MU - Micron Technology, Inc.

Operator: Thank you for standing by. Welcome to Micron Technology, Inc.'s First Quarter 2026 Financial Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. If your question has been answered and you would like to remove yourself from the queue, please press the pound key. As a reminder, today's program is being recorded. And now I would like to introduce your host for today's program, Satya Kumar, Investor Relations. Please go ahead, sir. Satya Kumar: Thank you, and welcome to Micron Technology, Inc.'s fiscal first quarter 2026 Financial Conference Call. On the call with me today are Sanjay Mehrotra, our Chairman, President and CEO, and Mark Murphy, our CFO. Today's call is being webcast from our Investor Relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website along with the prepared remarks for this call. Today's discussion contains forward-looking statements that are subject to risks and uncertainties. These forward-looking statements include statements regarding our future financial and operating performance, as well as trends and expectations in our business, contractual terms, market, industry, products, and regulatory and other matters. These statements are based on our current assumptions, and we assume no obligation to update these. Please refer to our most recent financial reports on Forms 10-K, Forms 10-Q, and our other filings with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially from expectations. Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures can be found on our website. I will now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Satya. Micron Technology, Inc. had an outstanding start to fiscal 2026, delivering fiscal Q1 revenue, gross margin, and EPS well above the high end of our guidance. This financial performance was driven by our strong execution across end markets and products in a tight supply environment. We achieved a number of records in fiscal Q1. Total company revenue, DRAM and NAND revenue, as well as HBM and data center revenue, and revenue in each of our business units also reached new records. We have completed agreements on price and volume for our entire calendar 2026 HBM supply, including Micron's industry-leading HBM4. We forecast an HBM TAM CAGR of approximately 40% through calendar 2028, from approximately $35 billion in 2025 to around $100 billion in 2028. This $100 billion HBM TAM milestone is now projected to arrive two years earlier than in our prior outlook. Remarkably, this 2028 HBM TAM projection is larger than the size of the entire DRAM market in calendar 2024. We are excited about our customized HBM4E customer engagements, which offer further differentiation opportunities to us, and we continue to make excellent progress on our HBM roadmap. Memory is now essential to AI cognitive functions, fundamentally altering its role from a system component to a strategic asset that dictates product performance from data center to the edge. This structural shift means that system capabilities heavily rely on advanced memory for real-time contextual processing, which is vital for achieving autonomous and intelligent behaviors in AI data centers as well as in applications ranging from self-driving cars to advanced medical diagnostics. With our technology leadership, differentiated product portfolio, strong operational execution, and solid balance sheet, Micron Technology, Inc. is in the best competitive position in its history and is one of the semiconductor industry's biggest enablers of AI. We anticipate substantial new records in revenue, gross margin, EPS, and free cash flow for both the second quarter and the full fiscal year 2026, and we expect our business performance to continue to strengthen through the year. Sustained and strong industry demand, along with supply constraints, are contributing to tight market conditions, and we expect these conditions to persist beyond calendar 2026. We are making progress with customers in our multiyear contracts with specific commitments. Simultaneously, we are focused on maximizing our production output from our current footprint, ramping our industry-leading technology nodes, and investing in new clean room space to add to our supply capability. Micron Technology, Inc.'s technology leadership is foundational to our strong competitive position. Micron Technology, Inc. has led the industry for four consecutive technology nodes in DRAM and three nodes in NAND with progressively faster yield ramps in every node. Our 1-gamma DRAM node is ramping well. 1-gamma will be the primary driver of our DRAM bit growth in calendar 2026 and will be the majority of our bit output in the second half of the calendar year. Looking beyond 1-gamma, development is underway for 1-delta and 1-epsilon nodes, which will feature innovations that we expect to extend our differentiation and technology leadership. In NAND, we are ramping our G9 node with robust yield ramps across both data center and client SSDs. Our QLC NAND mix, including G9 QLC, reached a record high during the quarter. Technology transitions to G9 will be the primary driver of our NAND bit growth in calendar 2026, and we expect it to become our largest NAND node later in fiscal 2026. I am pleased to report that calendar 2025 is a record year for Micron Technology, Inc. in terms of both internal and customer quality measures, positioning us well to deliver for our customers as the memory industry's quality leader. As our products are increasingly integrated into higher-value applications, our leadership in quality is becoming a more important differentiator. Turning to our end markets, as the world's leading technology companies advance toward artificial general intelligence and transform the global economy, our customers are committing to an extraordinary multiyear data center build-out. This growth in AI data center capacity is driving a significant increase in demand for high-performance and high-capacity memory and storage. Server unit demand has strengthened significantly, and we now expect calendar 2025 server unit growth in the high teens percentage range, higher than our last earnings call outlook of 10%. We expect server demand strength to continue in 2026. Server memory and storage content and performance requirements continue to increase generation to generation. Micron Technology, Inc. has a differentiated portfolio of high-value data center solutions to address these requirements, including our HBM, high-capacity server memory solutions, and data center SSDs. Micron Technology, Inc.'s HBM4, with industry-leading speed over 11 gigabits per second, is on track to ramp with high yields in the second calendar 2026, consistent with our customers' product ramp plans. Our HBM4 uses advanced CMOS and advanced metallization process technologies on the base logic die and DRAM core dies, which are designed and manufactured in-house. This, along with our unique HBM design, packaging, and test capability, enables Micron Technology, Inc.'s industry-leading performance and low power leadership. Micron Technology, Inc. pioneered the adoption of LPDRAM in the data center. Micron Technology, Inc.'s low-power DRAM server modules consume one-third the power of DTR DRAM server modules. Building on this leadership, we have sampled our 192-gigabyte LP SOCAM2 product, which enables a 50% increase in capacity per module and a rack-scale LPDRAM density of over 50 terabytes. Our data center NAND portfolio revenue exceeded $1 billion in fiscal Q1, and we are seeing strong momentum across our data center SSD portfolio enabled by our leadership NAND technology. In the performance SSD category, Micron Technology, Inc. has introduced the world's first PCIe Gen6 SSD, leveraging our G9 NAND. We are seeing rapidly increasing qualification commitments for this product, including at hyperscalers. In mainstream storage, our SSDs based on G9 NAND are already seeing robust demand in 2026. In capacity storage, our QLC-based 122 and 245 terabytes G9 SSDs are entering qualification at multiple hyperscale customers. PC demand continues to be driven by Windows 10 end-of-life and AI PCs. We forecast PC unit sales to grow in the high single-digit percentage range in calendar 2025, above our prior expectations provided in our last earnings call of mid-single digits. As we look ahead into 2026, we expect these demand drivers to continue while memory supply constraints may affect some PC unit shipments. Micron Technology, Inc. has completed multiple OEM qualifications of our 16-gigabit, 1-gamma-based DDR5 and our G9-based PCIe Gen4 QLC SSDs. Turning to mobile, smartphone unit volumes in calendar 2025 are on track to grow in the low single-digit percentage range. AI is driving memory content growth. The shipment mix of flagship smartphones with 12 gigabytes of DRAM increased to 59% in calendar Q3, more than twice the level from a year ago. Micron Technology, Inc. is accelerating innovation across our mobile DRAM portfolio. In fiscal Q1, we began sampling our breakthrough 1-gamma 16-gigabit LPDDR6 product to leading OEM and ecosystem partners, marking a major milestone in next-generation memory technology. LPDDR6 will power AI at the edge, delivering over 50% higher performance and improved power efficiency for flagship smartphones and AI PCs. Micron Technology, Inc. also sampled our 1-gamma LP5X 24-gigabit product and began volume shipments of the previously announced 1-gamma LP5X 16-gigabit product to multiple OEMs. Turning to auto, industrial, and embedded, in automotive, L2+ and LC adoption is driving robust demand today, and our customers' roadmaps indicate significantly higher memory content in fully automated vehicles. Micron Technology, Inc. is uniquely positioned for growth with our differentiated product portfolio and automotive market share leadership. Our ASIL-rated LPDDR5X and UFS 4.1 NAND products, optimized for automotive and advanced robotics that include bandwidth-enhancing features, are seeing strong demand and have already secured billions of dollars in design wins. In industrial, demand continues to strengthen, driven by the growing adoption of autonomous systems across various applications. Long-term demand trends trajectory remains robust for memory and storage in industrial applications, such as in factory automation, aerospace and defense, humanoid robotics, edge networking, and video surveillance. Across both auto and industrial markets, LPDDR4X and DDR4 are also experiencing strong demand, and we are making investments to provide long-term supply from our Manassas, Virginia fab. Now turning to our market outlook. Over the last few months, our customers' AI data center build-out plans have driven a sharp increase in demand forecasts for memory and storage. We believe that the aggregate industry supply will remain substantially short of the demand for the foreseeable future. The dramatic increase in HBM demand is further challenging the supply environment due to the three-to-one trade ratio with DDR5, and this trade ratio only increases with future generations of HBM. Additional clean room space is necessary to address this increased demand, and lead times for clean room build-out are lengthening across geographies. Together, these demand and supply factors are driving tight industry conditions across DRAM and NAND, and we expect tightness to persist through and beyond calendar 2026. Calendar 2025 DRAM and NAND bit demand growth expectations are higher than in our last earnings call outlook. We now expect calendar 2025 DRAM bit demand growth to be in the low 20% range versus high teens previously. We expect 2025 NAND bit demand growth to be in the high teens percentage range versus low to mid-teens previously. We expect calendar 2026 industry DRAM and NAND bit shipment growth to be constrained by industry supply. We expect both DRAM and NAND calendar 2026 industry bit shipments to increase around 20% from 2025 levels. Micron Technology, Inc. is working hard to support our customers' demand during this time, and we expect to grow our DRAM and NAND bit shipments approximately 20% in calendar 2026. Despite significant efforts, we are disappointed to be unable to meet demand from other customers across all market segments. Micron Technology, Inc. plans to increase our fiscal 2026 CapEx to approximately $20 billion versus our prior estimate of $18 billion. This increase will primarily support our HBM supply capability and also our 1-gamma supply in calendar 2026. We are pulling in equipment orders and accelerating installation timelines to maximize output capability. Micron Technology, Inc. is also investing across our global manufacturing footprint to add supply to support longer-term demand. We are seeing an enthusiastic customer response to our planned US supply. We are pulling in our first Idaho fab timeline, and we now expect first wafer output in mid-calendar 2027, earlier than our prior expectation of the second half of calendar 2027. Earlier this year, we announced our plans for the second Idaho fab, which will begin construction in 2026 and be operational by 2028. We are making good progress on securing necessary permits for our New York site and appreciate the partnership with the state of New York and the Trump administration. We plan to break ground on our first New York fab in early calendar 2026, which we expect will provide supply in 2030 and beyond. In Japan, with the support of METI, we are making technology and manufacturing investments. We are enabling future DRAM technology transition in coordination with our Boise R&D team. We are also adding clean room space in our Hiroshima fab to support these advanced nodes, which will increase production scale and optimize fab economics. In Singapore, our HBM advanced package facility is on track to contribute meaningfully to our HBM supply in calendar 2027. As HBM becomes a part of our Singapore manufacturing footprint, we expect opportunities for synergies between NAND and DRAM production. We are pleased with the progress on our assembly and test facility in India, which has initiated pilot production and will ramp in 2026. As we make progress on our strategic manufacturing initiative, we will continue to be responsive to the market environment and disciplined with our CapEx plans. I will now turn it over to Mark for our fiscal Q1 financial results and outlook. Mark Murphy: Thank you, Sanjay, and good afternoon, everyone. Micron Technology, Inc. delivered strong financial results for the fiscal first quarter, with revenue, gross margin, and EPS all exceeding the high end of our guidance. During the quarter, we generated record free cash flow, reduced our debt, and returned to net cash. Total fiscal Q1 revenue was $13.6 billion, up 21% sequentially and up 57% year over year, setting a quarterly record for the third consecutive quarter. We saw sequential revenue growth across all our business units. Fiscal Q1 DRAM revenue was a record $10.8 billion, up 69% year over year, and represented 79% of total revenue. Sequentially, DRAM revenue increased 20%, bit shipments were up slightly, and prices increased 20%, driven by tight industry DRAM supply, pricing execution, and favorable mix. Fiscal Q1 NAND revenue was a record $2.7 billion, up 22% year over year, and represented 20% of Micron Technology, Inc.'s total revenue. Sequentially, NAND revenue increased 22%. NAND bit shipments increased in the mid to high single-digit percentage range, and prices increased in the mid-teens percentage range, driven by tight NAND industry supply, pricing execution, and favorable mix. The consolidated gross margin for fiscal Q1 was 56.8%, up 11 percentage points sequentially. This improvement was driven by higher pricing with strong cost execution and favorable mix. Now turning to quarterly financial performance by business unit. Cloud Memory Business Unit revenue was a record $5.3 billion and represented 39% of total company revenue. CMBU revenue was up 16% sequentially, driven by an increase in bit shipments and higher prices. CMBU gross margins were 66%, higher by 620 basis points sequentially, supported by cost execution and higher pricing. Core Data Center Business Unit revenue was a record $2.4 billion and represented 17% of total company revenue. CDBU revenue was up 51% sequentially, driven by robust bit shipments and higher pricing. CDBU gross margins were 51%, up 990 basis points sequentially, supported by higher pricing and cost execution. Mobile and Client Business Unit revenue was a record $4.3 billion and represented 31% of total company revenue. MCBU revenue was up 13% sequentially, driven by higher pricing partially offset by lower bit shipments. MCBU gross margins were 54%, up 17 percentage points sequentially, driven primarily by higher pricing. Automotive and Embedded Business Unit revenue was a record $1.7 billion and represented 13% of total company revenue. AEBU revenue was up 20% sequentially, driven by higher bit shipments and higher pricing. AEBU gross margins were 45%, up 14 percentage points sequentially, driven primarily by higher pricing. Operating expenses in fiscal Q1 were $1.3 billion, up $120 million quarter over quarter and in line with our guidance range. The sequential increase was driven by higher R&D expenses in support of technology and product development on our new DRAM and NAND technology nodes. We generated operating income of $6.4 billion in fiscal Q1, resulting in an operating margin of 47%, up 12 percentage points sequentially and 20 percentage points year over year. Fiscal Q1 taxes were $977 million on an effective tax rate of 15.1%. Non-GAAP diluted earnings per share in fiscal Q1 was $4.78, with 58% sequential growth and 167% versus the year-ago quarter. Turning to cash flow and capital expenditures. In fiscal Q1, operating cash flows were $8.4 billion, and capital expenditures were $4.5 billion, resulting in free cash flow of $3.9 billion. Fiscal Q1 free cash flow was a quarterly record, exceeding our prior record in fiscal Q4 2018 by over 20%. Ending inventory for fiscal Q1 was $8.2 billion, down $150 million sequentially, with days of inventory at 126. DRAM inventory days remain tight and below 120 days. On the balance sheet, we held $12 billion of cash and investments at quarter-end and maintained $15.5 billion of liquidity when including our untapped credit facility. In fiscal Q1, we repurchased $300 million of shares as permitted by the terms of the CHIPS agreement. During the quarter, we also reduced debt by $2.7 billion, paying off a $1 billion balance of term loans and redeeming $1.7 billion of senior notes. We closed the quarter with $11.8 billion of debt and a net cash balance over $250 million. Through the fiscal year, we expect to further strengthen our balance sheet as we generate additional free cash flow. Before turning to our outlook, I would like to share an update on how we are benefiting from AI use across Micron Technology, Inc. Today, over 80% of our professional workforce actively uses GenAI, with total usage up tenfold since last year. In manufacturing, integrating AI into yield and quality management has cut root cause identification time by half in cases. Our coding teams are realizing gains of 30% or more using AgenTeq AI. In R&D, GenAI is accelerating development by reducing cycle times in design verification, product validation, issue triage, and root cause analysis. Across business functions, GenAI is broadening automation opportunities, and we are deploying conversational analytics to accelerate and improve decision-making. We expect Micron Technology, Inc.'s use of AI across the enterprise to further strengthen our competitiveness in the coming years. Now turning to our outlook for the fiscal second quarter. Industry demand is greater than supply for both DRAM and NAND. We expect higher prices, lower costs, and favorable mix to all contribute to gross margin expansion in Q2. Operating expenses for fiscal Q2 are projected to be approximately $1.38 billion. As mentioned last quarter, Micron Technology, Inc.'s fiscal Q4 2026 OpEx will also reflect the effect of an additional work week in this 53-week fiscal year. We expect a fiscal Q2 and fiscal year 2026 tax rate of around 15.5%. Micron Technology, Inc. is investing in a disciplined manner across our global manufacturing footprint to better meet demand. To address tight supply-demand conditions, if extending beyond 2026, we now project our capital spending in fiscal 2026 to be approximately $20 billion, weighted to the second half of the fiscal year. We expect free cash flow to strengthen in fiscal Q2, and we expect to generate significantly higher free cash flow year over year in fiscal 2026. Any impacts that may occur due to potential new tariffs are not included in our guidance. With all these factors in mind, our non-GAAP guidance for fiscal Q2 is as follows: We expect revenue to be a record $18.7 billion, plus or minus $400 million, gross margin to be in the range of 68%, plus or minus 100 basis points, and operating expenses to be $1.38 billion, plus or minus $20 million. Based on a share count of approximately 1.15 billion shares, we expect EPS to be a record $8.42 per share, plus or minus $0.20. I will now turn it over to Sanjay to close. Sanjay Mehrotra: Thank you, Mark. AI-driven demand is here, and it is accelerating. And Micron Technology, Inc. is capturing these opportunities with the best competitive position in its history. This success is built on the strength of our global team, and I want to thank our team members worldwide for their hard work and dedication. We are in the most exciting time in Micron Technology, Inc.'s history, and the best is yet to come. We will now open for questions. Operator: Operator, can you queue up the questions? Operator: Yes, sir. And I show our first question comes from the line of Timothy Arcuri from UBS. Timothy Arcuri from UBS, your line is open. Timothy Arcuri: Thanks a lot. Sanjay, I wanted to ask you about customer LTAs. I know we are hearing about DDR5 that's being bundled with HBM, and in some cases, even NAND. So can you just talk about these LTAs? I know it sounds like these are, you know, stretching out through 2026 and in some cases even 2027. I have even heard of some stuff into, you know, 2028. So can you talk about the nature of these LTAs? And then I had an AI follow-up as well. Thanks. Sanjay Mehrotra: These are multiyear contracts that we are in discussions with several of our key customers. And these contracts, of course, involve DRAM as well as NAND. And, you know, with respect to the returns, of course, these contracts that we are under discussions for are very different from prior LTAs. They have specific commitments in them and a much stronger contract structure. And beyond that, I cannot be giving you specifics at this point. Of course, in the future, if and when appropriate, we will be sharing further details. Timothy Arcuri: Thanks. And then, Mark, I want to ask you about CapEx. So you took it up to $20 billion net, but it still seems, I mean, you are not guiding all fiscal '26 revenue, so we do not really know what the capital intensity number is. But it seems like it is like 25 to 30%, which is a little below your 35%, you know, metric that you usually think of. So is that because you are constrained because of fab space? And can you just talk about does that sort of like roll into fiscal '27 where we would see, you know, cap up more near that 35% range? Thanks. Operator: Thank you. And I show our next question in the queue comes from the line of CJ Muse from Cantor Fitzgerald. Please go ahead. CJ Muse: Gotcha. Back to you. CJ Muse, your line is open. Operator: Yeah. Yeah. They did not answer the prior question. Operator? Operator: Yes, sir. Can you turn it back to management so they can answer the prior question? Operator: Sure. Management's line is open. Please proceed. Mark Murphy: I believe the speaker's lines are muted at this time. Operator: Ladies and gentlemen, please continue to stand by. Your call will resume momentarily. Mark Murphy: Operator, can you hear us? Operator: Yes. We can now. You are unmuted, sir. Please proceed. Mark Murphy: Okay. I am not sure what happened there. We were on mute here. So I just want to make sure that you heard Sanjay's response. Correct? Timothy Arcuri: We did not. Mark Murphy: You did not hear Sanjay's response. Okay. Thanks, Tim. So Sanjay, we heard the I heard Sanjay's response to the first question, but I did not hear your response, Mark, to my question on CapEx and on capital intensity. Mark Murphy: Okay, Tim. Okay, Tim. Thank you. So you are right, Tim. We are not providing a full-year revenue guide. We did indicate that our CapEx was going up in fiscal '26. And, you know, a substantial part of that CapEx is to support DRAM and specifically HBM and the 1-gamma and 1-gamma RAM. You know, I would say that from '25 to '26, the plan is roughly to double the brick-and-mortar construction CapEx. And at this time, we would expect '27 CapEx to be up, you know? But I want to emphasize that Micron Technology, Inc. is going to remain disciplined on CapEx growth to support, you know, bit demand and that bit supply and that supply will be in line with demand. Timothy Arcuri: As your question of capital intensity, our capital intensity, of course, is dropping as the market conditions remain very constructive, and of course, we are working to be very efficient with our capital spend. Mark Murphy: Okay, Mark. Thank you. Operator: Thank you. And I show our next question comes from the line of CJ Muse from Cantor Fitzgerald. Yes. Good afternoon. Thank you for taking the question. I guess, Mark, to follow up on the prior question around CapEx and the relative growth seems very conservative in the backdrop that we are in. And, you know, it feels like you are just sitting here without clean room space, and it also does not sound like you are, you know, meaningfully pulling in clean room. So can you talk about the philosophy there? And, you know, I guess what I am taking away from your commentary is that you are being very conservative and judicious with adding capacity here. Mark Murphy: Well, I would say that we have been indicating issues with supply for several quarters, that we were working inventories down, that node transitions were going to be the principal source of supply growth in fiscal '26. And that is, you know, that is exactly what is happening. And, you know, we know that clean room space takes time. And the HBM growth, which has only picked up with AI-driven demand, has further pressured supply. So there is no, you know, near-term solution. As we said in the prepared remarks, the entire industry we expect to be short to demand. And we are no different in that case. But we are moving quickly to do our best to provide customer supply. And we have pulled in tools. We have accelerated construction in Idaho. We are doing everything we can within our existing footprint and near-term capacity expansions to deliver supply. And so, you know, we provided a bit growth number for '26. And that is supply constrained. Sanjay Mehrotra: And I will just add that, of course, we are continuing to make the investments in technology transitions in our existing footprint. And as we highlighted, that 1-gamma node will be, you know, the majority driver of our supply growth in '26. And, of course, you have seen us make investments not only in technology transitions but also in greenfield capacity, but also enabling greater technology production capability in our existing clean rooms in Japan, and we are making the necessary investments there as well. So of course, we remain disciplined, but we are very much focused and trying to work hard toward increasing our supply there. And pleased with our plans for Idaho one, Idaho two, and, of course, New York as well. Of course, in the short term, very much focused on maximizing production efficiencies, maximizing our production output from the existing footprint as well. But, yes, I mean, demand fundamentals are pretty strong. Driven by AI from data center to edge with the build-out of our customers, supply is significantly short. And, you know, I would say that, you know, in the medium term, we are only able to meet about 50% to two-thirds of our demand from several key customers. So we remain extremely focused on trying to increase the supply here and making the necessary investments. CJ Muse: Very helpful. And then I guess as a follow-up for gross margins, obviously, the guide is quite stellar. But curious as you go through calendar '26, how should we think about cost down across both DRAM and NAND? And as you transition from 3E to 4, is there anything that we should keep in mind or we should think about contemplating in our models where there might be, you know, higher cost temporarily giving yields or whatnot? Thanks so much. Mark Murphy: Yeah. So our cost execution has been very good across both DRAM and NAND. Of course, we are getting some volume leverage, but spend control has been very good. Yields have been good. We do have some startup costs coming in for the new fabs, new construction across the network. That starts to come in '26 and into '27. But at these, you know, size of the business, at these levels, it is a relatively small impact on margin. We are not going to provide cost guidance for the rest of the year as it depends on many factors, including mix. But to our earlier question, I can say that, you know, we have talked about up 1-gamma DRAM and G9 NAND. That LAN for supply in '26. And those ramps are proceeding well and will be a tailwind to our cost as these nodes ramp. Sanjay Mehrotra: Regarding your question on HBM3E and HBM4, as we have said, we will be beginning to ramp production of HBM4 in CQ2 time frame in line with our customer demand. And, of course, our HBM4 is progressing extremely well. Very pleased with our product, industry-leading product with the highest performance of over 11 gigabits per second. And so, I mean, that is the highest performance. And we are very pleased with its overall yield ramp, and we expect that HBM4 to be expecting having a faster yield ramp than our HBM3E. And, of course, our mix of HBM3E and HBM4 during '26 will be very much based on our overall customer demand, and we will have both of these products with a strong profile in our '26 revenue. Mark Murphy: Thank you. Operator: And I show our next question in the queue comes from the line of Harlan Sur from JPMorgan. Please go ahead. Harlan Sur: Hey. Good afternoon, and great job on the quarterly execution. You know, just over the past three to four months as we track the different ASIC AI XPU programs, there has been a significant upward revision on ASIC XPU volume shipments next year. You have Google TPU, AWS Trinium, and so on. Right? And all of these XPUs are still going to be using HBM3E. Have you has the team seen this near-term positive dynamic in your order book for 3E? And given that you are fully contracted for calendar '26, like, what and what appears to be growing upside to next year's view, how is the team how is the Micron Technology, Inc. team going to try and manage this upside dynamic in 3E alongside a strong HBM4 demand profile? Sanjay Mehrotra: As I mentioned, Harlan, earlier, the top course, 2026 will have a mix of HBM3E and HBM4. And we have shared with you in the past that, you know, we are engaged with multiple with the entire ecosystem here of HBM customers. And very much engaged with them. And, you know, they will all contribute to our strong year-over-year growth in revenue in '26, and of course, that will be made up of both HBM3E and HBM4. So as I said, I mean, we will continue to manage the mix of the two based on, you know, customer requirements. I can tell you that, you know, in 2026, supply on HBM will be tight. A non-HBM DRAM will be tight as well. So we are continuing to see as we have highlighted in our prepared remarks, you know, tightening supply environment. And, of course, we see strong year-over-year growth in '26 for our HBM. We today upped our, you know, revenue forecast or if for each HBM, we highlighted that by 2028, we expect it to be $100 billion TAM, and that is two years ahead of our prior outlook. So, of course, HBM is on a good trajectory. And what I can also tell you is that customers, as their architectures are evolving, you know, as their platforms are evolving, and these are customers across the ecosystem, of course, they are requiring more and more HBM. I mean, the value of memory in terms of ability to deliver the AI capabilities and the functionality and the performance memory is critical, and more HBM is required, and that is across the various AI platforms in the industry. Harlan Sur: No. I appreciate that, Sanjay. And then after two to three quarters of enterprise, this is the sort of muted trends. I believe the team saw a strong reacceleration in the business, right, according to some of the third-party research estimates I think your enterprise SSD business grew, like, 25% sequentially. In the most recent quarter. Right? So you are the number three market share leader amongst eight or nine competitors. Right? Very strong share position. Given, I would assume, increasing demand trends here, expanding lead times, is the Micron Technology, Inc. team also entering into long-term supply agreements with your ES SSD customers? And then secondarily, I mean, SSD demand, is it more tied to expansion in inferencing workloads as customers aggressively move to monetization? In other words, is storage intensity higher on inferencing versus training workloads? Sanjay Mehrotra: So with respect to enterprise SSDs, really, very proud of our engineering and business teams and, of course, our sales teams in terms of our customer engagement and the strong momentum and the share gains that we have with our enterprise SSD. Of course, our enterprise SSDs are a big part an important part that we say, of our data center strengthening mix. You know, of course, DRAM is continuing to increase in mix toward data center, but data center SSDs are an important part of our overall revenue mix. And, you know, we expect to continue to focus on share gains with our take a strong SSD roadmap, customer engagement, and great quality that we provide to the customers. And as I mentioned, that our multiyear contract that we are in discussions with with our several key customers. Our SSDs, our data center SSDs are also part of that. And let me tell you that these multiyear contracts are not just about data center customers. They also are about multiple customers across our market segments here. And in terms of your questions on you know, is the SSD requirement growing with inferencing versus training? What I can tell you is that in the data center AI applications, I mean, as the generative AI moves to more and more video, of course, that drive greater demand. For more SSDs as well. So I mean, you know, the rapid evolution of AI from training to inferencing and the evolution rapid evolution of AI models and applications they are all driving greater growth of enterprise SSDs. Yes. Fueled by GenAI. Harlan Sur: Thanks, Sanjay. Operator: And I show our next question comes from the line of Thomas O'Malley from Barclays. Please go ahead. Thomas O'Malley: Hey, guys. Thanks for taking my question. Sanjay, you have been helpful in the past about kind of talking about Micron Technology, Inc.'s ramp in HBM and then also the ramp of the total market. You gave some new color on HBM with the $35 billion moving at a 40% CAGR. But Micron Technology, Inc. specifically, I was curious if you could give us any color on the percentage of the DRAM business today that is HBM from a dollars perspective? And then on share as you move into next year, obviously, there is a large competitor that is looking to become more competitive. Competitive at three. We have not heard anything on four yet. How do you feel about your competitive positioning into next year? And do you think that you are going to make any strategic decisions differently based on the public, you know, certification of their memory in the in the next couple of months? Thank you very much. Sanjay Mehrotra: We feel very good about our competitive position. We feel very, very good about our product and our HBM4 product that we have highlighted as industry-leading performance over 11 gigabits per second. The best specifications in the industry with our performance, and, of course, we feel very good about the power consumption in our product as well. You know, in the past, we have shared with you that how our HBM3E is 30% lower power than any of the competitors in the industry, and we are maintaining that momentum of low power, which, you know, is in data center applications is very important. Yeah. So we are maintaining our performance and power. And, of course, our strong capacity position with HBM4 roadmap as well. So we feel very good about our competitive position, about our roadmap, and our roadmap going beyond HBM4 for the future years beyond '26 as well. And we are very proud of our team's ability to execute successfully over the course of the last several quarters in terms of ramping up production capabilities of HBM3E. We shared with you that in CQ3, we reached our share of HBM to be in line with our, I mean, our HBM share to be in line with our DRAM share. And we have always highlighted that as we have reached that share, we will particularly in this tight supply environment, we will be managing the mix of our HBM as well as our non-HBM all of it is in high demand. And, you know, HBM as well as non-HBM has strong profitability. So looking at our strategic customer relationships as well as our overall profitability goals, and, you know, growth objectives, we will continue to manage that mix between HBM and non-HBM. But, of course, HBM, you know, is growing, and we have highlighted that how we expect the TAM to be $100 billion by 2028, a couple of years ahead of our prior projection. And, of course, we will grow our HBM as well. 2026 will see a strong year-over-year growth in our HBM. And you know, in this tight supply environment, as I mentioned, that the gap between the demand and supply for all of DRAM, including HBM, is really the highest that we have ever seen, and I quantified it earlier as well. So in this environment, of course, working closely with our customers, we are continuing to manage our mix of the product here. Thomas O'Malley: Thank you, Sanjay. And just as we focus on also continuing to increase supply to better address our customers' demand requirements. Thomas O'Malley: Perfect. And then just as a follow-up, you have said historically kind of the $8 billion run rate. If you look at November and February, you are taking up the total TAM, but any color specifically on HBM contribution the November quarter and what you are expecting in the guide? Sanjay Mehrotra: You know, we are not really providing those specifics here in terms of the breakout. Our HBM revenue was a record. We did highlight that. I mean, we highlighted that in FQ1. And beyond that, we are really not going to be providing the specifics in terms of revenue. And just would tell you again that year over year in '26, we will be seeing a strong growth in our HBM revenue. Mark Murphy: Thank you, sir. And our product is very well positioned. So, I mean, that is a very good place to be in in terms of managing the overall mix of the business. Thomas O'Malley: Thank you. Operator: And I show our next question comes from the line of Krish Sankar from TD Cowen. Please go ahead. Krish Sankar: Congrats on the phenomenal results and guidance. My first question is for Mark. I know you spoke about the sustainability for next year. I am kind of curious how to think about gross margins beyond the February, like into May, is it going to improve or sustain at these levels? How to think about the gross margins? I have a for Sanjay. Mark Murphy: Thanks, Krish. And for we are not guiding margins beyond Q2. We did guide a record Q2, as you know. Sixty-eight percent. Eleven points sequential improvement, seven points better than the previous record. We did indicate that we would our business would strengthen through the year. And so we do believe margins can be up. We do believe that they will be up for DRAM and NAND. Now keep in mind that at these high gross margin levels, you know, mathematically, you know, we get less in gross margin percent for the same increase in price. So, yeah, we would expect gross margins to expand beyond fiscal Q2. But we would expect that growth to be more gradual than what we have seen in the last couple of quarters. Or the first quarter and the second quarter guide. Krish Sankar: Got it. Thanks a lot, Mark. That is super helpful. And then for me just and, Chris, just one one one last thing. Mark Murphy: You know, we have indicated that, you know, strengthen through the year because we believe this constructive market environment will remain so through the year. These favorable market conditions. But we also, you know, we are executing very well on cost. And as Sanjay mentioned earlier, we are deploying the bits to, you know, the valuable part of the market. And where we can serve our customers best. Krish Sankar: Got it. Super helpful, Mark. Thanks for that. And Sanjay, just as a follow-up to the earlier question, I understand you want to, like, put some boundary conditions. But, you know, a year ago, you totally nailed it when you said you are going to get, like, HBM market share close to your DRAM market share, the DRAM market share. So when you talk about, like, 2028 40%, $100 billion TAM, how to think about Micron Technology, Inc.'s HBM market share in that realm? Should we as you know, it is going to be the 20%? So that spectrum, or it is going to be lower? Thank you. Sanjay Mehrotra: So, Krish, again, we are not really going to be specifying, you know, the share. As we have said, we will be managing the mix of the business between HBM as well as our non-HBM. It is like any other product in our portfolio that, you know, when you have a strong product roadmap across the portfolio, you know, then, of course, you know, we manage the mix across our portfolio with all the strategic and customer relationships in mind. So, Krish, we are not really going to break that break that down. And, you know, all I would say is that, you know, in this current industry environment, which we see as durable industry fundamentals, you know, in the foreseeable future. We are in a very good position with all the tailwinds of our product portfolio and, of course, the increasing value of memory across the board, you know, of course, HBM, but also a non-HBM in data center and other markets. We will just remain very focused on managing the mix of our business and, of course, managing for the best in the midterm as well as keeping in mind the longer term. Krish Sankar: Thanks a lot, Sanjay. Appreciate it. Operator: Thank you. One moment for our next question. And our next question comes from the line of Chris Danely from Citi. Please go ahead. Chris Danely: Hey. Thanks, guys. So I just wanted to dig in on these long-term customer contracts you guys are negotiating. Can you give us any more sense of when you think you will be able to sign these and then maybe just talk about what the holdup is. Is it just the unprecedented length? Or size? And given that the AI company asking for so much of your capacity, are you able to get them to, you know, more or less contribute to the building of a new fab? Sanjay Mehrotra: So we will not really get into the specifics around our contract discussions with our customers. But again, I will highlight a couple of important factors that, you know, customers are concerned about long-term access to adequate memory in the environment that we are heading into. And, you know, that is leading to constructive dialogues with, you know, several key customers in with them and across our multiple markets. You know, in terms of, you know, their supply as well as other important specific commitments related to these longer-term estimates. So not getting into the specifics, but as I highlighted, our contract structures that we are discussing are not like anything before. You know, they are far stronger contract structures with specific commitments, and, of course, different from prior contracts is that those used to be, money and contracts, and these are multiyear in nature as well. And as we look at addressing the customer discussions, of course, we have to look at our overall supply. And I have mentioned to you that in the midterm, medium term, we are only able to meet, you know, half to two-thirds of the demand from our several key customers. All of that, you know, as we are managing our customer relationships and, you know, keeping, you know, our strategic objectives in mind, all of that has to be taken into account as we manage our contract discussions. But really, not getting into the specifics here. Chris Danely: That is still very helpful, Sanjay. Thanks. And for my follow-up, just a question on HBM and the pricing there. So given that the demand is so strong, I think you said you are sold out for '26. Are you are you guys locked into a set price, or can you let that price, more or less float a little bit given how strong demand is like, you know, DDR5 does, for example? Sanjay Mehrotra: You know, we are really pleased with our product position and our, you know, ability to work with our customers as we highlighted. In our prepared remarks that our HBM for 2026 is sold out in terms of volume and our negotiations with customers have been completed for calendar year 2026 for volume as well as pricing. And as we have always highlighted that our HBM has strong profitability, you know, and of course, you know, very much focused on ROI. And our non-HBM business also clearly has healthy profitability as reflected in the results that we produce as well as in the guidance that we have provided here. Chris Danely: Great. Thanks, Sanjay, and congrats again on the results. Sanjay Mehrotra: Thank you. Operator: Thank you. And I show our next question comes from the line of Vivek Arya from Bank of America Securities. Please go ahead. Vivek Arya: Thanks for taking my questions. Sanjay, I am curious, at what point does increasing memory price impact, you know, demand for electronics? If you set aside the data center and the AI market, do you see some elasticity? Do you see any impact on demand as you look into 2026 for more consumer and kind of traditional enterprise products? How does that shape where memory pricing can go next year? Sanjay Mehrotra: You know, we have highlighted in our prepared remarks that, you know, in some of the consumer markets, yeah. I mean, some of the unit demand may get impacted, you know, given, you know, semiconductor prices here, given memory prices here. And, of course, some of the customers may have, you know, for example, in smartphone and PCs, they may have some mix adjustments in their portfolio as well to address available supply to them. But, you know, these are accounted for in our forecast that we have. And so it I mean, some of the possible impact on unit demand and some of the customer mix changes have been accounted for in our forecast. And we, of course, even then, we see a very, very tight supply environment here in the large gap between the demand and supply. However, I will highlight to you that AI experience across from data center to edge, including in these edge devices like smartphones and PCs and other devices, AI experience really more memory is essential. So without sufficient memory, you know, that AI experience, the functionality, the capability does get impacted in these edge devices as well. So, I mean, the punch line here is that AI across the board from data center to edge is driving an increase in content and increasing requirement for memory as the customers look ahead at their roadmaps. And, you know, that is why customers are, of course, you know, working with us with respect to access to supply for their long-term multiyear plans here as well. Operator: Thank you. This concludes our Q&A session and today's conference call. At this time, I would like to end today's conference call. Thank you all for participating. You may now all disconnect.

