformance has weighed down overall margins despite healthy DRAM margins, and confirmed it’s focused on improving product mix toward higher-margin offerings while maintaining supply discipline.

Micron Technology reported impressive 2Q results exceeding analyst expectations. The company posted revenue of $8.05 billion, a 38% year-over-year increase and adjusted EPS of $1.56, surpassing analyst expectations. Net income rose significantly to $1.58 billion, with the company highlighting that data center revenue tripled compared to the previous year. Micron provided optimistic guidance for 3Q, projecting revenue of approximately $8.8 billion, ±$200 million and adjusted earnings of $1.57 per share, both exceeding analyst forecasts. Notably, Micron’s entire HBM chip inventory for calendar year 2025 is already sold out, with sequential growth expected as the company expands capacity in this AI-focused segment. The company remains on track for record revenue and improved profitability in fiscal 2025, though noted its forecast doesn’t account for potential new tariffs from President Trump.

Continue Reading: Unearth the Vital Insights from Micron Technology Inc.’s Earnings Call!

Financial/Operational Metrics:

Revenue: $8.05 billion, up 38.4% YoY.
Net Income: $1.58 billion, up 99.5% YoY.
GAAP EPS: $1.41, up 99% YoY.
Operating Expense: $1.19 billion, up 34% YoY.

3Q Outlook:

Revenue: $8.80 billion ± $200 million.
Gross Margin: 35.5% ± 1.0%.
Operating Expenses: $1.13 billion ± $15 million.

Analyst Crossfire:

Gross Margin Outlook & DRAM Bit Demand Growth (Harlan Sur – J.P. Morgan): Gross margin is expected to improve in fiscal Q4, driven by stronger HBM and high-value product mix. However, NAND underutilization and startup costs for new DRAM nodes will partially offset gains. Increased DRAM bit demand for 2025 is driven by HBM growth, AI adoption in smartphones and PCs, and stronger purchasing activity as customer inventories normalize (Mark Murphy – CFO, Sanjay Mehrotra – CEO).

Q3 Revenue Growth Breakdown & Margin Recovery Timeline (Timothy Arcuri – UBS): DRAM, particularly HBM and data center exposure, will drive most of the Q3 revenue growth, while NAND will also see bit growth. Q4 gross margins will be slightly higher than Q3. DRAM cost remains flat for FY25, while NAND cost reductions are in the low double digits. The shift toward high-value DRAM and disciplined NAND supply actions will aid profitability (Mark Murphy – CFO, Sanjay Mehrotra – CEO).

Memory Pricing Sustainability & HBM3E & HBM4 Margin Impact (Krish Sankar – TD Cowen): Demand trends in smartphones, AI PCs, and data centers remain strong, supporting pricing improvements. Leading-edge DRAM supply is tight, and NAND supply actions by industry players are helping stabilize pricing. HBM3E 8-high execution has exceeded expectations. HBM3E 12-high is in volume production, and while it will have an initial yield ramp, it carries a price premium and will positively impact DRAM margins as it scales (Sanjay Mehrotra – CEO).

Gross Margin & Cost Management, HBM Growth Outlook (C.J. Muse – Cantor Fitzgerald): Underutilization charges in NAND will continue to weigh on gross margins through fiscal Q4 and into 2026, but improving market conditions and product mix shifts should lead to gradual margin improvement. HBM industry revenue is expected to exceed $35 billion in 2025, with stronger growth in the second half due to the shift from HBM3E 8-high to 12-high. Micron is also expanding its HBM customer base (Mark Murphy – CFO).

HBM Growth Outlook & Lower-End DRAM Impact (C.J. Muse – Cantor Fitzgerald, Chris Caso – Wolfe Research): HBM industry revenue is expected to exceed $35 billion in 2025, with stronger growth in the second half due to the shift from HBM3E 8-high to 12-high. Micron is also expanding its HBM customer base. Micron’s exposure to LP4 and DDR4 products is declining and now represents about 10% of total revenue. The company is focused on growing its presence in D5 and LP5 markets to strengthen margins (Sanjay Mehrotra – CEO).

Related Articles

Plains All American weakens as NGL divestiture and cost cuts frame muted 2026 growth

Operational Efficiency Powers MGY to Historic Production and Dividend Lift

Graham Corporation Sees Robust Q3 on Defense Momentum and FlackTek Integration