Operator: Thank you for standing by, and welcome to Micron Technology's Fiscal Fourth Quarter 2025 Financial Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. To remove yourself from the queue, please press star 11 again. I would now like to hand the call over to Satya Kumar, Investor Relations. Please go ahead. Satya Kumar: Thank you, and welcome to Micron Technology's fiscal fourth quarter 2025 financial conference call. On the call with me today are Sanjay Mehrotra, our Chairman and President and CEO, and Mark Murphy, our CFO. Today's call is being webcast from our Investor Relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website, along with prepared remarks for this call. Today's discussion contains forward-looking statements that are subject to risks and uncertainties. These forward-looking statements include statements regarding our future financial and operating performance, including our guidance as well as trends and expectations in our business, market, industry, and regulatory and other matters. These statements are based on our current assumptions, and we assume no obligation to update these statements. Please refer to our most recent financial report on Form 10-Ks and our other filings with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially from expectations. Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures can be found on our website. I'll now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Satya. Good afternoon, everyone. Micron had an outstanding finish to fiscal 2025, delivering fiscal Q4 revenue, gross margin, and EPS all above the high end of our updated guidance ranges, driven by pricing execution and strong performance across end markets. We achieved record revenue in Q4. In our March 2024 earnings call, we said that we expect Micron to be one of the biggest beneficiaries of AI in the semiconductor industry and that we expect to deliver record revenue and significantly improve profitability in fiscal 2025. I'm pleased to report that in fiscal 2025, Micron's revenue grew nearly 50% to a record $37.4 billion, and gross margins expanded by 17 percentage points to 41%. This performance was supported by the ramp of our high-value data center products and our broad-based DRAM pricing strength across end markets. The combined revenue from HBM, high-capacity DIMMs, and LP server DRAM reached $10 billion, more than a fivefold increase compared to the prior fiscal year. Our data center SSD business reached record revenue and market share in fiscal 2025. I want to thank our global Micron team for their focus and execution, which made these results possible. As we enter fiscal 2026, Micron is positioned better than ever. Our leadership in advanced technologies, including HBM, one gamma DRAM, and g9 NAND, enables a differentiated product portfolio that drives strong ROI. AI-driven demand is accelerating, and industry DRAM supply is tight. Our HBM performance has been strong, and robust demand, tight DRAM supply, and disciplined execution have significantly strengthened the profitability of the rest of our DRAM portfolio. In NAND, our higher mix to data center and improving industry conditions are contributing to profitability. Our fiscal Q1 guidance reflects new records for revenue and EPS. In addition to being a demand driver, AI is also a powerful productivity driver for Micron, contributing to our strong competitive position and financial performance. We are using AI throughout the company across product design, technology development, manufacturing, and other functional growth. We have seen strong adoption and as much as a 30 to 40% productivity uplift in select GenAI use cases such as code generation. In design simulation, AI is accelerating our silicon to systems design cycle to advance modeling and reduce iterations. In manufacturing, we have driven a fivefold increase in wafer images analyzed in the past year and doubled the amount of useful data and telemetry collected and analyzed from our fab tools, all of which improve our yield performance. These AI capabilities enable us to achieve superior product specifications, quality, and time to market at scale. Turning to technology and operations, we are proud to announce that our one gamma DRAM node reached mature yields in record time, 50% faster than in the prior generation. We are the first in the industry to ship one gamma DRAM and will leverage one gamma across our entire DRAM portfolio to maximize the benefits of this leadership technology. We achieved first revenue from a major hyperscale customer on our one gamma products for server DRAM in the quarter. Our g9 NAND production ramp has been progressing well, while scaling at a pace aligned with market demand. We have ramped our g9 NAND node for both TLC and QLC NAND and have qualified our g9 QLC NAND for enterprise storage. In fiscal Q4, we received a CHIPS grant disbursement following the completion of a key construction milestone for our new high-volume manufacturing fab in Idaho, with the first wafer output expected to begin in 2027. We began design work for our second Idaho manufacturing fab, which will provide additional capacity beyond 2028. In New York, we have completed initial phases of our environmental impact study and continue to work with state and federal authorities towards starting ground preparation. In fiscal Q4, we installed the first EUV tool for our Japan fab to enable one gamma capability, which will complement our existing one gamma supply from our fabs in Taiwan. The time from receiving this tool to completing installation was a record for all EUV tools globally, demonstrating Micron's expertise with this equipment. We plan to continue to invest in our Japan production capability to meet the requirements of the advanced memory technologies of the future. Our continued HPM assembly and test investments position us well to meet growing HBM capacity requirements in calendar 2026. We are making good progress on our Singapore HBM assembly and test facility construction, which is on track to contribute to our HBM supply capability beginning in calendar 2027. Turning to our end markets, in data center, we now expect calendar 2025 total server units to grow approximately 10%, up from our prior expectations of mid-single-digit percentage growth. The calendar 2025 traditional server growth outlook has strengthened significantly from flat to growth in the mid-single-digit range. We believe this change in outlook is in part related to the growth of AI agents and the traditional server workloads agents initiate as they execute tasks on behalf of users. Continued growth in traditional server applications in enterprises is also contributing to additional demand growth. In addition to traditional servers, AI server growth continues to be very robust. This growth in both traditional and AI servers is driving strong demand for our DRAM products. Data centers require some of our most complex and high-value products, and meeting this demand has presented several opportunities to enhance our product mix and profitability. In fiscal 2025, Micron's data center business reached a record 56% of total company revenue with gross margins of 52%. Our HPM business has posted many quarters of strong growth. In fiscal Q4, our HPM revenue grew to nearly $2 billion, implying an annualized run rate of nearly $8 billion, driven by the ramp of our industry-leading HBM CE products. We are pleased to note that our HPM share is on track to grow again and be in line with our overall DRAM share in this calendar Q3, delivering on our target that we have discussed for several quarters now. Micron's HPM four twelve high remains on track to support customer platform ramps even as the performance requirements for the HBM four bandwidth and pin speeds have increased. We have recently shipped customer samples of our HMM four with industry-leading bandwidth exceeding 2.8 terabytes per second and pin speeds over 11 gigabits per second. We believe Micron's HPM four outperforms all competing HBM four products, delivering industry-leading performance as well as best-in-class power efficiency. Our proven one beta DRAM, innovative and power-efficient HBM four design, in-house advanced CMOS-based die, and advanced packaging innovations are key differentiators enabling this best-in-class product. For HBM four e, Micron will offer standard products as well as the option for customization of the base logic die. We are partnering with TSMC for manufacturing the HVM four e base logic die for both standard and customized products. Customization requires close collaboration with customers, and we expect HPM four e with customized base logic dies to deliver higher gross margins than standard HPM four e. Our HBM customer base has expanded and now includes six customers. We have pricing agreements with almost all customers for a vast majority of our HBM three e supply in calendar 2026. We are in active discussions with customers on the specifications and volumes for HBM four, and we expect to conclude agreements to sell out the remainder of our total HPM calendar 2026 supply in the coming months. Micron's LPDD five for servers had over 50% sequential growth in the quarter and reached record revenue. In close collaboration with NVIDIA, Micron has pioneered the adoption of LPDRAM for servers, and since NVIDIA's launch of LPDRAM in their GB product family, Micron has been the sole supplier of LPDRAM to the data center. In addition to our leadership in HPM and LP five, Micron is also well-positioned with our GDDR seven products, which are designed to deliver ultrafast performance with pin speeds exceeding 40 gigabits per second along with best-in-class power efficiency to address the needs of certain future AI systems. In data center NAND, AI-influenced use cases, such as KV cache tiering and vector database search and indexing, are driving demand for performance storage, while AI server growth is driving demand for high-capacity SSDs for capacity storage. Micron is gaining share in these markets with our customer-focused technology leadership, vertical integration, and execution. We strengthened our portfolio with the industry's first g9 NAND data center products, including first-to-market PCIe Gen six SSDs. Near term, we see continued growth in the data center storage market, with HDD supply shortages expected to improve NAND demand and drive a healthier supply-demand environment. Turning to PCs, the end of life of Windows 10 and greater adoption of AI-enabled PCs are driving an improved PC demand outlook. We now expect PC unit shipments to grow at a mid-single-digit percentage level in calendar 2025 versus our low single-digit percentage growth expectations previously. During the quarter, we achieved our first OEM customer qualification of our 16-gigabit one gamma-based d five and commenced volume shipments. In NAND, we successfully qualified our first g9 NAND SSDs in both performance and mainstream categories with OEM customers. Our strong SSD portfolio enabled us to achieve record client SSD revenue in the quarter and in fiscal year 2025. Smartphone unit shipment expectations remain unchanged at a low single-digit percentage range in calendar 2025. An increasing mix of AI-ready smartphones continues to be a key catalyst for DRAM content growth in mobile devices. Notably, one-third of the flagship smartphones shipped in calendar Q2 contain 12 gigabytes or more, and given recent product launches from Apple, Samsung, and other smartphone OEMs, we expect this mix to increase over the coming quarters. In fiscal Q4, Micron ceased future mobile managed NAND product development in order to focus our resources and investments on higher ROI opportunities in our portfolio. We will continue to support existing mobile managed NAND products. Micron remains committed to serving the mobile DRAM market with our industry-leading portfolio. In fiscal Q4, we achieved OEM qualification of our first 10.7 gigabit per second one beta second-generation LP five x products at 16 gigabyte and 24 gigabyte capacities. Turning to auto, industrial, and embedded, in automotive, trends such as ADAS and AI-enhanced in-cabin experiences require significantly higher memory and storage content, making it a higher growth part of the industry. In embedded, we expect physical AI, such as drones, advanced robots, and ARVR, to become a more important driver of demand over time. Automotive and industrial demand strengthened throughout the quarter, exceeding our initial forecast. We are seeing improved profitability in this business with stronger pricing and an increased mix of advanced technology nodes, with greater adoption of d five and LP five products. We continue to see supply constraints in d four and LP four. In June, Micron announced investments in our Virginia facility in an effort to support our long life cycle customers' demand for d four and LP four. Now turning to our market outlook. Customer inventory levels are healthy overall across end markets. We expect calendar 2025 industry DRAM bit demand growth to be in the high teens percentage range, somewhat higher than our previous outlook. We expect calendar 2025 industry NAND bit demand growth to also be higher than our previous outlook, now in the low to mid-teens percentage range. We expect Micron's calendar 2025 bits to be below industry bit demand growth for non-HPM DRAM and for NAND. Robust data center demand, including the uptick in server unit growth, has contributed to a tight industry DRAM environment and strengthened NAND market conditions. Additionally, broadening of demand across end markets has also constrained DRAM supply. On the supply side, we expect low supplier inventories, constrained node migration, as industry supports extended d four and LP four end of life, longer lead times, and higher costs globally for new wafer capacity, all to limit the pace of supply growth for DRAM in 2026. In calendar 2026, we anticipate further DRAM supply tightness in the industry and continued strengthening in NAND market conditions. Over the medium term, we anticipate industry bit demand growth of mid-teens CAGR for both DRAM and NAND. Micron invested $13.8 billion in CapEx in fiscal 2025. As we continue to make one gamma DRAM and HPM-related investments, we expect fiscal 2026 CapEx to be higher than fiscal 2025 levels. DRAM front-end equipment and fab construction will drive higher capital spending in fiscal 2026. Our continued technology node migration to one gamma will provide the majority of our supply growth for DRAM in calendar 2026. As we transition more products to one gamma, our one beta capacity will support HBM growth in 2026. I'll now hand over the call to Mark to provide more color on our fiscal fourth quarter and fiscal 2025 financials. Mark Murphy: Thank you, Sanjay. Good afternoon, everyone. Micron delivered strong results to close out the fiscal year, with Q4 revenue, gross margin, and EPS all exceeding our updated guidance. For the full year, we achieved record revenue of $37.4 billion, up 49% year over year. Gross margins expanded to 41%, a 17 percentage point improvement from fiscal 2024. EPS reached $8.29, reflecting a 538% increase compared to the prior year. Total fiscal Q4 revenue was $11.3 billion, up 22% sequentially and up 46% year over year, and a quarterly record for Micron. Higher sequential revenue was driven by growth across our end markets, including record data center revenues and strong sequential growth in consumer-oriented markets. Fiscal Q4 DRAM revenue was $9 billion, up 69% year over year and represented 79% of total revenue. Sequentially, DRAM revenue increased 27%. Bit shipments increased in the low teens percent driven by strong demand across all end markets. Prices increased in the low double-digit percentage range driven by tight industry DRAM supply, pricing execution, and favorable mix. Fiscal 2025 DRAM revenues were a record $28.6 billion, up 62% year over year. Fiscal 2025 DRAM all-in costs inclusive of HBM were down by low single-digit percentage points. Fiscal Q4 NAND revenue was $2.3 billion, down 5% year over year, and represented 20% of Micron's total revenue. Sequentially, NAND revenue increased 5%. NAND bit shipments declined in the mid-single-digit percentage range, and prices increased in the high single-digit percentage range due to favorable mix. Fiscal 2025 NAND revenues were a record $8.5 billion, up 18% year over year. Fiscal 2025 NAND all-in cost reductions were around low teens percentage. Now turning to quarterly financial performance by business unit. Our new segment disclosures for our business units, which you see starting in today's press release and will see in future filings, highlight the improvements in our profitability and changing business mix. The cloud memory business unit and core data center business unit combined represent the totality of our data center business. Cloud memory business unit revenue was $4.5 billion and represented 40% of total company revenue. CMB revenues were up 34% sequentially, driven by robust bit shipment growth. HBM revenues reached a new quarterly record. CMBU gross margins were 59%, higher by 120 basis points sequentially, supported by cost reductions. Core data center business unit revenue was $1.6 billion and represented 14% of total company revenue. CDBU revenues were up 3% sequentially. CDBU gross margins were 41%, up 400 basis points sequentially, driven by higher pricing and favorable mix. Mobile client business unit revenue was $3.8 billion and represented 33% of total company revenue. MCBU revenues were up 16% sequentially, driven by higher DRAM shipments and improved pricing. MCBU gross margins were 36%, up 12 percentage points sequentially, driven by higher pricing and favorable mix. Automotive and embedded business unit revenue was $1.4 billion and represented 13% of total company revenue. AEBU revenues were up 27% sequentially, driven by higher bit shipments. AEBU gross margins were 31%, up 540 basis points sequentially, driven by higher pricing. The consolidated gross margin for fiscal Q4 was 45.7%, up 670 basis points sequentially. Sequential gross margin improvement was driven by favorable product mix, better DRAM pricing, and strong execution on cost reductions. Operating expenses in fiscal Q4 were $1.2 billion, up $81 million quarter over quarter and in line with our guidance range. The sequential increase was driven primarily by higher R&D. We generated operating income of $4 billion in fiscal Q4, resulting in an operating margin of 35%, up 820 basis points sequentially and 12 percentage points year over year. Fiscal Q4 taxes were $471 million on an effective tax rate of 12%, lower than our guidance due to favorability in certain discrete items. Non-GAAP diluted earnings per share in fiscal Q4 was $3.03, with 59% sequential growth and a 157% increase versus the year-ago quarter. Turning to cash flows and capital expenditures. In fiscal Q4, our operating cash flows were $5.7 billion, and our capital expenditures were $4.9 billion, resulting in free cash flows of $803 million. The increase in capital expenditures was driven by planned investments for DRAM. For the full year fiscal 2025, we generated $3.7 billion in free cash flow, representing 10% of revenue. Ending inventory for fiscal Q4 was $8.4 billion or 124 days. Inventory was down $372 million sequentially, and inventory days were down fifteen days, driven by strong sequential bit shipment growth in DRAM. DRAM inventory days are below target levels, and NAND inventory days improved sequentially. On the balance sheet, we held $11.9 billion of cash and investments at quarter-end and maintained $15.4 billion of liquidity when including our untapped credit facility. During fiscal Q4, we reduced debt by $900 million through the paydown of $700 million term loans and repurchased approximately $200 million of our senior notes. We closed the quarter with $14.6 billion of debt, maintaining low net leverage and a weighted average debt maturity of 2033. Now turning to the outlook for the first fiscal quarter. We expect price, cost, and mix to all contribute to strengthening gross margins in Q1. Operating expenses for fiscal Q1 are projected to be approximately $1.34 billion, with the sequential increase driven by R&D related to data center product innovation and development. Micron's fiscal 2026 will be a fifty-three-week fiscal year compared to fiscal 2025, which was a fifty-two-week fiscal year. As a result, fiscal Q4 2026 OpEx will reflect the effect of an additional work week in the quarter. We expect the fiscal Q1 and fiscal year 2026 tax rate to be around 16.5%. We expect our fiscal Q1 capital spending to be approximately $4.5 billion. While quarterly spend may fluctuate, this level serves as a reasonable quarterly baseline for the planned capital spend in fiscal 2026. We will continue to exercise supply discipline as we pursue our growth opportunities. We expect free cash flow to strengthen in fiscal Q1, and we project significantly higher annual free cash flow year over year in fiscal 2026. Any impacts that may occur due to potential new tariffs are not included in our guidance. With all these factors in mind, our non-GAAP guidance for fiscal Q1 is as follows: We expect revenue to be a record $12.5 billion, plus or minus $300 million, gross margin to be in the range of 51.5%, plus or minus 100 basis points, and operating expenses to be approximately $1.34 billion, plus or minus $20 million. Based on a share count of approximately 1.15 billion shares, we expect EPS to be a record $3.75 per share, plus or minus 15¢. I'll now turn it over to Sanjay to close. Sanjay Mehrotra: Thank you, Mark. Fiscal 2025 was a year of many records for Micron, as we have highlighted today. We have strong momentum entering fiscal 2026, with a robust fiscal Q1 demand outlook led by data center, and the most competitive position in our history. Over the coming years, we expect trillions of dollars to be invested in AI, and a significant portion will be spent on memory. As the only US-based manufacturer of memory, Micron is uniquely positioned to benefit from the AI opportunity ahead. Thank you for joining us today. We will now open for questions. Operator: Thank you. As a reminder, to ask a question, you will need to press 11 on your telephone. To remove yourself from the queue, you may press 11 again. Please limit yourself to one question and one follow-up to allow everyone the opportunity to participate. Please standby while we compile the Q&A roster. Our first question comes from the line of Timothy Arcuri of UBS. Please go ahead, Timothy. Timothy Arcuri: Thanks a lot. Mark, I was wondering if you could help on the guidance a little bit. I know you do not want to get into too much detail, but of the, let's say, $2.2 billion sequential that you're or sorry. The, you know, $200 million sequential revenue. Can you help us how that splits out between DRAM and NAND? And I guess, any gross margin puts and takes that you might have as well would be helpful. Mark Murphy: Yeah. Tim, you were breaking up a bit at the end, but I believe I've got it. So in the first quarter, we'll be heavier DRAM mix than NAND in that growth. As you mentioned, we're not gonna break out, you know, bits in ASP, but we are, you know, guiding up, you know, 580 basis points sequentially. It is split across, you know, mixed pricing and strong execution on our cost reductions. We're in a very constructive pricing environment. Supply is tight for DRAM and improving substantially in NAND. Yeah. We've got, you know, we've got essentially strong demand and supply factors at work. As you heard in the script today. On the demand side, data center spend remains robust. Projected to grow. Traditional server spend is improving and expected to grow. Refresh and inference workload demand drivers, and then PC, smartphone, auto all have increased content growth, and that's becoming clear. And then on the supply side, we'll get into that more in the Q&A here, but that is, you know, tight as well due to a number of factors that are structural. So, yeah, we're focused on our execution. And, again, sequentially here, expect price mix and strong execution to drive that 580 basis point margin expansion. Timothy Arcuri: Thanks a lot, Mark. And then Sanjay, I guess you had previously guided us to, like, a $100 billion HPN TAM by 2028, but since you gave us that number, there's been some massive numbers given out, some, you know, TAM numbers by NVIDIA and some, you know, some investments that are, you know, going on at and whatnot. So it's obvious that the Compute TAM is much bigger than what I think you probably would have seen at that time. So do I give an update to that number? I would assume it's bigger than that number, and maybe if you could comment on sort of what you see next year. I know this year sounds like mid-thirties. I'm wondering if you can give us any, like, milestone year and, you know, update that, you know, $100 billion and, you know, 2020. Thanks. Sanjay Mehrotra: But, Tim, your connection is poor, and you were breaking up a lot. But I think I got the gist of your question. What we have said before regarding longer-term HBM TAM, we have said that by 2030, we expect HPM TAM to reach $100 billion. And we had also said that HPM BIT CAGR will grow faster than the DRAM CAGR. And we see that in absolutely 2026 as well, you know, in terms of bits in HPM will outgrow the overall DRAM bits. And, of course, you know, as we look ahead, the value proposition of HBM continues to increase. And, of course, as we talked about, HPM now in 2026, transitioning to HPM four, Micron, of course, well-positioned. The market is starting to require even higher performances. And we today pointed out that Micron with our HPM four will have the highest performance product with over 11 gigabits per second and, of course, highest power efficiency as well. So the specs of HVM are becoming increasingly more demanding, which is exciting for us because we are very well positioned with these products. So this just means the value proposition of HPM just continues to grow. So we definitely continue to see strong long-term growth, very excited about all these various announcements of massive data center infrastructure spend. We have talked about trillions of dollars of spend over the next several years. And, of course, memory is very much at the heart of this AI revolution. This means a tremendous opportunity for memory and certainly a tremendous opportunity for HPM. So we feel very good about HPM longer-term opportunities, good about HPM opportunities in 2026, and very good about Micron's positioning. With our very strong product portfolio and strong execution, our track record, and the trust that we have built with our customers and our ability to supply quality and meet our customers' volume requirements. So exciting times ahead, and we are, of course, continuing to work very closely with our customers. Timothy Arcuri: Thanks a lot. Thank you. Operator: Our next question comes from the line of Vivek Arya of Bank of America. Please go ahead, Vivek. Vivek Arya: Thank you for taking my question. I'm curious. How do you see the transition from HPM three e to four? When do you expect the crossover next year? And I think as part of that, you mentioned that the pricing for three e is settled for 26. And I'm curious what is the direction of that pricing versus what you're getting now? Is it higher or lower? And do you expect your CE share to stay the same or change next year? Sanjay Mehrotra: So with respect to HPM four, you know, this is, of course, we will be at the forefront of this production ramp very much aligned with customers' timing. And, as we have mentioned, we have the best product in the industry, with the highest performance over 11 gigabits per second, and we have sampled that product. As well as low power. So industry-leading product performance. And so we will be ramping it up in line with customer demands, of course, you know, first production shipment and CQ2 of 26 time frame and production will ramp during the course of 2026. Again, in line with customer demand. And overall, in 2026, versus 2025, we see our share growing, product well-positioned. We are not commenting on the pricing of HPMC e. We had told you that HPMC e, we have pricing agreements completed with almost all customers for the vast majority of our HPMC e supply in 2026, and we are in discussions with regarding HPM four with our customers. What I will tell you is that supply is tight. We expect a healthy demand supply environment in 2026 for overall DRAM, and that bodes well for the profitability of DRAM, profitability of HBM, and, of course, profitability of non-HBM as well. Is experiencing tight supply. Vivek Arya: And for my follow-up, maybe, Mark, on the gross margin side, one is just conceptually, how do you think about the puts and takes of gross margins as you go through the rest of the year, the 51.5 this kind of the baseline? And as long as sales grow, can you expand off of this level? And then, you know, related to that, when I look at your cloud data center business, gross margin's 59%, operating margin's 48%. How much more room is there to from those very strong levels right now? Thank you. Mark Murphy: Yeah. Vivek, so we're not providing out quarter guidance, but what we will say is that we believe or we expect gross margin to improve sequentially first to second quarter. And it's on this tight DRAM supply and the associated pricing along with, you know, NAND business continuing to improve. And then just mix effects as we continue to steer bits towards high-value markets. And then our cost performance continues to be good. As, you know, mentioned in the prepared remarks, these supply-demand factors are, we believe, they're durable on the demand side. Data center spend continues to increase. I talked earlier about traditional server spend, and then the edge and auto. Having increased content. And then on the supply side, you know, customer inventory levels are healthy. Our supply is lean. Our DRAM inventories are below target. Band continues to improve. You know, we are, you know, we're working to be as efficient as we can in providing a supply response. You know, we're doing node transitions, but as the industry extends support for d four, that's constrained those node transitions. And then finally, it just takes a long time and is expensive to add new clean room space. And we all know the silicon intensity of HBM creating the urgency for that capacity requirement. So it's a good setup as we go into 26. And we, you know, delivered this strong guide on the first quarter gross margin, and we expect to see gross margins up in Q2. I also wanna reiterate something Sanjay mentioned that we expect margins to be healthy in both HBM and non-HBM in '26. So I'd leave it at that on the Alcorder guidance. Vivek Arya: Thank you. Operator: Thank you. Our next question comes from the line of CJ Muse of Cantor Fitzgerald. Your line is open, CJ. CJ Muse: Yeah. Good afternoon. Thank you for taking the question. I guess first question, you know, it certainly feels like in the last month or two, there's been an inflection in DRAM demand led by inference hyperscalers. So curious if you could kinda speak to what you have seen, the breadth of demand, and particularly the sustainability of that, and we'd love your thoughts. You've talked about tightness expected into fiscal 26. Your thoughts into this what is typically seasonally slower February should we see kind of normal seasonality? Or are there supply trends so limited that things can hold up much better than kinda normal seasonality? Sanjay Mehrotra: So, of course, we are not providing you f Q2 guidance at this point. But, you know, certainly, the AI trends are strong. And as you noted, not just in training, but in finance as well. And as the AI applications broaden, innovations increase, you know, greater different architectures, you know, all of this is only continuing to broaden the demand vector for AI, you know, in the data center as well as on edge devices such as smartphones. In the data center, of course, AI servers have driven strong demand as we have all known. Particularly with, you know, adjust the increasing demand and increasing demand for all DRAM, not just HPM, but LPDRAM, high-density DRAM module. But we are also seeing traditional server demand, as we noted in our remarks, increased as well. So this is really driving a strong growth trend overall for the industry. And then the demand vectors are broadening, as I noted, smartphones in particular, you have seen some recent launches of and shipments already starting of AI-enabled smartphones, which have higher content of DRAM in them versus the prior generation phones. And, of course, PCs is another tailwind. AI PCs and end of life for Windows 10 as the AIPCs are a tailwind for DRAM content as well. So overall, AI trends are strong, and this is across data center, across AI-enabled smartphones, and AI-enabled PCs. And this is what leads to, you know, strong demand in 2026. Across 2026, and we have talked about tight supply as well. Mark just laid out the factors for tight supply, which we also discussed in our prepared remarks. So overall, we look forward to a healthy demand supply environment in calendar year '26 for us. CJ Muse: Very helpful. And I guess that's my inventories customer inventories as well as supplier inventories. Are in good place. I mean, supplier inventories are actually running lean. Micron DRAM supply is very tight. CJ Muse: Thank you for that. As a quick follow-up on CapEx, Mark, it appears net CapEx implied $18 billion versus $13.8 billion last year. I think you talked about front-end equipment versus clean room space in DRAM. Is there a way to kinda partition how much, you know, on equipment versus clean room? And then can you share with us what the implied gross CapEx is for fiscal 26? Thanks so much. Mark Murphy: Yeah. Yeah. Yeah. We've not laid out in detail. It's just that our spend in '26 will be the majority, the vast majority will be for DRAM, and we've got construction and facilities related to that, some tools for node transitions and beginning to install for the new greenfield. As it relates to you're right that we guided, you know, framework to be at around $18 billion. We will generally talk about CapEx in the context of net, which is gross CapEx offset by proceeds from government incentives. Yeah. We're not gonna talk about, you know, the gross and net for twenty-six. But you can see the components. You can bit back into the components here on what you've seen in the filings. For the gross spend in '25. And then the government incentives. And so we ended up at 13.8 net, and we were at 15.8 gross with 2 billion of government incentives. In '25. Yeah. You'll, yeah, you'll see that going forward. And, you know, the government incentives in '25 are largely the US, Singapore, and Japan. And we can talk more about those in the future. CJ Muse: Thank you. Mark Murphy: Thank you. Operator: Our next question comes from the line of Harlan Sur of JPMorgan. Please go ahead, Harlan. Harlan Sur: Yeah. Good afternoon. Thanks for taking my question. Days of inventory are now at your target levels as you had expected previously. And within that, DRAM is actually below your targets. Right? So given the strong three e 12 high RAM, continued strong demand pull for non-AI DRAM. How are you guys thinking about your total and DRAM inventories exiting this quarter? Will days of inventory continue to come down? Just given the overall supply tightness, are your lead times extending? And customers placing orders further in advance? And is this better visibility? What gives the team confidence on continued tightness into calendar '26? Mark Murphy: Yeah. Harlan, I'll cover that. We do expect inventories to remain at or better on DIO than we've seen in the fourth quarter. DRAM will remain very tight as we talked about through the year, so we would expect to be, you know, below target. And then NAND, you know, we're being very disciplined around NAND, and that market continues to improve. So we do expect NAND DIO to decrease as well. Sanjay Mehrotra: And, of course, we work closely with our customers. And customers are fully aware that the demand environment is strong and the supply is very tight in the DRAM and supply outlook is tight. So we work closely with the customers. And I just want to point out that as we look ahead at our supply, we are looking at one gamma ramp to support our demand. In non-HBM products. HBM products we will support them with our one beta. And, of course, continue maintaining focus on, you know, maximum production efficiencies leveraging the clean room space that is available to implement the technology transitions as well as drive maximum production efficiency. Harlan Sur: No. I appreciate that. Thank you for the insights there. And Sanjay, you know, as your customers continue to differentiate their GPU and XPU platforms, memory continues to be sort of that key focus area of differentiation. As you mentioned, some of your HPM four customers are looking for as much as 25% more bandwidth versus the plain vanilla Jetix standard. Looks like the Micron team delivered a solution that's 40% more performant than the Jetix spec, right, and well exceeding your customers' requirements. Did the team have to redesign the base logic diet to achieve these impressive results? Just wondering if the higher performance HBM four skew maybe pushed out customer calls or have the call schedules remained on track relative to your original plan? But more importantly, even with the higher speeds, is your power consumption still superior to your competitive solutions? Sanjay Mehrotra: Very good questions, Harlan, and thank you for asking those questions. Very proud of our team's execution. Proud of our team's design, of our DRAM die and the SIEM advanced CMOS technology that is used in their DRAM die. As well as our base die, which has advanced CMOS as well. Combination of all of this, our innovative design, our memory architecture, our advanced CMOS in the DRAM, as well as advanced CMOS in the base die, and, of course, that advanced CMOS base die is manufactured here by Micron giving us a competitive advantage. All of this actually has enabled us to achieve, you know, customers' increasingly higher requirements bandwidth, at 2.8 gigabyte per second and speed at 11 more than 11 gigabits per second as well. And this has really positioned us well, you know, getting ready for the production ramp of our HP four product. With these kind of specs, and as I said, with these kind of specs, we'll be at the forefront of HPM shipment ramp, keeping it in line with customer demand. Thank you. Harlan Sur: And I just wanted to hear, I think I said for Bandwidth, 2.8 terabyte per second. I hope that came across clearly. 2.8 terabyte. Per second. Speed, 11 gigabit per second. Operator: Thank you. Our next question comes from the line of Krish Sankar of TD Cowen. Krish Sankar: Yeah. Hi. Thanks for taking my question. I told them, Sanjay, you mentioned about getting sold out in HPM, hopefully, in the next few months. Is there a way to quantify the supply opportunity in calendar twenty-six? Assuming you're fully sold out? And also, if the HBM demand is start better than expected, can you increase supply in calendar twenty-six? You're sold out in the next few months? And then I had a quick follow-up. Sanjay Mehrotra: Yeah. We are not breaking down the supply volumes, etcetera. But, yes, HPM three e as we mentioned, pricing agreements are done with the vast majority of our HPM CE for our vast majority of our HP and CE supply, and volume is also fixed for HBM three e with most customers. And as our customers are looking at their finalizing their plans with HPM four, particularly plans with increased specifications and their own deployment of that in their next-generation platforms. We expect to be concluding our agreement on, you know, HPM four supply as well as all of 2026, HPM supply here in 2026. I mean, in the next few months. And really very pleased with our industry-leading HPM four product specifications, absolutely outperforming the rest. So we are well positioned with this. And it really, you know, with respect to your question, we will, of course, manage the mix of in our now that we have reached our HPM share, in CQ3, to be in line with our industry DRAM share, we will manage and non-HPM being, you know, healthy margins as well. We will now manage the mix of our portfolio keeping in mind, of course, ROI on our portfolio as well as being disciplined with our total investment. We as you can well understand, we have, of course, flexibility to opportunistically manage share here for HPN because at the front end, it uses the same one beta wafers as rest some of the rest of our products as well. So that gives us fungibility at the front end in terms of supply management and assembly and test we have, of course, all the investments that we have made over the course of last several quarters, we are well positioned with capacity in assembly and test as well. So our investments and our team's strong execution in ramping up capacity and giving us the total confidence gives us now the flexibility to manage the mix of the full portfolio between HPM and non-HPM keeping ROI in mind, and, of course, staying disciplined here with our investments as well. Krish Sankar: Got it. Thanks, miss, Sanjay. Another quick question on HVM four. It's nice to see the 11 gigabits per second pin speed. You also said that you have the offering of both your in-house base dial, so that's customized TSM logic die. There a way to figure out what do you expect that mix to be? Do you expect more customers to go with the in-house die or the TSM die? And how easy is it for you from the Micron standpoint of switching between the two based on customer demand? Sanjay Mehrotra: So HBM four is the product that is with our internal base die. And HBM four e is where we said in our remarks, that, you know, we will be offering standard products as well as customized products. HBM four e is where we are partnering with TSMC. HVM four e is not in the industry, it's not the 2026 product that will be, you know, 2027. Kind of product, and we'll share more details with you, and we will have both standard and customized products in HBM four e. HVM four, using our own base die in the industry, HVM four is what will be the product that will be ramping in production. And as you mentioned that with, you know, the value proposition of HPM continues to increase, and with HPM four e, value proposition increases even further. And we would certainly expect, you know, the customization to provide high gross margin as I indicated in my prepared remarks. And once again, I would like to point out our HPM uses our own logic die. That means Micron's own CMOS and that gives us unique advantages and, of course, has been a key contributor along with our DRAM design and DRAM architecture as well as the CMOS that is embedded inside the DRAM. All of that gives us a unique advantage in terms of industry-leading performance. Operator: Thank you. And as that is all the time we have for Q&A today, that does conclude the Q&A portion of this call and today's conference call. Thank you for participating. You may now disconnect.

Operator: Thank you for standing by, and welcome to Micron's Third Quarter 2025 Financial Call. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Satya Kumar, Investor Relations. Please go ahead, sir. Satya Kumar: Thank you, and welcome to Micron Technology's Fiscal Third Quarter 2025 Financial Conference Call. On the call with me today are Sanjay Mehrotra, our Chairman, President and CEO; and Mark Murphy, our CFO. Today's call is being webcast from our Investor Relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website, along with the prepared remarks for this call. Before we begin, let me remind everyone that today's discussion contains forward-looking statements that are subject to risks and uncertainties. These forward-looking statements include statements regarding our future financial and operating performance, including our guidance as well as trends and expectations in our business, market, industry and regulatory and other matters. These statements are based on our current assumptions, and we assume no obligation to update these statements. Please refer to our most recent financial report on Form 10-K and our other filings with the SEC for more information on these risks and uncertainties that could cause actual results to differ materially from expectations. Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures can be found on our website. We encourage you to visit our website at micron.com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending. You can also follow us on LinkedIn, X and YouTube. I'll now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Satya. Good afternoon, everyone. Micron's strong competitive position and solid execution delivered record revenue in fiscal Q3 with revenue, gross margin and EPS all exceeding the high end of our guidance ranges. Data center revenue more than doubled year-over-year and reached a record level, and consumer-oriented markets had strong sequential growth. We generated substantial free cash flow in the quarter, even as we continue to make strategic investments critical to sustain long-term growth. I'm thankful to all our Micron team members for their focus and execution, which made these results possible. In fiscal Q3, DRAM revenue reached a new record driven by a nearly 50% sequential growth in HBM revenue. We remain the sole supplier in volume production of LPDRAM in the data center. In NAND, we achieved a new quarterly record for market share across data center SSDs as well as client SSDs in calendar Q1. For the first time ever, during calendar Q1, Micron has become the #2 brand by share in data center SSDs according to third-party data. Looking ahead to fiscal Q4, we see a robust demand environment and expect to grow revenue by 15% sequentially to a record $10.7 billion at guidance midpoint. In June, we have completed a strategic reorganization of our business units around key market segments to capitalize on the tremendous AI growth opportunity ahead. As high-performance memory and storage becomes increasingly critical to enabling AI- driven innovation, this new structure enhances Micron's ability to engage more deeply with customers by shifting more resources to AI-focused opportunities across our portfolio. We are making excellent progress on our 1-gamma DRAM technology node with yields ramping ahead of the record pace we have achieved on our 1-beta node. We completed several key product milestones during the quarter, including the first qualification sample shipments of 1-gamma based LP5 DRAM. Micron 1-gamma DRAM leverages EUV, and the node provides a 30% improvement in bit density, more than 20% lower power and up to 15% higher performance compared to 1-beta DRAM. We will leverage 1-gamma across our entire DRAM product portfolio to benefit from this leadership technology. In NAND, we reached a record-high mix of QLC bits in the quarter. We started qualifications for new high-performance SSD products based on our G9 2-terabit QLC NAND, and we continue to ramp our G9 node at a pace consistent with demand. We are making disciplined investments in our global operations network to add to supply in line with demand over time. Two weeks ago, with support from the Trump administration, Micron announced plans to invest approximately $200 billion in the U.S., which includes $150 billion in manufacturing and $50 billion in R&D over the next 20-plus years. As part of this $200 billion investment plan, Micron plans to invest an additional $30 billion beyond previously announced plans, which includes building a second leading- edge memory fab in Boise, Idaho; expanding and modernizing our existing fab in Manassas, Virginia, serving the automotive, aerospace, defense and industrial markets; and bringing advanced packaging capabilities to the U.S. to support our long-term HBM growth plans after we have established sufficient DRAM wafer scale in our U.S. operations. We are pleased with the strong endorsement we received for our technology, products and investment plans from our customers and ecosystem partners as part of this announcement. Our first Idaho fab, ID1, achieved another key construction milestone in June. We expect first DRAM wafer output at ID1 to begin in the second half of calendar 2027 with customer qualifications to follow. The second Idaho fab, ID2, will benefit from manufacturing economies of scale with ID1 and adds to R&D co-location benefits with greater efficiencies and faster time to market. To meet anticipated demand, ID2 will begin production before the first New York fab. We expect to begin ground preparation in New York later this year following the completion of state and federal environmental reviews. Turning to our end markets. In data center, we expect the CY25 server market to grow mid-single digits percentage in units, largely driven by significant growth in AI servers. In fiscal Q3, data center DRAM revenue reached a new record for the fourth consecutive quarter, driven by strong growth and share gains in HBM and robust performance by our industry-leading portfolio of high-capacity DIMMs and low-power server DRAM products. We are executing well on our HBM ramp and product development road map. Our yield and volume ramp on HBM3E 12-high is progressing extremely well, and we expect shipment crossover in FQ4. We expect to reach HBM shares similar to our overall DRAM share sometime in the second half of calendar 2025. At AMD's Advancing AI event earlier this month, we announced that Micron's HBM3E 36-gigabyte 12-high has been designed into AMD's Instinct MI355X GPU platform. We are now shipping HBM in high volume to 4 customers, spanning both GPU and ASIC platforms. As generative AI workloads grow in size and complexity, the performance demands on HBM continue to rise. Micron's HBM4 leverages our well-established 1-beta DRAM technology along with an internally developed and manufactured advanced CMOS logic base die to deliver bandwidth exceeding 2 terabytes per second per memory stack, over 60% higher performance than the previous generation. Additionally, Micron's HBM4 offers a 20% lower power consumption compared to the already industry-leading power performance on our HBM3E 12-high product, setting new benchmarks in power efficiency for this product category. The expanded interface for HBM4 facilitates rapid communication and a high throughput design that accelerates the inference performance of large language models and chain of thought reasoning systems. Micron has delivered samples of HBM4 to multiple customers and expect to ramp volume production in calendar 2026, aligned with our customers' plans. We are exceptionally well positioned for the ramp of HBM4. Building on the success of our HBM3E ramp, we have high-quality, field-proven technology and have executed a robust and significant ramp in our HBM manufacturing capacity. We have deep relationships with practically every major customer of HBM and have earned their trust with our execution, delivering the world's lowest-power, highest-performance HBM. Our portfolio of high-capacity DIMMs and low-power server DRAM solutions delivered another record revenue quarter. Micron has pioneered the adoption of LPDRAM for servers, and we continue to maintain our sole-source position for LP in server. Together, our high-capacity DIMM and LP server products have already generated multiple billions of dollars in revenue in fiscal 2025, reflecting a remarkable fivefold growth compared to the same period in the previous year. During calendar Q1, for the third consecutive quarter, Micron achieved a record for data center SSD market share driven by our portfolio of differentiated products enabled through vertical integration. In fiscal Q3, our data center 9550 performance SSD, which is on the NVIDIA GB200 NVL72 recommended vendor list, completed additional customer qualifications at multiple OEMs. Micron's 9550 SSDs provide an industry-leading performance and energy-efficient Gen5 data center storage solution for AI server systems. We continue to qualify additional customers and ramp revenue for our 6550 ION 60-terabyte capacity SSDs. Turning to PC. We expect PC market units to grow in the low single-digit percentage range in calendar 2025. In the quarters ahead, key catalysts for growth include the increasing adoption of AI-enabled PCs and the Windows 11 upgrade cycle. Micron is focused on bringing differentiated high-performance products to the PC market. Our strong SSD portfolio resulted in Micron achieving a record-high client SSD market share in calendar Q1. Tomorrow, we will be announcing our new G9 QLC 2- terabyte based SSD featuring our proprietary Adaptive Write Technology, which enables 4x faster write performance. This technology expands the addressable market for QLC SSDs by delivering performance equivalent to TLC NAND for most consumer use cases. Turning to mobile. We expect smartphone units to grow low single digits in calendar 2025. AI adoption remains a key driver of DRAM content growth for smartphones, and we expect more smartphone launches featuring 12 gigabytes or more compared to 8 gigabytes of capacity in the average smartphone today. Micron is focused on providing solutions to the high-end smartphone segments, leveraging our leading 1-beta and 1-gamma technology nodes for LP5X DRAM and G8 and G9 technology nodes for our UFS 4 NAND products. During the quarter, we began shipping qualification samples of the industry's first LP5X memory built on the 1-gamma node, offering a wide range of capacities and industry-leading speed grades for 2026 flagship smartphones. Micron's 1-gamma LP5X DRAM is engineered to accelerate AI applications in high-end devices, delivering over 25% faster recommendations across several use cases while reducing power consumption by 20%, all in an ultrathin form factor ideal for mobile. In NAND, we secured a key customer design win and ramped high-volume production of our G9-based UFS 4 products. The strength of our mobile portfolio was further recognized through top quality awards from 7 smartphone OEMs during the quarter. Turning to automotive, industrial and consumer embedded markets. We expect increasing adoption of L2 and L3 ADAS features, and AI-enabled in-vehicle infotainment systems to drive memory and storage content growth as well as higher bandwidth requirements. Micron is positioned for long-term success in the automotive market with new product introductions such as the industry's first 1-beta dual-channel LP5 DRAM with high-speed 9.6 gigabits per second support, which achieved production readiness during the quarter. In industrial, we are seeing a resumption in our growth as customers increase their investments for the adoption of AI, including in key areas like factory automation. Micron is driving price improvements with a market backdrop of constrained D4 and LP4 supply and low distributor channel inventory. Now turning to our market outlook. Customer inventory levels have been healthy overall across end markets, and there may have been some tariff-related pull-ins by certain customers. Our customers continue to signal a constructive demand environment for the remainder of this calendar year, and we remain agile to adjust to any unforeseen demand changes that may occur due to macro conditions or the evolving tariff-related situation. We expect CY '25 industry DRAM bit demand growth to be in the high teens percentage range and industry NAND bit demand growth to be in the low double-digit percentage range. We expect Micron's bit supply growth to be below industry bit demand growth for non-HBM DRAM and NAND. Over the medium term, we anticipate industry bit demand growth of mid-teens CAGR for both DRAM and NAND. As previously communicated, our efficient node conversions will result in 10% structurally lower NAND wafer capacity ending fiscal 2025 versus the end of fiscal 2024 levels. Additionally, given NAND technology transitions provide a significant increase in overall bit output, Micron plans to manage our node conversions at a measured pace, consistent with our demand. Recent press reports have discussed the end of life of D4 and LP4 products. Micron's leading-edge DRAM nodes such as 1-beta and 1- gamma are focused on the latest-generation products such as D5, LP5 and HBM and are not utilized to produce D4 and LP4. D4 and LP4 products are largely produced in our 1-alpha DRAM node. Micron has sent EOL notices for these products to customers in high- volume segments like mobile, client, data center and consumer several months ago with final shipments occurring in 2 to 3 quarters from now. This EOL process is similar to prior transitions from one generation of memory to another, and consistent with history, Micron intends to support its longevity customers with long-term and relatively lower-volume requirements in segments like automotive, industrial, defense and networking with supply of these 1-alpha DRAM products for several years. In the near term, customers in the high- volume segments are starting to see increasing shortages of D4 products. We are now on allocation for these products and are working with customers to try and support their high-priority near-term demand. D4 revenues are low single-digit percentage of our revenues in second half of fiscal 2025. We anticipate LP4 shortages may also increase as a result of EOL. In closing, Micron's record Q3 revenue performance and strong Q4 outlook are the results of our strategic focus and consistent execution. As AI drives unprecedented demand for high-performance memory and storage, Micron is exceptionally well positioned to capitalize on this transformative era. Our leadership in technology, highlighted by progress in HBM, 1-gamma DRAM and G9 NAND, alongside disciplined global manufacturing investments, supports our path to sustained growth. We are confident that our strategic direction, innovation capabilities and the execution by our exceptional team will continue to create meaningful value for our shareholders, customers and employees. We are on track to deliver record revenue with solid profitability and free cash flow in fiscal year '25, while we invest to build on our leadership to addressing growing AI-driven memory demand. I will now turn it over to Mark for our financial results and outlook. Mark J. Murphy: Thank you, Sanjay, and good afternoon, everyone. Micron delivered strong results in fiscal Q3 with revenue, gross margin and EPS all above the high end of the guidance ranges provided in our last earnings call. Total fiscal Q3 revenue was $9.3 billion, up 15% sequentially and up 37% year-over-year and a quarterly revenue record for Micron. Higher sequential revenue was driven by growth across our end markets, including record data center revenues and strong sequential growth in consumer-oriented markets. Fiscal Q3 DRAM revenue was $7.1 billion, up 51% year-over-year and represented 76% of total revenue. Sequentially, DRAM revenue increased 15% with bit shipments increasing over 20% and prices decreasing in the low single-digit percentage range, primarily due to a higher consumer-oriented revenue mix. Fiscal Q3 NAND revenue was $2.2 billion, up 4% year-over-year and represented 23% of Micron's total revenue. Sequentially, NAND revenue increased 16% with bit shipments increasing in the mid-20s percentage range and prices decreasing in the high single-digit percentage range. Now turning to revenue by business unit. Compute and Networking Business Unit revenue was $5.1 billion, up 11% sequentially and a quarterly record. This performance was driven by a nearly 50% sequential increase in HBM along with growth in our high-capacity DRAM and low-power server DRAM. Revenue for the Storage Business Unit was $1.5 billion, up 4% sequentially. This growth was primarily driven by an increase in consumer-oriented revenue. Mobile Business Unit revenue was $1.6 billion, up 45% sequentially. Sequential revenue growth was due to reduced customer inventories and strong demand from DRAM content growth. Embedded Business Unit revenue was $1.2 billion, up 20% sequentially, supported by growth in industrial and consumer embedded markets. The consolidated gross margin for fiscal Q3 was 39%, up 110 basis points sequentially and up 250 basis points versus the midpoint of our guidance. Gross margins were above the high end of our guidance range, primarily due to better prices for both DRAM and NAND, partially offset by a higher consumer-oriented mix. Operating expenses in fiscal Q3 were $1.1 billion, up $87 million quarter-over-quarter and in line with our guidance range. The increase was primarily driven by higher R&D investments and labor-related costs. We generated operating income of $2.5 billion in fiscal Q3, resulting in an operating margin of 26.8%, up approximately 190 basis points sequentially and up 13 percentage points year- over-year. Fiscal Q3 taxes were $306 million on an effective tax rate of 12.3%, lower than our guidance due to the effects of onetime discrete items in the quarter. Non-GAAP diluted earnings per share in fiscal Q3 was $1.91, above the high end of the guidance range with 22% sequential growth and up over 200% versus the year ago quarter. Turning to cash flows and capital spending. In fiscal Q3, our operating cash flows were over $4.6 billion, and our capital expenditures were $2.7 billion. Free cash flows in the quarter were over $1.9 billion, the highest quarterly amount in over 6 years. Ending inventory for fiscal Q3 was $8.7 billion or 139 days. Inventory was down $280 million sequentially, and inventory days were down 19 days sequentially, driven by strong sequential bit shipment growth in both DRAM and NAND. On the balance sheet, we held a record $12.2 billion of cash and investments at quarter end and maintained $15.7 billion of liquidity when including our untapped credit facility. During fiscal Q3, we refinanced our $900 million 2027 notes with $1.7 billion in new notes maturing in fiscal years 2033 and 2036. We closed the quarter with $15.5 billion of debt, maintaining low net leverage and a weighted average debt maturity of 2032. Now turning to our outlook for the fourth fiscal quarter. We expect our revenue growth to be weighted towards DRAM, supported by robust pricing execution, favorable product mix and continued cost improvements, all of which benefit gross margins. Operating expenses for fiscal Q4 are projected to be approximately $1.2 billion with the sequential increase primarily driven by planned R&D investments in future technology nodes and HBM product development. Our fiscal 2025 capital spending plans remain unchanged at approximately $14 billion. The overwhelming majority of the fiscal 2025 CapEx is to support HBM as well as facility, construction, back-end manufacturing and R&D investments. We expect a fiscal Q4 tax rate of around 13%. As previously disclosed, our fiscal 2026 tax rate is expected to be in the high teens percentage range following Singapore's adoption of the global minimum tax. Any impacts that occur due to potential new tariffs are not included in our guidance. With all these factors in mind, our non-GAAP guidance for fiscal Q4 is as follows. We expect revenue to be $10.7 billion, plus or minus $300 million; gross margin to be in the range of 42%, plus or minus 100 basis points; and operating expenses to be approximately $1.2 billion, plus or minus $20 million. We expect our fiscal Q4 tax rate to be around 13%. Based on a share count of approximately 1.15 billion shares, we expect EPS to be $2.50 per share, plus or minus $0.15. With another quarter of shipment growth forecasted in fiscal Q4, we expect to exit fiscal 2025 with tight DRAM inventories, significantly reduced NAND inventories and overall company DIO near our target levels. With low inventories on hand and a constructive demand environment, we will continue to focus on improving pricing and further strengthening our product mix. In fiscal Q3, Micron delivered earnings above the guidance range, achieved record revenue and continued ramping our industry- leading HBM. We also began transitioning to a new market segment-focused business unit structure. Starting in fiscal Q4, we will report revenue, gross margin and operating margin metrics across these new business units. With strong execution and a differentiated product portfolio, Micron is well positioned to maintain our leadership and to deliver record revenue and significantly improved profitability once again in fiscal Q4. Thank you for joining us today. We will now open it up for questions. Operator: [Operator Instructions] And our first question comes from the line of Timothy Arcuri from UBS. Timothy Michael Arcuri: Sanjay, I wanted to ask sort of how you see the HBM TAM scaling with the accelerator TAM. One thing that's been clear over the past 3 months or so is that the accelerated TAM is definitely upsiding and growing a lot. And it seems -- if I take their projections and I take your HBM projections, it kind of seems like the HBM market is going to remain 15% to 20% of what the overall accelerator market is. I guess, how do you see the HBM TAM scaling with that market? And then is there some sort of limit or like asymptote that we begin to reach in terms of HBM attached to these GPUs and these custom ASICs? Sanjay Mehrotra: With respect to HBM growth, we certainly see that HBM demand grows in the future. I'll tell you that in this year, if you look at calendar year '25, HBM is growing from last year about $18 billion in revenue to approximately $35 billion in calendar year '25. We see in calendar year '26, if you look at HBM bit demand growth, it will significantly exceed the overall DRAM industry demand growth. And of course, the transition from 8-high to 12-high in HBM in '26, transition to HBM4 as well, which is even a higher-value product, all of that essentially bodes well in terms of the value of HBM and the overall need for HBM in these accelerator platforms that are, of course, evolving fast. And of course, our customers are very much focused on working with us and looking at their platforms, assessing the mix of 12- high and HBM4. And then when we look at '27, that goes into HBM4E. '28 starts introducing customization in HBM as well. So the trajectory of HBM in terms of the value proposition in these accelerators continues to be strong and healthy. And of course, we are well positioned. We -- as we shared with you, we have already begun to sample our HBM4 products. And these -- again, we plan to maintain our leadership with respect to specifications here, and we have certainly demonstrated a capacity ramp-up as well. So we remain excited about HBM. We see this as clearly a strong growth driver as well as value driver for our business. Operator: And our next question comes from the line of Vivek Arya from Bank of America Securities. Vivek Arya: I wanted to talk about gross margins. So first, what is driving the upside sequentially? And then is this the new baseline for gross margins? And then what would be kind of the puts and takes as we look at the next few quarters beyond Q4? Mark J. Murphy: Yes. Vivek, it's Mark. So in the third quarter, I think maybe start with what happened in gross margin in the third quarter. We had a strong sequential volume growth in the quarter. But versus the guide, the defining factor was we had -- prices were down, as I said in the opening comments, but we had better-than-expected pricing that drove the margin improvement versus expectations. I'll add, too, that we had good cost performance and all. But certainly, the price was better than we had expected. Now that carries on into rebaselining on the fourth quarter. So we provided an indication of the fourth quarter before when the market was in transition, and we said at that time that the inventory outlook that we would -- was improving when it weakened a bit late last year. And we had intended to work to inflect price. And as you know, a few weeks later, the situation with the Liberation Day tariffs, the environment got a bit more challenging. The condition of the market is better than expected since then, and it strengthened through the quarter. You saw that outperformance. And then we've executed well. And so what you see here from this rebaseline of the business, you see us add to that through favorable mix Q3 to Q4. That's more DRAM growth than NAND, so you have favorable mix there, and then more data center than consumer- oriented mix, which was weighing down the margins in the third quarter. So yes, so it's -- again, it's a continued good market backdrop. We're going to continue to focus on pricing. But third quarter to fourth quarter, we have favorable mix effects that is helping drive margins up to the current guide of 42%. Vivek Arya: And anything beyond this mark? Any puts and takes as we look at the next several quarters? Is this kind of the new baseline? Or is it going to be entirely dependent on the direction of pricing? Mark J. Murphy: Yes. We're not going to provide Q1 guidance. We are positive on the trajectory of the business. The market environment does remain constructive, particularly in DRAM versus NAND. Again, we're focused on pricing and making sure to put our bets in the right places. As we said in the prepared remarks, our inventories are very tight, particularly on leading edge and then now even pockets of some of the legacy and DRAM. So we're going to have some bit constraints going into first quarter, but we're going to mix to DRAM, higher- value DRAM and higher-value NAND products. And so we think gross margins can be up. Operator: And our next question comes from the line of CJ Muse from Cantor Fitzgerald. Christopher James Muse: I was hoping to revisit your comments on HBM. So you're talking 23%, 24% market share. And it sounds like you're now calling not exiting the year but sometime in the second half. So that's coming in better. And so I guess first question is, should we be thinking that, that number is kind of a 22%, 23% depending, I guess, on seasonality of the $35 billion number? And then perhaps more importantly, as you think about HBM growth in calendar '26, how should we be thinking about the contributions to that growth, both from bits as well as higher ASPs as you go to next-generation products? Sanjay Mehrotra: C.J., I didn't quite understand the question around 22%, 23%. What exactly did you say there? Christopher James Muse: Just trying to understand how you talked about getting to your DRAM market share, which I think you said 23%, 24% for the HBM market. And your previous comments were exiting the year. Now you're saying sometime in the second half. So trying to get an idea of kind of what that revenue number looks like. Sanjay Mehrotra: We are already at -- if you look at our performance based on FQ3, we are already at more than $6 billion run rate here with our HBM and certainly continuing to ramp up our HBM output, shifting production to 12-high HBM as well. So yes, it could be that compared to what we said before in terms of toward the end of the calendar year, we expect to get to our HBM share in line with our DRAM share. So versus that, it could be that we do end up getting to our industry share for -- in line with industry share for HBM share earlier than that. So it could be. And that's really absolutely based on our very, very strong execution and strong execution in terms of output, in terms of yield ramp. We noted that our 12-high yield ramp is actually going faster than our 8-high yield ramp, of course, built on all the learning that we have had. The team has done an excellent job with capacity ramp as well. All of that is contributing to our strong performance on HBM. Extremely pleased with where we are and extremely pleased with not just execution today and our ability to ramp up yield and capacity successfully and built in the process trust with the customers, but very pleased with the road map that is ahead for us for HBM as well. So I mean these are things that will obviously play an important role in calendar year '26 as we work closely with the customers to understand their overall mix requirements for 2026. Operator: And our next question comes from the line of Thomas O'Malley from Barclays. Thomas James O'Malley: Two here. So my first on the HBM side, you're obviously reaching your share target a little bit earlier. Going into next year, are you guys ready to talk about what you think that your normalized share will be? Obviously, there's difficulties with some of your competitors getting qualified. If that continues into next year, do you guys have a view of if you're able to increase capacity, and if you are, what that share may look like? And then two, on the NAND side, where does utilization stand today? And obviously, you're going through some of the transitions right now internally, which has allowed you to kind of keep some things offline. But as you move into next year, what is your plan for utilization? Is that going to be market dependent? Or at some point, do you need to start bringing on utilization just from the fact that there's a gross margin headwind? Sanjay Mehrotra: So as I said, we are very pleased that we are executing well and with what we told you several quarters ago in terms of our share objectives with HBM that we are going to be able to achieve that goal for this year in second half of '26. Now our HBM is really at scale. It has a healthy share and we are successfully delivering. So going forward, of course, this becomes like part of our overall product portfolio and just like we manage the rest of the portfolio with respect to total I on ROI and profitability. And of course, HBM really positions us very well with respect to our profitability objectives. We will, of course, continue to manage the mix of our products in the portfolio, including that of HBM, including the share that sometimes can move around in different parts of the end market segments that we address. So I think that's how you have to look at it. Overall, really very pleased with our HBM products, 12-high as well as HBM4 built with our well-proven 1-beta technology, which also gives us cost-effective benefits. And of course, the packaging technology, well established. And company, of course, has been investing in expanding our HBM back-end capacity as well. We have talked about investments in Singapore, bringing assembly and packaging capacity there in line, starting production, targeting that for 2027 time frame. And I'll tell you that HBM, given that it uses our well-proven 1-beta technology, is really fungible capacity with the rest of the portfolio as well. So this gives us plenty of flexibility in terms of managing our business and extremely focused on really meeting customers' requirements and continuing to deliver and enhance our product capabilities to meet their growing requirements. And your second question around NAND in terms of utilizations, so we have said before that toward the end of fiscal '25, our NAND overall capacity would be down versus end of fiscal '24 by about 10%. And that's a structural reduction in capacity. And of course, as we have discussed before, that structural reduction was implemented to achieve capital-efficient next node transition for us like G9 node transition. So as that capacity has come down, of course, our underutilization has come down as well, although part of NAND continues to remain underutilized. I must note here that, of course, leading edge of NAND is fully utilized. Operator: And our next question comes from the line of Harlan Sur from JPMorgan. Harlan L. Sur: If I rewind back 1 year ago during your June earnings call, you guys did say back then that you were sold out on your HBM supply through calendar '25 and that majority of that committed supply was locked in from a pricing perspective. One year later, where are you on your negotiations for your calendar '26 HBM supply and pricing discussions? Is the team's supply outlook for next year fully committed, too? Or maybe a better way to frame it, right, because I know that the HBM3E and HBM4 12-high qualification cycles might be taken a bit longer, but maybe the other way to frame it is, if you look at your customers' calendar '26 forecasted demand for HBM, is it exceeding your forecasted supply capability? Sanjay Mehrotra: With respect to HBM in 2025, yes, very pleased that what we told you back a year ago, we are continuing to deliver on that, as I said earlier. And yes, our HBM is sold out for 2025. And as I mentioned earlier, we are working closely with our customers as their platforms, AI accelerated platforms, both with GPUs as well as with ASICs, are continuing to evolve and move fast. And they themselves are working on overall their supply chain requirements and product mix with respect to HBM3E 12-high as well as HBM4. So we continue to work with the customers in those, and we are still in the middle of '25 and for 2026. As I said earlier, we see, with respect to bit demand growth, strong trend in 2026, bit demand growth for HBM significantly exceeding DRAM demand growth. And of course, we have a strong product road map. And we are working on continuing. As we said, we sampled HBM4, focused on getting these products qualified with the customers. And HBM3E 12-high is already in volume productions and doing very well with our yield ramp there as well. So very much focused on addressing the '26 needs for the customers and executing well and remaining extremely focused on our execution for 2026. Operator: And our next question comes from the line of Joseph Moore from Morgan Stanley. Joseph Lawrence Moore: I wonder if you could talk in terms of your long-term CapEx plans and the sort of 35% of revenue levels. Is that kind of a reasonable guideline to think about for fiscal '26? Or are you thinking because of the opportunity here you need to invest ahead of that? Mark J. Murphy: Yes. Joe, I mean we have a generational tech transition opportunity in front of us that Micron is exceptionally well positioned for. And we've talked about inventory levels for some time now, getting leaner, especially, being very tight on the leading edge. And with the silicon requirements of HBM and with trade ratio, we need to build greenfield capacity. So that's underway. If you look at our CapEx forecast, we had a little bit lower CapEx than we expected in the quarter at $2.7 billion, but you'll see by the guide that we're going to see that CapEx increase in the fourth quarter. So we stuck with our approximately $14 billion number. I think as we go forward, we're continuing to build out the greenfield capacity, and there'll be equipment installs on the new nodes. There's grants involved and construction. So the timing of that spend can be a bit lumpy. But we anticipate generating free cash flow in the fourth quarter. And you will see we'll just continue to build our capacity. I do want to note that we continue to make steps to improve the balance sheet further in the quarter. We're down -- net debt now down to $3 billion. We further reduced maturities in the short end of the maturity schedule, taken out the $900 million '27 notes and issuing $1.75 billion further out. And we continue to be in a great position with a flexible balance sheet to invest in the business, make sure we maintain technology leadership and then return capital to shareholders through dividend and opportunistic buyback. Operator: And our next question comes from the line of Krish Sankar from TD Cowen. Krish Sankar: I had 2 questions for Sanjay -- or 2-part question. One is, when you look into HBM4, given the double I/O count through silicon via, what kind of trade ratio should we expect for HBM4? And also, when you look at -- broadly speaking, is there a difference in HBM bits and margin profile between selling to GPU versus ASIC customers? Sanjay Mehrotra: With respect to HBM4, its trade ratio is greater than 3. For HBM3E, previously, we have shared that trade ratio is approximately 3, and HBM4 has a higher trade ratio than 3. It has a larger die size. And of course, as you noted, it has a higher performance. We shared 60% higher performance given the high-bandwidth interface that this has. And HBM4E will have a ratio that would be even greater. So as we have shared with you in the past that as we are going from HBM3E to 4 to 4E, the trade ratio is going from about 3 towards 4 in that time frame. So of course, this puts -- HBM trade ratio and the growth of HBM absolutely puts a pressure on the non-HBM supply in the industry as well. And with respect to your question on the margin difference for GPU versus ASIC, of course, HBM commands high value, whether it's in GPU accelerators or ASIC-based accelerators. And that value proposition is only growing. When you look ahead over the years, the content with the future generation GPUs or ASIC platforms that will be out there of HBM continues to -- is expected to continue to increase as well. We have shared with you in the past that going from about 200 to 288 gigabytes in GPU accelerators today as well as in the ASIC- based accelerators in that range going to higher levels as we go from 8-high to 12-high capacity. So we don't -- so value proposition is strong, both for GPU accelerators as well as ASIC accelerators. And of course, we don't get into the specifics or differentiating the 2 here. Operator: And our next question comes from the line of Chris Caso from Wolfe Research. Christopher Caso: Just a clarification on one of the things you said in the prepared remarks. You talked about there may have been some tariff-related pull-ins by certain customers. I think overall, your comments suggest that you -- at least my interpretation is that you think that the customer inventory levels are getting a bit cleaned up here. Could you clarify the remarks a little bit, put it in context of what you expect that means for customer inventory levels and how that kind of affects your view of bit demand in the second half? Sanjay Mehrotra: Yes. As we said, customer inventory levels have been healthy overall across our end markets. Some customers may have some level of tariff-related pull-ins. We think the impact of that is relatively modest here, and customers definitely continue to signal a constructive demand environment for the remainder of the calendar year. And of course, the demand trends are driven by strength in AI-driven data center demand, demand coming back in the automotive, industrial, resumption of growth there as well as distribution channels. And as we have discussed, smartphone and PCs, really, as AI penetration increases, the content increase story is there intact for AI smartphones as well as PC. We provided some details in our script there. So we see a constructive demand environment as our customers discuss with us. And again, the effect of the pull-in is relatively modest here. Our growth in Q3 as well as our exceptional record for FQ4 guidance is really driven by Micron's strong execution in the growing market for AI. Operator: And our final question for today comes from the line of Vijay Rakesh from Mizuho. Vijay Raghavan Rakesh: Just a quick question on the HBM4. Just wondering how the qualification is progressing and if you continue to see that similar power performance leadership that you guys have had on HBM3E. Do you see that continuing on the HBM4 side as well? Sanjay Mehrotra: So we have provided early units to our customers. We have sampled the products to our multiple customers with HBM4. Really very pleased with the execution and all the specs that we see our HBM delivering, as I mentioned, not only performance, but we plan to continue to focus on that power -- strong power position that we -- which is critically important in AI applications that we have established with our HBM portfolio as well. So of course, the qualifications -- the customer qualifications are ahead of us, and we will be ready to meet customers' demand in 2026 time frame. So HBM in terms of volume ramp is a 2026 product and meeting the time line requirements of customers with their next-generation platforms that will be implementing the HBM4 products. I want to again remind you that the HBM4 uses our well-proven, cost-effective, 1-beta technology node. And of course, it has internal advanced CMOS logic die, internally developed and internally manufactured advanced CMOS logic die, which positions us well as well. And all of our experience of HBM3E ramp-up, we are going from 3E 12-high to HBM3E -- going from -- sorry, going from HBM3E 8-high to HBM3E 12-high, we told you that, that ramp is going extremely well with our yields ahead of our plans, output ahead of our plans as well as yields faster than the ramp that we had experienced in 8-high. All of that gives us confidence and positions us well for HBM4 ramp as well. So we feel very, very good about our overall capabilities to address the HBM4 markets in 2026. Vijay Raghavan Rakesh: Got it. And on the SSD side, just quickly, with your focus on AI servers, are you seeing an accelerated pull-through on the AI server side for SSDs as well? Sanjay Mehrotra: So we had mentioned on the data center side in SSDs in late Q4 of calendar '24 as well as early part of calendar '25, there had been some inventory digestion for the data center SSDs given that prior to this period that I just mentioned, there was a very strong demand growth for SSDs. And as we look ahead, we think second half of calendar '25 will be better than the first half of '24 -- I mean, first half of '25, which was impacted by some of that inventory digestion as well. And our data center SSDs are well positioned with some of these recently announced accelerator platforms as well. And that, of course, will be contributing towards the data center SSD future growth as well. We are very pleased with our record data center SSD share as achieved in CQ1 per the third-party reports. And we are now a clear #2 brand in terms of market share at the end of CQ1. So we plan to continue to leverage our SSD portfolio to continue to focus on shifting the mix of the products towards higher-value parts of the NAND market. Operator: This does conclude the question-and-answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.

Operator: Thank you for standing by, and welcome to Micron's Second Quarter 2025 Financial Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Satya Kumar, Corporate Vice President, Investor Relations and Treasury. Please go ahead, sir. Satya Kumar: Thank you, and welcome to Micron Technology's Fiscal Second Quarter 2025 Financial Conference Call. On the call with me today are Sanjay Mehrotra, our Chairman, President and CEO; and Mark Murphy, our CFO. Today's call is being webcast from our Investor Relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website, along with prepared remarks for this call. Today's discussion of financial results is presented on a non-GAAP financial basis, unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures can be found on our website. We encourage you to visit our website at micron.com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending. You can also follow us on X at MicronTech. As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, including demand for our products, our market share, market pricing and cost trends and drivers, our plans for manufacturing, the impact of developing technologies such as AI, product ramp plans, technologies and market position, expected capabilities of our future products, our planned investments and expenditures, our expected results and guidance, regulatory matters and other matters. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer you to documents we file with the SEC, including our Form 10-K, Forms 10-Q and other reports and filings for a discussion of risks that may affect our future 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 confirm these statements to actual results. I will now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Satya. Good afternoon, everyone. Micron is in the best competitive position in our history, and we are achieving share gains across high-margin product categories in our industry. Our strong product momentum has enabled us to build deeper customer relationships, and Micron's industry-leading products are now more firmly entrenched in our customers' high-value product roadmaps. In fiscal Q2, data center DRAM revenue reached a new record. HBM revenue grew more than 50% sequentially to a new milestone of over $1 billion of quarterly revenue. Our HBM shipments were ahead of our plans, demonstrating strong execution of our ongoing ramp. The combination of our revenue from high-capacity DRAM modules and our industry-leading LPDRAM for the data center also exceeded the $1 billion milestone for the quarter. Micron remains the only company in the world to ship low-power DRAM into the data center in high volume, showcasing our pioneering innovation and deep partnership with our customers for differentiated solutions. As we build on this momentum, we expect fiscal Q3 revenue to be another record for Micron, driven by shipment growth across both DRAM and NAND. We see the combination of AI data center demand and the ramp of HBM and its associated trade ratio contributing to tightness at the leading edge and constraining non-HBM DRAM supply. We expect supply actions announced by NAND companies to improve the dynamics in the NAND market. Micron's 1-beta DRAM technology leads the industry, and we are extending our leadership with the launch of our 1-gamma node and the industry's first shipments of 1-gamma-based D5 products last month. Micron's 1-gamma is our first DRAM node incorporating EUV, and we have achieved 20% lower power, 15% better performance and over 30% improvement in bit density compared to our 1-beta DRAM. Micron's leading-edge Gen9 NAND technology node delivers the industry's fastest TLC-based NAND, and we are managing the ramp of this node, mindful of the supply-demand balance in the industry. Micron continues to make disciplined investments that position us to capitalize on the significant growth opportunities driven by AI. We are focused on growing HBM capacity in our existing manufacturing facilities to meet requirements through 2026. In January, we broke ground on an HBM advanced packaging facility in Singapore. This investment allows us to meaningfully expand our total advanced packaging capacity beginning in calendar 2027. Our new DRAM fab construction in Idaho completed an important construction milestone that enabled the receipt of the first disbursement of funding from our CHIPS grant for the project during the quarter. This new Idaho fab will provide meaningful DRAM output starting in fiscal 2027. Turning to our end markets. Dramatic improvements in computation hardware have reduced the per-token cost of generative AI models. These hardware improvements, along with more efficient algorithms and software, drive down the cost of inference and make generative AI-based capabilities more accessible to new applications and use cases. This broadening deployment creates a powerful growth vector for aggregate AI demand, and recent innovations and those in the pipeline from key contributors to the AI ecosystem will continue to fuel this growth trend. As GPU and custom AI accelerate our performance capabilities continue to improve with each new generation of product, these high-performance processors are starved of memory bandwidth. HBM memory provides the bandwidth necessary to leverage these powerful processors in the most effective and efficient manner, and we are excited to see the growth opportunities ahead for this complex and high-value product category where our customers now recognize Micron as the HBM technology leader in our industry. Recently, large hyperscale customers reiterated strong year-over-year growth for their capital investments in calendar 2025. We project mid-single-digit server unit growth in calendar 2025, with growth in both traditional and AI servers. We see strong demand for HBM and have once again increased our HBM TAM estimate for calendar 2025 to over $35 billion. We remain on track to reach HBM share similar to our overall DRAM supply share on a run rate basis in calendar Q4 2025. As previously mentioned, Micron has sold out of our HBM output in calendar 2025. We are seeing strong demand for our HBM supply in 2026 and are in discussions with our customers on agreements for their calendar 2026 HBM demand. Micron's industry-leading HBM3E delivers a 30% power reduction compared to the competition. And our HBM3E 12-high has a remarkable 20% power advantage over competing 8-high products while providing a 50% higher memory capacity. We have begun volume production of HBM3E 12-high and are focused on ramping capacity and yield. We anticipate HBM3E 12-high will comprise the vast majority of our HBM shipments in the second half of calendar 2025. We are making good progress on additional platform and customer qualifications with HBM. Micron's HBM3E 8-high is designed into NVIDIA's GB200 system, and our HBM3E 12-high is designed into the GB300. In fiscal Q2, we initiated volume shipments to our third large HBM3E customer and anticipate additional customers over time. We expect multibillion dollars in HBM revenue in fiscal 2025. Looking ahead, we are enthusiastic about Micron's HBM4, which will ramp in volume in calendar 2026. Our HBM4 provides a bandwidth increase of over 60% compared to HBM3E. The timing of our HBM4 is aligned to our customers' requirements, and we are focused on delivering the best HBM4 products to the market across power efficiency, quality and performance. Our proven HBM product performance, our strong HBM road map and our demonstrated manufacturing excellence uniquely positioned Micron to capitalize on next-generation HBM4 and HBM4E solutions. Micron has led the adoption of LP in data center. In AI servers, Micron's LP lowers memory power consumption by over 2/3 compared to D5. We expect to maintain our leadership position in LP for server as it transitions from soldered components to SOCAMM, or Small Outline Compression Attached Memory Module form factor. Micron's SOCAMM was developed in collaboration with NVIDIA to support the GB300. LPDRAM in a SOCAMM form factor enables easier server, manufacturability and serviceability and helps drive broader LP adoption in the server market. We are on track to deliver multibillion dollars in revenue in fiscal 2025 from our portfolio of high-capacity D5 modules and LP products for the data center. In data center NAND, demand moderated in fiscal Q2 due to short-term customer inventory-driven impacts, and we see a return to bit shipment growth in the months ahead. In calendar Q4 2024, based on industry analyst reports, Micron achieved yet another record high market share in data center SSDs with revenue growth in each category, including performance, mainstream and capacity SSDs. Our high-performance 9550 SSD, which is on NVIDIA GB200 NVL72-approved vendor list, completed qualifications at multiple customers. During the quarter, we announced that Micron's data center class G8 QLC-based NAND components are qualified for production in pure storages, high-capacity 150-terabyte DirectFlash module. Micron's data center class NAND components give customers the ability to leverage our industry-leading NAND design and process technology in their custom storage solutions. Micron's leadership in QLC NAND supports the transition from HDD to NAND solutions in the data center. We expect to generate multiple billions of dollars in data center NAND revenue and once again grow our data center NAND market share in calendar 2025. We expect the PC market to grow mid-single digits in unit terms in calendar 2025, with growth weighted to the second half of calendar 2025. The Windows 10 end of life in October 2025, combined with an aging installed base and the desire amongst customers to ensure that their PC hardware specs can support compelling AI applications in the future, are key catalysts that drive this growth. AI PCs required a minimum of 16 gigabytes of DRAM, with many models requiring even higher memory versus the average 12 gigabyte PC content last year. During the quarter, we sampled our 16-gigabit 1 gamma-based D5 products to PC clients. In NAND, we launched our Gen9 based 4600 performance SSDs, the fastest in the world for the client market, and completed qualifications of our 2650 mainstream SSDs at multiple PC OEMs. Turning to mobile. Our expectations for smartphone unit volume growth in calendar 2025 remain at low single-digit percentages. Smartphone customer inventory dynamics have played out as anticipated, leading to mobile DRAM and NAND bit shipment growth in our fiscal Q3. AI adoption continues to be a significant driver for increased mobile DRAM demand. AI-capable flagship phones increasingly feature DRAM capacities of 12 gigabyte or higher compared to the 8 gigabyte in last year's models. Smartphone OEMs are using Micron's industry-leading 9.6 gigabit per second LP5X DRAM to improve AI performance, delivering up to 20% more tokens per second than those using legacy speed grades on the same SoC. During the quarter, we announced that our LP5X DRAM and UFS 4.0 NAND were featured in the high end of the Samsung Galaxy S25 Series. Micron's mobile DRAM and UFS storage solutions are in high demand and will continue to launch in flagship and high-end smartphones throughout the year. Additionally, we are now sampling the industry's first mobile G9 managed NAND-based UFS 4.1 solution in densities of 1 terabyte. Automotive OEMs, industrial and consumer embedded customers are in the later stages of adjusting their inventory levels. In automotive, which comprises the largest portion of our EBU revenue, memory and storage content per car continues to increase as AI-enabled in-vehicle infotainment systems become more enriched and driver assistance functions become more capable. Advanced robotaxi platforms today contain over 200 gigabytes of DRAM, or 20x to 30x higher than the amount of DRAM in the average car. Micron is well-positioned to capitalize on this trend with our industry-leading portfolio of automotive products. During the quarter, we announced the production readiness of the industry's first automotive LP5X DRAM product that supports the 9.6 gigabits per second speed grid, addressing the increasing performance requirements of AI-driven applications in vehicles. Additionally, our 4150 SSD became the industry's first enterprise SSD product that is automotive qualified and is now sampling at target customers, further reinforcing our commitment to innovation and leadership in this important market. Now turning to our market outlook. Calendar 2024 DRAM bit demand growth was in the high teens, consistent with our prior expectations. Calendar 2024 NAND bit demand growth was approximately 10%, slightly below our previous view of low double digits. We forecast calendar 2025 DRAM bit demand growth in the mid- to high teens percentage range and NAND in the low double-digit percentage range. Over the medium term, we expect industry bit demand growth of mid-teens CAGR for both DRAM and NAND. As we have previously discussed, NAND technology transitions provide a significant increase in overall bit output. Sustained NAND industry supply demand balance can result from increasing the time between node transitions, along with sustained reductions in NAND industry CapEx and wafer capacity. NAND industry wafer capacity underutilization can help to improve the near-term dynamics in the NAND market. We expect Micron's supply growth in calendar 2025 to be lower than industry demand growth for both DRAM and NAND. We expect our inventory days to decline as we move through calendar 2025. We expect to maintain our bit share in DRAM and NAND in calendar 2025. In DRAM, we expect a strong ramp of HBM throughout calendar 2025. As noted before, HBM3E consumes 3x the amount of silicon compared to D5 to produce the same number of bits. Looking ahead, we expect the trade ratio to increase with HBM4 and then again with HBM4E when we expect it to exceed 4:1. The sustained and significant increase in silicon intensity for the foreseeable future contributes to tightness for industry leading-edge node supply and constraints capacity for non-HBM products. In NAND, we continue to underutilize our fabs, and our wafer output is down mid-teens percentage from prior levels. We plan to reuse a portion of our underutilized NAND equipment to support capital efficient conversions to leading-edge nodes. This strategy results in over 10% structural reduction of NAND wafer capacity exiting fiscal 2025 compared to levels exiting fiscal 2024. We will continue to prudently manage our NAND supply, including the levels of our capital investment, the pace of ramp of our new technology node, SaaS capacity and utilization, consistent with our demand growth. Our capital spending plans remain unchanged at approximately $14 billion for fiscal 2025. A significant portion of our capital investments are focused on multiyear facility investments to support our DRAM and HBM manufacturing, including our Idaho fab, Singapore HBM advanced packaging facility and Taiwan DRAM test facility. Micron will remain disciplined with our overall equipment investments to manage our supply growth consistent with demand. On tariffs, Micron serves as the U.S. importer of record for a very limited volume of products that would be subject to newly announced tariffs on Canada, Mexico and China. We continue to monitor the possibility of future tariffs and are prepared to work with our customers and suppliers to understand future tariff effects and supply chain options that may arise. Where tariffs do have an impact, we intend to pass those costs along to our customers. With that, I will now turn it over to Mark for our financial results and outlook. Mark Murphy: Thank you, Sanjay, and good afternoon, everyone. Micron delivered fiscal Q2 EPS above the guidance range and revenue and gross margin within the range. Total fiscal Q2 revenue was approximately $8.1 billion, down 8% sequentially and up 38% year-over-year. Fiscal Q2 DRAM revenue was $6.1 billion, up 47% year-over-year, and represented 76% of total revenue. Sequentially, DRAM revenue decreased 4%, with bit shipments decreasing in the high single-digit percentage range and prices increasing in the mid-single-digit percentage range as a result of improving portfolio mix. Fiscal Q2 NAND revenue was $1.9 billion, up 18% year-over-year and represented 23% of Micron's total revenue. Sequentially, NAND revenue decreased 17%, with bit shipments modestly higher and prices decreasing in the high-teens percentage range. Fiscal Q2 bit NAND bit shipments were above our expectations, driven by higher consumer-oriented shipments. Now turning to revenue by business unit. Compute and Networking business unit revenue was up 4% sequentially to $4.6 billion and reached 57% of our total revenue. For the third consecutive quarter, CNBU revenue reached a new quarterly record, driven by a more than 50% sequential increase in HBM revenue. Revenue for the Storage business unit was $1.4 billion, down 20% sequentially. Decline in SBU revenue was driven primarily by lower storage investments from data center customers after several quarters of very strong growth and overall NAND industry pricing. Mobile business unit revenue was $1.1 billion, down 30% sequentially, as mobile customers continue to improve their inventory positions. Embedded business unit revenue was $1 billion, down 3% sequentially. Lower sequential revenue was primarily due to inventory improvement initiatives at automotive customers. The consolidated gross margin for fiscal Q2 was 37.9%, down 160 basis points sequentially due primarily to pricing and consumer-oriented segments of the market, especially in NAND and NAND mix shift to consumer-oriented products, as mentioned earlier. Our ongoing high-value mix shift in our DRAM portfolio partially offset some of these factors. Operating expenses in fiscal Q2 were $1 billion, flat sequentially. R&D expenses were lower than planned due to earlier product qualification and timing of certain R&D projects. We generated operating income of $2 billion in fiscal Q2, resulting in an operating margin of 24.9%, which was down approximately 260 basis points sequentially and up 21 percentage points from the year ago quarter. Fiscal Q2 adjusted EBITDA was $4.1 billion, resulting in an EBITDA margin of 50.7%, up 10 basis points sequentially and up 14 percentage points or $2 billion from the year ago quarter. Fiscal Q2 taxes were $214 million on an effective tax rate of 10.7%, lower than our guidance due to the effects of onetime items in the quarter. Non-GAAP diluted earnings per share in fiscal Q2 was $1.56, above the high end of the guidance range compared to $1.79 per share in the prior quarter and $0.42 in the year ago quarter. Turning to cash flows and capital spending. In fiscal Q2, our operating cash flows were over $3.9 billion, and our capital expenditures were $3.1 billion, net of proceeds from government incentives. As a result, free cash flows in the quarter were $857 million. Our fiscal Q2 ending inventory was $9 billion or 158 days, up as communicated previously, and an increase of 9 days from the prior quarter. On the balance sheet, we held $9.6 billion of cash and investments at quarter end and maintained $12.1 billion of liquidity when including our untapped credit facility. During fiscal Q2, we extended our debt maturities through a $1 billion 10-year senior note offering and a $1.7 billion term loan, with proceeds principally used to pay down notes maturing in 2026 and the previous term loan balance. We ended the quarter with $14.4 billion in total debt, low net leverage and a weighted average maturity on our debt of 2032. Following quarter end, we renewed and increased the size of our 5-year revolving credit facility to $3.5 billion. This provides an additional $1 billion of liquidity and further improves our financial flexibility. Now turning to our outlook for the third fiscal quarter. We forecast growth in DRAM and NAND bit shipments in fiscal Q3. We forecast sequentially lower fiscal Q3 gross margin, which includes the effects of higher consumer-oriented volumes. NAND underutilization continues to weigh on gross margins. We project operating expenses in fiscal Q3 to be approximately $1.13 billion and fiscal 2025 OpEx to increase by over 10%, reflecting planned increases to support our portfolio of high-value products, including HBM. We expect DIO to decrease in the third fiscal quarter on higher bit shipments. We continue to project ending fiscal 2025 with tight DRAM inventories. For fiscal Q3 and Q4, we estimate our non-GAAP tax rate to be approximately 14%. In fiscal Q3, we forecast CapEx to be over $3 billion. Our CapEx projection for fiscal 2025 remains approximately $14 billion. The overwhelming majority of the fiscal 2025 CapEx is to support HBM, as well as facility construction, back-end manufacturing and R&D investments. Impacts from potential new tariffs are not included in our guidance, given the uncertainty around tariff timing, nature and implementation. With all these factors in mind, our non-GAAP guidance for fiscal Q3 is as follows. We expect revenue to be $8.8 billion, plus or minus $200 million; gross margin to be in the range of 36.5%, plus or minus 100 basis points; and operating expenses to be approximately $1.13 billion, plus or minus $15 million. As mentioned, we expect the fiscal Q3 tax rate to be around 14%. Based on a share count of approximately 1.14 billion shares, we expect EPS to be $1.57 per share, plus or minus $0.10. In fiscal Q2, Micron delivered earnings above guidance range, achieved record revenues again in data center DRAM, ramped our leading HBM and released the industry's most advanced DRAM process technology. For fiscal Q3, we project record quarterly revenue at the midpoint of our guidance. We are focusing our R&D resources, exercising capital discipline and maintaining a strong balance sheet as we extend our leadership and tap into substantial growth opportunities ahead. I will now turn it back over to Sanjay. Sanjay Mehrotra: Thank you, Mark. Micron is uniquely positioned to capitalize on the transformative growth driven by AI from data center to edge devices. And we are on track for the record revenue and significantly improved profitability in fiscal 2025. We are confident in our ability to navigate the current market dynamics with disciplined investments and a focus on our high-value portfolio mix shift. This is the most exciting time I have seen for memory and storage, and Micron's innovations are at the forefront of this revolution. We are excited about the opportunities ahead and remain committed to delivering value for all our stakeholders. Thank you for joining us today. We will now open for questions. Operator: And our first question for today comes from the line of Harlan Sur from JPMorgan. Harlan Sur: Back in mid-February at an investor conference, I know the team had walked us through the dynamics on a weaker gross margin profile during the May quarter. That's playing out, but you did anticipate an improved gross margin profile beyond this quarter, fiscal Q3. So is that still the case that we should see gross margin improvements maybe starting in fiscal Q4 and potentially beyond? And is that a possible data center and your consumer-related products? Is that across total DRAM and your NAND segments? Any color here would be great. Mark Murphy: Sure, Harlan, this is Mark. I'll take that. So let me just make some comments about the third quarter. It is down sequentially, as we had indicated in the conference. And again, as we said in the conference down primarily due to higher mix of consumer-oriented volumes, lower CQ1 pricing on consumer-oriented markets and industry and can just generally, all that partially offset by higher HBM. We do see -- while down, conditions have improved since those public comments. And the updated view is reflected in the guide today. Now we're not providing guidance on the fourth quarter. However, we do expect gross margin to be up somewhat. There's always tailwinds and headwinds. As you know, on tailwinds, we do expect market conditions to improve. We do expect HBM and other high-value products to grow and contribute to mix improvement. Some headwinds, we do see NAND underutilization as we talked about. And actually, since our capacity has come down structurally, we're going to see less of those costs in the third quarter on period and see more of those costs hit us as inventory clears in the fourth quarter. It's still -- we've taken actions to manage the NAND supply, and that's important, and that part of the business is still getting its legs back under it, but we intend to take price action in the second quarter calendar and just -- to maintain supply discipline. And then we are going to see in fourth quarter, the beginning of some start-up costs related to construction activities and new node in DRAM that we're working. So in short, we would expect fourth quarter margins to be up somewhat from third quarter. Harlan Sur: I appreciate that. And then, Sanjay, you increased your industry bit demand outlook from mid-teens last earnings to mid- to high teens this quarter for calendar '25 for DRAM. I assume part of it is the HBM related dynamics as you increased your TAM outlook for HBM this year. But is the team seeing any other segments within DRAM that are driving the better industry, this demand profile as the year unfolds? Sanjay Mehrotra: We had projected that customer inventories will get in a better place by spring time frame in the consumer side of the business. And it's turning out to be the way we had projected. And of course, the smartphone and PC markets are also seeing more and more devices that have AI implemented. That drives content growth. So as customer inventories got closer to healthier levels, we are seeing resumption of purchases by customers, and all that plays into our guide for 2025 bit demand. And as you noted, of course, data center continues to be strong. And in data center, of course, HBM is a strong contributor towards revenue growth in terms of bit demand growth for data center, of course, high-density DIMMs, as well as LP where Micron leads the industry, all of these actually contributing towards the demand increase in 2025 as well. Operator: And our next question comes from the line Timothy Arcuri from UBS. Timothy Arcuri: Mark, can you give us a little detail on the fiscal Q3 guidance? You're guiding revenue up about $750 million. How much of that is coming from DRAM versus NAND? And I know you said that bits are up in both. But can you give us a sense of how much bits are up in each of those 2 markets? And then I had another question as well. Mark Murphy: Yes. Tim, we've provided you the consolidated revenue number. You have the year-to-date figures on both revenue and DRAM, our revenue and bit growth and price for both DRAM and NAND. And then we've provided you a demand growth for the year in bits. So I think we've provided you the contours of the business, and you should be able to make some volume and price assumptions on the revenue outlook. We do expect bit growth in both DRAM and NAND in third quarter. Timothy Arcuri: Okay. But I guess, Mark, can you say that you expect revenue growth in both DRAM and NAND as well? Mark Murphy: DRAM with the HBM and data center exposure will be -- the bias of growth will be there. Timothy Arcuri: Okay. Cool. And then -- so Mark, I mean, obviously, everything you're doing here is great. I think the -- bugaboo obviously is -- margins are still a bit low, certainly into the fiscal Q4. So I guess I had like a 2-part question. One, I know you don't want to guide fiscal Q4 margins, but do you think you can get back to what you just did in fiscal Q2 in fiscal Q4? And I guess, broadly, when does this stuff clear and sort of we begin to see the true goodness flowing through from HBM and from all the cost downs you're doing on the non-HBM DRAM side? So sort of when do we start to get kind of a clean gross margin number, if you will? Mark Murphy: Tim, we're not going to provide a fourth quarter number. We have indicated that fourth quarter gross margins would be up somewhat from third quarter. I think as Sanjay mentioned in the prepared remarks, we're in the best position we've ever been in on technology and market exposure products. Manufacturing is operating very well. On the cost side, maybe to help you with the modeling, our all in DRAM costs for fiscal year '25, we expect to be flattish. Our all-in NAND cost for FY '25, in line with front-end cost reductions in the low double-digits. So we are taking supply actions on the NAND side, consists of underloading, reducing CapEx, delaying node transitions, as we talked about. And we're beginning to see some signs of improvement on that part of the business. On the DRAM side of the business, we know the continued HBM growth and broader data center. And then the lead edge on DRAM is tight, and we're, again, projecting our DIO levels to be below our target by the end of the fiscal year. Sanjay Mehrotra: And Tim, I'll just add that, of course, we continue to be focused on increasing the mix of our revenue towards higher profit pools of the industry, both in DRAM and NAND. So in terms of our product portfolio, as we have said, it is best positioned. So continue to drive the product portfolio and mix, focusing on, really strengthened profitability. And demand trends we have talked about, I mean we feel good about DRAM demand trend. And of course, in NAND, the supply discipline will be important. We, of course, are extremely focused on that. And AI is benefiting our DRAM demand across data center and edge as well. And of course, our technology position, our product position and our cost position continues to be healthy. Operator: And our next question comes from the line of Krish Sankar from TD Cowen. Krish Sankar: I have 2 of them, first, Sanjay or Mark. You've seen some of the memory prices improve of late. I'm just wondering how much of that is true end demand versus actually tariff-related pull-ins? And how sustainable do you think the industry pricing dynamics today are? Sanjay Mehrotra: So of course, as we have indicated, the DRAM demand drivers as well as NAND on the consumer side of the business in smartphones, particularly in smartphones as well as in PCs are improving as the customers are getting closer to their normal inventory levels in the consumer market again, along the lines of what we had projected. PC, probably more second half of this year that we start seeing greater demand trend with respect to AI PCs and increasing penetration of AI PCs. AI PCs require greater DRAM content than what was in the past, we have talked about that last year, average 12 gigabyte in PCs and AI PCs with the NPU running at 40 tops or higher requires 16 gigabytes or higher. So these are good demand trends on the PC side and same thing happening on the smartphone side. You have seen several introductions and more of these are smartphones and more of them to be rolling out with AI smartphones that too have higher DRAM content greater than 12 gigabyte versus last year at 8 gigabyte. And of course, data center demand trend in DRAM continues to be strong as well. So all of this, I mean, first of all, demand trends are in a good place. And of course, on the supply side, leading-edge supply, as we mentioned in the prepared remarks, as well as Mark just mentioned, leading-edge DRAM supply is tight. And certainly, that is happening because of increasing demand for the HBM and HBM trade ratio. And on NAND, the supply actions by various players and underutilization in the fabs certainly is improving the supply picture as well. So all of this is improving the demand/supply environment in the industry. And of course, we are well focused on driving an inflection towards higher pricing in CQ2 and we are well positioned with our products across the end market segments. And we really look forward to continue to maximize the opportunities for our business and continue to increase the mix of our business toward higher profit pools of the industry. Krish Sankar: Got it. Got it. Thanks, Sanjay. And then a quick question on the gross margin side. Clearly, HBM3E 8-high is obviously a mature technology as you move to 12-high in HBM4. Would the yields might be lower than 8-high? Just kind of curious, does it have any negative impact on gross margins? Or is it de minimis at this point? Sanjay Mehrotra: First of all, in HBM3E 8-high, I'm very pleased with how our team has executed. And we mentioned in the prepared remarks that we actually delivered greater volume of HBM3E versus our plans in our FQ2 and exceeded revenue for the first time, a major milestone of more than $1 billion. And HBM3E continues to do well with 8-high, our yields, our capacity ramp is going well. Our execution is going well. And all that experience of 8-high in terms of capacity ramp as well as yield ramp will, of course, help us as we ramp our 12-high. You know, we have announced before that we are now in volume production with our 12-high. Just like any other new product, and these are highly complex products, HBM is the most complex product ever made in the industry. These kind of complex products, of course, in the early stages, there is a yield ramp. We expect 12-high to, of course, have a premium over 8-high and of course, will continue to be accretive to our DRAM margins nicely as well. And we remain very focused in second half shifting the vast majority of the second half of the calendar year, shifting the vast majority of our volume to 12-high. And as we ramp that volume, of course, yields will continue to go up as well. And with that, by the end of this calendar year, as we shared with you, we expect to reach our share to be in line with our overall industry DRAM share. Operator: And our next question comes from the line of Joseph Moore from Morgan Stanley. Joseph Moore: Great. I wanted to make sure I got the inventory targets right. So you're at 153 days and you'll be below the target model, which I think is 120 days in 2 quarters. And I guess if that's right that seems like a lot of reduction. Can you talk about how much volume do you need to do that? How much is the inventory kind of impacted by some of the HBM supply trends, things like that? Could you just characterize a little bit, how you reduce that much inventory? Mark Murphy: Yes, Joe, it's Mark. So 158 days. I think it was the DIO in the second quarter. As we've talked about, conditions are tighter in DRAM than NAND. You've heard about the supply actions that we've taken on NAND. We have seen good volume growth there, and that is expected to continue. But the industry conditions are such that you've heard us talk about underutilization, reducing CapEx and delaying the node transition. On the DRAM side, as Sanjay mentioned, AI-driven growth and related to HBM and other product sets, but particularly HBM with the trade ratio is creating tightness in that market. And the target we have for inventories that we've stated before is 120 days, and we would expect to be below that on DRAM by -- in our fiscal fourth quarter. Joseph Moore: Okay. Great. And did you guide inventory for this coming quarter with -- I assume that starts to come down now? Mark Murphy: We just said that on days, that will go down through the year. Operator: Our next question comes from the line of C.J. Muse from Cantor Fitzgerald. CJ Muse: I guess first question, I to follow up on gross margins, Mark, is there a point where we're thinking about the underutilization charges and the period cost into kind of May and August on the NAND side? And then is there also a way to think about the incremental construction cost as we go into August and November? Mark Murphy: Yes. So CJ, the -- we had less period costs in our third quarter here than we had originally projected in part due to the fact that we've structurally brought down our capacity. And so more of the underutilization charge will go into inventories, and then that will flush through that way versus a period cost. Those period costs, I'd say the under-absorption costs do weigh on gross margins in fourth quarter and into '26. Now even with that, the combination of growth in the business, the improved market conditions and the mix improvements, those will, we believe, result in somewhat higher gross margins in the fourth quarter. As it relates to start-up costs, the effect is relatively small on a sequential basis, third to fourth quarter. But as we approach wafer outs in Idaho, that number will increase through '26. And so we'll provide more color on that as our plans and timing is finalized. CJ Muse: Very helpful. And a quick follow-up. You revised your HBM industry revenue outlook higher. Curious if there's a framework on how you're thinking about kind of first half versus second half for the industry? Sanjay Mehrotra: Of course, the revenue in the second half as you go from 8-high to 12-high continues to go up because 12-high will be carrying a certain premium over 8-high. So if we have projected more than $35 billion for calendar year 2025 and a bigger portion of that in second half of calendar '25 versus first half. And more than $35 billion, of course, is the industry TAM for HBM that we have referred to here. And I'll just point out that, of course, with respect to HBM, there is expansion of HBM customer base taking place. Micron itself, now we are shipping to a third large customer that we have begun shipping our products to. So that also is contributing to the growth in HBM revenue in the second half as the customer base expands. Operator: And our next question comes from the line of Chris Caso from Wolfe Research. Chris Caso: Yes. First question is with regard to the lower end of the market. And -- if you could tell us about what the exposure is, particularly on DRAM side, LP4 and DDR4. And I guess as you start to see growth in HBM, get some normalization in some of the consumer markets as you go to the second half of the year, I guess, is that going to be kind of -- have a de minimis effect on revenue and margins as you go into the second half? Sanjay Mehrotra: So regarding D4 and LP4, last quarter in our earnings call, we had shared that our revenue from those products, LP4 and D4, for the remainder of the fiscal year, we have said at the time, corresponds to about 10% of our total company revenue. So we continue to see that for the remainder of the fiscal year. And your second question is that -- can you repeat the second question? Chris Caso: Yes. It's just -- does that have a de minimis effect on margins? I guess the point is, does that cease being a drag on margins as you go into the second half as other parts of the business grow? Sanjay Mehrotra: I mean it is a smaller part of the overall company revenue. And it is -- I mean, we are, of course, leading in D5 and HBM. And D5 based and LP5-based product in data center as well as other parts of the consumer markets. So of course, LP4 and D4 will continue to become smaller over time. And just keep in mind that, overall, industry conditions in DRAM are improving from the point of view of DRAM demand drivers and the supply tightness. And that can also play some role in the overall dynamics of all parts of the DRAM market. Chris Caso: As a follow-up on HBM, what you said in the past is you sold out for the year. But yet, your TAM assumptions have moved higher for the past several quarters. As we look into next year, presumably, the higher TAM this year translates to higher TAM assumptions as you go to next year. Are -- do you still have the capability to increase your capacity to maintain that market share in HBM, which is equal to our overall share of DRAM as you go into next year? Sanjay Mehrotra: So of course, we have said that as we exit calendar '25, our share in HBM will correspond to our industry DRAM shares. So if you look at that run rate, I mean, clearly, in calendar year 2026, our share would be higher for the full year basis versus 2025. And we remain very focused on continuing to increase our capacity of HBM. I mentioned earlier that we are doing executing quite well in terms of continuing to increase the capacity, continuing to shift from 8-high to 12-high, very much focused on bringing HBM4 into the market next year and, of course, addressing all the capacity needs related to that as well. So while we are not projecting 2026 market share at this time, we feel very good about our HBM position, our close relationships with our customers, our execution on our technology and products and our manufacturing overall. Operator: And our next question comes from the line of Chris Danely from Citi. Chris Danely: Thanks. So if we look at the May guidance and then just going back the last 3 quarters, your revenue is between $7.8 billion and $8.8 billion per year. And the last time that happened was about 3 years ago, that was the last upturn but your gross margins were 10 points higher. So why are gross margins -- because depreciation hasn't changed that much? Why are gross margins like 10 points lower at essentially the same revenue base? And does this mean that we can forget about your gross margins ever going to the 50s again? Or maybe give us a path to getting them back there, if you think that that's conceivable? Sanjay Mehrotra: Overall, our gross margins in DRAM have been healthy and again, supported by our strong technology and product positions based on our D5 products, LP5 products, HBM products. NAND is what has weighed down on our margins. And of course, we have continued to focus. And NAND, it is because of the overall industry environment and overall industry demand/supply imbalances. And so of course, both in DRAM and NAND, it's always a function of demand/supply environment but also very much a focus of ours on increasing the mix of the business towards high-value solutions. And that's what we continue to do in NAND as well. And as we see a greater supply discipline, we would certainly fully expect that NAND fundamentals would improve in the industry as well. Of course, it's important to maintain the focus on sustained supply discipline there as well. So as we look ahead, we -- as we have pointed out, that we remain very focused on continuing to strengthen the mix of our revenue, mix of our products in the business towards higher-margin products, both in NAND and DRAM, continue to focus on product portfolio strength, managing demand supply very closely and managing our technology development and ramp into production closely to make sure that our supply and demand is well aligned and of course, very much focused on overall costs as well. And with that, we are certainly optimistic here that the structural overall with the industry that the improvements will occur in the business fundamentals. Chris Danely: Thanks, Sanjay. Just 1 brief follow-up on that. So you talked about increasing the mix to higher-value solutions. And then in the commentary and also in the press release, you said that part of the reason that the gross margin was lower was this increasing consumer exposure. And your NAND actually was down a lot more than DRAM. So are you seeing increased consumer exposure in DRAM? And why is that happening? And how do we -- or how do you guys change that? Sanjay Mehrotra: Well, first of all, we are doing well in data center and our mix of business in data center for DRAM, as we have pointed out, continues to increase. And we have leadership products in DRAM with data centers, including, not just HBM, but we have also talked about when we just announced -- SOCAMM products, these are important products. So doing well with respect to DRAM. On the consumer side, of course, over the last few quarters, there was overhang of customer inventory on the consumer side, and that was there in DRAM as well. And as that customer inventories get closer to normalization along the lines of what we have said before, of course, along with the AI drivers in consumer devices, we see a strong bounce back particularly in smartphones with respect to demand. And that's causing actually overall HBM trade ratio as well as a strong bounce back in the consumer demand is causing tightness in leading edge as well. And of course, these fundamentals of demand and supply enable us to drive inflection in pricing higher in CQ2 timeframe. And same thing on the NAND side that supply actions that have been taken in the industry as well as consumer inventories -- on the -- customer consumer inventory is getting normalized, is bringing back demand on the NAND side as well. And of course, we'll be driving inflection in pricing higher on the NAND side as well in CQ2. Operator: And this does conclude the question-and-answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.

Operator: Thank you for standing by, and welcome to Micron's Post Earnings Analyst Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. And now, I would like to introduce your host for today's program, Satya Kumar, Corporate Vice President, Investor Relations and Treasury. Please go ahead, sir. Satya Kumar: Yeah. Thank you, Jonathan, and thank you. And welcome to Micron Technology's Fiscal First Quarter 2025 Post Earnings Analyst Call. Joining me today are Sumit Sadana, Micron's Chief Business Officer; Manish Bhatia, EVP of Global Operations; and Mark Murphy, our CFO. As a reminder, the matters we are 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 statements made today. We refer you to documents we have filed with the SEC, including our most recent Form 10-Q 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 and 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 the call to Q&A. Operator: Certainly. And our first question for today comes from the line of Harlan Sur from JPMorgan. Your question please. Harlan Sur: Hello. Thanks guys for hosting this call back. So I've got two questions. On the 100 basis point decline in gross margin in Q2, as you guys mentioned, it's almost all NAND related mixed, pricing, lower shipments. But qualitatively, like, what are you guys anticipating for DRAM pricing, where you talked about positive mix impacts, HVM, server DRAM, partially offset by weak commodity pricing. So I guess my question is, blended DRAM pricing up sequentially in Q2? Sumit Sadana: Yeah. I think, we don't really guide for pricing. I think we have given you a lot of data points that can help you in your modeling, but we are not going to provide guidance on the actual pricing expectation for competitive reasons. And I think the overall set of comments that you heard in the prepared remarks and the comments that Sanjay and Mark made, basically, the mix improvement continues on a good trajectory. HBM growth continues on a good trajectory. Data center overall revenue trajectory continues to be robust. While we do have some near-term moderation in data center SSD after a lot of growth in the past quarters, the overall data center revenue trajectory remains very robust and we expect that to underpin our performance through fiscal and calendar 2025 and so those are the positives. And of course, we spoke about the near-term issues related to market environment, seasonality, NAND related challenges. So those are some of the headwinds. The mix and data center growth and overall DRAM robust results is what is helping us ensure that the margin for rest Q2 is still fairly similar to what we have in F Q1 in terms of 100 basis point only delta despite some of these headwinds we mentioned in some of the other areas. Harlan Sur: No, that's helpful. And then maybe to follow-up, one of the -- and I've said this before, right, one of the big Micron specific inflections has been the strong increase in your enterprise and data center SSD share, right? I mean, you guys have always been strong in SATA. Mainstream PCIe and NVMe is where you guys have gone from like 3% to 5% market share in calendar '21 to 10% to 12% exiting last year. I think in Q3, your share was like 14%, and it grew sequentially again in fiscal Q1. So my guess is $1.1 billion, $1.2 billion of data center SSD, that’s like, 65% of your overall NAND business. You guys are now the number two or number three market share leader. I know enterprise SSD can be lumpy as you mentioned, right, that's impacting Q2. But do you guys expect sequential reacceleration in data center SSD in fiscal Q3 and just overall growth in data center SSD business fiscal '25 and calendar '25 just because AI demand pull for those products is just so strong? Sumit Sadana: Yeah. I think you laid it out really well. We have made tremendous progress in our data center SSD business over the years. This has been an area we had been investing in for five, seven years now, and we have seen a tremendous rejuvenation in our product portfolio with industry-leading products now. So 30 terabyte SSDs. 60 terabyte SSD we just announced. First PCIe Gen5 60 terabyte SSD on the market. The 9550 fastest SSD in the world. So there are lots of these amazing products that have enabled us to get to a really solid performance, several quarters of record setting revenue and market share performance. So as we look ahead beyond the lumpiness you mentioned, beyond that, F Q2, we do expect a growth in bit shipments restarting in F Q3 for data center SSD and then continuing from there on into future quarters, that trajectory should grow because we do expect the overall data center CapEx from our end customers to remain strong, and that should enable us to get significant opportunity with the portfolio that we have that is now the strongest it ever has been in our history. Harlan Sur: No, that’s very helpful. Thank you. Operator: Thank you. And our next question comes from the line of Aaron Rakers from Wells Fargo. Your question, please. Aaron Rakers: Yeah. Thanks for doing the call back and I have two questions as well. I guess the first question, Mark, I want to go back to kind of the Q&A in the prepared call. I'm trying to understand, like, you talked about constraints on gross margin into the fiscal third quarter. Trying to kind of frame the impact that you're thinking about from the underload. Is it 100 basis points? Is it 200? Is it less? And when you say constraints, are you implying -- are you necessarily implying that there isn't the potential or rather, is there a potential to see some gross margin positive drivers into fiscal 3Q relative to fiscal 2Q? Even with that underload charges, could we see gross margin flat to up? I'm just trying to understand a little bit of what you're trying to kind of frame as far as being constrained? Mark Murphy: Yeah. So Aaron, we're not guiding third quarter gross margin. So we're just trying to be mindful to make sure that when we provide a number, it's a number that we have high conviction on. What we do know is that there are some unfavorable items that persist into the third quarter. The NAND challenging market conditions, we believe, extend into calendar Q1, which overlaps with our third quarter fiscal and so that's still an issue. And then as I mentioned, in the third quarter, the underload charges will begin to hit and those will hit in the form of period costs and then just some higher cost inventory. And that effect is, yeah, you mentioned 100 basis points to 200 basis points, closer to 100 basis points impact. And then there are definitely some favorable effects which continue to occur in second quarter and third quarter and beyond, and that is the most important thing on the call, and that is continued growth in data center, continued mix benefits from higher margin products, HBM, high capacity DIMMs, LPDRAM. And then as Sumit mentioned, volume growth and better market conditions in NAND, but volume growth in data center SSD is continuing. So all these items will, we believe, beyond the third quarter support margin expansion. And then finally, Aaron, we've been clear that we expect inventories to be up in the near-term because these volume declines in NAND and DRAM in the second quarter. DIO and dollars of inventory will be up. In DRAM, we're still very tight on leading edge and overall DRAM inventories are fine and to the point where through the end of the year, they will continue to improve from second quarter. And then, at the end of the year, where overall DRAM inventories will be below our target levels. And then NAND, as that market recovers, we expect NAND inventories while not as healthy as DRAM, NAND inventories will improve second to third to fourth quarter. Aaron Rakers: Yeah. That's helpful. And then, as a quick follow-up, I know a lot of focus is placed on HBM understandably. But one of the things that you guys have highlighted over the last several quarters is LPDDR5X and obviously, getting into the Blackwell product cycle GB200 from NVIDIA. How would you characterize your views of that ramp and where you think Micron's relative share position is within those -- that LPDDR5x data center opportunity? I'm just curious. Thank you. Sumit Sadana: Yeah. We are actually the pioneering memory supplier of LP in the data center. If you think about all of the market for LP in the data center worldwide, it is pretty much Micron driving that right now. Over time, there'll be others, but we are in the pole position of having driven the innovations that are needed for a data center to deploy memory that was not purpose built for data center RAS environment. So reliability, availability, serviceability that is built into DDR5 is not available in an LP solution. And Micron has made some important innovations in that product category. And hence, we are the ones who are really partnering with customers to drive this significant opportunity for us. And this is something that is a really important part of our overall strategy. It's an important part of our data center business. And when you combine this with the advantages that we have driven in the high capacity DIMM portion of the data center market where we were the first company with mono die-based 128 gigabyte DIMMs (ph), then you look at the overall advantage that we offer to customers with LP in the data center, high-capacity DIMMs in the data center, this -- these two categories for the data center in itself is going to be multi-billions of dollars. HBM separately is multiple billions of dollars. Data center SSD is going to be multiple billions of dollars. And the combined momentum of that is what you're seeing drove the 40% sequential growth in data center, 400% year-over-year in F Q1, and the greater than 50% of our revenue now that comes from data center. Aaron Rakers: Okay. Thankyou. Operator: Thank you. And our next question comes from line of Chris Caso from Wolfe Research. Your question, please. Chris Caso: Yes. Hi. I guess the first question is, maybe just some clarity on what may have precipitated some of the cautious -- some of the incremental caution here and what might have changed over the last couple of months? I know that is kind of back and forth a little bit, there were some cautious signs kind of back in August and they kind of received in the last earnings call. Was it -- I guess the question is, is it a function of the customer inventories turned out to be a bit more than we had expected or do you think it was a function of demand? Sumit Sadana: Yeah. Let me try to maybe address what changed. So, if you think about over the course of CQ4, we have seen a pushout of the PC refresh cycle that our customers had been anticipating, we had been anticipating. And it's not like the refresh cycle won't happen. It will happen in 2025. It just been a little bit delayed. There are numerous drivers which we mentioned in our prepared remarks as to why we believe and our customers believe that the refresh cycle will happen. The average age of the PC has become pretty long in the tooth, and it is ripe for an upgrade. And as people look to keep their PCs for a number of years, they will look to ultimately future proof the hardware specs, which is why we believe that even with very modest unit volume growth, the mix improvement that will come from higher memory content in these PCs will be a positive driver in 2025. But the delay in that upgrade cycle means that our calendar '24 PC shipment forecast at the unit level for PCs at our end customers has been reduced and is now very flattish year-over-year in calendar '24, so that has been one driver. The other is that definitely the inventories that we had highlighted in the last earnings call, that we expected by spring would become healthier at our customers, that inventory and inventory reduction as well as the seasonality of CQ1, those are continuing impacts. Some impact coming from the moderation. You mentioned -- previous discussion we just had a short while ago about lumpiness of demand on the data center SSD side. So some moderation in data center SSD into CQ1 after significant bout of buying over several quarters in calendar '24. So those are the things that have impacted the near-term outlook. But I just wanted to mention that most of the impact is limited to consumer-oriented segments, and the trajectory of demand in the data center continues to be very robust. Our own data center segment view of the overall revenue trajectory through fiscal '25, calendar '25 remains in a very solid trajectory. You have seen our F Q1 results as well that we highlighted. So it's mainly the consumer-oriented segments and some very temporary moderation of the data center SSD, which we expect will pick up again in a couple of months. And so if you think about just these consumer-oriented segments, we do expect that by spring time, the inventories will be much healthier. And then we are back to shipment growth because right now, we are shipping to these customers at a rate that is lower than their ship out because they are consuming DRAM and NAND at a faster rate than they're purchasing from us and from the industry. So that's the effect of the inventory that we expect will be in a much healthier place by spring and then a resumption of shipments and growth in shipments for the second half of the fiscal year and then things will be much better. And overall, DRAM will be continuing to be in a much healthier place. The supply is tight. HBM continues to pressure non-HBM availability of supply. So a large part of the issue is NAND related, and we have outlined the actions we are taking on the supply there to decisively bring our supply and balance with the demand. Chris Caso: That's helpful. Thank you. I mean just a follow-up to that. In terms of -- and I think you've been very clear on what's going on with NAND. But with DRAM, and I guess, this lower bit demand assumption overall for Q2. How much of that is DRAM versus NAND? And with the mid-teens growth that you now have for DRAM for the year, how back end loaded is that given what you're seeing in Q1? Because, I guess, you really weren't specific in NAND versus DRAM bit demand for -- bit growth for Q1? Yeah. Mark Murphy: Yeah, Chris. Just to be clear, we did say that DRAM bits would be down in Q2. We said that NAND would be down meaningfully. Chris Caso: Okay. Mark Murphy: Yeah. The majority of revenue decline versus the second quarter will be NAND. Sumit Sadana: So yeah, I mean, the DRAM decline in F Q2 is largely driven by the dynamics I described on the segment side for consumer oriented segments, right? I mean the data center segment, very strong on the DRAM side, very strong. So it's really the consumer-oriented segments. And we feel that, that's -- we're going to get past a lot of that headwind in the spring timeframe. So after CQ1, things will start to improve there. So we do expect sequential increases in volume in both DRAM and NAND starting in F Q3. F Q2 is what Mark had mentioned, the sequential decline in DRAM volume, but a meaningful decline sequentially in NAND volume. Chris Caso: Okay. Got it. Helpful clarification. Thank you. Operator: Thank you. And our next question comes from the line of Vijay Rakesh from Mizuho. Your question, please. Vijay Rakesh: Yeah. Hi, Mark and Sumit. Thanks for doing the call back. Just wondering on the -- as your SPM capacity, maybe goes up next year, how much is your conventional DRAM capacity coming down? And can you size the HBM capacity, how much do you think that goes up next year? I have a follow-up. Manish Bhatia: Hi, Vijay. It's Manish. So I think we've given the data points that -- as we go towards mature yields in HBM, the trade ratio between HBM and DRAM is -- HBM3E and our conventional DRAM is at 3. So that's -- you can sort of do the math at how much of our -- as we grow our HBM share towards our natural bit share, which we expect to achieve sometime next year in calendar '25, you can do the math and determine how much of that impact will be on our conventional DRAM wafer starts because we'll -- essentially for everyone, we're going to have to have three wafer starts or -- in HBM for every one that we would have had for the same number of bits in conventional DRAM. And we are focused on being able to maintain our DRAM bit share as we go through the Atrium transition here next year. And I think our DRAM overall bit growth will be in line with the industry bit growth numbers -- demand numbers that we had talked about for calendar '25. Vijay Rakesh: Got it. And then on the CapEx side, can you talk to what's the split between HBM and conventional DRAM and NAND? Thanks. Manish Bhatia: I don't know we're breaking it out specifically, but we have said that when you think about HBM in terms of both the capital that's specific to the HBM product, whether that's in the front-end fabs or in the specific assembly and test process and the clean room needed for new HBM capability, all of that, plus you also have the CapEx to be able to maintain the bid output as you or impacted by that trade ratio, that overall HBM is the largest portion of our CapEx for this fiscal year. Other areas that we're focused on are in facilities in construction and also some in back end. As you know, we have a facility that we're investing in, in India and others, so... Mark Murphy: Vijay, NAND is -- clearly, we've mentioned we've cut CapEx in NAND. It's lower. The percent spend on NAND is lower than the percent of the business revenue. So it's a much lower spend. And the DRAM spend, as Manish mentioned, is largely driven by this trade ratio effect and HBM requirements there. Vijay Rakesh: That’s excellent (ph). Thanks. Operator: Thank you. And our next question comes from the line of Brian Chin from Stifel. Your question, please. Brian Chin: Hi, there. Good afternoon. Thanks for letting us ask a few questions. Maybe first on the NAND side. We've heard of at least one other NAND supply reducing wafer starts, maybe kind of similar as to how you've disclosed today. But back in early 2023, some of the larger suppliers were slow to take actions to reduce wafer inputs. Do you expect maybe some of these other suppliers to follow more quickly this time, similar actions or lag like they did previously? Sumit Sadana: Difficult for us to project or predict what others would do. We'd rather not speculate other activities. What we can say is, how we look at the market and the decisive actions we are taking immediately. And we feel like these things will at least help Micron's view of supply growth coming from us and our view of demand growth to be aligned, so that's what we are doing. Brian Chin: Okay. Thanks. And then on the DRAM side, I don't think it was that many quarters ago that your DDR5 bit shipments crossed over DDR4. And now you're indicating only 10% or so of your global DRAM sales will be from DDR4 for the next several quarters through fiscal year-end, that's actually a lot lower ratio than I would have expected. Does this shipment mix actually closely match your internal production mix? Meaning that it's not just you're holding back inventory, but structurally, you've shifted a high majority of your DRAM production to DDR5, HBM specialty, those types of products. Sumit Sadana: Yeah. I mean that's correct. I mean we do have -- I mean, just for clarity, DDR4 and LP4, right, that's in that 10% approximately range of revenue for the remainder of fiscal year. And we do have long life cycle products that we support for the different segments like industrial, automotive, over time with more defense, aerospace, etc., that will have some of this long cycle effect. However, as our overall revenue grows, the mix of these products will remain at a very contained level. We have shifted a lot of our mix to these leading edge products, and our leading edge nodes are very constrained. So we are dedicating a lot of capacity to a very fast ramp of HBM, and you're seeing the results from that. And even as we continue to increase our view of calendar '25 time of HBM, we are maintaining our view of getting to our natural share in the second half of calendar '25. So you're seeing that a lot of mix shift is happening. And I spoke about the LP leadership in the data center, DDR leadership and the growth that is taking place. And even the growth in LP5 on the flagship smartphone side that we are supporting. So yeah, definitely, that shift is very meaningful. Brian Chin: Great. Thank you. Operator: Thank you. And our next question comes from the line of Quinn Bolton from Needham & Company. Your question, please. Quinn Bolton: Hey, Mark. I just wanted to come back to your comment on the NAND. And I think you said that NAND would account for most of the sequential decline. I mean if that's right, it could be down 30% plus. So I just want to make sure I heard you right that, that was indeed what you said? And then I got a follow-up on the consumer-facing business. Mark Murphy: Yeah. I -- it's the majority of the revenue decline versus second quarter sequentially. Quinn Bolton: Okay. Thank you. And then just -- you talked about the high inventory levels last quarter. It sounds like you thought you might have made some progress through fiscal Q1. Just wondering if you might be able to sort of quantify how much is left? Can you give us any sense on, are you looking to reduce a week or two weeks in -- through the spring? And from where you started last quarter, I assume most of that inventory reduction is happening in the second quarter that you probably didn't get through that much in fiscal Q1, but just wondering if you might be able to sort of from where you started, how much have you gotten through? And how much is left maybe on a percentage basis, if you don't want to talk on a week's basis? Mark Murphy: Are you talking overall inventories, Quinn? Quinn Bolton: Yeah. Just mostly on the consumer-facing business that seems to be kind of driving most of that sequential decline into fiscal Q2. Mark Murphy: Yeah. So we didn't break down inventories by market. We did make progress in the first quarter, as you've noted. DIO was down below 150 days overall. But we have a volume related decline or deterioration in DIO in the second quarter. So on a -- we'll have DIO go up first to second quarter, we'll have absolute inventory dollars go up. And again, this is a volume driven phenomenon. And then from there, in part due to the continued data center strength, the resumption of data center SSD volume growth and the refresh cycle and content driven growth in consumer and consumer-related markets. We do see our inventories drawing down through the year, both in NAND and DRAM. Now in DRAM, we will need our leading-edge inventories that we have now just to be able to supply the market we see. So we're going to on our forecast today, and total DRAM inventories below our target levels by end of fiscal [indiscernible]. Quinn Bolton: Sorry, Mark. I guess my question was more inventory at the customers rather than on your balance sheet, sort of, you said your current shipping low consumption in Q2. I guess maybe the other way is, it sounds like you think you start shipping in line with consumption again by Q3? Mark Murphy: Yeah. I thought that was covered earlier on that we see inventories getting to a better place in the spring. So -- but as Sumit mentioned, we're shipping in less than they're shipping out or consuming. So we have confidence that both in their demand and related our inventory consumption through fiscal year '25 beyond our second quarter. Quinn Bolton: Yeah. Okay. Thank you. Operator: Thank you. And our next question comes from the line of Timothy Arcuri from UBS. Your question, please. Timothy Arcuri: Thanks. Mark, I think, I just want to clarify that I heard what you said. So you -- in terms of your DRAM bit shipments, you're sort of saying that they're going to be in line with the mid-teens for calendar '25. Is that right? Number one. And then number two, are you going to under-ship the market? Because I think you said demand is growing low doubles, which you took that down, but I would think you're going to under-ship that. Mark Murphy: We said that industry -- well, we said industry bit supply -- our industry bit demand mid-teens. We gave -- we said with DRAM -- yeah, for DRAM. And when we've said that volumes will be down in the second quarter and expect to ship in-line with the industry. Timothy Arcuri: For the year -- full year? Mark Murphy: For the year. Timothy Arcuri: Yeah. Okay. And then what about NAND? I mean NAND demand is up low doubles, but I would guess you're going to under-ship that for the year. Is that fair? Sumit Sadana: No. I mean, for the year, we expect to have stable bit share in calendar '24 and '25. Across both DRAM and NAND, generally, that is true across '24 and '25. We expect to have relatively stable. Some noise here and there, but relatively stable bit share across both of those years. Timothy Arcuri: Okay. So you'll ship -- your NAND shipments are going to be up like close to that low double-digit demand. Is that fair? Mark Murphy: Yes. Timothy Arcuri: All right. Mark Murphy: There's always the calendar versus fiscal, right? I just want to be careful because that skews things somewhat, but we have a four month skew between calendar and fiscal year. So that changes things. Timothy Arcuri: Yeah. But I mean, I was talking calendar-to-calendar. So I'm just trying to just say in the calendar year because you're giving us a demand number for calendar year. So I'm saying in that calendar year, you're going to ship in-line roughly for both DRAM and NAND. Mark Murphy: Yeah. That's right. Timothy Arcuri: Got it. Okay. All right. I’ll let somebody else ask. Operator: Thank you. [Operator Instructions] Our next question comes from the line of Krish Sankar from TD Cowen. Your question, please. Hadi Orabi: Hey, guys. This is Hadi for Chris. I would like to clarify your comments regarding HBM and the volume and pricing agreements being locked in. Are these agreements cancelable? If so, I wonder under what conditions can customers cancel? I'm wondering if there are specific like duration limits or restrictions in place? Thank you. Sumit Sadana: Yeah. I mean, these are agreements that relates to amount of bits and cubes of HBM that our customers are going to purchase 8-high versus 12-high by quarter with pricing associated with them. And once we get into certain relatively lengthy lead times, then we get firm orders because of these lead times that we build with and ship for. And given the environment in the industry, more of the discussion is around chasing more supply because we have an extraordinarily strong product that customers want more of, and we are ramping as fast as possible -- fast as humanly possible to be able to grow our share to the targets that we have outlined. And so yes, customers can cancel if it is not in that firm time for the purchase order. If it is beyond that time line, yes, customers can make changes, but there's a fairly lengthy time line when based on very long lead times that they have to place from purchase orders for. And customers have been doing that with consistency, and that's what gives us the confidence for a very strong ramp ahead. Hadi Orabi: Got it. Thank you. Operator: Thank you. And our next question comes from the line of Toshiya Hari from Goldman Sachs. Your question, please. Toshiya Hari: Hi. Thank you for taking the follow-up here. I had one question on HBM and how to think about the ramp going forward on a quarterly basis. You guys don't report HBM revenue. So I'm guessing a little bit here. But based on everything you've said over the past couple of quarters, we're sort of estimating you did, I don't know, $800 million, $900 million in revenue in the quarter. I assume it's going to be up again nicely this quarter. So when I think about the starting point this quarter and then the comments you made on calendar '25 TAM and your market share goals, it feels like the trajectory kind of flattens out from here, still up, but flatter. I'm curious, am I thinking about it the right way? And if so, what are some of the constraints? Is it space? Is it TSP capacity both? And when should we expect your supply side -- your capacity to increase nicely. Is it tied to the Taiwan facility? Any insights there would be really helpful. Thank you. Sumit Sadana: I'll give you a couple of opening comments, and then I'll pass it over to Manish to talk about the second half of your question that relates to space and so on. Yes, we did give you the expectation of how we would ramp and how we get to this market share that is roughly equivalent to our DRAM supply share, which is in the low-20s and get there in the calendar second half with a view that there is going to be a $30 billion plus TAM on HBM for calendar '25, right? So that's sort of the outline we have given you. Now you're right, we don't report HBM numbers. We may choose to provide some data points in the future, but we haven't done so, except for that over $100 million point that we had mentioned when we first crossed that. The numbers that you outlined for F Q1 are a little bit high. But nonetheless, I think there is going to be still a pretty robust ramp occurring on the HBM revenue for us to hit the targets that we have outlined based on the TAM expectation and the growth of TAM on a quarterly basis that we had mentioned. And with that, I'll just pass it on to Manish to answer the second half of your question. Manish Bhatia: Yeah, Toshiya. So the -- we're pleased with how the 8-high ramp has gone. We've made some comments on the prior call about how that had exceeded our expectations in the last quarter, and we're continuing to have a strong ramp forward here. We think that the process choices we've made are -- this demonstrates that we have a scalable process and that it's going to be able -- we're going to be able to transition it to the 12-high as we move -- transition our capacity towards that ramp, which will become increasingly important as we go through calendar year '25. And really, it's just a ramp. It's just a ramp of adding capacity across many different dimensions and it's just gradually happening over time as we are installing new equipment and qualifying that new equipment and growing our capacity week-over-week as we move towards that goal. Keep in mind, we had zero -- we had no product in HBM3 and very limited production in HBM2E on a process that was quite a bit different than what we have right now in HBM3. So we really are starting from a very low point as we were beginning this HBM3E ramp and are continuing to grow, and we're adding capacity gradually as we went through this year and continuing into next year. So as Sumit said, I think we would expect that as we go through the year and as we get to the 12-high being a larger portion of our mix through the year, you will still see solid revenue growth as we're going quarter-over-quarter through the rest of fiscal '25 and even as we go through calendar year '25. Toshiya Hari: That’s really helpful. Thank you so much. Operator: Thank you. This does conclude the question-and-answer session as well as today's program. Thank you, ladies and gentlemen for your participation. You may now disconnect. Good day.

Operator: Thank you for standing by and welcome to Micron's Fourth Quarter 2024 Financial Call. At this time, all participants are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Satya Kumar, Investor Relations. Please go ahead, sir. Satya Kumar: Thank you and welcome to Micron Technology's fiscal fourth quarter 2024 financial conference call. On the call with me today are Sanjay Mehrotra, our President and CEO, and Mark Murphy, our CFO. Today's call is being webcast from our Investor Relations site at investors.micron.com including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website, along with the prepared remarks for this call. Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures can be found on our website. We encourage you to visit our website at micron.com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending. You can also follow us on X at MicronTech. As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, market and pricing trends and drivers, the impact of developing technologies such as AI, product ramp plans and market position, expected capabilities of our future products, 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 statements made today. We refer you to the documents we file with the SEC, including our Form 10-K, Forms 10-Q and other reports and filings for a discussion of risks that may affect our future 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. I'll now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Satya. Good afternoon, everyone. Micron delivered a strong finish to fiscal year 2024, with fiscal Q4 revenue at the high end of our guidance range and gross margins and EPS above the high end of our guidance ranges. In fiscal Q4, we achieved record-high revenues in NAND and in our storage business unit. Micron's fiscal 2024 revenue grew over 60%. We expanded company gross margins by over 30 percentage points and achieved revenue records in data center and in automotive. I am thankful to all our Micron team members for their focus and execution, which made these results possible. We are entering fiscal 2025 with the strongest competitive positioning in Micron's history. We have leadership 1-beta DRAM and G8 and G9 NAND process technology, and leadership products across our end markets. Robust data center demand is exceeding our leading-edge node supply and is driving overall healthy supply-demand dynamics. As we move through calendar 2025, we expect a broadening of demand drivers, complementing strong demand in the data center. We are making investments to support AI-driven demand and our manufacturing network is well positioned to execute on these opportunities. We look forward to delivering a substantial revenue record with significantly improved profitability in fiscal 2025, beginning with our guidance for record quarterly revenue in fiscal Q1. Micron is ramping production of the industry's most advanced technology nodes in both DRAM and NAND. Our 1-beta DRAM and G8 and G9 NAND nodes are ramping in high volume and will become an increasing portion of our mix through fiscal 2025. As a reminder, our G8 NAND node refers to our 232-layer NAND technology node. Our 1-gamma DRAM pilot production using extreme ultraviolet lithography is progressing well, and we are on track for volume production in calendar 2025. We delivered fiscal 2024 DRAM front-end cost reductions at the high end of the outlook provided at the beginning of the year and NAND cost reductions were consistent with our forecast. We expect fiscal 2025 DRAM front-end cost reductions excluding HBM to be in the mid-to-high single-digit percentage range. We expect fiscal 2025 NAND cost reductions to be in the low-to-mid teens percentage range. We continue to make progress on the construction for our new fab in Idaho and are working with state and federal agencies on the permitting process for our New York site. Construction is underway on our India assembly and test facility, as well as our China Xi'an back-end expansion. We are continuously assessing opportunities to manage our manufacturing footprint in a capital-efficient manner. Consistent with this strategy, we announced the acquisition of an LCD factory in Taiwan that will be converted to enable DRAM production testing. Micron's proprietary and vertically integrated testing capabilities provide competitive differentiation and enable us to provide high-quality products to our customers. Now turning to our end markets. Memory is essential to extend the frontier of AI capability. Multiple vectors will drive AI memory demand over the coming years. Growing model sizes and input token requirements, multimodality, multiagent solutions, continuous training, and the proliferation of inference workloads from cloud to the edge. Micron is focused on translating the opportunities from AI demand into value captured for all our stakeholders. Demand from data center customers continues to be strong and customer inventory levels are healthy. Industry server unit shipments are expected to grow in the mid-to-high single-digit percentage range in calendar 2024, driven by strong growth for AI servers as well as low single-digit percentage range growth for traditional servers. We expect traditional server demand to benefit from a refresh cycle as a single latest-generation traditional server can replace multiple older-generation servers to provide valuable space, power and performance improvements to improve data center efficiency. We see increasing DRAM and NAND content both in traditional as well as AI servers. Our mix of data center revenue reached a record level in fiscal 2024 and we expect will grow significantly from here in fiscal 2025. Micron is well positioned in the data center with our portfolio of HBM, high-capacity D5 and LP5 solutions, and data center SSD products. We expect each of these three product categories to deliver multiple billions of dollars in revenue in fiscal 2025. In HBM, we are making excellent progress on our yield and output capability. In fiscal Q4, we delivered on our expected volumes and achieved our objective of several hundred millions of dollars in revenue from HBM in fiscal year 2024. Even as our DRAM gross margins improved, our fiscal Q4 HBM gross margins were accretive to both company and DRAM gross margins, indicative of our solid HBM yield ramp. We expect to achieve HBM market share commensurate with our overall DRAM market share sometime in calendar 2025. We expect the HBM TAM to grow from approximately $4 billion in calendar 2023 to over $25 billion in calendar 2025. As a percent of overall industry DRAM bits, we expect HBM to grow from 1.5% in calendar 2023 to around 6% in calendar 2025. We have a robust roadmap for HBM and are confident we will maintain our time-to-market, technology and power efficiency leadership with HBM4 and HBM4E. During the quarter, Micron started shipments of production-capable HBM3E 12-high 36GB units to key industry partners to enable qualifications across the AI ecosystem. Remarkably, Micron's HBM3E 12-high 36GB delivers 20% lower power consumption than our competitors' HBM3E 8-high 24GB solutions while providing 50% higher DRAM capacity. We expect to ramp our HBM3E 12-high output in early calendar 2025 and increase the 12-high mix in our shipments throughout 2025. As we have said before, our HBM is sold out for calendar 2024 and 2025, with pricing already determined for this time frame. In calendar 2025 and 2026, we will have a more diversified HBM revenue profile as we have won business across a broad range of HBM customers with our industry-leading HBM3E solution. We see strong demand for our high-capacity D5 and LP5 solutions. We are seeing increasing adoption of our high-capacity mono-die-based 128GB D5 DIMM products. We are leveraging our innovative, industry-leading LP5 solutions to pioneer the adoption of low-power DRAM for servers in the data center. Micron's LP5 is specifically designed with data center and AI applications in mind, offering unique features for enhanced reliability, availability and serviceability or RAS in a server platform. We are focused on LPDDR design innovation to optimize the capacity, power and system reliability requirements of AI server infrastructure. Data center SSD demand continues to be driven by strong growth in AI as well as a recovery in traditional compute and storage. Our strategy to use greater levels of vertical integration, including Micron-designed controllers and firmware has resulted in a data center SSD portfolio that addresses customer requirements for a robust set of features and functionality, competitive total cost of ownership and industry-leading performance and quality. We have gained substantial share in data center SSDs as a result. We achieved a quarterly revenue record with over a billion dollars in revenue in data center SSDs in fiscal Q4, and our fiscal 2024 data center SSD revenues more than tripled from a year ago. Turning to PC. As discussed in our last earnings call, PC customers have built inventories due to the rising memory price trajectory, anticipated growth in AI PCs as well as an expectation of tight supply caused by an increasing portion of production output being dedicated to meeting the growing data center demand. As sell through of PCs continues at a steady pace with a seasonal increase in the second half of calendar 2024, we expect healthier inventories at PC OEMs by spring 2025. PC unit volumes remain on track to grow in the low single-digit range for calendar 2024. We expect unit growth to continue in 2025 and accelerate into the second half of calendar 2025, as the PC replacement cycle gathers momentum with the rollout of next-gen-AI PCs, end of support for Windows 10 and the launch of Windows 12. The PC market is in the early stages of a transformation and we expect a significant shift towards AI-driven functionalities that promise to enhance user experiences and productivity. AI PCs require a higher capacity of memory and storage. As an example, leading PC OEMs have recently announced AI-enabled PCs with a minimum of 16GB of DRAM for the value segment and between 32GB to 64GB for the mid and premium segments, versus an average content across all PCs of around 12GB last year. Micron is well positioned to support the growth of AI PCs with our portfolio of client LPDRAM, DRAM and SSD products. Our low-power compression attached memory module or LPCAMM2 product has had multiple design wins at leading PC OEMs. These modules offer all the benefits of low-power DRAM in an upgradable form factor. Compared to the alternative modular D5 based solutions, LPCAMM2 provides up to 60% lower power and up to 70% better performance along with 60% space savings. Our 3500 client SSD is qualified at all the major PC OEMs and provides the power-performance enhancements needed for AI workloads. Turning to mobile. Smartphone customer inventory dynamics are evolving in a manner somewhat similar to that of PC customers. Smartphone unit volumes in calendar 2024 are on track to grow in the low-to-mid single-digit percentage range and we expect unit growth to continue in 2025. Smartphone OEMs are seeking to differentiate their devices by incorporating more AI features such as personalized recommendations, improved camera functionalities and smarter voice assistants. Recently, leading Android smartphone OEMs have announced AI-enabled smartphones with 12GB to 16GB of DRAM, versus an average of 8GB in flagship phones last year. Micron is well positioned to support the growth of AI smartphones with our leading-edge memory and storage products. During the quarter, we extended our product leadership with the first customer qualification of our second-generation 1-beta based LP5X DRAM and second-generation of G8 NAND UFS 4.0 products. In the automotive market, infotainment and ADAS are driving long-term memory and storage content growth. For the fourth consecutive year, Micron achieved a fiscal year record for automotive revenue in 2024. Micron has built an industry-leading portfolio of automotive-grade DRAM and NAND products that provide best-in-class solutions for these high growth applications leveraging our technology and product leadership, top quality rankings, and close customer collaborations. During the quarter, we achieved qualification of our 1-beta based 16Gb LP5 with 9.6 Gbps speed for the automotive market, which will support the increased performance requirements driven by AI both in the digital cockpit and ADAS. The automotive industry continues to adjust the mix of EV, hybrid and traditional vehicles to meet evolving customer demand. As auto customer inventories adjust to this new mix, we expect a resumption in our automotive growth in the second half of fiscal 2025. Now, turning to our market outlook. Calendar 2024 DRAM industry demand outlook has improved, driven by strength in data center servers, and growth in the other market segments has performed consistent with our prior market commentary. Hence, we have upgraded our expectation for calendar 2024 industry DRAM bit demand growth to now be in the high-teens percentage range. Our expectation for calendar 2024 industry NAND bit demand growth remains in the mid-teens percentage range. In calendar 2025, we expect both DRAM and NAND industry bit demand growth to be around the mid-teens percentage range. Turning to supply. Constructive industry conditions will help drive the considerable improvements in profitability and ROI that are needed to enable the investments required to support future growth. Due to CapEx and supply reduction actions taken across the industry in 2023, we expect industry wafer capacity in both DRAM and NAND in 2024 to be below 2022 peak levels, and for NAND meaningfully so. This factor combined with the increasing mix of HBM wafers is reducing DRAM supply allocated to traditional products and contributing to the healthy industry supply-demand environment that we expect for DRAM in calendar 2025. Given the significant reduction in industry wafer capacity in NAND and the ongoing low NAND CapEx environment, we also expect a healthy industry supply-demand environment for NAND in calendar 2025. NAND technology transitions generally provide more growth in annualized bits per wafer compared to the NAND bit demand CAGR expectation of high teens. Consequently, we anticipate longer periods between industry technology transitions and moderating capital investment over time to align industry supply with demand. This can reduce both R&D expense growth and capital intensity in NAND over time, which can contribute to the improved financial health of the NAND industry. Micron invested $8.1 billion in CapEx in fiscal 2024. We expect fiscal 2025 CapEx to be meaningfully higher and at around the mid-30s percentage range of revenue based on our current CapEx and revenue expectations. The growth in both greenfield fab construction and HBM CapEx investments is projected to make up the overwhelming majority of the year-over-year CapEx increase. As a reminder, our investments in facility and construction in Idaho and New York will support our long-term demand outlook for DRAM and will not contribute to bit supply in fiscal 2025 and 2026. Micron will continue to exercise supply and CapEx discipline and focus on improving profitability, including walking away from less profitable business, while still maintaining our overall bit market share for DRAM and NAND. I will now turn it over to Mark for our financial results and outlook. Mark Murphy: Thanks, Sanjay, and good afternoon, everyone. In fiscal Q4, Micron delivered revenue at the high end of the guidance range and gross margin and EPS above the high end of the guidance ranges. We are exiting the fiscal year with excellent momentum, having expanded our industry-leading product portfolio, executed well on pricing, and improved our financial performance significantly from the start of the year. Total fiscal Q4 revenue was approximately $7.8 billion, up 14% sequentially and up 93% year-over-year. Fiscal 2024 total revenue was $25.1 billion, up 62% year-over-year. Fiscal Q4 DRAM revenue was $5.3 billion, up 93% year-over-year and represented 69% of total revenue. Sequentially, DRAM revenue increased 14%, with flattish bit shipments and prices increasing in the mid-teens percentage range. For the fiscal year, DRAM revenue increased 60% year-over-year to $17.6 billion, representing 70% of total revenue. Fiscal Q4 NAND revenue was $2.4 billion, up 96% year-over-year, and represented 31% of Micron's total revenue. NAND revenue increased 15% sequentially, with bit shipments increasing in the high single-digit percentage range and prices increasing in the high single-digit percentage range. Fiscal Q4 NAND revenue was a new quarterly record for Micron. For the fiscal year, NAND revenue increased 72% year-over-year to $7.2 billion, representing 29% of total revenue. Now turning to revenue by business unit. Compute and Networking Business Unit revenue was $3 billion, up 17% sequentially. Data center server DRAM achieved a quarterly revenue record in fiscal Q4, driven by strong demand for high-capacity solutions as well as our continued ramp of HBM. Revenue for the Mobile Business Unit was $1.9 billion, up 18% sequentially driven by seasonal product ramps. Revenue for the Storage Business Unit was $1.7 billion, up 24% sequentially and led by data center SSD, which reached a quarterly revenue record. We achieved record-high revenue for fiscal year 2024 for our NAND storage business. Embedded Business Unit revenue was $1.2 billion, down 9% sequentially. In fiscal 2024, the automotive segment achieved a new fiscal year revenue record for the fourth consecutive year. The consolidated gross margin for fiscal Q4 was 36.5%, improving over eight percentage points sequentially. Higher pricing and improved product mix were the key drivers of the stronger profitability. For the fiscal year, consolidated gross margin was 23.7%, up over 31 percentage points year-over-year. Operating expenses in fiscal Q4 were $1.08 billion, up $105 million sequentially due to an increase in R&D program expenses. For the fiscal year, operating expenses were $4 billion, up 11% year-over-year. The increase in fiscal 2024 operating expenses was primarily driven by an increase in R&D investments and reinstatement of short-term incentive compensation. We generated operating income of $1.7 billion in fiscal Q4, resulting in an operating margin of approximately 23%, which was up nine percentage points sequentially and up 53 percentage points from the year-ago quarter. Fiscal 2024 operating income was $1.9 billion, resulting in an operating margin of approximately 8%, which was up 39 percentage points year-over-year. Fiscal Q4 adjusted EBITDA was $3.7 billion, resulting in an EBITDA margin of 48%, up five percentage points sequentially and up 30 percentage points from the year-ago quarter. Fiscal 2024 EBITDA was $9.7 billion, resulting in an EBITDA margin of over 38%, which was up 20 percentage points year-over-year. Fiscal Q4 taxes were $387 million and higher than our guide, largely due to a shift in the jurisdictional mix of earnings. Fiscal 2024 taxes were $379 million or approximately 20% of pretax income. Non-GAAP diluted earnings per share in fiscal Q4 was $1.18 compared to $0.62 per share in the prior quarter and a loss per share of $1.07 in the year-ago quarter. Fiscal Q4 non-GAAP EPS exceeded the high end of our guidance range, driven by better pricing and profitability. Fiscal 2024 non-GAAP EPS was $1.30. Turning to cash flows and capital spending, our operating cash flows were $3.4 billion in fiscal Q4, representing 44% of revenue. For the fiscal year, we generated $8.5 billion of operating cash flows, representing 34% of revenue. Capital expenditures were $3.1 billion during the quarter. CapEx totaled $8.1 billion for the fiscal year, up from $7 billion in fiscal 2023. We generated $323 million of free cash flow for the quarter and $386 million for the fiscal year. As announced in early August, we determined that share repurchases may resume in light of improved conditions. As such, with our return to free cash flow, reduced leverage and long-term positive outlook, we saw an opportunity to repurchase shares in the quarter. In fiscal Q4, we repurchased $300 million or 3.2 million shares at an average price of $93.07 per share. Micron's fiscal Q4 ending inventory was $8.9 billion or 158 days, up three days from the prior quarter. Micron continues to exercise pricing discipline and expects a healthy supply-demand environment in the industry in fiscal 2025. We intend to draw down our inventory to support our revenue growth in fiscal 2025. On the balance sheet, we held $9.2 billion of cash and investments at quarter-end and maintained near $11.7 billion of liquidity when including our untapped credit facility. We ended the quarter with $13.4 billion in total debt, low net leverage and a weighted average maturity on our debt of 2031. We are committed to further strengthening our balance sheet and sustaining our investment-grade credit rating. Now turning to our outlook for the fiscal first quarter. Fiscal Q1 gross margin is projected to improve sequentially primarily on better pricing and portfolio mix. Recall that, in fiscal Q4, HBM remained accretive to both DRAM and overall company gross margins. We project changes in our portfolio mix to continue to be an important and favorable contributor to gross margins over time. We forecast operating expenses to be flat to slightly up in the fiscal first quarter compared to fiscal fourth quarter levels. For the full fiscal year 2025, we see operating expenses growing by a mid-teens percentage versus fiscal 2024. Growth in operating expenses is planned to be second half weighted, as we ramp necessary R&D program investments, including for HBM, to capture the substantial growth opportunity ahead. For fiscal Q1 and fiscal 2025, we estimate our non-GAAP tax rate to be in the mid-teens percentage range. We project days of inventory outstanding to decline in fiscal 2025 and for DIO to approach our target by the end of fiscal 2025. In fiscal Q1, we forecast capital expenditures to increase sequentially to approximately $3.5 billion. As Sanjay mentioned, we expect fiscal 2025 CapEx to be around mid-30s percentage range of revenue based on our current CapEx and revenue expectations. We remain circumspect with all capital spending and disciplined with WFE investments in order to grow bit supply in line with industry demand. With all these factors in mind, our non-GAAP guidance for fiscal Q1 is as follows. We expect revenue to be $8.7 billion plus or minus $200 million. Gross margin to be in the range of 39.5% plus or minus 100 basis points and operating expenses to be approximately $1.085 billion plus or minus $15 million. As mentioned, we expect the fiscal Q1 tax rate to be in the mid-teens percentage range. Based on a share count of approximately 1.14 billion shares, we expect EPS to be $1.74 per share plus or minus $0.08. In closing, we remain focused on investing in a disciplined manner to support our growth and maintain stable bit share in DRAM and NAND. Micron is well positioned to deliver record revenue as well as significantly improved profitability and free cash flow in fiscal 2025. I will now turn it back over to Sanjay. Sanjay Mehrotra: Thank you, Mark. Fiscal 2024 was a year of many records as we discussed earlier and I expect fiscal 2025 to be even better. With the advent of AI, we are in the most exciting period that I have seen for memory and storage in my career. Micron's memory and storage innovations are enabling tremendous breakthroughs, transforming how the world uses information to enrich life for all. Micron has sustained multiple generations of technology leadership in DRAM and NAND. Our unique culture and our industry-leading product portfolio, combined with our world-class manufacturing execution and quality are enabling us to deliver differentiated, high-value solutions across end markets. This has made us the partner of choice for our customers as they plan their long-term roadmaps and our momentum lays the foundation for an exciting fiscal 2025. Thank you for joining us today. We will now open for questions. Operator: Certainly. Thank you. And our first question comes from the line of Timothy Arcuri from UBS. Your question please. Timothy Arcuri: Thanks a lot. Mark, I guess my first question is, some of the assumptions in guidance. I think you've been saying kind of on the conference circuit that bits would be pretty flat in fiscal Q1 for both DRAM and NAND. Is that what you're still assuming so that most of the increase in the revenue is basically pricing? Is that correct? Mark Murphy: Tim, what we see now and we had provided a slight update in August, but we now see that DRAM bits, we expect to be up somewhat higher than what we had said before. We had said before they were going to be flat and then we revised that to flat to slightly up and in this latest guide, we now view DRAM to be up somewhat higher from that. NAND bits, we expect to be sequentially flattish. Keep in mind that our guide also contemplates a healthy supply-demand environment and an increasingly favorable mix in the business with HBM, high-capacity DIMMs, LP, data center SSD. So we see stronger data center demand and we had indicated that it was robust and that's been favorable. And then we're just executing well on our product road maps, our product execution, our overall manufacturing execution. Timothy Arcuri: Thanks, Mark. And then just one last thing. You had said that HBM revenue last quarter in May was a little over $100 million. Can you give us the number in August? Was it -- it looks like it was $300 million to $350 million something like that. Is that about right for your HBM revenue in fiscal Q4? Sanjay Mehrotra: So we are not disclosing a specific revenue for FQ4. We have said earlier that we will have several hundred million dollars of revenue in fiscal year '24 and we achieved that objective. And really very proud of all the execution from our team in terms of putting in place the capacity, managing the yield ramp successfully to our goals, and of course, continue to deliver a strong product to our customer base. So not providing -- we're not going to be providing specifics on a quarter-by-quarter basis. But keep in mind, yes, we delivered several hundred million dollars of revenue in fiscal year '24 and we look forward to delivering multiple billions of dollars of revenue of HBM in fiscal year '25. Timothy Arcuri: Okay. Thank you, Sanjay. Operator: Thank you. And our next question comes from the line of C.J. Muse from Cantor Fitzgerald. Your question please. C.J. Muse: Yes. Good afternoon. Thank you for taking the question. I guess first question on gross margins. You guided up a robust 300 basis points. I was hoping you could spend a little bit of time kind of walking us through what's driving that? How much is from like-for-like DRAM ASP increases, mix, HBM yield improvements and cost downs. And I guess, as you kind of walk through that, can you give us a flavor of how to think about those drivers beyond the November quarter? Mark Murphy: So C.J., in the fourth or first quarter, as we look at that margin expansion, it's similar to the themes we've talked about before. The supply-demand environment is healthy. So we're seeing that play through on -- in pricing. We're also seeing the execution of our product road map and the ramp of the higher-value products and that's contributing. On costs, we are doing well on cost downs. However, in the first quarter because of the mix with HBM, we are going to see DRAM costs go up slightly. And that's so as we look forward into the first quarter, things are coming together as we had hoped, tied at the leading edge, good supply demand, favorable pricing environment and certainly favorable mix and that becoming a more important part of the business and good cost execution. C.J. Muse: Very helpful. And then I guess maybe as a follow-up, you've reiterated your CapEx outlook, but obviously, the end market environment has changed a bit in the last three months. So curious if you've changed your prioritization of CapEx at all? Obviously, you talked about a focus on shelves and HBM. Any other change in terms of your spending? Sanjay Mehrotra: Not really. We don't have any other change. I mean again continuing to focus our CapEx on HBM investment, which as you know, is a high-value solution and product tends to be accretive to the margins. And of course, long-term construction CapEx, and that is -- the construction CapEx that is targeted for longer term bit growth for the second -- latter part of this decade. C.J. Muse: Thank you. Operator: Thank you. And our next question comes from the line of Krish Sankar from TD Cowen. Your question please. Krish Sankar: Yes, I have two questions. One, Sanjay, your AI GPU customers are moving to a one-year cadence of your products. And it looks like the HBM road map is also moving to that 12 months from a prior 18-month cadence. Do you think that this puts you and your peers at a yield disadvantage, i.e., in other words, as HBM3E yield and gross margin improves, you have to migrate to HBM4 and that new node might come at a lower yield. So I'm just kind of curious how to think about that cadence of HBM progression and how that impacts yield and gross margin? And then I had a quick follow-up. Sanjay Mehrotra: As we mentioned, we are doing well with respect to our goals on HBM3E yields with 8 high. And in '25, of course, we will be increased -- beginning our output in early 2025 with 12 high. And of course, 12 high will be going through its own yield ramp and 12 high will be ramping through our calendar year '25 and HBM4 will be a 2026 product. And like any other new product, of course, there are in the early stages, always ramp-up of yield involved. But we are very pleased with the technical expertise that we have, manufacturing expertise and doing really quite well in terms of continuing to ramp up the yield and the quality of our products. And at the end of the day, you know, that cadence of -- our customers' cadence moving faster only benefits those who have the best product and technology because they are the ones who are able to work with the customers at the pace that they need. And we are with our HBM3E, which has demonstrated clear leadership in performance, in power and overall product feature set for our customers, we absolutely plan to maintain that leadership going forward with our road map from 8 high to 12 high of HBM3E and HBM4 and 4E in the future years. Along with our expertise in manufacturing, that should play to our strength in the time frame ahead. And we work very closely with our customers. Krish Sankar: Got it. Very helpful. Sanjay Mehrotra: We work very, very closely with our customers to understand their cadence, to understand their requirements and make sure that our road map, both from technology, product and manufacturing capabilities is aligned well with their requirements. Krish Sankar: Got it. Thanks a lot for that Sanjay. Super helpful color. And a quick follow-up for Mark on inventory. I understand you're going to draw that down in FY'25. But just in the last quarter, it went up, any color on where that inventory level is going up? Is that within PCs? Is it mobile DRAM? Any color there would be helpful. Thanks a lot. Mark Murphy: Sure. We were clear about this in the August conferences that we were seeing -- while we were seeing robust data center demand, we were seeing some customers had -- were buying ahead in anticipation of price increases, the rollout of AI-related devices and just surety of supply, given that leading edge is tight. So we did see some inventory build and we communicated that inventories would remain elevated going into FY'25. So as what you see, so our days did go up. We continue to be prudent with our supply and walking away from less profitable business. We do expect the environment, supply-demand environment to be constructive for improved profitability in '25. And given the tight leading-edge nodes and our outlook, we're going to need these inventories to bridge us to when our production on tech node transitions ramps. So that's why we've given an outlook that our inventories by the end of the fiscal year, we expect to be approaching our target inventory levels. Now our volumes happen to be a bit more second half weighted of the fiscal year. So we'll see a bit shallower improvement at the first half of the fiscal year and then that improvement in DIO will steepen as we move through the second half. But we're confident in our inventory outlook and definitely need these leading-edge inventories to supply the market. Krish Sankar: Thanks, Mark. Operator: Thank you. And our next question comes from the line of Joseph Moore from Morgan Stanley. Your question please. Joseph Moore: Great. Thank you. In terms of your target for getting to HBM market share that's more in line with your overall market share, can you kind of characterize how you get there? Do you anticipate that it's still a supply-constrained environment for everybody or are we sort of more -- a little bit more balanced in the quality of the Micron product drives us through? Just what's the determinant of that market share that gets you to that level? Sanjay Mehrotra: Well, certainly, I mean we are being responsible and disciplined in terms of managing our market share. We have industry's best HBM3E product, and it's the best product with 30% lower power with 8 high. And in fact when you go to 12 high, we are 20% lower power despite 50% increase in capacity versus others 8 high products. So we are well positioned with our product, with its performance, with this power. And that's what is really putting us in the strong position of being -- product being sold out for our '24 and '25 time frame. And when we look at HBM, we have talked about that next year, we project a TAM of $25 billion, consuming about 6%, over 6% of the industry best, in fact, a TAM of greater than $25 billion in 2025. And we are pretty confident that with our product, with our yield ramp, and with the agreement that we have in place with our customers, we will deliver sometime in 2025 get to our share to be in line with our industry share. So of course, it's limited at this point by our production ramp, but we are really on a very good trajectory there. So we feel very confident with our product and with the production ramp and with share opportunities. And frankly our HBM3E product is getting premium in the industry as well versus other products. So it just puts us on a good trajectory ahead as well. Joseph Moore: Great. Thank you. Congratulations. Operator: Thank you. And our next question comes from the line of Vivek Arya from Bank of America Securities. Your question please. Vivek Arya: Thanks for taking my questions. I had two as well. Sanjay, on that same topic of HBM, there is some concern about the potential for HBM oversupply in '25, let's say, there are three suppliers instead of the two that are right now. Is that something you see that there is any potential for oversupply? And let's say if you take the other scenario where there continue to be only two suppliers of NextGen HBM, do you think the third supplier could flood the market with additional DRAM, just sort of the reverse of this trade ratio argument? So just curious to hear how you think about the supply-demand dynamics for both traditional DRAM and HBM4 next year? Sanjay Mehrotra: So we certainly assume that the third supplier will ultimately succeed in having HBM3E product as well and we'll have some share in the marketplace as well. And again, as I pointed out earlier, with the solid product that we have, our product has sold out through 2025 time frame and we are really well positioned with this product. I think the part that you have to keep in mind is that leading-edge supply, as we have mentioned here is tight. Leading-edge supply is tight because industry in '22, '23 time frame with reductions in CapEx and CapEx-efficient industry-wide transitions to the newer technology nodes, the wafer capacity has come down from the peak levels in meaningful ways. So the lower wafer capacity compared to the peak of 2022 as well as the HBM 3:1 trade ratio, these are the ones that are overall keeping the industry in a tight supply. And tight supply, not just for HBM, but also for non-HBM part of the market. So we, of course, feel very good about our own plans with HBM. And of course we always stay completely focused on managing the mix of our business between non-HBM and HBM and remaining extremely disciplined about CapEx, about our share objectives. We have shared those share objectives about HBM here. Overall, we have said we maintain our DRAM as well as NAND supply share to be stable. And this is how we look at the overall market. But when you look at the market trends, it's not just about demand trend on HBM, which is, of course, growing substantially becoming more than $25 billion market in 2025. It's also about, past spring, we see that demand for memory in smartphones and PCs as AI-enabled smartphones become bigger and bigger part of the market in the quarters and the years to come. And of course, customer inventories by spring time frame in smartphone and PCs for memory get to earlier levels, we see that to be a driver of demand as well to complement the strong data center demand. And we are looking at strong momentum, not just with HBM. We have talked about multiple billions of dollars of revenue that we target to generate in our fiscal year 2025 from high-capacity DRAM modules as well as LP memory in data center, so these are all the elements that point to strong demand trends and demand trends driven by AI in data center as well as in smartphone and PCs where more and more content is required in an environment where the leading-edge supply is today tight. So I think the opportunity is tremendous and we see healthy demand supply balance and a constructive environment for our financial performance in fiscal 2025. And that's why we say with confidence that we'll deliver a substantial revenue record in fiscal year 2025, the significant improvement in our profitability as well. Vivek Arya: Got it. Very helpful. And maybe a quick follow-up for Mark. Mark, on the Q3 call, I think you were a little more explicit about both industry pricing and your gross margins expanding through fiscal '25. Is that still a useful construct from where you see -- from what you see today or do you think there is a scenario where gross margins or your pricing start to flatten out or even go in the other direction through fiscal '25? What is the operating assumption for fiscal '25 as you see it right now? Thank you. Mark Murphy: Maybe just following up here to draw on Sanjay's comments. I mean we see a very positive setup in fiscal '25 and so had said substantial revenue record significantly improved profitability. The supply-demand setup is quite good. The market's leading-edge is very tight. As we've talked about, the industry wafer capacity has come down, and so in HBM, of course, is creating supply constraints in the marketplace as share bits increase. So we still see that the supply-demand environment is healthy through the year. We also are constructive for the year. We also see the trend we've talked about that our volume is increasingly moving to support higher-value ad products with our differentiated portfolio. So HBM, high-capacity DIMMs, more LP and then our NAND SSD for data center portfolio products. So I think the margin expansion through the year supported by those elements and continued good cost performance gives us confidence on a very good year. Vivek Arya: Thank you. Operator: Thank you. And our next question comes from the line of Toshiya Hari from Goldman Sachs. Your question please. Toshiya Hari: Thank you. I had a two-part question on the HBM business. Sanjay, you talked about you all being sold out through calendar '25. I'm curious if there's an opportunity for Micron to present upside or deliver upside to what the plan is currently for '25 or are equipment lead times such that you're essentially capped vis-a-vis what your expectations are today for HBM specifically. And then my second part is on gross margin for HBM. We all understand that the business is accretive to both the corporate average and also relative to DRAM. As you look forward into calendar '25 with volumes locked in and pricing locked in, I would assume you've got decent visibility on gross margin. Should we expect HBM gross margins to stay kind of where they are or could they move further up as long as you execute on the yield side? Thanks. Sanjay Mehrotra: So regarding your part of your question on the upside for HBM in 2025. So again let me emphasize that we are extremely focused on delivering our goals of getting to our share in HBM to be in line with DRAM share sometime in 2025, extremely focused on continuing to ramp up our production capacity and yield ramp, which are going well according to our plan. I'm very pleased with that. So remaining focused on that. And of course if there are opportunities to be opportunistic, with any upside, of course, we will be capturing those. And those upsides always remain. And yields, we expect to get to mature yields on our HBM in fiscal year '25. Yields are always an upside opportunity, productivity of the equipment always can be an opportunity as well. So we'll manage our business responsibly and with total focus on delivering to our goals and maintaining our focus on keeping our HBM commitments to our customers coming through successfully. Now regarding your questions on gross margin being accretive, yes, we would expect our HBM business to be accretive for our fiscal year 2025. Beyond that really not providing any further details. And, yes, you are right that our volume and pricing for HBM is locked up for 2024 as well as for 2025 time frame, calendar year 2024 and calendar year 2025. Toshiya Hari: Great. And then as a quick follow-up on DRAM industry bit growth. I think you raised your '24 outlook to high-teens and you gave a preliminary '25 outlook of mid-teens. I'm curious what's driving the decel from '24 to '25. Is the '25 number a supply-constrained number. From a demand perspective, Sanjay, you sounded pretty constructive on PCs and smartphones and obviously, the content opportunity, and you remain pretty positive on data centers. So I'm just curious what's driving the expected decel in '25. Thank you. Sanjay Mehrotra: Yes. We'll just point, I mean, by the way, we have, in the past, talked about DRAM CAGR being mid-teens. At 2024, we have increased the outlook to high-teens based on the strength in the data center. And 2025 as we look at it just keep, in fact, mind two factors. One is we are now comparing it to the higher base of 2024, which has gone to high-teens. So that, of course, impact the percentage of the '25. And second piece is that, as we have noted, that smartphone and PC, which at the end market level are continuing to do fine. But given for the three factors that we have mentioned in our earnings call script that the customers built some inventory. The sell-in is somewhat less than their sellout in terms of memory and we have said that by spring of 2025, we expect in PCs customer inventory levels to get to healthier levels versus now and these will continue to improve. So that too plays a factor. And of course I would just like to remind you that we have pointed out that overall smartphone and PC unit growth will be occurring in 2025 and of course increasing penetration of AI phones and second half that acceleration, that growth will be obviously stronger than the first half. So all of these factors are included in our current outlook of 2025 DRAM growth being in mid-teens. And let me just point out that previously we have said that HBM, we would expect it to be greater than $20 billion opportunity in 2025. We have now said HBM is more than $25 billion opportunity in 2025. So as you know HBM has a trade ratio of 3:1, it takes three times as many wafers to produce the same bit as standard products in the technology nodes. So obviously the growth of HBM also impacts the total bit growth year-over-year in aggregate. Toshiya Hari: Thank you Operator: Thank you. And this does conclude the question-and-answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.

Operator: Thank you for standing by, and welcome to Micron Technology's Fiscal Third Quarter 2024 Financial Results Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Satya Kumar, Investor Relations. Please go ahead, sir. Satya Kumar: Thank you, and welcome to Micron Technology's fiscal third quarter 2024 financial conference call. On the call with me today are Sanjay Mehrotra, our President and CEO; and Mark Murphy, our CFO. Today's call is being webcast from our Investor Relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website, along with the prepared remarks for this call. Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures can be found on our website. We encourage you to visit our website at micron.com throughout the quarter for the most current information on the Company, including information on financial conferences that we may be attending. You can also follow us on X at MicronTech. As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, market and pricing trends and drivers, the impact of new technologies such as AI, product ramp plans and market position, 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 statements made today. We refer you to the documents we filed with the SEC, including our most recent Form 10-Q and the upcoming 10-Q, for a discussion of risks that may affect our future 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. With that, let me turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Satya. Good afternoon, everyone. I am pleased to report that Micron delivered fiscal Q3 revenue, gross margin, and EPS, all above the high end of guidance ranges. Micron drove robust price increases as industry supply-demand conditions continued to improve. This improved pricing, combined with our strengthening product mix, resulted in increased profitability across all our end markets. In data center, rapidly growing AI demand enabled us to grow our revenue by over 50% on a sequential basis, and we grew share in high-margin AI-related product categories such as HBM, high-capacity DIMMs, and data center SSDs. Our mix of data center revenue is on track to reach record levels in fiscal 2024 and to grow significantly from there in fiscal 2025. Robust AI-driven demand for data center products is causing tightness on our leading-edge nodes. Consequently, we expect continued price increases throughout calendar 2024 despite only steady near-term demand in PCs and smartphones. As we look ahead to 2025, demand for AI PCs and AI smartphones and continued growth of AI in the data center creates a favorable setup that gives us confidence that we can deliver a substantial revenue record in fiscal 2025, with significantly improved profitability underpinned by our ongoing portfolio shift to higher-margin products. Micron is ramping the industry's most advanced technology nodes in both DRAM and NAND. Over 80% of our DRAM bit production is now on leading-edge 1-alpha and 1-beta nodes. Over 90% of our NAND bit production is on our two leading-edge NAND nodes. 1-gamma DRAM pilot production using extreme ultraviolet lithography is progressing well, and we are on track for volume production in calendar 2025. Our next-generation NAND node is on track, with high-volume production planned for calendar 2025. We experienced some operational disruptions after the recent Taiwan earthquake but were able to recover quickly, thanks to diligent efforts from Micron Taiwan team members working together with our global operations teams. Despite impacts from the earthquake, we now expect our fiscal 2024 DRAM front-end cost reductions, excluding HBM, to be in the high single-digit percentage range. We expect our fiscal 2024 NAND front-end cost reductions to be in the low-teens percentage range. These cost reductions are supported by our industry-leading 1beta DRAM and 232-layer NAND nodes. During the quarter, Micron signed a nonbinding preliminary memorandum of terms, or PMT, with the U.S. government for $6.1 billion in grants under the CHIPS and Science Act. These grants support our planned leading-edge memory manufacturing expansions in Idaho and New York. Federal and state incentives, projected power-cost advantages and R&D co-location synergies will enable Micron to achieve cost-competitive, leading-edge memory manufacturing in the United States when these projects reach efficient manufacturing scale. Fab construction in Idaho is underway, and we are working diligently to complete the regulatory and permitting processes in New York. This additional leading-edge greenfield capacity, along with continued technology transition investments in our Asia facilities, is required to meet long-term demand in the second half of this decade and beyond. These investments support our objective to maintain our current bit share over time and to grow our memory bit supply in line with long-term industry bit demand. Micron retains flexibility under the PMT to manage construction and timing of supply growth in a manner that allows us to remain responsive to market conditions. Now turning to our end markets. We are in the early innings of a multi-year race to enable artificial general intelligence, or AGI, which will revolutionize all aspects of life. Enabling AGI will require training ever-increasing model sizes with trillions of parameters and sophisticated servers for inferencing. AI will also permeate to the edge via AI PCs and AI smartphones, as well as smart automobiles and intelligent industrial systems. These trends will drive significant growth in the demand for DRAM and NAND, and we believe that Micron will be one of the biggest beneficiaries in the semiconductor industry of the multi-year growth opportunity driven by AI. Most data center customer inventories have normalized, and demand from customers continues to strengthen. PC and smartphone customers have built additional inventories due to the rising price trajectory, the anticipated growth in AI PCs and AI smartphones, as well as the expectation of tight supply as an increasing portion of DRAM and NAND output is dedicated to meeting growing data center demand. Due to expectations for continued leading-edge node tightness, we are seeing increased interest from many customers across market segments to secure 2025 long-term agreements ahead of their typical schedule. In data center, industry server unit shipments are expected to grow in the mid-to-high single digits in calendar 2024, driven by strong growth for AI servers and a return to modest growth for traditional servers. Micron is well positioned with our portfolio of HBM, D5, LP5, high-capacity DIMM, CXL, and data center SSD products. Recently, our customers have announced their long-term AI server product roadmaps, with an annual cadence of new products with significantly improved capabilities for the next several years. Micron's technology and product leadership puts us in an excellent position to support this growth. Customers continue to provide feedback that our HBM3E solution has 30% lower power consumption compared to competitors' solutions. Our HBM shipment ramp began in fiscal Q3, and we generated over $100 million in HBM3E revenue in the quarter, at margins accretive to DRAM and overall Company margins. We expect to generate several hundred million dollars of revenue from HBM in fiscal 2024 and multiple billions of dollars in revenue from HBM in fiscal 2025. We expect to achieve HBM market share commensurate with our overall DRAM market share sometime in calendar 2025. Our HBM is sold out for calendar 2024 and 2025, with pricing already contracted for the overwhelming majority of our 2025 supply. We are making significant strides toward expanding our HBM customer base in calendar 2025, as we design-in our industry-leading HBM technology with major HBM customers. We have sampled our 12-high HBM3E product and expect to ramp it into high-volume production in calendar 2025 and increase in mix throughout 2025. We have a robust roadmap for HBM and are confident we will maintain our technology leadership with HBM4 and HBM4E. Our next generations of HBM will provide further performance and capacity enhancements while we continue to evolve our industry-leading low-power innovations. We achieved full validation on our 1-beta 32 gigabit monolithic-die-based 128 gigabyte high-capacity server DIMM products and are on track to achieve several hundred million dollars of revenue from high-capacity DIMMs in the second half of fiscal 2024. Additionally, we continue to see strong interest in our industry-leading 1-beta LPDRAM in data center applications. Data center SSD is in the midst of a strong demand recovery as customers have worked through their 2023 inventory. Hyperscale demand is improving, driven primarily by AI training and inference infrastructure, and supplemented by the start of a recovery of traditional compute and storage infrastructure demand. Micron is gaining share in data center SSDs as we reach new revenue and market share records in this important product category. During the quarter, we more than tripled bit shipments of our 232-layer-based 6500 30 terabyte SSDs, which offer best-in-class performance, reliability, and endurance for AI data lake applications. We continued our leadership and innovation by becoming the first NAND vendor to supply 200-plus-layer QLC for the enterprise storage market. In PC, unit volumes remain on track to grow in the low single-digit range for calendar 2024. We are optimistic that the planned Windows 10 end-of-life in 2025, the launch of Windows 12, and the introduction of a new generation of AI PCs will accelerate the PC replacement cycle starting in late calendar 2024. The PC replacement cycle should gather momentum through calendar 2025 as new AI applications are rolled out. During Computex in Taiwan, we saw several announcements of next-generation chipsets and AI PCs. These devices feature high-performance neural processing unit chipsets, and we expect these devices will have 40% to 80% more DRAM content than today's average PC. Microsoft's minimum system requirement for Copilot+ PCs, such as the Surface Pro, is 16 gigabyte of DRAM. We expect next-gen AI PCs to make up a meaningful portion of total PC units in calendar 2025, growing each year until most PCs ultimately support next-gen AI PC specs. AI PCs are also likely to require higher performance and higher average capacity SSDs than traditional PCs, aligning well with our leading technology portfolio on our 232-layer NAND with our performance 3500 SSD and our industry-leading value QLC 2500 NVMe SSDs. Turning to mobile. Smartphone unit volumes in calendar 2024 remain on track to grow in the low- to mid-single-digit percentage range. Leading smartphone OEMs recently announced new AI capabilities, and we are optimistic that delivering high-quality AI experiences can accelerate the smartphone refresh cycle. Smartphones have tremendous potential for personalized AI capabilities that offer greater security and responsiveness when executed on device. Micron's leading LP5X is enabling the recent 12 gigabyte and 16 gigabyte AI phone releases at all Android Tier 1 customers, representing a 50% to 100% increase over last year's flagship models. Micron's leading mobile solutions provide the critical performance, capacity, and power efficiency needed to unlock AI capability. Our mobile DRAM and NAND solutions are now widely adopted in industry-leading flagship smartphones. In calendar Q1, we received recognition for being Number One in quality by five of the world's leading smartphone OEMs. Qualifications are on track for our second-generation 1-beta LP5X products, and we see broadening use of our 232-layer NAND, moving beyond flagship phones into high-capacity high-and mid-tier phones. Turning to auto and industrial. The automotive sector continued to experience robust demand for memory and storage, and Micron achieved a record quarter for automotive revenues. Car production volumes are returning to pre-pandemic levels, and broader adoption of intelligent digital cockpits and more advanced driver-assistance capabilities are driving content growth. We anticipate further content growth as additional intelligence, including generative AI-based technologies, is adopted in vehicles. Micron continues to be a leader in automotive with high-quality and industry-first product introductions. In the fiscal third quarter, we launched the world's first multiport Gen 4 NVMe SSD in support of next-generation centralized compute architectures. In industrial and retail consumer segments, which are a smaller part of our business, we are seeing some near-term demand uncertainty from our distribution partners and end customers. We remain confident in the long-term fundamentals and growth drivers of these businesses, especially with the increasing adoption of AI in a variety of applications. Now, turning to our market outlook. We forecast calendar 2024 bit demand growth for the industry to be in the mid-teens percentage range for both DRAM and NAND. Over the medium term, we expect industry bit demand growth CAGRs of mid-teens in DRAM and high teens in NAND. Turning to supply. We expect calendar 2024 industry supply to be below demand for both DRAM and NAND. As discussed previously, the ramp of HBM production will constrain industry supply growth in non-HBM products. Industrywide, HBM3E consumes approximately three times the wafer supply as D5 to produce a given number of bits in the same technology node. With increased performance and packaging complexity, across the industry, we expect this trade ratio for HBM4 to be even higher than the trade ratio for HBM3E. We anticipate strong HBM demand due to AI, combined with increasing silicon intensity of the HBM roadmap, to contribute to tight supply conditions for DRAM across all end markets. As the memory industry is still recovering from the challenging environment in 2023, this tight supply environment will help drive the considerable improvements in profitability and ROI that are needed to enable the investments required to support future growth. Micron's bit supply growth in fiscal 2024 remains below our demand growth for both DRAM and NAND. Micron will continue to exercise supply and CapEx discipline and focus on improving profitability while maintaining our bit market share for DRAM and NAND. We continue to project we will end fiscal 2024 with low double-digit percentage less wafer capacity in both DRAM and NAND than our peak levels in fiscal 2022. We intend to use our existing inventory to drive a portion of the bit growth supporting our revenue in fiscal 2025 to enable a more optimized use of our CapEx investments. Micron's fiscal 2024 CapEx plan will be approximately $8 billion, and WFE spending will be down year-on-year in fiscal 2024. We expect to increase our capital spending materially next year, with CapEx around mid-30%s range of revenue for fiscal 2025, which will support HBM assembly and test equipment, fab and back-end facility construction as well as technology transition investment to support demand growth. The construction CapEx in the planned Idaho and New York greenfield fabs in fiscal 2025 will be half or more of the expected increase in total CapEx. In fact, the growth in both greenfield fab construction and HBM CapEx investments, is projected to make up the overwhelming majority of the year-over-year CapEx increase. These fab construction investments are necessary to support supply growth for the latter half of this decade. This Idaho fab will not contribute to meaningful bit supply until fiscal 2027, and the New York construction CapEx is not expected to contribute to best supply growth until fiscal 2028 or later. The timing of future WFE spend in these fabs will be managed to align supply growth with expected demand growth. I will now turn it over to Mark for our financial results and outlook. Mark Murphy: Thanks, Sanjay, and good afternoon, everyone. Micron delivered strong results in fiscal Q3 with revenue, gross margin, and EPS above the high end of the guidance ranges provided in our last earnings call. Improving market conditions and strong price and cost execution drove the financial outperformance. Total fiscal Q3 revenue was $6.8 billion, up 17% sequentially and up 82% year-over-year. Fiscal Q3 DRAM revenue was approximately $4.7 billion, representing 69% of total revenue. DRAM revenue increased 13% sequentially, with bit shipments declining in the mid-single-digit percentage range and prices increasing by approximately 20%. Fiscal Q3 NAND revenue was approximately $2.1 billion, representing 30% of Micron's total revenue. NAND revenue increased 32% sequentially, with bit shipments increasing in the high single-digit percentage range and prices increasing by approximately 20%. Now turning to revenue by business unit. Compute and Networking Business Unit revenue was $2.6 billion, up 18% sequentially. DRAM data center revenue more than doubled year-over-year. Revenue for the Mobile Business Unit was $1.6 billion, down 1% sequentially as a planned decline in volume was partially offset by improved pricing. Embedded Business Unit revenue was $1.3 billion, up 16% sequentially driven by record revenue in automotive. Revenue for the Storage Business Unit was $1.4 billion, up 50% sequentially with growth across all end markets. We achieved record data center SSD revenue, which nearly doubled sequentially. The consolidated gross margin for fiscal Q3 was approximately 28%, up over 8 percentage points sequentially driven primarily by higher pricing and helped by product mix and cost reductions. Excluding the effects of previously written-down inventories on fiscal Q2 gross margin, the sequential improvement in fiscal Q3 would have been 15 percentage points. As a reminder, previously written-down inventories had no impact on fiscal Q3 gross margin and will not affect our gross margin moving forward. Operating expenses in fiscal Q3 were $976 million, up $17 million quarter-over-quarter. Continued spend discipline and ongoing operational efficiencies helped deliver operating expenses at the low end of the guidance range. We generated operating income of $941 million in fiscal Q3, resulting in an operating margin of 14%, which was up 10 percentage points sequentially and up 53 percentage points from the year-ago quarter. Fiscal Q3 adjusted EBITDA was $2.9 billion, resulting in an EBITDA margin of 43%, up 6 percentage points sequentially and up 30 percentage points or $2.4 billion from the year-ago quarter. Fiscal Q3 taxes were $227 million, lower than expectations at the time of our guidance, driven by one-time discrete items. Non-GAAP diluted earnings per share in fiscal Q3 was $0.62, compared to $0.42 in the prior quarter and a loss per share of $1.43 in the year-ago quarter. Fiscal Q3 non-GAAP EPS exceeded the high end of our guidance range by $0.10, driven by better revenue and profitability. Turning to cash flows and capital spending, our operating cash flows were $2.5 billion in fiscal Q3, representing 36% of revenue. Capital expenditures were $2.1 billion during the quarter, and we generated free cash flow of $425 million. Our fiscal Q3 ending inventory was $8.5 billion or 155 days, a decline of five days from the prior quarter. Our leading-edge supply continues to be very tight for both DRAM and NAND. On the balance sheet, we held $9.2 billion of cash and investments at quarter end and maintained near $12 billion of liquidity when including our untapped credit facility. Considering our ample liquidity, return to free cash flow generation, and strong outlook, during the quarter, we repaid $650 million of debt maturing in November 2025. We ended the quarter with $13.3 billion in total debt, low net leverage, and a weighted average maturity on our debt of 2031. Now turning to our outlook for the fiscal fourth quarter. We expect DRAM bit shipments to be flattish and NAND shipments to be up slightly in fiscal Q4. We forecast shipment growth to strengthen modestly in the November quarter. We project continued gross margin expansion. Pricing trends remain positive, supported by favorable supply-demand conditions. Portfolio mix will be an important contributor over time as HBM, high-capacity DIMMs, data center SSDs, and other high-value products increase as a portion of our mix. The high mix for our leading-edge nodes supports front-end cost reductions in line with our long-term cost-reduction CAGRs, excluding HBM on DRAM. Keep in mind that higher mix of HBM will offset non-HBM DRAM cost reductions, but HBM will be at accretive gross margins. We forecast operating expenses to increase sequentially in the fiscal fourth quarter due to an increase in R&D program expenses and a nonrecurring Q3 asset sale gain contemplated in our Q3 guidance. We estimate fiscal Q4 tax expense of approximately $320 million. For fiscal 2025, we estimate our non-GAAP tax rate to be in the mid-teens percent range. We project days of inventory outstanding to decline through fiscal 2025 and DIO to approach our target by the end of fiscal year 2025. We forecast capital expenditures to increase sequentially in the fiscal fourth quarter to approximately $3 billion. Despite this increase in CapEx, we project continued positive free cash flow in fiscal Q4. We expect full year fiscal 2024 CapEx of around $8 billion. Record revenue and significantly improved profitability in fiscal 2025 will help support average quarterly CapEx in fiscal 2025 to be meaningfully above the fiscal Q4 2024 level of $3 billion. We expect CapEx around mid-30%s range of revenue for fiscal 2025, which will support HBM assembly and test equipment, fab and back-end facility construction, as well as technology transition investment to support demand growth. As noted earlier, half or more of the expected CapEx increase in fiscal 2025 will be to support U.S. greenfield fab construction. As we have noted in the past, the CHIPS grants, ITC, and state incentives offset a significant portion of the U.S. fab CapEx investments. Receipt of some of these incentive reimbursements occurs well after when we incur the spend, resulting in higher CapEx for a period while we ramp our greenfield U.S. investments. Micron will remain disciplined in our capital spending and will modulate our WFE investments to grow bit supply in line with industry demand. With all these factors in mind, our non-GAAP guidance for the fiscal Q4 is as follows. We expect revenue to be $7.6 billion, plus or minus $200 million; gross margin to be in the range of 34.5%, plus or minus 100 basis points; and operating expenses to be approximately $1.06 billion, plus or minus $15 million. We expect tax expenses of approximately $320 million. Based on a share count of approximately 1.1 billion shares, we expect EPS to be $1.08 per share, plus or minus $0.08. In closing, market conditions are improving, with price increases driven by favorable supply-demand trends and tightness on the leading edge. Micron is executing well on leveraging our technology leadership to grow our mix of high-value solutions, especially in products that support AI applications. Finally, our leading-edge investments and productivity initiatives are delivering cost-downs and operating leverage during this market recovery. We expect record revenue and significantly better profitability in fiscal 2025 to support disciplined investment to maintain stable bit share and deliver free cash flow growth. I will now turn it back over to Sanjay. Sanjay Mehrotra: Thank you, Mark. I want to close by commending our team in Taiwan for their response to the significant earthquake in fiscal Q3. In many ways, that response exemplifies Micron, an agile, prepared team that assesses and reacts quickly, supported by a brilliant network of colleagues around the globe. That collaboration, planning, discipline, and experience are precisely what ensures Micron is so well positioned today. I look forward to our teams accelerating Micron's memory and storage leadership as AI solutions present increasing opportunities to provide greater value, from data centers to the edge. Thank you for joining us today. We will now open for questions. Operator: Certainly. And one moment for our first question. Our first question comes from the line of Krish Sankar from TD Cowen. Your question, please. Krish Sankar: Yes. Hi. Thanks for taking my question. I have two questions. Sanjay, the first one. It's on HBM. Clearly, you're gaining traction in HBM3E. I'm just curious how the HBM3E is, and how is the qualification going beyond one customer? Last time, you publicly said that you're qualified at NVIDIA's H200. I'm kind of curious, how is it going with the B100 for NVIDIA? And also, along the same path, your competitors spoke about pulling in the timeframe for HBM4 versus the regular 18-month cadence for HBM technology transit system. So, basically, I'm curious, Sanjay, any comment on HBM3E? Call a different customer, timing of HBM4 would help. Then I have a quick follow-up. Sanjay Mehrotra: So, let me start off by again pointing out that we delivered over $100 million in revenue in fiscal Q3 with our HBM3E. And I'm very pleased with our team's focus on this and delivering this number. And note that this was margin accretive to our overall margins, but also to our DRAM margins. And of course, we remain very much focused on delivering several hundred million dollars in fiscal 2024 for HBM revenue. And as I noted, multiple billion dollars in revenue. And in HBM, we are very much focused on continuing to ramp our production and also to improve our yields. And that is, of course, an important priority. And any new product that is as complex as HBM or any new technology node always has a yield ramp, and the team is extremely focused on that. So, as we look ahead to 2025, we remain confident in our ability to deliver our market share consistent with DRAM share some time in 2025. And again, very pleased with Micron's strong product of HBM3E that, as I noted, has been well recognized by our customers to have 30% better power than any competitor's product that is out there. Now, regarding your question on qualifications, of course, we are in qualifications with other customers as well. And as I noted in my remarks, that in 2025 timeframe, we expect to be broadening, diversifying our customer base as well. And HBM4, I mentioned in my remarks that we have a strong roadmap ahead for HBM4 and HBM4E. And we feel very good about our capabilities there, the roadmap that we have in front of us, and our ability to deliver leadership with HBM4 and HBM4E as well. Krish Sankar: Got it. Thanks, Sanjay, for that. Another quick follow-up, on NAND, in this -- on the NAND bit demand, you kind of mentioned that the bit growth -- demand bit growth is going to be in the high teens. If I remember right, last quarter, you said it's going to be in the low 20%s. So, I'm kind of curious, what was the delta since last few months ago? Because there's a general view that AI should be helping NAND. So, why is the NAND bit demand growth not going higher? Looks like it's going lower. Thank you. Sanjay Mehrotra: So, what I would tell you, Krish, is that there is really not much of a difference between the CAGR that we shared last time versus the CAGR we shared here. And I'll also tell you that we basically revised the base year for the CAGR that we used. So, this time, the CAGR that we used, we used the base year of 2023. And in 2023, as you know, we had a bit demand growth in NAND that was higher, meaningfully higher than the CAGR. So, that, of course, the larger base of 2023 just somewhat changed our outlook on the overall CAGR. But you're absolutely right to note, as we have also highlighted, that data center SSDs are a good growth demand driver. And I'll just provide you some color. The data center, automotive, and industrial, these are all growing faster in terms of NAND demand versus the CAGR that we have shared. Client, mobile, and consumer somewhat slower. But these slow-growing segments actually have also average capacity increases ahead of them. As I gave you examples of AI PCs and AI smartphones driving content growth. And we have just conservatively planned for this, perhaps. And we will continue to assess the average capacity growth in smartphones and PCs in the times ahead. And it's important that the CAGR that we highlight here, this is what we use for our capacity planning. And we want to, of course, always remain disciplined with respect to our capacity planning and very much focusing on demand-supply balance and ROI. Krish Sankar: Got it. Thanks a lot, Sanjay. Very helpful. Thank you. Operator: Thank you. And our next question comes from the line of Vivek Arya from Bank of America Securities. Your question, please. Vivek Arya: Thanks for taking my question. Sanjay, you mentioned a 3x trade ratio of HBM to D5. What happens to this ratio as you go to higher stacks, 12-high or more? And on the other hand, what happens as you make yield improvements? Just overall, is 3x still the operative assumption for calendar '25? And just what are the puts and takes around this ratio? Sanjay Mehrotra: Yes, I mean, I think for HBM3E, 3x here is the operative guidance here with respect to the trade ratio. And again, just keep in mind that this already accounts for the larger die that exists with HBM3E given its performance and packaging and overall product expectations, as well as, of course, with the 8-die stack, as well as the logic die in there, the mature yield expectations there as well. And as the yield will be ramping up for us, of course, we will be able to get the benefit on the lower cost as we go forward. But with mature yields, the trade ratio with HBM3E is about 3 times over the mature yields of D5 in the same technology node. And as you go up to HBM4, of course, the trade ratio, as we have said before, increases and goes higher than 3x. And as you go up from 8-die stack to 12-die stack in HBM3E, of course, 12-die stack will have somewhat lower mature yields as well. That's just the nature of how device yields work. And -- but the operative guidance, I think, remains still 3x for HBM3E and greater than that for HBM4, inclusive of the assumption of mature yields. And, of course, our assumption of mature yields here is world-class mature yields. Vivek Arya: Got it. And a quick follow-up, maybe for Mark. So, you're suggesting fiscal '25 could be a record in terms of sales. Why can't it be a record in terms of gross margins? What are the puts and takes of gross margins as we go into next year? So, maybe give us some sense of what incremental margins can be. Let's say sales are up $5 billion or $10 billion year-on-year, just so we can level-set our model from a gross margin perspective. Thank you. Mark Murphy: Yes, Vivek, we're happy to take that. We're not providing fiscal year '25 guidance yet. I can talk about some sequential improvements from here. Of course, we guided a 600 basis point increase gross margin guidance between third quarter and the guide and fourth. And, yes, that's driven by price, but also mix is beginning to become a more substantive factor in the sequential gross margin expansions. We see November quarter, we see gross margin expansion continuing up a few hundred basis points. Again, price is a factor, but also, as a fourth quarter mix, participating in the -- or contributing to the increase. And that's the effect of HBM and high-capacity DIMMs and other higher-value products. We do expect through fiscal '25 for price to continue to increase, and we expect this favorable mix effect to continue to increase. You've seen very clearly in the third quarter and our fourth quarter guide, the strength in data center, and we see that growth continuing. And then later in the year, we see replacement cycle for smartphone and PC. And then the associated content with AI picking up. So, we expect that to, again, second half of the calendar year in the early '25 for that to kick in. Then on the supply side, you've got just tight conditions. You've got structurally lower capacity in the industry. Inventories are trending down, which we believe ours will trend down through fiscal '25 to close to our target by the end of '25. And then just the HBM trade ratio, which Sanjay just commented on. And then, of course, I talked about in the sequential gross margin, talked about the mix that we see in the business with our higher-value products, which are HBM, high-capacity DIMMs, SSDs, which we've talked about. So, the momentum is very strong. We've got technology leadership. We've got the best product position the Company's ever had. And the manufacturing is operating very well. So, well-positioned for fiscal '25. Vivek Arya: Thank you. Operator: Thank you. And our next question comes from the line of Toshiya Hari from Goldman Sachs. Your question please. Toshiya Hari: Hi. Thank you so much for taking the question. I had two as well. The first one on HBM, I guess recently there have been a couple of reports about you all having some yield issues. Just based on your commentary, it didn't sound like you were having these issues, but just wanted to clarify that. If you could address that, that would be really helpful. And then on HBM, the second part is, so gross margins are intuitive to overall corporate margins today. What are your thoughts on sort of relative profitability going into the second half of the year and into calendar '25, particularly given the fact that you have pretty good visibility as it pertains to HBM pricing? Sanjay Mehrotra: So, regarding the yield, I think I already commented that we are pleased that in the very first quarter of production, we were able to ship over $100 million of HBM revenue. And we remain focused on our goals and remain confident about our goals of delivering several hundred million dollars of revenue in fiscal '24 and a multiple hundred billions of dollars of revenue in fiscal '25 and getting to our share to be in line with -- our share for HBM to be in line with our DRAM share sometime in 2025. So, of course, our yield assumptions are baked in in all of that. And we look to continue to work on all aspects of ramping up our capacity. And, of course, we expect to improve yields as we go forward. Again, that is typical of any new technology, any new product that you ramp up. So, that's what we remain focused on. And regarding the gross margin comment, maybe Mark can add some color. But as I mentioned earlier, the gross margin is accretive not only for -- to our corporate margins, but it is also accretive to our DRAM margins. And our DRAM margins, as you know, tend to be higher than our corporate margins, which are lower because of the lower margins in NAND, generally in the industry. Mark Murphy: It is helping to drive continued gross margin expansion through '25. Toshiya Hari: Okay. Got it. That's helpful. And then as my follow-up, maybe one for Mark on CapEx. So, you're guiding fiscal year '25 up materially, given some of the hints that you've provided, maybe you're looking at a mid-teens billion dollar number for fiscal '25. I know more than half of that or half of that is coming from the greenfield investments in the U.S., but how should we be thinking about your bit supply growth in fiscal '25 or calendar '25? Should we expect you guys to grow more or less in line with the demand CAGR you have for DRAM and NAND, mid-teens and high-teens respectively, or do you expect to undershift relative to those ranges in fiscal '25? Thank you. Mark Murphy: Yes, we -- good questions, Toshiya. And your view on CapEx, we've given enough that we don't want to guide revenue for '25 because we -- we'll do that at a future date by quarter. But we do expect a material increase year-over-year. For the quarter, sequentially, we'll see a meaningful step up, and we were at $3 billion, we increased from $2.1 billion to $3 billion third quarter to fourth quarter guide. I would characterize that both on a dollar and percent basis as more than meaningful, so it would be less than that sequentially. But we are spending more. Yes, to your question on, we are very constrained on bits, bit production, and so we will -- as I mentioned in my earlier comments, we will certainly see inventory levels come down. In fact, we expect to be approaching target inventory levels by the end of 2025. Toshiya Hari: Thank you. Operator: Thank you. And now our next question comes from the line of Thomas O'Malley from Barclays. Your question, please. Thomas O'Malley: Hi, guys. Thanks for taking my question. This is for Sanjay or Mark. So, you've given us the fiscal year '25 kind of Company guidance of several billion in HBM. And then you've kind of talked about the share that you're getting to is equivalent to that of DRAM. So, you kind of saw for that market low teens, total HBM market. I just kind of want to understand, what's your view of the suppliers to that market? As it stands today, it seems like there's really two major suppliers. When you look at the out year, do you think that number changes if there is additional qualifications? Would that number change if you were to have a third qualification, aka, the market be bigger? And how did you kind of come up with that total market number? Is that kind of a bottoms-up accelerator forecast? But just kind of how you're thinking about the market. And did that change or is it contingent upon qualifications of some of your competitors? Sanjay Mehrotra: Well, as we have said before, that we see the CAGR for HBM growth, in terms of bit growth CAGR to be well above 50% over the next few years. So, certainly, HBM is a strong growth driver. And again, as we increase our mix of HBM going forward, it will of course be continuing to be accretive to our financial performance, including margins. And we are pleased that with the strong performance that we have, we are sold out for '25 as well, with a overwhelming part of our output already committed in terms of pricing. So, that points to a strong position that we have in terms of continuing to work toward achieving our goal of getting to our HBM market share to be in line with DRAM share sometime in 2025. And of course, we are working with a broad range of customers, in qualifications, and next year we plan to be shipping to broader set of customers. Having said all of that, no question that HBM is a complex product for our customers to qualify as well. It's highly resource intensive, not just for us, but for our customers as well. And this is where we think that our strong product position, highlighting again those attributes of 30% better power than nearest competitor, and a better performance, and really high quality here positions us well when customers work with those resource-intensive qualifications for Micron. And that's what we are already seeing in terms of our engagement. So, we feel pretty good about our plans here for HBM. Thomas O'Malley: Super helpful. And then just switching gears over to the NAND side of things. Obviously, you had a competitor out in the market talking about kind of run rate industry CapEx and kind of talking about the change in industry architecture, maybe not scaling as quickly or as capital intensively as you had in the past. You obviously are talking about CapEx. A lot of your CapEx next year is going towards greenfield and HBM. Could you talk to the remainder of that CapEx? Could you give us any color on DRAM or NAND split between that? And then do you agree with, in this instance, it was Western Digital talking about capital intensity longer term on the NAND side? Do you agree that maybe structurally you'll see a lower investment threshold in the future to kind of continue to maintain what the industry needs? Sanjay Mehrotra: So, for us, certainly, our CapEx is dominated by our DRAM-related CapEx. That's certainly HBM because it's growing as mixed in the industry and HBM is capital intensive when it comes to unique clean room requirements for HBM and in packaging and assembly as well as test equipment. So, our CapEx is dominated by that, as well as to meet the future requirements in the second half of this decade. And that involves the construction of the fab. So, NAND CapEx is certainly a much smaller portion of our total CapEx. And we have a very strong technology position with our NAND and strong portfolio that you see. And we are continuing to shift that portfolio toward higher-value solutions as well. So, we certainly will remain extremely disciplined when it comes to NAND as well in terms of driving the CapEx. And we will be disciplined in terms of driving our technology node transitions in the timing of node transitions across the industry. I think it is certainly helpful given the bit growth that you get from those transitions to slow down the timing of those -- the cadence of those node transitions so that your bit growth CAGR versus the gain of bits that you get from the wafers can be managed well. These are the kind of things we are very much focused on in order to maintain a good supply discipline, maintain supply growth that is very much in line with the demand growth, and managing our CapEx here prudently. But yes, I mean overall our CapEx is -- in NAND is significantly smaller, but we remain extremely disciplined, focused on managing our supply growth in line with demand there. And again, I want to point out that with NAND, technology transitions are sufficient to meet the demand growth. We do not need the new clean room, the new greenfield fabs, the kind that are needed in DRAM. And HBM and the trade ratio of HBM with standard DRAM is a factor in the greenfield requirements only, also. Operator: Thank you. One moment for our next question. And our next question comes from the line of Christopher Danely from Citi. Your question, please. Christopher Danely: Hi, thanks, guys. So, I think you mentioned you are signing up some customers to long-term contracts. Given your belief that the pricing is going to keep going up, why sign people up to long-term contracts and potentially miss out on some of the increased pricing? Or is there some potential for wiggle room on pricing with the contracts and it is more of a unit basis? Just curious there. Sanjay Mehrotra: Well, the long-term contracts really help us and customers get closer, not only with respect to, let's say, supply or pricing discussions as may be relevant to our various customer contracts, but also with respect to the technology roadmap, the product roadmap, the timing of the supply. And they are very helpful factors in building a close relationship with the customers. And you can see that we are pointing to a substantial revenue record in 2025, of course leveraging some of these contracts that we have put in place. And we have also pointed to a significant improvement in profitability. So, I think we are well positioned in these contracts with respect to not only the supply and demand fundamentals, but also with respect to the financial aspects. Christopher Danely: Great. Thanks, Sanjay. And then just a quick one for Mark. Mark, was the Taiwan quake impact limited to the May quarter, or is it impacting the current quarter as well? Mark Murphy: Not a material impact, Chris. Christopher Danely: It was just May. All right. Thanks. Operator: Thank you. And our next question comes from the line of Harlan Sur from JPMorgan. Your question, please. Harlan Sur: Good afternoon. Thanks for taking my question. Enterprise SSDs are seeing really strong demand pull from AI workloads, right? The team has driven significant share gains in enterprise SSD just over the past few quarters. I think in calendar Q1, I think Micron was the number three global share leader in enterprise SSD. I think it's now about 20%, 25% of the overall NAND business. I mean, this is a position that we've never seen Micron in before. So, I think first question is, are enterprise SSD gross margins accretive to your overall NAND gross margins? And then secondly, I saw your next-gen PCIe Gen5 SSD demo at NVIDIA's GTC conference. Pretty significant performance uplift on AI workloads versus your Gen4 SSDs. So, are you qualifying these next-gen Gen5 SSDs for AI applications? When do you expect to shift? Just wanted to understand the sustainability of your strong share position here. Sanjay Mehrotra: Well, thank you, Harlan, for recognizing the strong momentum that Micron's data center SSD have. And certainly, our data center SSDs are accretive to our overall NAND margins. And we have really great products. I already highlighted in my prepared remarks that we saw tripling of bits that we shipped with our 32-layer NAND AI SSDs going absolutely toward AI data center applications. And we have a broad set of customers that we are working with in terms of growing our share. So, we see -- when we talk about sequentially, we had 50% increase in revenue for our data center products, of course, that includes the benefit of our strong data center SSD roadmap. And yes, I mean, we will, of course, continue to work with our Gen5 SSDs in terms of working with customers for qualifying and not prepared to discuss, at this point, specifics regarding timing of some of the roadmap that is in front of us for shipments. So, yes, in terms of sustainability of the strong improvement to share, we are definitely with our strong product portfolio counting on it. And this will -- our SSD momentum, data center SSD momentum, will absolutely contribute also toward my remarks that I said that we will increase our mix of data center revenue in fiscal year '25 as well. Of course, HBM, high-density DIMMs, these will, of course, be a big part of it. But also, data center SSDs is going to be another big part of our growth in fiscal 2025 related to data center revenue. Mark Murphy: So, I would just add, Harlan, that the storage business unit delivered operating profit in the quarter. Harlan Sur: Perfect. Thank you very much. Insightful. Operator: Thank you. This does conclude the question-and-answer session, as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.

Operator: Thank you for standing by, and welcome to Micron's Second Quarter 2024 Financial Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Satya Kumar, Corporate Vice President, Investor Relations and Treasurer. Please go ahead, sir. Satya Kumar: Thank you, and welcome to Micron Technology's Fiscal Second Quarter 2024 Financial Conference Call. On the call with me today are Sanjay Mehrotra, our President and CEO; and Mark Murphy, our CFO. Today's call is being webcast from our Investor Relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website, along with the prepared remarks for this call. Today's discussion of financial results is being presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures can be found on our website. We encourage you to visit our website at micron.com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending. You can also follow us on X at MicronTech. As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, market and pricing trends and drivers, our technology, product ramp plans and market position, 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 statements made today. We refer you to the documents we filed with the SEC, including our most recent Form 10-Q and upcoming 10-Q, for a discussion of risks that may affect our future 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. I will now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Satya. Good afternoon, everyone. I am pleased to report that Micron delivered fiscal Q2 revenue, gross margin, and EPS well above the high end of guidance. Micron has returned to profitability and delivered positive operating margin a quarter ahead of expectation. I would like to thank all our Micron global team members for their dedication and excellent execution that made this result possible. Micron drove robust price increases as the supply-demand balance tightened. This improvement in market conditions was due to a confluence of factors, including strong AI server demand, a healthier demand environment in most end markets, and supply reductions across the industry. AI server demand is driving rapid growth in HBM, DDR5, and data center SSDs, which is tightening leading-edge supply availability for DRAM and NAND. This is resulting in a positive ripple effect on pricing across all memory and storage end markets. We expect DRAM and NAND pricing levels to increase further throughout calendar year 2024 and expect record revenue and much improved profitability now in fiscal year 2025. Micron is at the forefront of ramping the industry's most advanced technology nodes in both DRAM and NAND. Reinforcing our leadership position, over three-quarters of our DRAM bits are now on leading-edge 1-alpha and 1-beta nodes, and over 90% of our NAND bits are on 176-layer and 232-layer nodes. We expect fiscal 2024 front-end cost reductions, excluding the impact of HBM, to track in line with our long-term expectations of mid to high single digits in DRAM and low teens in NAND, supported by the continued volume ramp of 1-beta DRAM and 232-layer NAND. We continue to mature our production capability with extreme ultraviolet lithography and have achieved equivalent yield and quality on our 1-alpha as well as 1-beta nodes between EUV and non-EUV flows. We have begun 1-gamma DRAM pilot production using EUV and are on track for volume production in calendar 2025. The development of our next-generation NAND node is on track, with volume production planned for calendar 2025. We expect to maintain our technology leadership in NAND. Now turning to our end markets. Inventories for memory and storage have improved significantly in the data center, and we continue to expect normalization in the first half of calendar 2024. In PC and smartphone, there were some strategic purchases in calendar Q4 in anticipation of a return to unit growth. Inventories remain near normal levels for auto, industrial, and other markets. We are in the very early innings of a multiyear growth phase driven by AI as this disruptive technology will transform every aspect of business and society. The race is on to create artificial general intelligence, or AGI, which will require ever-increasing model sizes with trillions of parameters. On the other end of the spectrum, there is considerable progress being made on improving AI models, so that they can run on edge devices, like PCs and smartphones, and create new and compelling capabilities. As AI training workloads remain a driver of technology and innovation, inference growth is also rapidly accelerating. Memory and storage technologies are key enablers of AI in both training and inference workloads, and Micron is well-positioned to capitalize on these trends in both the data center and the edge. We view Micron as one of the biggest beneficiaries in the semiconductor industry of this multiyear growth opportunity driven by AI. In data center, total industry server unit shipments are expected to grow mid to high single digits in calendar 2024, driven by strong growth for AI servers and a return to modest growth for traditional servers. Micron is well positioned with our portfolio of HBM, D5, LP5, high-capacity DIMM, CXL, and data center SSD products. Delivering improved memory bandwidth, power consumption, and overall performance is critical to enable cost-efficient scaling of AI workloads inside modern GPU or ASIC-accelerated AI servers. Our customers are driving an aggressive AI roadmap on their GPU and ASIC-based server platforms that require significantly higher content and higher-performance memory and storage solutions. For example, earlier this week, Nvidia announced its next-generation Blackwell GPU architecture-based AI systems, which provides a 33% increase in the HBM3E content, continuing a trend of steadily increasing HBM content per GPU. Micron's industry-leading high-bandwidth memory HBM3E solution provides more than 20 times the memory bandwidth compared to standard D5-based DIMM server module. We are executing well on our HBM product ramp plans and have made significant progress in ramping our capacity, yields, and quality. We commenced volume production and recognized our first revenue from HBM3E in fiscal Q2 and now have begun high-volume shipments of our HBM3E product. Customers continue to give strong feedback that our HBM3E solution has a 30% lower power consumption compared to competitors' solutions. This benefit is contributing to strong demand. Our HBM3E product will be a part of Nvidia's H200 Tensor Core GPUs, and we are making progress on additional platform qualifications with multiple customers. We are on track to generate several hundred million dollars of revenue from HBM in fiscal 2024 and expect HBM revenues to be accretive to our DRAM and overall gross margins starting in the fiscal third quarter. Our HBM is sold out for calendar 2024, and the overwhelming majority of our 2025 supply has already been allocated. We continue to expect HBM bit share equivalent to our overall DRAM bit share some time in calendar 2025. Earlier this month, we sampled our 12-high HBM3E product, which provides 50% increased capacity of DRAM per cube to 36 gigabyte. This increase in capacity allows our customers to pack more memory per GPU, enabling more powerful AI training and inference solutions. We expect 12-high HBM3E will start ramping in high-volume production and increase in mix throughout 2025. We have a robust roadmap and we are confident we will maintain our technology leadership with HBM4, the next generation of HBM, which will provide further performance and capacity enhancements compared to HBM3E. We are making strong progress on our suite of high-capacity server DIMM products. During the quarter, we completed validation of the industry's first mono-die-based 128 gigabyte server DRAM module. This new product provides the industry's highest-bandwidth D5 capability, with greater than 20% better energy efficiency and over 15% improved latency performance compared to competitors' 3D TSV-based solutions. We see strong customer pull and expect a robust volume ramp for our 128 gigabyte product, with several hundred million dollars of revenue in the second half of fiscal 2024. Additionally, we also started sampling our 256 gigabyte MCRDIMM module, which further enhances performance and increases DRAM content per server. We achieved record revenue share in the data center SSD market in calendar 2023. During the quarter, we grew our revenue by over 50% sequentially for our 232-layer-based 6500 30 terabytes SSDs, which offer best-in-class performance, reliability, and endurance for AI data lake applications. In PC, after two years of double-digit declines, unit volumes are expected to grow modestly in the low single-digit range for calendar 2024. We are encouraged by the strong ecosystem momentum to develop next-generation AI PCs, which feature high-performance Neural Processing Unit chipsets and 40% to 80% more DRAM content versus today's average PCs. We expect next-generation AI PC units to grow and become a meaningful portion of total PC units in calendar 2025. At CES, the consumer electronics show in Las Vegas, Micron launched the industry's first low-power compression-attached memory module, or LPCAMM2, for PC applications. LPCAMM2 brings a modular form factor, with a maximum capacity point of 64 gigabyte for PC module and 128 gigabyte for server module, along with a number of benefits such as higher bandwidth, lower power, and smaller form factor. During the quarter, we launched our 232-layer-based Crucial T705 Gen 5 consumer SSD, which won several editor choice awards and was recognized by a leading publisher as the fastest M.2 SSD ever. We increased our client SSD QLC bit shipments to record levels, with QLC representing nearly two-thirds of our client SSD shipments, firmly establishing Micron as the leader in client QLC SSDs. Turning to mobile. Smartphone unit volumes in calendar 2024 remain on track to grow low to mid-single digits. Smartphones offer tremendous potential for personalized AI capabilities that offer greater security and responsiveness when executed on device. Enabling these on-device AI capabilities is driving increased memory and storage capacity needs and increasing demand for new value-add solutions. For example, we expect AI phones to carry 50% to 100% greater DRAM content compared to non-AI flagship phones today. Micron's leading mobile solutions provide the critical high performance and power efficiency needed to unlock an unprecedented level of AI capability. In DRAM, we are now sampling our second-generation, 1-beta LPDRAM LP5X product, which delivers the industry's highest performance at improved power for flagship smartphones. And in NAND, we announced our second generation of 232-layer NAND UFS 4.0 devices, featuring the industry's smallest package and breakthrough features that enable greater reliability and significantly higher real-world performance for complex workloads. Our mobile DRAM and NAND solutions are now widely adopted in industry-leading flagship smartphones, with two examples being Samsung's Galaxy S24 and the Honor Magic 6 Pro announced this year. The Samsung Galaxy S24 can provide two-way, real-time voice and text translations during live phone calls. The Honor Magic 6 Pro features the Magic LM, a seven-billion parameter large language model, which can intelligently understand a user's intent based on language, image, eye movement, and gestures and proactively offer services to enhance and simplify the user experience. Turning to auto and industrial. The automotive sector continues to experience robust demand for memory and storage as non-memory semiconductor supply constraints have eased and as new vehicle platforms are launched. In the past quarter, we experienced strong growth with partners who are driving the most advanced capabilities within the automobile's increasingly intelligent and connected digital cockpits. In addition, adoption of Level 2+ ADAS capabilities continues to gain momentum, further expanding content per vehicle. The industrial market fundamentals for memory are also healthy, with improving distributor inventory, book-to-bill, and demand visibility improvements, as well as pricing benefits from the tight supply for products, especially those built on leading-edge nodes. Now, turning to our market outlook. Calendar 2023 DRAM bit demand growth was in the low double-digit percentage range, and NAND bit demand growth was in the low-20s percentage range, both a few percentage points higher than previous expectations. We forecast calendar 2024 bit demand growth for the industry to be near the long-term CAGR for DRAM and around the mid-teens for NAND. Given the higher baseline of 2023 demand, these expectations of 2024 bit growth have driven an increase in the absolute level of 2024 bit demand in our model for DRAM and NAND versus our prior expectations. The industry supply-demand balance is tight for DRAM and NAND, and our outlook for pricing has increased for calendar 2024. Over the medium term, we expect bit demand growth CAGRs of mid-teens in DRAM and low-20s percentage range in NAND. Turning to supply. The supply outlook remains roughly the same as last quarter. We expect calendar 2024 industry supply to be below demand for both DRAM and NAND. Micron's bit supply growth in fiscal 2024 remains below our demand growth for both DRAM and NAND, and we expect to decrease our days of inventory in fiscal year 2024. Micron's fiscal 2024 CapEx plan remains unchanged at a range between $7.5 billion and $8.0 billion. We continue to project our WFE spending will be down year-on-year in fiscal 2024. Micron's capital-efficient approach to reuse equipment from older nodes to support conversions to leading-edge nodes has resulted in a material structural reduction of our DRAM and NAND wafer capacities. We are now fully utilized on our high-volume manufacturing nodes and are maximizing output against the structurally lowered capacity. We believe this approach to node migration and consequent wafer capacity reduction is an industry-wide phenomenon. We project to end fiscal 2024 with low double-digit percentage less wafer capacity in both DRAM and NAND than our peak levels in fiscal 2022. Significant supply reductions across the industry have enabled the pricing recovery that is now underway. Although our financial performance has improved, our current profitability levels are still well below our long-term targets, and significantly improved profitability is required to support the R&D and CapEx investments needed for long-term innovation and supply growth. Micron will continue to exercise supply and CapEx discipline and focus on restoring improved profitability while maintaining our bit market share for DRAM and NAND. As discussed previously, the ramp of HBM production will constrain supply growth in non-HBM products. Industrywide, HBM3E consumes approximately three times the wafer supply as D5 to produce a given number of bits in the same technology node. With increased performance and packaging complexity, across the industry, we expect the trade ratio for HBM4 to be even higher than the trade ratio for HBM3E. We anticipate strong HBM demand due to AI, combined with increasing silicon intensity of the HBM roadmap, to contribute to tight supply conditions for DRAM across all the end markets. Finally, as we consider these demand and technology trends, we are carefully planning our global fab and assembly/test capacity requirements to ensure a diversified and cost-competitive manufacturing footprint. Announced projects in China, India, and Japan are proceeding as planned. On potential U.S. expansion plans, we have assumed CHIPS grants in our CapEx plans for fiscal 2024. Our planned Idaho and New York projects require Micron to receive the combination of sufficient CHIPS grants, investment tax credits, and local incentives to address the cost difference compared to overseas expansion. I will now turn it over to Mark for our financial results and outlook. Mark Murphy: Thanks, Sanjay, and good afternoon, everyone. Micron delivered strong results in fiscal Q2 with revenue, gross margin, and EPS well above the high end of the guidance ranges provided in our last earnings call. Much improved market conditions, along with the team's excellent execution on pricing, products, and operations, drove the strong financial results. Total fiscal Q2 revenue was $5.8 billion, up 23% sequentially and up 58% year-over-year. Fiscal Q2 DRAM revenue was approximately $4.2 billion, representing 71% of total revenue. DRAM revenue increased 21% sequentially, with bit shipments increasing by a low single-digit percentage and prices increasing by high teens. Fiscal Q2 NAND revenue was approximately $1.6 billion, representing 27% of Micron's total revenue. NAND revenue increased 27% sequentially, with bit shipments decreasing by a low single-digit percentage and prices increasing by over 30%. Now turning to revenue by business unit. Compute and Networking Business Unit revenue was $2.2 billion, up 26% sequentially. Data center revenue grew robustly, and cloud more than doubled sequentially. Revenue for the Mobile Business Unit was $1.6 billion, up 24% sequentially, as an expected decline in volume was more than offset by improved pricing. Embedded Business Unit revenue was $1.1 billion, up 7% sequentially on solid demand for leading-edge products in the industrial market. Revenue for the Storage Business Unit was $905 million, up 39% sequentially with strong double-digit growth across all end markets. Datacenter SSD revenue more than doubled from a year ago, driven by share gains for Micron's products. The consolidated gross margin for fiscal Q2 was 20%, up 19 percentage points sequentially driven by higher pricing. Fiscal Q2 gross margins benefited from $382 million associated with selling the remainder of previously written-down inventories. In the second fiscal quarter, underutilization charges were modest and related to our legacy manufacturing capacity. We expect to sustain these lower levels of underutilization charges moving forward. Operating expenses in fiscal Q2 were $959 million, down $33 million quarter-over-quarter and in line with our guidance range. OpEx was modestly above the midpoint of our guidance range, as variable compensation expense was higher on an improved fiscal 2024 outlook. We generated operating income of $204 million in fiscal Q2, resulting in an operating margin of 4% and turning positive a quarter earlier than originally forecasted. We recognized a net benefit for income taxes in fiscal Q2 of $294 million. We had previously guided that we would recognize tax expense of $45 million based on expected quarterly results for fiscal Q2. With our improved fiscal 2024 outlook, we can now estimate a more reliable annual effective tax rate and have reverted to a global annual effective tax rate method. The second fiscal quarter tax benefit arises from applying this estimated annual effective tax rate to our year-to-date results. Non-GAAP diluted earnings per share in fiscal Q2 was $0.42, compared to a loss per share of $0.95 in the prior quarter and a loss per share of $1.91 in the year-ago quarter. Fiscal Q2 EPS benefited from the aforementioned favorable income tax effect of approximately $0.34 per share. Turning to cash flows and capital spending, our operating cash flows were approximately $1.2 billion in fiscal Q2, representing 21% of revenue. Capital expenditures were $1.2 billion during the quarter, and free cash flow was near breakeven. Our fiscal Q2 ending inventory was $8.4 billion or 160 days, roughly in line with the prior quarter. Finished goods were down in the quarter. Our leading-edge supply both for DRAM and NAND is very tight. We expect to reduce inventory levels and excluding strategic inventory stock, be within a few weeks of our 120 days target by the end of fiscal 2024. We project DIO improvements to continue into fiscal year 2025. On the balance sheet, we held $9.7 billion of cash and investments at quarter end and maintained $12.2 billion of liquidity when including our untapped credit facility. During fiscal Q2, we refinanced approximately $1 billion of existing debt, extending our debt maturities and lowering our near-term borrowing costs. We ended the quarter with $13.7 billion in total debt, low net leverage, and a weighted average maturity on our debt of 2031. Now turning to our outlook for the fiscal third quarter. Fiscal Q3 bit shipments are expected to be down modestly for DRAM and up somewhat for NAND, compared to fiscal Q2 levels. While demand continues to improve, supply is constrained, especially at the leading edge. We expect DIO to improve sequentially in fiscal Q3. Note that fiscal Q2 gross margins had the benefit from previously written-down inventories, which have cleared completely in fiscal Q2. Despite this benefit in fiscal Q2, we expect solid sequential improvement in fiscal Q3 gross margins due to robust price increases across both DRAM and NAND. We forecast operating expenses to increase by approximately $30 million in the fiscal third quarter, driven by R&D expenses. For the fiscal year, we now project OpEx to be approximately $4 billion. Having delivered operating profit in fiscal Q2 ahead of prior expectations, we forecast continued improvement in operating income through the remainder of the year. Based on an improved taxable income outlook, our tax forecast for fiscal year 2024 has increased from a prior projection of over $300 million to approximately $400 million. In fiscal 2025, we expect our annual effective tax rate to be in the mid-teens percentage range. We plan fiscal Q3 capital expenditures to be higher than in the second quarter. Our full-year fiscal 2024 CapEx plan is unchanged at a range between $7.5 billion and $8 billion. We now expect to generate positive free cash flow in fiscal Q3 and Q4. With all these factors in mind, our non-GAAP guidance for fiscal Q3 is as follows. We expect revenue to be $6.6 billion, plus or minus $200 million; gross margin to be in the range of 26.5%, plus or minus 150 basis points; and operating expenses to be approximately $990 million, plus or minus $15 million. We expect tax expenses of approximately $240 million. Based on a share count of approximately 1.1 billion shares, we expect earnings per share of $0.45, plus or minus $0.07. In closing, with a significantly improved supply demand balance in the industry coupled with excellent execution, Micron is driving a strong inflection in pricing and a richer mix of high-value solutions. We remain disciplined with our investments and supply growth and focused on driving efficiency across the company. We expect positive free cash flow for the second half of fiscal 2024 and project record revenue in fiscal 2025. I will now turn it back over to Sanjay. Sanjay Mehrotra: Thank you, Mark. [Technical Difficulty] Operator: Ladies and gentlemen, your program will resume momentarily. Once again, please standby, your program will resume momentarily. Thank you for your patience and please continue to hold. Sanjay Mehrotra: Hi, can you hear us? Operator: Yes. Yes. Welcome back. Ladies and gentlemen, we will resume. Sanjay Mehrotra: Yes, so we apologize for the technical difficulty here. But, operator if you can go ahead and start the Q&A section, please? Operator: Certainly. One moment for our first question. And our first question comes from the line of Toshiya Hari from Goldman Sachs. Your question, please. Toshiya Hari: Hi, can you guys hear me okay? Operator: Yes. Mark Murphy: Yes, we can. Toshiya Hari: Okay, great. Thank you for taking the question. Sanjay on HBM, you mentioned that you continue to expect your market position in '25 or at some point in '25 to be similar, to be in line with your overall position in DRAM. Given your revenue outlook for '24, that seems to imply, I don't know quadrupling or quintupling of your business in HBM year-to-year. I guess part one, am I thinking about the trajectory accurately? And then part two, how should we -- what does that mean for your CapEx over the next 12, 18 months, and more importantly, your wafer capacity? You mentioned fiscal year '24, you're down low-double-digits. Is your wafer capacity likely to be down again in fiscal '25? Thank you. Sanjay Mehrotra: So HBM3E, first of all, it's a great product. As I mentioned well received by our customers, high-performance, and 30% lower-power than any other product that's out there. So of course it has strong demand and as we have highlighted, we are sold out for our calendar year '24 supply and calendar year '25 supply is also mostly vast majority is already allocated. We are -- we have just begun production shipments, and these will continue to increase through the course of calendar year '24, as well as continue to increase through calendar year '25. We are continuing to work on increasing our capacity and making good progress with respect to capacity as well as overall yield and quality. So certainly, in calendar year '25 versus calendar year '24, given that we are just starting our production here now, will certainly be a significant growth over our calendar year '24 numbers. And you can look at it the same way for fiscal '24 versus '25, so it will be definitely a significant increase with us, achieving our shares in HBM, in line with our industry share, sometime in calendar '25. I'm not in a position to spell it out exactly for you in terms of what is the volume increase, but certainly HBM with our strong product position, it will be a strong driver of revenue growth, fiscal year '24 -- fiscal year '25 or fiscal year '24. Regarding the wafer capacity by end of this fiscal year, we have said low double-digit structural reduction in capacity. And of course, we will be managing this capacity in fiscal year '24, keeping in mind our focus on supply-demand discipline, I was staying extremely disciplined with respect to supply growth, staying extremely disciplined with respect to our HBM share as well. And advantaging our technology transitions, as we go through the year. And our CapEx in '25 -- well, in fiscal '25 will be higher than fiscal '24. WFE will be higher as well. And of course, construction CapEx related to the Greenfield that is required for the second half of the decade will contribute to some of the CapEx increase in fiscal '25. But some of those details we'll provide you as we get closer to fiscal year '25. So, most important thing is that we will manage our wafer capacity technology transitions to really maintain our bit share, that is part of our strategy to have stable bit share even with increasing penetration of HBM. And again, just keep in mind that our overall framework of our CapEx being 35% of our revenue across the cycles still applies. Toshiya Hari: Thank you for all the details. Operator: Thank you. One moment for our next question. And our next question comes from the line of Aaron Rakers from Wells Fargo. Your question, please. Aaron Rakers: Yes. Thank you very much for taking the question. I guess two real quick ones. One I just wanted to understand or maybe appreciate the context of the accretive nature of HBM3. I know in the prepared remarks, I think are -- in the slide deck it notes that you'll be accretive gross margin from HBM in the current quarter. And then I know you talked a little bit about PCs and smartphones. I'm curious of -- what you're seeing in terms of traditional server demand and whether or not your forecast assumes any improvement of shipments in that end-market. Thank you. Sanjay Mehrotra: So with respect to the accretive nature of HBM, look, HBM carries a higher cost, but it also carries a significantly higher pricing because it brings such great value in the applications in terms of its performance and power. And we are executing well. Our yield ramp is going well as well according to plan. And therefore, we are pleased that in this quarter when we have begun our production shipments, we will be having it accretive to our gross margins in the quarter. And of course, this momentum will continue to build in the quarters ahead. And regarding the second part of your question on traditional server demand, so yes, we do see that in calendar '25, traditional server demand will grow modestly. And of course, it's coming after a significant decline in server unit sales in calendar '23. We are very pleased to see the increasing momentum of content growth in the traditional server demand. But also AI server units are going up and AI -- we have said overall server units going up in mid- to high-single-digits range with AI server driving a higher growth percentage year-over-year and traditional servers being modest. And I may have said '25 here, I just want to clarify that I'm talking about 2024 here. So when I'm talking about modest server unit growth, it's referring to 2024 versus 2023. Aaron Rakers: Thank you. Sanjay Mehrotra: And we are actually seeing strong demand for both our DRAM products and NAND products in server and actually we are shifting some of our portfolio toward these higher mix solutions. HBM being one of them. High-density DIMMs being another one that's in strong demand for server applications and then data center SSDs. All of this is -- we are seeing a healthy demand drivers. And just remember we had said that for memory and storage, customer inventories in data center market would be largely normalized in first half of '24. And we are seeing the market play out just as we had predicted several quarters ago. Aaron Rakers: Thank you. Operator: Thank you. One moment for our next question. And our next question comes from the line of C.J. Muse from Cantor Fitzgerald. Your question, please. C.J. Muse: Yes, good afternoon, thanks for taking the question. I guess, Sanjay, would love to hear your thoughts around wafer movement from Big 3 to HBM and what impact that's having on the supply-demand outlook for DDR5 and sort of any context around customer engagement and longer-term contracts? And then more on the gross margin side, you've talked about the inventory previously written down, now behind us. Can you walk through the moving parts that should dictate what we'll see in gross margins throughout the remainder of calendar '24? Thanks so much. Sanjay Mehrotra: So on your questions regarding wafers shift to HBM, as we have highlighted that HBM -- HBM3E needs three times more wafers than nearly three times more wafers than DDR5 in the same technology node of the same capacity to produce the same bits. So this is of course highly silicon intensive technology and this factor of three has the trade ratio between HBM and D5 is really common across the industry. So what -- and HBM demand is increasing rapidly, you see all the recent announcements that are only showing you that even greater attach rate of HBM to the latest GPU solutions that were just announced earlier this week. 192 gigabyte in the Blackwell platforms versus the 144 gigabyte. And of course, this is a phenomenon that's occurring across the Board. Even today, I think, Broadcom talked about how HBM content is going to further increase. So HBM is in a high-demand growth phase and this demand growth will continue in terms of bits, in terms of revenue over the course of the foreseeable future. And this is putting tremendous pressure on the non-HBM supply. The trade ratio of three to one, increasing demand in HBM, increasing -- increased profitability of HBM is putting non-HBM part of the memory in tight supply. This is why we say that leading-edge nodes are in very tight supply. And as a result, we would fully expect that D5, as well as other DDR products will improve in their profitability picture as well, given their very much tight supply there. And of course, HBM being in a strong position. When you look at the LTAs, we have talked to you about our supply already being locked up for '24 and '25, and this then increases our confidence in our D5 as well as LP5 -- LPA positions with the customers. Mark Murphy: And good afternoon, C.J., it's Mark. On the gross margin side, as you mentioned it's been a tough year, plus year and a half on a lot of timing differences, difficult to gauge the cost downs and gross margin progression underutilization effects, lower node transitions, structural capacity-reduction and so forth that we're contributing to the weaker cost downs. And as you mentioned, the lower the written-down inventories, finally cleared in the second quarter. It was a bit of a headwind to actually in the sense that, it was less of a benefit than the first quarter. So, but still, nonetheless it was a favorable benefit that we will market in the third quarter. And then the period costs also reduced from first to second quarter. So, we're now under $50 million on period costs related to underutilization. As I mentioned in my comments that's legacy-related capacity now only and that would continue going forward. So now we see more normal conditions on cost downs and related margin effects. We see node transitions occurring. Those are positive. The underutilization effects are fading away, as we mentioned. We're getting volume leverage and the associated absorption and then just the business being able to focus on efficiency. So as we mentioned before, we're now in the front end would expect mid to high-single-digit cost downs as normal. I think that as you look forward, and Sanjay alluded to this, you will begin to see the costs related to HBM weigh on our cost down performance. Now it's a good trade, of course, because the mix is favorable, the price is higher on those products. So it's an accretive margin trade, but that will impact the cost downs. C.J. Muse: Very helpful. Thank you. Operator: Thank you. One moment for our next question. And our next question comes from the line of Timothy Arcuri from UBS. Your question please. Timothy Arcuri: Thanks a lot. Sanjay, I had a question just around the tenor of the discussions that you're having with your customers. I mean the industry is bigger this year in terms of bits. It sounds like mostly due to a higher baseline coming off last year. But it sounds like supply hasn't really increased to match that higher bits this year. So the balance has gotten even tighter over the past three months. So how has that changed the dynamics of your discussions with your customers? I know you had a $600 million prepay last quarter. Did you get any prepays this quarter? Are you talking about new sort of contract structures with customers where they maybe fund some of your CapEx? Can you kind of talk about all that? Thanks. Sanjay Mehrotra: So just keep in mind that in fiscal year '24 or calendar '24 versus '23, the shipments will increase substantially. And as you noted, I mean, the year-over-year increase in shipments will be substantial. And as you noted, the supply is very tight. Supply is tight due to the factors that we have discussed before. Due to the downturn that the industry experienced last year, CapEx cuts were made, utilization cuts were made, structural shift from traditional older nodes to newer nodes of equipment was made in order to support the leading-edge nodes. And that resulted in a structural reduction in wafer capacity in the industry as well. And then there is the HBM factor, the trade ratio 3:1 that I have discussed today. All of this has contributed to a very tight supply situation. And as I noted earlier in my remarks, non-HBM supply is tight. So some of our discussions with customers, particularly with respect to HBM, when we talk about that HBM is sold out, those type of contracts have both pricing as well as volumes as well as other stricter terms baked in as part of our LTAs. And 2024 volume as well as pricing is all locked up. 2025, as I mentioned, the volumes are largely allocated. A vast majority of our production supply is allocated, and some of the pricing is already firmed up. Keep in mind, this has never happened before, right, that we are talking about 2025, and we are sitting in CQ1, and we already have so much discussion around supply and pricing for 2025 getting locked up here as we speak. And of course, this is then, as I said earlier, impacting our -- in a positive way, our discussions with non-HBM part of the market with other customers. And so, I mean, this overall tight supply environment bodes well for our ability to manage the pricing increases as well as keep an eye on demand-supply balance and remain extremely disciplined in driving the growth of our business in revenue and profits while continuing to execute our strategy of maintaining stable bit share. So leading edge is very tight, and we are continuing to work on maximizing our output, which means leading edge is running at full utilization at this point. Timothy Arcuri: Great, thanks. But I guess that means that there were no prepays this quarter, correct? Sanjay Mehrotra: Well, we have not commented on that. We have not provided any color on that. Timothy Arcuri: Okay, okay. Thank you, Sanjay. Operator: Thank you. One moment for our next question. And our next question comes from the line of Joseph Moore from Morgan Stanley. Your question please. Joseph Moore: Great, thank you. The 128 gig that you talked about getting qualified, it seems like that's a pretty important market in AI. And you guys are approaching it monolithically where I know your competitor has used this packed approach. Can you talk about the reception to that, and you spoke of several hundred million. How big do you think that opportunity could be? Sanjay Mehrotra: As I said, I mean, in my prepared remarks, that this product has very strong customer pull. This really offers significantly improved latency, as well as energy efficiency. And this is simply due to the architecture that we chose to pursue fully focusing on what is ultimately important to our customers. This mono die architecture just gives you -- versus a stacked architecture gives you the benefit of more simplified interconnect, which results in power efficiency as well as greater performance advantage. So yes, I mean, we are seeing strong reception to this product. And this will -- we have said that this will have a meaningful revenue this fiscal quarter for us and several hundred million dollars of revenue in our fiscal 2024. So clearly on a strong growth rate. And our goal, again, would be to continue to manage the mix of our business across our portfolio in a prudent fashion so that we continue to shift the mix of our products towards more profitable parts of the business, particularly like data centers, solutions, including these high-capacity DIMMs that we just discussed as -- HBM, data center, SSD. So all of this really just shows you that how we are continuing to deliver successfully on strengthening our product portfolio and targeted -- targeting it towards increasing the mix of our business towards more profitable parts of the market. Joseph Moore: Great, thank you. Operator: Thank you. One moment for our next question. And our next question comes from the line of Brian Chin from Stifel. Your question, please. Brian Chin: Hi, great. Thanks for taking our questions and congratulations on the results. I guess it is sort of an extrapolation question. But if HBM worth 20% of Micron DRAM revenue, and you have said that, again, at some point next year, you think on a bit basis, it could be equivalent to your market share, that HBM were 20% of Micron DRAM revenue as opposed to a much lower percentage today. Could you maybe help quantify how accretive to gross margins as that richer mix would represent? Mark Murphy: Yes. Brian, it's Mark. We won't break it out specifically, but maybe just to give you a sense of the trajectory of gross margins. The increase from first quarter of 1% to 20% in the second quarter was dominantly price. And obviously, a lot of other things going on, but the dominant feature of that increase was price. Likewise, in the 20% second quarter actuals to the 26.5% guide, price remains the largest contributor. And offsetting part of that is, of course, what CJ mentioned on the benefit of those lower cost inventories fade away. So -- but price is still the largest factor. But what begins to come in are both a resumption of cost downs. And then we're starting to see some favorable mix effects for the products that Sanjay talked about, including HBM. And then as we move into the fourth quarter, where we would expect a margin increase comparable to the levels that we saw second to third quarter. That becomes more balanced between price effects and product mix effects and cost downs. And most notably, HBM begins to become more material. And that would then proceed into '25. As we look in '25, we see continued pricing strength in '25. We see favorable product mixes -- product mix in '25. And then our cost downs, excluding the HBM effects, we expect to have good cost down, all contributing to margin expansion. Brian Chin: Okay. Thank you, very helpful. Operator: Thank you. One moment for our next question. And for our last question for today comes from the line of Chris Danely from Citi. Your question, please. Chris Danely: Hey, thanks, guys. I guess just another multipart question on margins like everybody else. So you mentioned that there's still some underutilization charges related to legacy manufacturing capacity. When do those go away? And then as a follow-up to all these HBM margin questions. Can you just talk about the gross margin arc of your HBM products as more competition and capacity comes on to the market? Like when would the gross margins peak and then start to decline as Samsung starts to increase capacity, your capacity goes up, all that stuff? Thanks. Mark Murphy: I'll deal with the first question. On the underutilization charges, Chris, they went from, I think it was $165 million in the first quarter down to under $50 million in the second quarter. We believe they'll stay at low levels well below 50 for the foreseeable future. So we'll no longer comment on those. And again, as I mentioned in my comments, they're related to the legacy capacity. Sanjay Mehrotra: And regarding your question on gross margin projections for HBM, so we are not going to do that here. We are totally focused on increasing our production capability and bringing in 2025 a bit share for DRAM -- for HBM to be in line with our DRAM share. And of course, this will bring about greater profitability opportunities, but we are really not projecting pricing of HBM here in the future. But clearly, HBM brings tremendous value in the applications. You are seeing these new platforms that are hungry for more HBM, and HBM has been in shortage, and we have talked about our '24 and '25 supply being spoken for. So all of that, I think, bodes well for high revenue growth and highly profitable HBM business for us. And of course, we will stay extremely focused on maintaining discipline, maintaining our CapEx discipline and maintaining our share target discipline for HBM and really staying very disciplined on overall supply growth being in line with our DRAM share for the whole DRAM part of our business. So I think these will be key as we continue to look ahead at our execution and driving our opportunities forward. Chris Danely: Got it. Thanks, guys. Operator: Thank you. This does conclude the question-and-answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.

Operator: Thank you for standing by, and welcome to Micron Technology's First Quarter 2024 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Satya Kumar, Investor Relations. Please go ahead. Satya Kumar: Thank you, and welcome to Micron Technology's Fiscal First Quarter 2024 Financial Conference Call. On the call with me today are Sanjay Mehrotra, our President and CEO; and Mark Murphy, our CFO. Today's call is being webcast from our Investor Relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website, along with the prepared remarks for this call. Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures can be found on our website. We encourage you to visit our website at micron.com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending. You can also follow us on X at MicronTech. As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, market trends and drivers, 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 statements made today. We refer you to the documents we file with the SEC, including our most recent Form 10-K and upcoming 10-Q, for a discussion of risks that may affect our future 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. I'll now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Satya. Good afternoon, everyone. In fiscal Q1, Micron delivered revenue, gross margin, and EPS above the high-end of the guidance ranges we provided at the last earnings call, reflecting Micron's strong execution combined with improved pricing. We are in the very early stages of a multi-year growth phase catalyzed and driven by generative AI, and this disruptive technology will eventually transform every aspect of business and society. Memory is at the heart of GPU-enabled AI servers, and we are already seeing strong demand driven by early deployment of AI solutions, which will only accelerate over time. Micron is well positioned to leverage this growth, having executed the most robust set of new technology and product introductions in our 45-year history. The improved supply-demand environment in the current calendar quarter gives us additional confidence in the trajectory of our business. We have driven a strong inflection in industry pricing this calendar quarter, which will allow us to benefit from higher prices earlier in our fiscal year compared to our prior plans. We intend to stay very disciplined with our supply and capacity investments as our pricing is still far from levels associated with necessary ROI. We expect our pricing to continue to strengthen through the course of calendar 2024. We expect improved margins and financial performance throughout 2024 and record industry TAM in calendar 2025. We have made significant progress with our industry-leading technology roadmap. Micron is at the forefront of ramping the industry's most advanced technology nodes in both DRAM and NAND. The vast majority of our bits are on leading-edge nodes: 1-alpha and 1-beta in DRAM and 176-layer and 232-layer in NAND. As previously stated, both 1-beta DRAM and 232-layer NAND nodes have reached mature yields faster than the prior nodes. We expect fiscal 2024 front-end cost reductions to track in line with our long-term expectations of mid- to high-single-digits in DRAM and low-teens in NAND. We are on track for volume production in 1-gamma DRAM using EUV in calendar 2025. Now turning to our end markets. Inventories for memory and storage are at or near normal levels for most customers across PC, mobile, auto, and industrial end markets. Consequently, the demand that we see from customers in these markets is closer to their end-market demand. Data center customer inventory of memory and storage is improving, and we continue to expect customer inventory to approach normal levels in this market sometime in the first half of calendar 2024. Across our data center and PC markets, we are ahead of the industry in our transition to D5 and we expect to cross over our D5 volume from D4 in early calendar 2024. Generative AI use cases are expanding from the data center to the edge, with several recent announcements of AI-enabled PCs, smartphones with on-device AI capabilities, as well as embedded AI in the auto and industrial end markets. The proliferation of on-device AI at the edge offers a host of benefits such as enhanced privacy, lower latency, improved performance, greater personalization and competitive costs for a wide range of use cases, from content creation to productivity. We see a rapid evolution in our customer product roadmaps enabling and leveraging this AI market expansion, which in turn is driving higher capacity, lower power, and increased performance requirements for memory and storage. We expect to increasingly benefit from content growth as these trends in AI gain momentum. In data center, total server unit shipments are expected to increase by a mid-single-digit percentage in calendar 2024, following a year of low-double-digit percentage decline in calendar 2023. Demand for AI servers has been strong as data center infrastructure operators shift budgets from traditional servers to more content-rich AI servers. Also, in response to AI-driven data center demand, several customers have announced aggressive roadmaps for new GPU and AI accelerator ASIC product introductions with increasing requirements for HBM capacity, performance, and power. Micron is addressing these exciting opportunities brought on by the proliferation of AI with an industry-leading portfolio of data center solutions, including HBM3E, D5, several types of high-capacity server memory modules, LPDRAM, and data center SSDs. We have received very positive customer feedback on our HBM3E, which has approximately 10% better performance and about 30% lower power consumption compared to competitive offerings of HBM3E. In fiscal Q1, we shipped samples of HBM3E to a number of key partners and are making good progress in our qualifications. Micron is in the final stages of qualifying our industry-leading HBM3E to be used in NVIDIA's next-generation Grace Hopper GH200 and H200 platforms. In addition, our LP5x is being used for the Grace CPU, driving a new use case for LP memory in the data center for accelerated computing. We are on track to begin our HBM3E volume production ramp in early calendar 2024 and to generate several hundred millions of dollars of HBM revenue in fiscal 2024. We expect continued HBM revenue growth in 2025, and we continue to expect that our HBM market share will match our overall DRAM bit share some time in calendar 2025. Last month we introduced the industry's fastest and lowest latency 128GB high-capacity modules built on our industry-leading 1-beta node and using a monolithic die, which does not require 3D stacking and thus enables a simpler process flow for assembly. Featuring best-in-class performance, our solution will support customers' memory-intensive data center workloads today and into the future. Additionally, leading CPU vendors have confirmed validation support for our monolithic-die-based 128GB modules on existing platforms released in 2022 and 2023 as well as upcoming new platforms. This ensures that our offering has a significant TAM that we can address immediately. We expect volume production to start next quarter, with significant growth in fiscal 2025 and beyond. A testament to our solid execution and superior offerings, Micron ended the third calendar quarter with record-high revenue share in data center SSDs based on independent industry assessments. This marks the second consecutive quarter of record revenue share in data center SSDs, and we look to build on this revenue momentum through fiscal 2024. In PCs, we forecast unit volumes to grow by a low- to mid-single-digit percentage in calendar 2024, after two years of double-digit percentage PC unit volume declines. We expect PC OEMs to start ramping AI-on-device PCs in the second half of calendar 2024, with an additional capacity of 4GB to 8GB of DRAM per unit, and we see average SSD capacities increasing as well. We also completed qualifications for our industry-leading 1-beta-based 16GB D5 at several PC customers in fiscal Q1. In fiscal Q1, we achieved record bit shipments in both client and consumer SSDs, as customers adopted our industry-leading solutions. Building upon our QLC leadership, our client SSD QLC bit shipments also reached a new record in fiscal Q1. QLC now comprises the majority of our bit shipment mix for both client and consumer SSD. This month, we also announced that we are shipping the Micron 3500 NVMe SSD, the world's first performance client SSD with 200 plus layer NAND. Built on our industry-leading 232-layer NAND, the 3500 will help our customers handle demanding workloads for business applications, scientific computing, gaming, and content creation. In mobile, smartphone demand is showing signs of recovery, and we forecast smartphone unit shipments to grow modestly in calendar 2024. Leading chipset vendors have announced powerful new products supporting on-device large language models with 10 billion or more parameters. We expect smartphone OEMs to start ramping AI-enabled smartphones in 2024, with an additional capacity of 4GB to 8GB of DRAM per unit. Longer-term, many popular generative AI applications will be on smartphones, and our leading product portfolio is poised to capture this memory and storage opportunity. Our new industry-leading 9.6Gbps LP5x will address the bandwidth requirements of the most demanding AI-based mobile applications. We also began sampling our next-generation 232-layer NAND UFS 3.1 and our 1-beta DRAM 24Gb LP5x to support the memory needs of emerging AI foundational models. Last, I'll cover auto and industrial, which are end markets we value as part of the portfolio due to their relatively more predictable revenue and profitability and long-term growth opportunity. The proliferation of AI at the edge continues to increase in the industrial and auto markets. For memory, this translates to content growth in a host of AI-enabled edge devices. For example, AI-enabled industrial PCs have 3x to 5x more memory than standard PCs and there is an 8x increase in memory content for AI-enabled edge video security cameras compared to standard non-AI video cameras. Our automotive business achieved a new quarterly revenue record in fiscal Q1, driven by better demand and volume ramps of new vehicle platforms. As a leader in automotive market share and quality, Micron will benefit from memory and storage content growth as automotive OEMs expand features in ADAS and in-cabin applications. Our automotive design win trajectory remains strong. Our industrial business saw double-digit sequential growth in fiscal Q1 as the industrial market continued to recover. Inventory levels for memory and storage continued to improve at distribution partners and are at normal levels at the majority of our customers. Industry fundamentals remain strong for memory and storage as the widespread adoption of IoT, AI, and machine learning solutions creates new growth opportunities for us. Now turning to our market outlook, starting with demand. We expect calendar 2023 DRAM bit demand to grow in the high-single-digit percentage range, up from prior expectations for mid-single-digit growth. In NAND, we continue to expect calendar 2023 bit demand growth in the high-teens percentage range. Looking forward, over the next few years, we expect bit demand growth CAGRs of mid-teens in DRAM and low-20s percentage range in NAND. We forecast calendar 2024 bit demand growth for the industry to be near the long-term CAGR for DRAM and somewhat below the long-term CAGR for NAND. Turning to supply, significant supply reductions across the industry have enabled the recovery that is now underway. An extended period of supply growth less than demand growth would strengthen the pace of recovery. Micron will continue to exercise supply and CapEx discipline, aligned with our strategy to maintain our long-term bit market share for DRAM and NAND. Micron's fiscal 2024 CapEx is projected to be between $7.5 billion and $8 billion, slightly higher than last year's levels and prior plans, primarily to support the HBM3E production ramp. We continue to expect WFE CapEx in fiscal 2024 to be down year-over-year. As we have discussed previously, the ramp of HBM production will constrain supply growth in non-HBM products and will help improve the overall DRAM industry supply-demand balance. Across the industry, the HBM3E die is roughly twice the size of equivalent capacity D5. Additionally, the HBM product includes a logic interface die and has a substantially more complex packaging stack that impacts yields. These factors result in HBM consuming more than 2 times the wafer supply as D5 to produce a given number of bits. In last quarter's earnings call, we communicated that we strategically diverted underutilized equipment toward ramping new technology nodes, which will help us increase leading-edge production in a capital-efficient manner. Since the number of wafer processing steps is higher for leading-edge nodes, this approach of diverting underutilized tools to the leading edge meaningfully reduces our overall wafer capacity. Thus, underutilization in our fabs early this fiscal year transitions to structurally lower wafer capacity at higher utilization rates as we move through the fiscal year. Reports indicate that this redeployment of underutilized tools at the leading edge is an industry-wide practice that is likely to constrain industry supply in 2024. Taking all these factors into account, Micron's bit supply growth in fiscal 2024 is planned to be well below demand growth for both DRAM and NAND, and we expect to decrease our days of inventory in fiscal year 2024. We expect calendar 2024 industry supply to be below demand for both DRAM and NAND, which will result in a contraction of industry inventory levels. As we have highlighted before, we continue to work with the US government and CHIPS grants are assumed in our CapEx plans for fiscal 2024. The viability and global competitiveness of our Idaho and New York projects depends on Micron receiving CHIPS grants to address the cost difference compared to overseas expansion. To better support our customers around the globe, we have opened state-of-the-art assembly and test facilities in Malaysia and Taiwan. We are proceeding with our previously announced expansion of our Xi'an facility, having received approval from Chinese authorities for our planned investment. In fiscal Q1, we achieved the first mobile customer qualification of LPDRAM assembled at our Xi'an site, furthering our strong commitment to serve our mobile customers in China. Our broad, diverse network of global operations remains a key element of our strategy to address customer demand in a reliable and resilient fashion. Our leading technology, strengthening product portfolio, strong manufacturing capabilities, and our dedicated team members position us well to capture the opportunities ahead. I will now turn it over to Mark for our financial results and outlook. Mark Murphy: Thanks, Sanjay, and good afternoon, everyone. Micron delivered strong results in fiscal Q1 with revenue, gross margin, and EPS higher than the upper end of the guidance range we provided in our last earnings call. During the quarter, an improving supply-demand environment and our team's strong execution resulted in higher prices across DRAM and NAND. The current pricing trajectory has improved our financial outlook for the second quarter and full fiscal year. Total fiscal Q1 revenue was approximately $4.7 billion, up 18% sequentially and up 16% year-over-year. Fiscal Q1 DRAM revenue was $3.4 billion, representing 73% of total revenue. DRAM revenue increased 24% sequentially, with bit shipments increasing in the low-20s percentage range and prices increasing in the low-single-digit percentage range. Robust bookings entering the quarter, including customer strategic buys that occurred in prior quarters for fiscal Q1 shipment, limited our reported fiscal Q1 DRAM price increases despite Micron's strong execution on CQ4 pricing. Our strong calendar Q4 price execution contributes to our solid sequential growth in fiscal Q2, even with the effect of seasonality. Fiscal Q1 NAND revenue was $1.2 billion, representing 26% of Micron's total revenue. NAND revenue increased 2% sequentially with pricing more than offsetting an expected and communicated decline in volumes. Bit shipments declined in the mid-teens percentage range after record shipments in the prior quarter, and prices increased by approximately 20%. Portfolio mix improvements in NAND contributed to the increase. Now turning to revenue by business unit. Compute and Networking Business Unit revenue was $1.7 billion, up 45% sequentially. Data center and client shipments strengthened in the quarter. AI-related shipments increased in the data center market and normalized inventory at client customers enabled bit shipment growth. Revenue for the Mobile Business Unit was $1.3 billion, up 7% sequentially. Mobile revenue continued to show strength as customer inventories normalized and smartphone units and average memory and storage capacity growth at customers drove demand. Our mobile fiscal Q1 revenue almost doubled from year-ago levels. Embedded Business Unit revenue was $1 billion, up 21% sequentially. Growth was strong across most end markets. Revenue for the Storage Business Unit was $653 million, down 12% sequentially due to sharply lower consumer component sales, partially offset by strong growth in SSD revenue. The consolidated gross margin for fiscal Q1 was near 1%, improving 10 percentage points sequentially and driven by higher prices and a greater mix of DRAM products. Operating expenses in fiscal Q1 were $992 million, up $150 million sequentially and in line with our late November update. OpEx increased on higher R&D expenditures and the reinstatement of certain compensation programs suspended in the prior fiscal year including short-term incentive compensation. We had an operating loss of $955 million in fiscal Q1, resulting in an operating margin of negative 20%, improved from negative 30% in the prior quarter. Fiscal Q1 taxes were $59 million, lower than the anticipated $80 million based on an updated view of projected taxes across the year, driven by our improved fiscal 2024 outlook. The non-GAAP loss per share in fiscal Q1 was $0.95 compared to a non-GAAP loss per share of $1.07 in the prior quarter and a non-GAAP loss per share of $0.04 in the year-ago quarter. Turning to cash flows and capital spending, our operating cash flows were approximately $1.4 billion in fiscal Q1 representing 30% of revenue. During the quarter, we received $600 million in customer prepayments to secure supply for leading-edge memory products. Capital expenditures were $1.7 billion during the quarter resulting in free cash flow of negative $333 million in the quarter. Our fiscal Q1 ending inventory was $8.3 billion or 159 days, down from 170 days in the prior quarter. As mentioned in prior quarters, we hold strategic inventory stock associated with build ahead of products for cost optimization and risk mitigation. Excluding strategic stock, our fiscal Q1 ending inventory days would be approximately 142 days, only 22 days higher than our target inventory level. On the balance sheet, we held $9.8 billion of cash and investments at quarter end and maintained $12.3 billion of liquidity when including our untapped credit facility. We ended the quarter with $13.5 billion in total debt, low net leverage, and a weighted average maturity on our debt of 2030. Now turning to our outlook for the fiscal second quarter. While we remain mindful of macroeconomic risks, the memory and storage market environment is improving. We expect supply-demand balance to tighten in both DRAM and NAND throughout 2024. Our leading-edge DRAM and NAND nodes are oversubscribed for the full year. Consequently, we expect prices to increase through calendar 2024, driving improvements in our financial performance. Our leading-edge inventory is very tight, and we are also working to minimize pull-in of customer demand in response to higher pricing. As a result, our sequential growth in the near term will be driven primarily by pricing rather than a sequential increase in bit shipments. Both DRAM and NAND bit shipments are expected to decline somewhat in the fiscal second quarter. We expect our fiscal Q2 gross margin to benefit from sequential price increases and reduced impact from underutilization. We project the balance of previously written-down inventories to clear in fiscal Q2. We forecast operating expenses to decline in the fiscal second quarter on lower R&D program expenses and an asset sale previously expected to occur in the first quarter. For the fiscal year, due to some higher R&D expenses including what we saw in Q1 and higher short-term incentive compensation from an improved outlook, we now project OpEx to be over $3.9 billion. We forecast a much reduced operating loss in fiscal Q2 and project a return to operating income in Q3. Our tax forecast for the year has increased from under $200 million to over $300 million based on an updated taxable income outlook. We project the allocation of tax expense across the year to be heaviest in the fourth quarter driven by profitability and other factors. As we've mentioned previously, at current levels of profitability, tax estimates and the distribution of taxes across the year are highly sensitive to changes in the outlook. We plan fiscal Q2 capital expenditures to be in line with first quarter levels. We see operating cash flows improving substantially in the second-half of the fiscal year and are now forecasting positive free cash flow in the fiscal fourth quarter. With all these factors in mind, our non-GAAP guidance for fiscal Q2 is as follows. We expect revenue to be $5.3 billion, plus or minus $200 million; gross margin to be in the range of 13%, plus or minus 150 basis points; and operating expenses to be approximately $950 million, plus or minus $15 million. We expect tax expenses of approximately $45 million. Based on a share count of approximately 1.1 billion shares, we expect a loss of $0.28 per share, plus or minus $0.07. In closing, the industry environment is improving, and our financial outlook has strengthened for the fiscal year and beyond. We will continue to take a disciplined approach to managing the business and remain focused on optimizing price, driving productivity, and controlling capital spend. With high levels of liquidity and low net leverage, we continue to operate from a position of balance sheet strength as we forecast a return to profitability and positive free cash flow. I will now turn it back over to Sanjay. Sanjay Mehrotra: Thank you, Mark. Over the last year, our world-class technology, business, and manufacturing teams ensured ongoing leadership in foundational memory technologies and the expansion of our industry-leading product portfolio. We are encouraged by the progress we have made on pricing, and we are on track to restore profitability more commensurate with the great value our solutions provide to our customers. We expect 2024 to be a year of recovery and can see the path towards a healthy supply-demand environment along with strong growth in critical new technologies like HBM3E. From the data center to the edge, AI has emerged as a significant secular driver that will further bolster the industry towards record revenue TAM in 2025 and drive growth for years to come. Micron's broad and growing suite of leading-edge products positions us well to capitalize on the immense opportunities ahead. Thank you for joining us today. We will now open for questions. Operator: Certainly. [Operator Instructions] And our first question comes from the line of Krish Sankar from TD Cowen. Your question, please. Krish Sankar: Yes. Hi. Thanks for taking my question. Sanjay or Mark, the first question I had is kind of you spoke about sustainability of pricing in calendar '24. I'm kind of curious if you can peel the onion one layer below and say how we think about pricing through calendar '24 for DRAM and NAND, and if you can extrapolate it into 2025, that'll be very helpful. And then I had a follow-up. Sanjay Mehrotra: Thanks, Krish for the question. And with respect to the pricing, we of course expect pricing to continue to strengthen during calendar 2024. And this is because of the healthy demand-supply balance as we discussed in the context of our script. As you have seen, there have been significant cuts in supply growth in the industry. Customer inventories have normalized, supplier inventories are improving, as we have discussed our own inventory here as well. And pricing will continue to improve as a result through the course of the year. And of course, you know, the demand trends overall, because of improvement of customer inventories are in PCs, in smartphones, automotive and industrial, the demand trend will continue. And in sometime in first half of '24, calendar '24, we expect data center inventories at customers to get normalized as well. And beyond that point, we would expect data center to become another boost in demand in 2024. So we expect pricing to continue to increase both in NAND and in DRAM as well. And we expect a healthy demand-supply environment in 2025 as well as a healthy pricing environment in '25 too. And I just want to point out that as we noted, we have tightness on our leading-edge nodes. They are already in short supply and inventories will continue to improve for us. And all of this results in overall healthy dynamics for pricing improvements, profitability improvements, and revenue opportunity growth in the backdrop of demand drivers, AI being a dominant demand driver across the end markets. Krish Sankar: Got it. That's very helpful, Sanjay. And then just a quick follow-up on CapEx. I understand a lot of the CapEx is going towards HBM and WFE is going to be down year-over-year. Is there a way of quantifying how much of the CapEx for next year is for HBM? And at -- what is the catalyst for you to start investing in NAND? Is it price? Is it gross margin? Any such catalyst for NAND. That'd be very helpful. Thank you. Sanjay Mehrotra: So we are not breaking down the CapEx, you know, between HBM and other parts of the business, but we have noted that our WFE is down, and of course, we are very much focused on supporting the growth of our HBM business. We are very excited about our leading-edge product, HBM3E, which is the most advanced HBM3E offering in the industry. And we are -- as we noted in our remarks, post the qualification, you know, we are going to be starting production ramp early in calendar '24 and driving revenue growth will be more back half loaded for us. So -- I mean, we will of course make the necessary investments to support the demand for our HBM in '24. I would just point out that our HBM supply is basically in calendar year '24 is sold out at this point. And, you know, in terms of, you know, NAND and CapEx, whether in NAND or in DRAM, what's most important is that the profitability returns to the levels that are really needed in order to justify ROI in increasing any CapEx investments. So this is what we are focused on and we'll remain extremely disciplined with respect to any CapEx, with respect to any supply growth considerations. And you know that the profitability in the industry is still far from the levels that are needed to get ROI on the investments and we plan to remain extremely disciplined in this regard. Krish Sankar: Thanks, Sanjay. Operator: Thank you. [Operator Instructions] And our next question comes from the line of Aaron Rakers from Wells Fargo. Your question, please. Aaron Rakers: Yes. Thanks for taking the question. I have two as well, real quick. You know, first, building on the HBM comment that you're basically sold out for the year. I know that you referenced in your prepared remarks that you're qualified in with the GH200 and the H200 at NVIDIA. I'm just curious, when you get qual-ed in on HBM3E, you know, how does that market work in terms of -- you know, do these customers dual qualify? Do you have line of sight and kind of your share position within those product SKUs? I'm just curious of how the qualifications work and the visibility that you have to basically kind of, you know, double down on the fact that you expect to be kind of, you know, comparable market share in HBM as DRAM in total as you look out into '25. Sanjay Mehrotra: So our product is in qualification, as we noted in our comments here, and qualification is progressing well. And post qualification, we expect to be ramping production volumes as well as shipments to our customers. And that's what will yield to several hundred millions of dollars of revenue for us in fiscal year '24. Again, that revenue will be more back half of our fiscal year, more so in the back half. But that volume ramp and that revenue opportunity will continue to build up as we go into '25. It will continue to increase in our fiscal year as well as calendar year '25. And as we have said that sometime in calendar year '25, we expect to be able to get to a level of our share in the HBM market that would align with our share in DRAM. So this is an exciting opportunity for us. And as you know, HBM is higher revenue per gigabyte. It is also higher profitability per gigabyte. So this is -- and it's one of the biggest growth markets in memory today. So we are excited about this opportunity. And of course, you know, there's a very tight relationship, tight integration with customers for quals on HBM. And it takes longer than standard products. And, you know, these are all factors that will play a role in terms of, you know, the number of suppliers that customers would tend to have for any given platform for HBM. Aaron Rakers: Yes. And then as a quick follow-up, I'm curious, in the comment you had said that basically your leading-edge inventory was very tight. And I think the follow-up comment was that you're really, you know, focusing on minimizing any pull-in in the midst of, you know, pricing increases materializing. Can you just help us appreciate what exactly you're able to do to minimize any pull-in or the visibility you have in whether any customers are taking strategic inventory? Just curious how you manage that. Sanjay Mehrotra: So with respect to strategic inventory, I think we had discussed in the past that we had made certain strategic -- certain customers had built certain strategic purchases in our FQ4 time frame and those are completing in CQ4 here. And of course, as we look ahead, we are very much focused on, you know, managing our supply, managing our demand. Pricing environment is increasing and we want to in this environment, of course, make sure that we meet the requirements of our customers in a fashion that overall maintains, you know, healthy dynamics of our business. Beyond that, I don't think we are in a position to discuss further specifics here. Aaron Rakers: Fair enough. Thank you. Operator: Thank you. [Operator Instructions] And our next question comes from the line of Toshiya Hari from Goldman Sachs. Your question, please. Toshiya Hari: Hi. Good afternoon. I had two questions as well. One on gross margins, maybe for Mark, and then my follow-up is for Sanjay. Mark, so the gross margin profile is improving from, you know, breakeven or 1% in the prior quarter to 13%. I was hoping you could sort of break that down, the sequential change for us in terms of pricing, I guess lower underutilization charges, and whatever else is happening from an inventory perspective. And beyond Feb, as we sort of look out into May, you talked about pricing improving throughout '24, so that continues to be a tailwind. How should we think about some of the other dynamics that go into your gross margin math? Mark Murphy: Sure. Excuse me. So on the fourth quarter to the first quarter gross margin, you know, we were up 10 points over half, or about half of that was price. Most of the remainder was mix on the higher DRAM volumes. And then we did see some favorable cost. We had the lower-cost inventories clear at $600 million and then we had some reduced idle charges that we've talked about. Now, if we move out to second quarter, as we mentioned, we're not seeing volume growth in the second quarter, but we are seeing gross margins still up 12 points. So it's all driven by price, or principally price. There is some mix shift within, you know, by customers and some seasonal effects, but again, it's largely a price-driven increase. You know, while we have lower benefits from the low-cost inventory clearing, we'll have $400 million clear or $400 million of benefit in the second quarter when we had $600 million in the first quarter. We are seeing some cost declines occurring with the increase of leading node production, and then again with the lower wafer starts and the higher utilization. What we've talked about before, we start to see idle charges dropping, as we've discussed. So again, principally price in the second quarter, but then beginning to see some cost benefits, even though we're losing the benefit of that lower cost inventory. We will see price appreciation through the year. We're going to -- we don't expect there to be volume growth in the third quarter either, but good price appreciation, which will drive gross margins up. And then in the fourth quarter, we would expect to see volume and price, and again some lower utilization charges. So again, we would expect to see margin expansion second quarter to third quarter, and then again third quarter to fourth quarter. Toshiya Hari: Okay. Great. That's super helpful. And then, as my follow-up for Sanjay, you know, you guys had presented a, you know, cross-cycle financial model at your Investor Day, I think it was last May. Clearly, the environment has changed quite a bit. But when you sort of, you know, talk about necessary ROI for your business, as you guys debate when to increase production, when to increase CapEx, should we look at the model from last May still as a reference point, you know, through cycle operating margins of 30%, free cash flow margins of 10% or higher? Is that still the model that's relevant in your view, or have things changed since? Thank you. Sanjay Mehrotra: Yes, that model is very much relevant once we get past this downturn and the recovery from this downturn as well. And I think we just have to recognize that this downturn has been steep. This has been driven by once in 100 year pandemic as well as all the other related factors which we have talked about, customer inventories and demand pull-in and demand normalization and all other things that have impacted -- severely impacted the industry environment over the course of last year. 2024, we'll be recovering and we have called it the year of recovery. And we have talked about how we see pricing continuing to increase through the year and of course, profitability continuing to improve through the year as well. As we look past this recovery, we would definitely say that cross-cycle model that we have discussed in the past definitely would hold and that's what we target for. Toshiya Hari: Thank you. Operator: Thank you. [Operator Instructions] And our next question comes from the line of Timothy Arcuri from UBS. Your question, please. Timothy Arcuri: Thanks a lot. I had a question on these prepays that you're getting. That's $600 million. That's a pretty big number. So is that more of a one-time deal or should we expect these, you know, prepays to continue? And as part of that, is that mostly related to say HBM or a particular vertical like data center or is that across, you know, most of your end markets? And then I had a follow-up as well. Sanjay Mehrotra: So obviously, due to the confidential nature of this agreement, we cannot provide any specifics around these prepayments. But what I would like to point out is that it does reflect the importance of our technology, our products, and our delivery capabilities. It also reflects our close relationships with our partners and, you know, commitment from both sides from our -- a good example of commitment from customers as well as from Micron. Beyond that, I'm not able to really provide any specifics here. And again, honoring the confidentiality. Timothy Arcuri: Okay. Okay, got that. I guess then can you talk, Sanjay, just about limiting the bit shipments? I think you said you're limiting the bit shipments to prevent pull-ins ahead of price increases. Sounds like bits are flat sequentially for fiscal Q2 and fiscal Q3. Can you talk about the logistics of that? Are you just kind of holding back on volumes to regain some, you know, pricing leverage? I guess if your competitors don't match that approach, you might risk losing some shares. So can you just talk about the logistics of that? Thanks. Sanjay Mehrotra: Well, as we noted that leading-edge supply is already tight. And, you know, so that, you know, certainly impacts in our FQ2, some of the shipments. FQ2, of course, is also impacted by seasonality. And -- so supply is -- managing supply, given the tight environment of supply on the leading nodes, is really the main consideration in terms of us guiding you to this profile. And of course, as we manage, as we allocate that supply across the customers, we want to make sure that we are managing our shipments to our customers carefully. Timothy Arcuri: Okay. Thank you so much. Operator: Thank you. [Operator Instructions] Our next question comes from the line of Mehdi Hosseini from Susquehanna Financial. Your question, please. Mehdi Hosseini: Yes. Thanks for taking my question. Two follow ups. Sanjay, historically, memory industry tends to gravitate towards higher-margin products, which has historically led to margin erosion. Why is HBM any different? And what are your thoughts? Anything you can share with us as to what can preserve the higher margin associated with these high-end products? And I have a follow-up. Sanjay Mehrotra: I think, you know, AI is in very early innings. Gen AI is barely starting and these are great growth opportunities ahead. You know, this is, you know, biggest revolution since Internet and recently you have heard industry estimates of data center AI accelerator TAM CAGR of being about 70% over the course of next few years. Of course, as those opportunities grow with data center accelerators, you know, from various suppliers, of course, the whole infrastructure grows and it's about AI and Gen AI applications from training to inferencing and really proliferating all across, you know, the data center environment. And that's where -- and along with the growth in data center AI accelerators, the rest of the infrastructure, including HBM, will continue to grow. So we project that HBM CAGR will be over 50% over the course of next few years. And when you think about it, that is more than 3 times of the DRAM industry CAGR that we are talking about. And still, we are in the very, very early innings. 2023 is the first year of meaningful shipments of HBM in the industry and that too corresponds to low-single-digit percentage in terms of bits shipped in HBM this year, but much higher pricing, much higher revenue opportunity. So as we look ahead, we see HBM continuing to grow strongly in the industry. Its demand will grow. It will be a key enabler of Gen AI applications in training as well as inferencing because more and more data is required. As you look at more and more, larger and larger large language models, and more training on more data just drives more demand for high bandwidth, high performance, low power memory. So this is the very beginning. It has long ways to go. And the other important factor with HBM, as we have discussed is, that it really takes more than 2 times as many wafers to produce the same number of bits as D5. So it really has -- it is a headwind to the supply growth in the DRAM industry and it has the effect of helping strengthen the supply-demand balance of the industry as well. So I think these are, you know, some of the important aspects. Of course, when -- so important thing is that this has to be looked at as a long-term opportunity, long-term growth opportunity. And of course, you know, we are excited about getting our HBM share to align with our DRAM share some time in 2025. And of course, as we look at any large opportunity, you know, over time, it will certainly have some ebb and flow in terms of demand and supply and we will prudently manage this. And maintaining flexibility in managing this is absolutely key. And you have seen us manage this well over time in our overall industry for DRAM as well as for NAND on part of Micron, and we'll continue to manage it in that fashion. It is an exciting opportunity. We are well positioned with our product and we look forward to continuing to grow revenue and profit contribution with this product line over the course of next few years. Mehdi Hosseini: Great. Thanks for detail. Just a quick follow-up for Mark. Is there a normalized capital intensity that we should think of, especially as we come off this kind of nuclear winter in memory? Is there any -- if you don't have a normalized capital intensity, what else out there that could help us better forecast free cash flows? Mark Murphy: Yes, no update, Mehdi, to the cross-cycle model that we've provided. So I think the best way to think about CapEx is just over time as a percent of revenue, which we've given mid 30s percent over time. Of course, you know, for example, HBM, you know, requires more CapEx, but it also yields a price premium and accretive margin. So we believe that at this time that capital intensity model that we've provided before is still intact. Mehdi Hosseini: Thank you. Operator: Thank you. [Operator Instructions] And our next question comes from the line of Harlan Sur from JPMorgan. Harlan Sur: Good afternoon. Thanks for taking my question. As you mentioned, your leading-edge DRAM and NAND supply output is oversubscribed for the full year. Does you factor in your CapEx plans, conversion of capacity from mature nodes to leading-edge nodes? When do you guys see your ability to fully supply to your customers' demand profile? Is that looking more likely now calendar year '25 and what end markets or applications are you seeing the largest demand-supply gap as you move through the fiscal year? Sanjay Mehrotra: As we move through the fiscal year, of course, you know, leading-edge nodes being in tight supply. You know, leading-edge nodes are, you know, driver of demand in PCs and smartphones and data center applications and we have a strong portfolio that is well positioned with these nodes. And -- so -- I mean, basically, this is important for us to maintain the supply discipline and we -- industry is still not at the profitability levels for investments to be made and we'll manage our supply very, very prudently as we work ahead. And of course, we'll continue to focus on driving the pricing as well as driving the profitability of our business to bring in return on investments on our CapEx that is needed and do our best to manage and allocate the demand across our end markets and customers. Harlan Sur: Great. Thanks for that. And again, you mentioned this briefly in your prepared remarks, but if you look at some of the third-party research estimates, September quarter was the second consecutive quarter where the team had, I think, somewhere about 10% to 12% market share in data center NVMe SSDs. If I look back historically, like your share has been more in the sort of 3% to 5% range. So obviously strong recent market share performance. You've got a strong lineup of data center SSDs. What's been the big differentiator for the team here and how do you guys continue to grow your share going forward? Sanjay Mehrotra: So thank you for acknowledging that. I mean, our team has done a great job with data center SSD product portfolio over the course of the years and now we have a strong set of product offerings for, you know, data center SSDs, NVMe SSDs and we now achieved record data center market share in SSDs for two consecutive quarters. And for the calendar Q3, our data center SSD share now is in line with our NAND share in the industry. And this is really the benefit, and you're seeing the full benefit, the full power of vertical integration playing out here where our team has worked together from device to design to firmware to system implementation to understanding of customer application, working closely with customers in qualifications and really across a wide range of customers over course of time, have really developed very robust industry-leading, strong product portfolio with greater opportunities ahead as well. So, this is the transformation that we began to drive in the company, going from selling components in the past to value-add solutions and really very pleased how data center SSD recognition is being provided to our team in terms of revenue opportunities by our customers and, you know, certainly reflected in the share gains that we have made in this market. And of course, another big factor that has been a key contributor to the success here is you may recall we transitioned some time ago from floating gate to replacement gate technology in NAND and that has definitely been a key factor. Strong, successful, timely execution on that has played an important role in our data center SSD strength. So we are very excited about Micron's market position in this market and our future opportunities here. Harlan Sur: Thank you, Sanjay. Operator: Thank you. This does conclude the question-and-answer session as well as today's program. Thank you, everyone, for participating in today's program. You may now disconnect. Good day.

Operator: Thank you for standing. Welcome to Micron's Fourth Quarter 2023 Financial Call. [Operator Instructions] As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Samir Patodia, Investor Relations. Please go ahead, sir. Samir Patodia: Thank you, and welcome to Micron Technology's fiscal fourth quarter 2023 financial conference call. On the call with me today are Sanjay Mehrotra, our President and CEO, and Mark Murphy, our CFO. Today's call is being webcast from our Investor Relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website, along with the prepared remarks for this call. Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of non-GAAP to GAAP financial measures can be found on our website. We encourage you to visit our website at micron.com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending. You can follow us on X at MicronTech. As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, our expected results, and other matters. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer you to the documents we file with the SEC, including our most recent Form 10-K and 10-Q, for a discussion of risks that may affect our future 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. I'll now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Samir. Good afternoon, everyone. In fiscal Q4, Micron delivered revenue and gross margin above the midpoint of our guidance, with EPS above the high end of the range. These results reflect our strong execution, and we are well-positioned to drive significant improvements in our financial performance. We believe pricing has now bottomed. Ongoing demand growth, customer inventory normalization, and industry-wide supply reductions have set the stage for increased revenue, along with improved pricing and profitability throughout fiscal 2024. We continue to expect record industry TAM in calendar 2025 with more normalized levels of profitability. Fiscal 2023 was a challenging year for the memory and storage industry as the revenue TAM reached a multiyear low, resulting in a significant impact to financial performance. Despite this difficult backdrop, the Micron team stayed focused on our strategy, executed well and accomplished several important milestones. We achieved record annual automotive revenue, record NAND QLC bit shipments for the full fiscal year, and reached record levels in calendar Q2 for revenue share in data center and client SSDs. We were the first in our industry to introduce 1-beta DDR5 and LP5X DRAM products and the first to ship HBM3E samples with industry-leading performance and power efficiency. We were also the first to introduce 232-layer NAND SSD products in data center, client and consumer markets. These accomplishments were underpinned by our leadership technology and continued strong progress in manufacturing execution. We achieved world-class mature yields in record time on our industry-leading 1-beta DRAM and 232-layer NAND technologies. In addition, Micron took several prudent and timely actions to reduce our CapEx and supply in order to address the market imbalances through the course of fiscal 2023. Our industry-leading technology roadmap continues to progress well. As we have mentioned before, the vast majority of our bits are on leading-edge nodes 1-alpha and 1-beta in DRAM and 176-layer and 232-layer in NAND. We continue to make good progress on 1-gamma DRAM development using EUV and are on track for production in calendar 2025. Development of our next-generation NAND node is also well on track. Now turning to our end markets. Customers continued to reduce their excess inventory for memory and storage in fiscal Q4. Most customer inventories for memory and storage in the PC and smartphone markets are now at normal levels, consistent with our prior forecasts. Inventory levels are normal across most customers in the automotive market as well. Data center customer inventory is also improving and will likely normalize in early calendar 2024. Consequently, we see demand continuing to strengthen, which has led to an inflection in pricing. Some customers have made strategic purchases in DRAM and NAND to take advantage of unsustainably low pricing as the market begins its recovery. In data center, traditional server demand remains lackluster while demand for AI servers has been strong. Data center infrastructure operators have shifted budgets from traditional servers to higher-priced AI servers. Total server unit shipments are expected to decline in calendar 2023, the first year-over-year decline since 2016. We expect total server unit growth will resume in calendar 2024 to help fulfill ever-increasing workload demand. We also expect content growth in both AI and traditional servers. Compared to traditional servers, AI training servers contain significantly higher DRAM and NAND content with greater technology complexity, robust product value and higher profitability. We believe our data center revenue has bottomed, and we expect growth in fiscal Q1 and increasing momentum through fiscal years '24 and '25 in our data center business. Micron has a strengthening portfolio of solutions optimized for bandwidth, capacity and power. These include HBM3E, DDR5 and associated high-capacity modules, LPDRAM, and data center SSDs. This portfolio of industry-leading products positions us well to capture the opportunities presented by data-centric computing architectures and AI. The introduction of our HBM3E product offering has been met with strong customer interest and enthusiasm. Our HBM3E provides superior bandwidth, power and capacity for generative AI workloads. We developed this industry-leading design using our 1-beta technology, advanced TSV, and other innovations that enable a differentiated packaging solution. We have been working closely with our customers throughout the development process and are becoming a closely integrated partner in their AI roadmaps. Micron HBM3E is currently in qualification for NVIDIA compute products, which will drive HBM3E-powered AI solutions. We expect to begin the production ramp of HBM3E in early calendar 2024 and to achieve meaningful revenues in fiscal 2024. Micron also has a strong position in the industry transition to D5. We expect Micron D5 volume to cross over D4 in early calendar 2024, ahead of the industry. We expanded our high-capacity D5 DRAM module portfolio with a monolithic die-based 128 gigabyte module, and we have started shipping samples to customers to help support their AI application needs. We expect revenue from this product in Q2 of calendar 2024. Last month, we announced the introduction of 128 gigabyte and 256 gigabyte CXL 2.0 memory expansion modules. By leveraging a unique dual-channel memory architecture, we are able to deliver higher module capacity and increased bandwidth. We have shipped samples to several customers and key partners. In data center SSDs, Micron's entire portfolio utilizes 176-layer or 232-layer NAND in production, a testament to our product and technology leadership. We are well-positioned to serve the growing demand for fast storage as data-intensive AI applications proliferate. We saw strong demand for our data center NVMe SSDs across our AI-focused, industry-leading 30-terabyte product, as well as for our mainstream products. Micron ended the second calendar quarter with record high revenue share in data center SSDs, based on independent industry assessments. We expect to build on this momentum in fiscal 2024. In PCs, we continue to forecast calendar 2023 PC unit volume to decline by a low double-digit percentage year-over-year and then grow by a low to mid-single-digit percentage in calendar 2024. AI-enabled PCs will drive content growth and an improved refresh cycle over the next two years. In fiscal Q4, we saw strong sequential bit shipment growth at PC OEMs driven by demand for LPDRAM in thin client notebooks. We expect to begin revenue shipments of our industry-leading 1-beta-based client D5 in fiscal Q1 to PC OEMs. According to third-party analysts, in calendar Q2, we reached record revenue share in client SSDs for PC OEMs as customers adopted our industry-leading solutions. Our 232-layer NVMe client SSD is now qualified at large OEMs and shipping in volume production. Our SSD QLC bit shipment mix reached a new record for the second consecutive quarter, with growth in both client and consumer markets. We continue to expand our footprint in the high-end consumer SSD space with the launch of three new products that extend our reach into professional content creators and enthusiast PC gamers. In mobile, we expect calendar 2023 smartphone unit volume to be down by a mid-single-digit percentage year-over-year and then grow by a mid-single-digit percentage in calendar 2024. Elasticity, along with a mix shift toward premium phones with greater capacity, is contributing to memory content growth. About a third of smartphones sold today have at least 8 gigabyte of DRAM and 256 gigabyte of NAND, up more than 7 percentage points versus smartphone units a year ago. Similar to our view on PCs, AI-enabled mobile phones could drive content growth and a stronger refresh cycle over time. Longer term, we see generative AI applications executing on handsets. These applications will continue to drive new requirements for higher capacity, lower power and increased performance in memory and storage. Last, I'll cover the auto and industrial end markets, which contribute to more stable revenue and profitability. Fiscal 2023 marked another record revenue year for our automotive business. Micron continues to lead in automotive market share and quality. Long term, we expect memory and storage content per vehicle to increase in both ADAS and in-cabin applications. In addition, fast-growing EVs typically contain higher memory and storage content. Our automotive design win trajectory remains strong. The industrial market showed signs of recovery in fiscal Q4. Inventory levels for memory and storage are stabilizing at distribution partners and at the majority of our customers. We expect the volume recovery that we observed in the second half of fiscal 2023 to continue into 2024. We see strong growth prospects in this market over time, as industrial customers continue to adopt and implement the IoT, AI and machine learning solutions. As previously discussed, the CAC or Cybersecurity Administration of China decision earlier this year has impacted our business, particularly in the domestic data center and networking markets in China. We remain committed to serving our customers in China for those areas of their business not impacted by the CAC decision. While there is near-term impact to our demand due to these challenges in China, we remain focused on maintaining Micron's global market share. Our team's grit and Micron's deep relationships with our customers, underpinned by our technology leadership, increasing product momentum, excellent product quality, and extensive manufacturing and supply chain capabilities position us well toward these goals. Now, turning to our market outlook, starting with demand. We expect calendar 2023 DRAM bit demand to grow in the mid-single-digit percentage range. In NAND, our expectations for demand growth this calendar year have increased from high-single digits to high teens percentage. These are below the expected long-term bit demand growth CAGRs of mid-teens in DRAM and low-20s percentage range in NAND. While calendar 2023 DRAM demand has been in line with expectations, NAND growth expectations have increased due to stronger than expected demand in certain parts of the consumer market and a trend of greater elasticity in per unit content. While macroeconomic factors remain a risk, we expect robust year-over-year bit demand growth in calendar 2024 for both DRAM and NAND, driven by improving end-market demand, normalized customer inventory levels, content growth across products, and ongoing growth in AI. Calendar 2024 bit demand growth is expected to exceed the long-term CAGR for DRAM and to be near the long-term CAGR for NAND. Turning to supply. Significant supply and CapEx reductions across the industry have helped to stabilize the market and are enabling the recovery that is now underway. We see both DRAM and NAND year-over-year supply growth in calendar 2023 to be negative for the industry. We expect Micron's year-on-year bit supply growth to be meaningfully negative for DRAM. We also expect to produce fewer NAND bits in calendar 2023 than in calendar 2022. In calendar 2024, we expect industry DRAM and NAND supply growth to be below industry demand growth and meaningfully so for DRAM. We believe calendar 2024 is positioned to be a year of recovery in the memory and storage industry. A sustained period of supply growth less than demand growth will strengthen the pace of recovery. HBM production will be a headwind to industry bit supply growth. Across the industry, the HBM3E die is roughly twice the size of equivalent-capacity D5. The HBM product includes a logic interface die and has a substantially more complex packaging stack that impacts yields. As a result, HBM3 and 3E demand will absorb an outsized portion of industry wafer supply. The ramp of HBM3 and 3E production will reduce overall DRAM bit supply growth industry-wide with particular supply impact on non-HBM products as more capacity is diverted to addressing HBM opportunities. Micron is experiencing a similar impact of our planned HBM3E ramp on our bit supply capability. Micron's bit supply growth in fiscal 2024 is planned to be well below demand growth for both DRAM and NAND, and we expect to decrease our days of inventory in fiscal 2024. We continue to execute to our strategy of maintaining global bit shipment market share for DRAM and NAND while sustaining tight supply and CapEx management discipline. Micron's fiscal 2024 CapEx is projected to be up slightly compared to fiscal 2023 levels. WFE CapEx will be down again year-over-year in fiscal 2024. We remain focused on carefully managing overall supply growth. In last quarter's earnings call, we communicated that total wafer start reductions in both DRAM and NAND are approaching 30% versus peak 2022 levels. Amid an intense focus on capital efficiency over the last few quarters, we have redeployed a portion of the underutilized equipment to support production ramp of leading-edge nodes in both DRAM and NAND. Given the higher process step count of these leading-edge nodes, transitioning this equipment results in a significant and structural reduction to our overall wafer capacity in both DRAM and NAND. Due to this structural reduction in capacity, our DRAM and NAND wafer starts will remain significantly below 2022 levels for the foreseeable future. Our industry supply projections assume a similar structural reduction in wafer capacity industrywide. Lead times to increase this wafer capacity will be long and will depend on improving demand, pricing and financial performance. We expect underutilization to continue in our legacy nodes well into calendar 2024. We see our demand at leading-edge nodes exceeding our supply in fiscal and calendar 2024, particularly in the second half of the year. Construction CapEx will be elevated to support our plans to build leading-edge memory fabs in Idaho and New York, for which we filed CHIPS applications in August. As we have highlighted before, the requested level of CHIPS grants for our Idaho and New York projects are essential to the viability and global competitiveness of each of these projects. Our CapEx plans assume that a certain level of CHIPS grant funds will be made available to us in fiscal year 2024. Assembly and Test CapEx is projected to double year-over-year in fiscal 2024, predominantly driven by investments to support HBM3E production. Our planned fiscal 2024 CapEx investments in HBM capacity have substantially increased versus our prior plan in response to strong customer demand for our industry-leading product. Over the course of calendar 2024, we see accelerating AI-driven opportunities for memory and storage across multiple market segments from the data center to the edge. We are encouraged by the improving industry demand and supply fundamentals. We believe that the CapEx constraints created by the industry profitability environment, coupled with improved inventories, announced supply reductions and the impact of the HBM ramp on DRAM bit supply growth will create conditions that will increasingly tighten the supply-demand balance, particularly in the second half of our fiscal year. Our Micron team is executing well and they are taking prudent and proactive actions to navigate through the near-term environment and position the company to emerge stronger from the current downturn. We look forward to a recovery in our business financials taking shape in fiscal 2024. I will now turn it over to Mark for our financial results and outlook. Mark Murphy: Thanks, Sanjay, and good afternoon, everyone. In the fourth quarter of fiscal 2023, Micron delivered revenue and gross margin higher than the midpoint of the guidance range and EPS above the high end of the range. We are exiting the fiscal year with the business improving due to multiple factors including higher volumes, an inflection in the pricing environment, strong productivity and ongoing capital discipline. Total fiscal Q4 revenue was approximately $4 billion, up 7% sequentially and down 40% year-over-year. Fiscal 2023 total revenue was $15.5 billion, down 49% year-over-year. Fiscal Q4 DRAM revenue was $2.8 billion, representing 69% of total revenue. DRAM revenue increased 3% sequentially, with bit shipments increasing in the mid-teens percentage range and prices declining in the high-single-digit percentage range. For the fiscal year, DRAM revenue declined 51% year-over-year to $11 billion, representing 71% of total revenue. Fiscal Q4 NAND revenue was $1.2 billion, representing around 30% of Micron's total revenue. NAND revenue increased 19% sequentially, with bit shipments increasing over 40% driven by timing of shipments including strategic purchases and prices declining in the mid-teens percentage range. For the fiscal year, NAND revenue declined 46% year-over-year to $4.2 billion, representing 27% of total revenue. Now turning to revenue by business unit. Compute and Networking Business Unit revenue was $1.2 billion, down 14% sequentially. Data center revenue remained weak as customers continued to adjust inventories and as a result of the CAC decision. In fiscal Q1, we expect sequential growth in data center. Revenue for the Mobile Business Unit was $1.2 billion, up 48% sequentially due to seasonal effects and timing of shipments. Embedded Business Unit revenue was $860 million, down 6% sequentially. Embedded Consumer revenue increased sequentially, helped by seasonality while automotive and industrial revenue declined modestly. Revenue for the Storage Business Unit was $739 million, up 18% sequentially and driven by increased shipments across most of the product portfolio. SBU bit shipments set records for fiscal Q4 and the fiscal year. The consolidated gross margin for fiscal Q4 was negative 9%, improving seven percentage points sequentially. Gross margin was impacted by lower pricing and underutilization costs, while the sell through of previously written-down inventory provided some uplift. For the fiscal year, consolidated gross margin was negative 8%, down 54 percentage points year-over-year driven by price effects, inventory write-downs and the burden of underutilization. Approximately six percentage points of the reduction is from net inventory write-downs. Operating expenses in fiscal Q4 were $842 million, down $24 million sequentially due to ongoing expense-reduction initiatives and the timing of certain R&D program expenditures. For the fiscal year, operating expenses were $3.6 billion, down $209 million year-over-year driven by expense-reduction initiatives. On OpEx for the fourth quarter and year, we ended below the target we communicated starting with our September call a year ago. As market conditions improve, we will remain disciplined in all spending, including operating expenses, focusing R&D on the most critical programs and leveraging a competitive and more productive overhead structure. We had an operating loss of roughly $1.2 billion in fiscal Q4, resulting in an operating margin of negative 30%, improved from negative 39% in the prior quarter. Fiscal 2023 operating loss was $4.8 billion, resulting in an operating margin of negative 31%. We recorded a tax benefit of $14 million in fiscal Q4, better than expectations and due primarily to lower than expected foreign taxes related to currency effects. For fiscal 2023, total taxes were $142 million. The non-GAAP loss per share in fiscal Q4 was $1.07, compared to a loss per share of $1.43 in the prior quarter and earnings per share of $1.45 in the year-ago quarter. Non-GAAP EPS was a loss per share of $4.45 for the fiscal year. Turning to cash flows and capital spending. Our operating cash flows were approximately $250 million in fiscal Q4. For the fiscal year, we generated $1.6 billion of cash from operations representing 10% of revenue. Capital expenditures were $1 billion during the quarter and totaled $7 billion for the fiscal year. This was in line with recent guidance, and for the year, at the low end of the range of estimates we provided on our December 2022 earnings call. Free cash flow was negative $758 million in the quarter. Our fiscal Q4 ending inventory was $8.4 billion or 170 days. As mentioned last quarter, we are holding approximately $1 billion of strategic inventory stock associated with build ahead of products for cost optimization and risk mitigation. We see days of inventory improving into the first half of the fiscal year and, adjusting for this strategic stock, expect to have only a few weeks of above target inventories as we enter the second half of fiscal 2024. Inventory levels and profitability will remain principal factors in our decisions around wafer starts and capacity planning. Continuing with the balance sheet, we maintained historically high levels of liquidity. At year-end, we held $10.5 billion of cash and investments and had $13 billion of liquidity when including our untapped credit facility. We ended the year with $13.3 billion in total debt, a weighted average maturity of 2030 on debt, and low net leverage. Now turning to our outlook for the fiscal first quarter. Demand is improving as customer inventory levels continue to normalize and secular growth drivers remain intact. We expect record DRAM bit shipments in fiscal Q1. For NAND, we expect fiscal Q1 bit shipments to decline somewhat from fiscal Q4 levels but remain relatively strong. In China, the Cyberspace Administration of China decision continues to impact our revenue opportunity, and the associated headwind is reflected in our guidance. Fiscal Q1 gross margin is projected to improve sequentially on a greater mix of DRAM and more sell-through of written-down inventories. We expect approximately 60% of the remaining benefit from lower cost inventories to clear in fiscal Q1. Our gross margin guidance does not contemplate any additional inventory write-downs due to pricing. Period costs associated with underutilization will weigh on gross margins in the quarter, as first quarter period costs are projected to be similar to the prior quarter. Beyond fiscal Q1, we project gross margin improvement to continue as prices increase and period costs become less of a factor. We expect the rate of price improvement in the second fiscal half to exceed the first half. We now forecast gross margins to be positive throughout the second half of fiscal 2024. As mentioned last quarter, we expect fiscal Q1 operating expenses to increase sequentially, driven by an increase in R&D and as temporary reductions to employee compensation come to an end. For the full fiscal year 2024, we expect operating expenses to be up by a low-single-digit percentage versus fiscal 2023. On taxes, we project a material sequential quarterly increase as we move from a credit in Q4 to a more normal expense. As discussed previously, though overall profitability remains low, a minimum level of taxes will occur based primarily on local jurisdiction profit. As we are forecasting a consolidated pretax loss in fiscal 2024, these local factors will drive tax expense again this year. We estimate our full-year fiscal 2024 taxes to be under $200 million. A first quarter tax estimate of $80 million reflects our forecasted Q1 results in proportion to full-year projected tax expense. Changes in the distribution of profit within the year may result in changes in the tax expense recognized each quarter. We project our fiscal 2024 capital expenditures to increase slightly versus fiscal 2023 as we balance the long-term capacity needs of the business with ongoing capital discipline and near-term cash flow objectives. Consistent with our comments the last few quarters, we do see WFE CapEx decreasing from fiscal 2023 to fiscal 2024. When factoring higher construction spend and expected grants in fiscal 2024, we forecast our CapEx to be more evenly distributed over fiscal 2024. A sequential increase in quarterly CapEx, together with improving but still challenging profitability levels in the near term, means free cash flow will remain significantly negative in the first half of the fiscal year. We forecast improved free cash flow in the back half of the fiscal year. We project our balance sheet to remain strong and net leverage ratio to peak in the second quarter of fiscal 2024. To support the long-term investment priorities of the business, we have ample liquidity and ready access to multiple sources of credit. We will continue to manage our business to maintain financial flexibility and in a manner consistent with our commitment to our investment-grade rating. With all these factors in mind, our non-GAAP guidance for fiscal Q1 is as follows. We expect revenue to be $4.4 billion, plus or minus $200 million. Gross margin to be in the range of negative 4%, plus or minus 200 basis points. And operating expenses to be approximately $900 million, plus or minus $15 million. We expect tax expense of approximately $80 million. Based on a share count of approximately 1.1 billion shares, we expect EPS to be a loss of $1.07, plus or minus $0.07. In closing, we achieved many successes in fiscal 2023 despite facing a historic downturn. We sustained our technology, product and manufacturing leadership and achieved mature yields in record time on the industry's most advanced nodes in DRAM and NAND. Micron's leading product announcements position us well to address the growing performance requirements of data-centric computing. In response to severe market conditions, we acted quickly and decisively to cut supply and capital spend, to reduce operating costs and improve productivity, and to maintain a solid and flexible balance sheet. As the business improves in fiscal 2024, we will leverage our strengths in technology, product and manufacturing while maintaining the productivity and capital discipline that we displayed in fiscal 2023. I will now turn it back over to Sanjay. Sanjay Mehrotra: Thank you, Mark. The past four quarters tested the resilience and agility of our entire industry. While the recovery from this downturn has begun, Micron will exercise continued supply discipline to drive a return to sustained profitability. I am proud of our team's response to adversity, sustaining our technology leadership, improving time to mature yield, and launching a suite of leading-edge products that represent one of the strongest portfolio expansions in Micron's 45-year history. As our global investment announcements throughout the year clearly show, Micron remains keenly focused on building our business to meet future demand driven by the proliferation of AI from the data center to the edge. I have full confidence in our team, the position we have built for Micron, and our collective ability to capitalize on the opportunities ahead. Thank you for joining us today. We will now open up for questions. Operator: [Operator Instructions] And our first question for today comes from the line Tom O'Malley from Barclays. Your question, please. Tom O'Malley: Hi guys, thanks for taking my question. I just want to understand the trajectory here on the NAND business. You guys in the quarter kind of took your demand profile from high-single-digits to high teens and you pointed out consumer in particular. What can you do to give us confidence that, that wasn't a pull in from some of your large consumer customers, and that later this year there might be a little hole there, and just talk about the trajectory of where you see that business going, just given you said that bits are going to be down sequentially into November? Thank you. Sanjay Mehrotra: So with respect to NAND, yes, I mean compared to what we have said before, we saw strong demand, particularly on the consumer, including some parts of the channel and the consumer part included likes of smartphones, PCs, et cetera, and again, as I pointed out, the channel as well. And keep in mind, with the pricing that has existed for NAND, elasticity has certainly kicked in. The content is continuing to increase in the devices. Today, flagship smartphones have minimum of 8 gigabyte DRAM and 128 gigabyte of NAND. So that's the overall trend and same thing in PCs that the elasticity is driving, increasing average capacities. And overall certainly strategic vibe have influenced some of the NAND demand for the year as well. And keep in mind that next year in 2024, we see that the demand growth will be pretty much close to the long-term CAGR for NAND. And the strat buyers - the strategic buyers that I mentioned, of course, they help improve the inventory position for NAND as well. So overall, of course, supply cuts have been made in NAND as well. And as we look ahead, we do see that the demand and supply fundamentals will continue to improve on the NAND side as well. Tom O'Malley: Very helpful. Sanjay Mehrotra: And the inflection in pricing as well has occurred and, you know, particularly in the second half of our fiscal year we would see that continued improvement in the pricing as well. Tom O'Malley: Helpful. And then just as a follow-up, obviously you're facing headwinds from the CAC band. Can you just talk about areas of the market where you guys are targeting to help make up some of those bits. Is it just conversations with customers in the consumer space or are you looking at content increases in the data center, just given the puts and takes of you know where you're making up that a double-digit percentage hole and if you see kind of any change to that. Is it getting worse or is it getting better into February and May of this year? Thank you very much. Sanjay Mehrotra: So as we have mentioned before, the CAC headwinds are primarily in the data center and networking markets for us in China. And the impact, the negative impact of revenue as a result of CAC decision is already baked in in our CQ4 results, and is also included in our FQ1 guidance here. And keep in minds that the CAC decision, I mean, continues to remain a risk for our business and the impact in our China demand is meaningful. However, Micron has made strong progress with respect to mitigating the effects as well with our global customers who are not impacted by the CAC decision. And we are mitigating that and effect of the mitigation also is reflected in our FQ4 results, as well as in FQ1 guidance. So the - FQ4 results and FQ1 guidance reflect the net effect of the loss of revenue in China as well as the success with some of the mitigation, and of course, we are working on mitigating the China revenue loss with increases in demand for us across our multiple end-markets, across all our global end-markets. And remember that our goal remains to maintain our global share. While there may be some ebbs and flows in the near term, But you know our goal absolutely remains to maintain our global market share here in terms of bits. Tom O'Malley: Thank you, Sanjay. Operator: Thank you. One moment for our next question. And our next question comes from the line of Toshiya Hari from Goldman Sachs. Your question, please. Toshiya Hari: Hi guys, thank you for the question. I had a gross margin question for you, Mark. You're guiding November quarter up five percentage points sequentially. I was hoping you could provide a bridge, if you will, on a sequential basis. You talked a little bit about you know period costs continuing to be a headwind. You gave a little bit of color for the benefit you'll see from selling through written-down inventory. But, you know what are your thoughts on pricing. What are your thoughts on cost-downs? And if you can give you know directional guidance for FED and the puts and takes there, that would be helpful as well. Thank you. Mark Murphy: Sure, Toshi. I am - so on the fourth to first quarter bridge, as you mentioned, we are forecasting roughly a 500 basis-point improvement. We did say over the last few quarters that this would be the profile of our improvement. I will say that it's gotten incrementally better. And that we said before that our profile would be that we would be positive gross margin in the fourth quarter of fiscal '24. We now believe will be positive gross margin through fiscal '24 and so you'll see this positive margin trend continuing. As it relates to the first quarter, we do get a small benefit roughly, you know, roughly a point of incremental low-cost inventory pass-through from what passes through in the first quarter, which will be around $600 million versus what we had pass-through in the fourth quarter, which is roughly $550 million. We also will see a slight benefit in price indeed in the first quarter. As we've mentioned in the last several quarters, we first saw pockets of improvement. And then, we mention that prices bottoming. We are mentioning on this call that it has bottomed and we are seeing in the first quarter price improvement and we expect that in this transition period to be somewhat muted in the first half and then pick-up momentum and strengthen considerably in the second half. So that's the, you know, general walk for the first quarter. I will, because there's a lot of puts and takes, maybe just, it's been a very difficult several quarters around both utilization write-downs. And fortunately, we're on the other side of that which we can cover later in this call or the after call. Toshiya Hari: Thank you. And then maybe as a quick follow-up on HBM for Sanjay. You know, three months ago, you guys talked about or at least hinted that in fiscal '24, you might be able to generate you know several $100 million in revenue. Is that sort of target still intact? Have things improved since then and I guess at what point do you expect your presence in HBM to be similar to your presence in DRAM overall? Thank you. Sanjay Mehrotra: We are very excited with our HBM product. It is an industry-leading product with respect to performance, power, capacity, capability. And as we have mentioned, this product is in the qualification stages with our customers here and we expect revenue to begin in early 2024. And yes, we are very much still on track for meaningful revenue, $700 million in our fiscal year '24. So pleased with the progress, continuing to make good progress. It is an exciting opportunity for the memory industry and Micron will be well-positioned to capture the generative AI opportunities that require the kind of attributes that our HBM3E memory brings to the market. And, of course, as we proceed through the fiscal year, we expect to be gaining share in this important part of the high - in this important high growth part of the memory market. Toshiya Hari: Thanks so much. Operator: Thank you. One moment for our next question. And our next question comes from the line of Timothy Arcuri from UBS. Your question, please. Timothy Arcuri: Thanks a lot, Mark, I wanted to clarify the statement on gross margin. So, you had said in the prepared remarks that it would be positive in the back half of the fiscal year. But in response to the question just before, you said that it will be positive through fiscal '24. So since you're guiding negative in fiscal Q1, does that tell us that fiscal Q2 gross margin will be positive? Mark Murphy: Good question, Tim. I didn't comment on fiscal Q2. I - fiscal Q3, we believe, will be positive. And there'll be a trend of improving gross margin fiscal Q1 through fiscal Q3. Timothy Arcuri: Okay. So you don't want to state that fiscal Q2 will be positive, maybe it will be, maybe it won't. Mark Murphy: It - maybe. It depends on of course pricing and we're continuing to drive productivity and we'll just have to see at these profitability levels, mix and other things matter. I mean, we do have favorable mix of DRAM going into the first half. You know, we're increasing DRAM relative to NAND in the first half of the year. So that helps. You know, we, pricing, the momentum is definitively positive. It's just a case of you know we're in a transition period, we did see you know, we kind of had to meet the market on some special deals here in the fourth quarter and you know those effects will continue in the first half, but you know we're definitely seeing new deals being struck at higher prices and we certainly expect that to strengthen in the second-half. Timothy Arcuri: Got it, thanks. And then as a follow-up, just on that comment you just made about called special deals and - that you, you know, struck in, you know, fiscal Q4. NAND demand, you're more positive on NAND demand, but pricing was still as bad if not worse than at least I thought it would have been in - you know, side of fiscal Q4. So is - can you kind of foot that, is that maybe you offering some big deals on the NAND side, some you know customers coming in and being opportunistic and you offerings some big deals to move bits and maybe shore up your NAND share, but at the expense of price. Can you just walk through that force? Thanks. Mark Murphy: Yes. I would say, Tim, that, you know, really NAND pricing was not - was basically in line with the downs that we saw in the third quarter. So, I would say that prices - the decrease had slowed and the price or the market was being the firm off. You know that - you know customers realize that this is a period that's ending, the markets firming up, you know, and so, you know, there is also some mix effects in there. We do see price and NAND improving in the first quarter. It will be up actually in the first quarter. And so I think that's all, I'd say, on price for NAND. Timothy Arcuri: Thanks, Mark. Operator: Thank you. One moment for our next question. Our next question comes from the line of Mehdi Hosseini from Susquehanna Financial Group. Your question, please. Mehdi Hosseini: Yes, sir. Thank you for taking my question. Two follow-ups. I would like to better understand the dynamics of seasonality. You talked about the NAND bit shipment declining in the Q1 fiscal year and most of the growth coming from DRAM, but how should we think about seasonality impact in February quarter? And I have a follow-up. Sanjay Mehrotra: So certainly, the typical seasonality will be in place. But just keep in mind that FQ4, we had a very strong sequential bit growth in the NAND business. And - I mean coming off that big sequential growth, we are just guiding to you know normalized level of overall shipments as part of FQ1 and overall, you know - and again, the content continues to increase across the end-market applications. And that will continue to drive increased demand growth for us as well. Mehdi Hosseini: But would there be seasonality in February quarter? Sanjay Mehrotra: Well, typical seasonality trends that exist in the consumer market would be there. But keep in mind that you know it all depends on the mix of the business as well for us. In terms of NAND, you know, in - it - maybe I have already guided to the trends. But overall when we look at the full-year basis, we would look at you know that calendar year '24, NAND will be growing in line with the long-term CAGR or near the long-term CAGR and DRAM will be growing in terms of demand much ahead of the long-term CAGR as well and all of that will of course take into account the typical seasonality that occurs in the industry. Mehdi Hosseini: Great, thanks for detail. And second question has to do with the puts and takes in reducing wafer starts. And I understand that more emphasis is on the trade mix. But as you - as I think about memory like, there is no trailing edge. And in that context as you think about bringing utilization rate back up to the normal level. and some of the trailing edge converted to the leading edge, could that help with a bigger step-up in gross margin improvement? How should we think about it, assuming that the trailing edge would be phased out? Sanjay Mehrotra: Well, good question and I think I would like to take the opportunity to provide some context here and overall background. As you know that in 2023, the industry has experienced extreme over supply and you know extreme negative effect on the profitability as well. And you see now that CapEx cuts and underutilization in the fab have been implemented across the industry given the CapEx constraints that we have, as well as given the poor profitability and certainly Micron has done that, but this is happening across the industry as well. And at the same time, the demand for the new products is increasing that requires, you know, as you were pointing out, leading edge technology as well. And in order to maintain our supply discipline and to meet the demand for these new products such as HBM, such as DDR5, we are shifting some of our equipment from older nodes into the newer technologies to ramp up those newer technologies into production. In the past, we would have done this with more CapEx. But we are being extremely mindful of CapEx spend, extremely disciplined about supply. So as a result, when we move the equipment from older nodes to support the ramp-up of leading-edge nodes, it results in a net reduction in overall - in a net reduction and the structural reduction in the wafer capacity as well. And that overall bodes well for the industry demand-supply fundamentals. So keep in mind that as we go through the year, we - and you know, as we shift more of the equipment toward ramp up of leading edge nodes, this will result in overall wafer capacity reduction and lowering underutilization as well. Of course, the legacy nodes will continue to have underutilization through the course of the year. And these are all helpful factors in terms of the demand-supply balance in the industry. And you know, some of the phenomena that we have described regarding structural wafer capacity reduction, this is not unique to Micron. We believe this is happening with other suppliers as well as they grapple with the same supply profitability and CapEx considerations as we are adjusting. So the reduction in wafer capacity is actually the headwind and supply growth. And this you know that increasing wafer capacity has a high bar for auto - for CapEx investments, it has a high bar in terms of ROI, and of course, it would require longer lead-time as well given the new equipment that would be required. So reduction - structural reduction in wafer capacity is overall good coupled where the underutilization in the legacy nodes. And as we pointed out, the new products in the leading-edge nodes also do require more wafer capacity for the same gigabits of production given the nature of like HBM that - where the die-size is twice as big. So, these new products also actually have a favorable impact on the industry supply growth capability. And these trends of supply growth with respect to structural wafer capacity-reduction and the new products that end up requiring more new wafer capacity are extremely important factors in terms of really understanding the improving, strengthening demand-supply fundamentals as we look at our fiscal year '24 and calendar year 2024. Mehdi Hosseini: Thank you. Operator: Thank you. This does conclude the question and answer session, as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.

Operator: Thank you for standing by, and welcome to Micron's Third Quarter 2023 Financial Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Farhan Ahmad, Vice President, Investor Relations. Please go ahead, sir. Farhan Ahmad: Thank you, and welcome to Micron Technology's fiscal third quarter 2023 financial conference call. On the call with me today are Sanjay Mehrotra, our President and CEO, and Mark Murphy, our CFO. Today's call is being webcast from our Investor Relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on our website, along with the prepared remarks for this call. Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures can be found on our website. We encourage you to visit our website at micron.com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending. You can also follow us on Twitter at MicronTech. As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, our expected results, and other matters. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer you to the documents we file with the SEC, including our most recent Form 10-K and 10-Q, for a discussion of risks that may affect our future 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. I'll now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Farhan. Good afternoon, everyone. Micron delivered fiscal third quarter revenue within our guidance range, with gross margin and EPS above the range. The ongoing improvement of customer inventories and memory content growth are driving higher industry demand, while production cuts across the industry continue to help reduce excess supply. As a result, pricing trends are improving, and we have increased confidence that the industry has passed the bottom for both quarterly revenue and year-on-year revenue growth. Our technology leadership and strengthening product portfolio position us well across diverse growth markets, including AI and memory-centric computing. Beyond this downturn, we expect to see record TAM in calendar 2025 along with a return to more normalized levels of profitability. The impact of the May 21 decision by the Cyberspace Administration of China on Micron's business remains uncertain and fluid. Several Micron customers, including mobile OEMs, have been contacted by certain critical information infrastructure operators or representatives of the government in China concerning the future use of Micron products. As discussed before, Micron's revenue with companies headquartered in mainland China and Hong Kong, including direct sales as well as indirect sales through distributors, accounts for approximately a quarter of Micron's worldwide revenue and remains the principal exposure. We currently estimate that approximately half of that China-headquartered customer revenue, which equates to a low double-digit percentage of Micron's worldwide revenue, is at risk of being impacted. This significant headwind is impacting our outlook and slowing our recovery. Micron is working to mitigate this impact over time and expects increased quarter-to-quarter revenue variability. Micron's long-term goal is to retain its worldwide DRAM and NAND share. Turning to technology. Micron continues to lead the industry in both DRAM and NAND technology. We are investing prudently to maintain our technology competitiveness while managing CapEx, node ramps and wafer start reductions to reduce our bit supply and align it with demand. Our industry-leading 1-beta DRAM and 232-layer NAND nodes are achieving world-class yields, and the yield ramp for these nodes has been faster than any of our prior nodes. These leadership nodes provide a strong cost capability, along with best-in-class power and performance specifications that will be leveraged across the portfolio of DRAM and NAND products. In fiscal Q3, we achieved several important product qualifications on these advanced nodes and are well positioned to ramp them in fiscal 2024. We are also making good progress toward the introduction of our EUV-based 1-gamma node in 2025. This node will be manufactured first in our Taiwan site, where we already have EUV capability installed and operating in preparation for this ramp. We also recently announced plans to bring EUV technology to our fab in Hiroshima, Japan, with support from the Japanese government. Micron will be the first company to bring EUV technology to Japan for production. We are also advancing our global assembly and test network in order to support our product portfolio and extend our ability to deliver on global customer demand in the future. In China, we announced an investment of approximately $600 million over the next several years in our operations in Xi'an. This builds on our long history of significant investment in our Xi'an assembly, packaging and test operations. As a part of this investment, we have decided to purchase the assembly equipment of our partner Powertech Semiconductor Xi'an, who has been operating inside our Xi'an facility for the last eight years. We also intend to construct a new building at our Xi'an site to provide space to add more product capabilities. This will allow us, over time, to serve more of the demand from our customers in China from the Xi'an site. In India, with the strong support of the Indian government, we will build a new assembly and test facility in Gujarat to address demand for the latter half of this decade. We are also increasing our investments in assembly and test capacity in Taiwan for high-bandwidth memory products as we gear up for stronger demand in this segment driven by the AI wave. Now turning to our end markets. Customers continued to make progress in reducing their excess inventory in fiscal Q3. Most customer inventories in the PC and smartphone segments are close to normal levels now, consistent with our forecast six months ago. Some of these inventory levels can get distorted by customer attempts to leverage current prices, which are deemed to be transient and unsustainable at these levels, to purchase additional volumes before prices rise significantly. Data center customer inventory is also improving and will likely normalize around the end of this calendar year or somewhat thereafter, depending on the growth in traditional data center spending. In data center, we saw strong sequential revenue growth in both cloud and enterprise in fiscal Q3, driven by some recovery from depressed sales levels in fiscal Q2. The recent acceleration in the adoption of generative AI is driving higher-than-expected industry demand for memory and storage for AI servers, while traditional server demand for mainstream data center applications continues to be lackluster. Micron's product portfolio and roadmap of innovative products position us to capture growth opportunities from AI and data-centric computing architectures for both training and inferencing. Increasingly large AI models with an exponentially growing number of parameters are driving demand for dramatically higher memory content. As we have said before, AI servers have six to eight times the DRAM content of a regular server and three times the NAND content. In fact, some customers are deploying AI compute capability with substantially higher memory content. A striking example is NVIDIA's DGX GH200 supercluster, which shows just how memory-intensive AI workloads can be; it provides developers the ability to support giant models with a massive, shared memory space of 144TB. A significant majority of that memory footprint is enabled by a joint development project between our two companies that extends Micron's low-power DRAM leadership to server class applications. We are proud to pioneer this differentiated LP DRAM innovation to deliver a significant reduction in data center power consumption compared to DDR-based solutions, helping to support our customers' green initiatives. High-bandwidth memory, used in high performance computing, is seeing very strong demand this year, driven by demand for generative AI. We are working closely with our customers and have begun sampling our industry-leading HBM3 product offering. The customer response has been strong, and we believe our HBM3 product delivers significantly higher bandwidth than competing solutions and establishes the new benchmark in performance and power consumption, supported by our 1-beta technology, TSV, and other innovations enabling a differentiated advanced packaging solution. We expect to begin a mass production ramp for this exciting HBM3 product in early calendar 2024 and to achieve meaningful revenues in fiscal 2024. Micron also has a strong position in the industry transition to D5, which is the latest generation of DDR memory. Our D5 percentage of DRAM shipments has more than doubled from fiscal Q2 to Q3, and we expect Micron D5 volume to cross over D4 at the end of first calendar quarter of 2024 versus mid-calendar 2024 for the industry. Micron's 1-alpha D5 modules are qualified and shipping to data center customers. We are also making good progress on our 1-beta-based, high-density 128 gigabyte D5 modules using a 32 gigabit die that optimizes cost and performance to provide customers with a lower cost-of-ownership solution for memory-intensive workloads like AI. We expect these high-density modules to ramp in calendar Q2 of 2024 with significant cost improvements over today's expensive TSV-based solutions in the industry. Our 96 gigabyte D5 high-density module built on 1-alpha technology, using 24 gigabit die, is already shipping in volume and delivers equivalent performance for the majority of workloads versus the more expensive TSV dual-die package-based 128 gigabyte modules. In data center SSDs, Micron's entire portfolio is now on 176-layer or 232-layer NAND, demonstrating our product and technology leadership. We are in a strong position to serve AI demand for fast storage as these data-intensive applications proliferate. In fiscal Q3, we launched the world's first 200-plus layer NAND data center SSD, and qualification is in progress at multiple key customers to support AI cluster installations. In fact, we have already passed qualification of this product at a critical server OEM partner. We also launched our extreme endurance data center SSD, which offers superior scalability and affordability versus hard drives. In PCs, we now forecast calendar 2023 PC unit volume to decline by a low double-digit percentage year-over-year, with PC units expected to be below the pre-COVID levels last seen in 2019. We are excited about the ongoing industry transition to D5 and are well positioned for it with our strong D5 product lineup. Industry client D5 mix is expected to cross over from D4 in early calendar 2024. In fiscal Q3, we achieved record quarterly client SSD bit shipments, driven by share growth in client SSDs as customers adopted our industry-leading solutions. Our SSD QLC bit shipment mix reached a new record for the third consecutive quarter, with growth in both client and consumer. Last month, we launched Crucial T700, the world's fastest Gen5 PCIe consumer SSD, built with our 232-layer NAND. In graphics, industry analysts continue to expect graphics' TAM growth CAGR to outpace the broader market, supported by applications across client and data center. We expect customer inventories to normalize in calendar Q3. We plan to introduce our next-generation G7 product on our industry-leading 1-beta node in the first half of calendar year 2024. In mobile, we now expect calendar 2023 smartphone unit volume to be down by a mid-single digit percentage year-over-year. While units are weaker, we are seeing stronger memory content growth driven by a mix shift toward premium phones and elasticity. We expect sequential growth in fiscal Q4 as customers prepare for upcoming product launches in the back half of calendar 2023. In fiscal Q3, we achieved key mobile customer qualifications on our 1-beta-based LP5X and started high-volume revenue shipments to Tier-1 OEMs. In addition, we achieved significant milestones in UFS with the qualification and ramp of a high-capacity uMCP5 featuring 16 gigabyte of DRAM and 512 gigabyte of NAND. We have also started to sample a new UFS 4 product based on our latest 232-layer NAND technology, which enables industry-leading performance for flagship handsets. Last, I'll cover the auto and industrial end markets, which represent over 20% of our revenue and contribute more stable revenue and profitability. Micron continues to lead in automotive, which is a key market and growth driver for us. In fiscal Q3, auto revenue reached another quarterly record and grew by a high single-digit percentage year-over-year. We continue to expect growth in auto memory demand for the second half of calendar 2023, driven by easing non-memory semiconductor supply, normalizing customer inventory levels, and increasing memory content per vehicle. The industrial market saw early signs of recovery in fiscal Q3. Inventory levels are stabilizing at distribution partners and at the majority of our customers. As a result, we expect an improvement in demand in the second half of calendar 2023. We are excited about our growth prospects in this market, as industrial customers continue to adopt and implement IoT, AI, and machine learning in the factory. Now, turning to industry outlook. Our expectations for calendar 2023 industry bit demand growth have been further reduced to low- to mid-single digits in DRAM and to high-single digits in NAND, which are well below the expected long-term CAGR of mid-teens percentage range in DRAM and low 20%s range in NAND. While the AI-driven demand has been stronger than our expectations three months ago, the PC, smartphone and traditional server demand forecasts are now lower. We continue to expect stronger industry bit shipments for DRAM and NAND in the second half of the calendar year, driven by secular content growth and continued improvement in customer inventory. While the industry demand forecast for calendar 2023 is now lower, the significant supply reductions across the industry have started to stabilize the market. We see both DRAM and NAND year-over-year supply growth to be negative for the industry in calendar 2023 as utilization and CapEx cuts across the industry impact supply growth. While supply demand balance is improving, due to the excess inventory, profitability and cash flow will remain extremely challenged for some time. Market recovery can accelerate if there is further reduction in industry production and these cuts are sustained well into calendar 2024. In response to the industry environment, Micron has taken decisive actions to bring our supply back in balance with demand. We expect Micron's year-on-year bit supply growth to be meaningfully negative for DRAM. We also expect to produce fewer NAND bits in calendar 2023 than in calendar 2022. Our fiscal 2023 CapEx plan of $7 billion is down more than 40% from last year, with WFE down more than 50%. We continue to expect fiscal 2024 WFE to be down year-on-year. Recently, we have further reduced wafer starts to approach 30% in both DRAM and NAND. We currently expect reduced wafer starts will continue well into calendar 2024 as we remain focused on managing down our inventories and controlling our supply. I will now turn it over to Mark. Mark Murphy: Thanks, Sanjay. Good afternoon, everyone. Fiscal Q3 results were in line to better than expectations, with revenue coming in above the midpoint of our guidance range and gross margin and EPS exceeding the high end of the range. Total fiscal Q3 revenue was approximately $3.8 billion, up 2% sequentially and down 57% year-over-year. Fiscal Q3 revenue included $72 million from an insurance settlement disclosed at the time we provided guidance. Fiscal Q3 DRAM revenue was $2.7 billion, representing 71% of total revenue. DRAM revenue declined 2% sequentially, with bit shipments increasing in the 10% range and prices declining by approximately 10%. Fiscal Q3 NAND revenue was $1 billion, representing 27% of Micron's total revenue. NAND revenue increased 14% sequentially, with bit shipments increasing in the upper 30% range and prices declining in the mid-teens percentage range. Now turning to revenue by business unit. Compute and Networking Business Unit revenue was $1.4 billion, up 1% sequentially. Strong sequential growth in server and graphics revenues was offset by a decline in client. Embedded Business Unit revenue was $912 million, up 5% sequentially. On a sequential basis, automotive and consumer revenues were strong. Revenue for the Mobile Business Unit was $819 million, down 13% sequentially due to timing of shipments. As Sanjay mentioned, we expect growth in mobile revenues in fiscal Q4. Revenue for the Storage Business Unit was $627 million, up 24% sequentially and driven by increased shipments across most of the portfolio. The consolidated gross margin for fiscal Q3 was negative 16%, improving 15 percentage points sequentially. This result was negatively impacted by approximately $400 million or 11 percentage points of write-downs associated with inventory produced in the quarter. Operating expenses in fiscal Q3 were $866 million, down roughly $50 million sequentially. OpEx benefited from ongoing expense-reduction initiatives and gains on sales of certain assets. We had an operating loss of roughly $1.5 billion in fiscal Q3, resulting in an operating margin of negative 39%, improved from negative 56% in the prior quarter. Fiscal Q3 taxes were $102 million, higher than expectations at the time of our guidance, driven by one-time discrete items. As mentioned in previous quarters, despite a consolidated loss on a worldwide basis, we still have taxes payable in certain geographies due to taxable income levels reported in those geographies. The non-GAAP loss per share in fiscal Q3 was $1.43, down from a loss per share of $1.91 in the prior quarter and earnings per share of $2.59 in the prior year. Fiscal Q3 EPS included approximately $0.37 of losses from the impact of the inventory write-down associated with inventory produced in the quarter. Turning to cash flows and capital spending. Our operating cash flows were approximately $24 million. Capital expenditures were $1.4 billion during the quarter. We continue to expect capital expenditures to be approximately $7 billion for the fiscal year, thus near $1 billion in fiscal Q4. Free cash flow was negative $1.4 billion in the quarter and improved from the previous two quarters. Our fiscal Q3 ending inventory was $8.2 billion or 168 days. Due to increases in process steps and product complexity, we now target inventory levels of around 120 days, which at present would equate to approximately $6 billion. Our current inventories include strategic stocks of approximately $1 billion over target levels associated with build-ahead of product for cost optimization and risk mitigation. At quarter-end, we held cash and investments of $11.4 billion and had total liquidity of $13.9 billion, including our untapped credit facility. We issued $1.5 billion of long-term debt in the quarter and, with part of those proceeds, paid down $600 million of our term loan facility, resulting in a net increase to debt of $900 million. Our fiscal Q3 ending debt was $13.2 billion. Now turning to our outlook for the fiscal fourth quarter. As mentioned in filings and our comments today, the CAC decision is a headwind to our outlook. We expect the revenue impact to vary by quarter, with the impact in fiscal Q4 being less than the quarterly impact in the first half of fiscal 2024. Over time, we have a goal of retaining our global market share in both DRAM and NAND. In fiscal Q4, as the industry demand continues to improve and despite the effects on our business from the CAC decision, we still see record bit shipments. Fiscal Q4 gross margin will be impacted by costs from underutilization, weak pricing levels and product mix. In the current business environment, the gap between our DRAM and NAND profitability is significant, and changes in the mix can drive large variability in gross margins. Our gross margin guidance does not contemplate additional write-downs of inventory. We continue to aggressively manage our operating expenses and remain on track to exit the fiscal year at less than $850 million. Looking beyond fiscal Q4, we expect OpEx to increase over $50 million in fiscal Q1 2024 on R&D program expense timing and as reductions to employee compensation end. With all these factors in mind, our non-GAAP guidance for fiscal Q4 is as follows. We expect revenue to be $3.9 billion, plus or minus $200 million; gross margin to be in the range of negative 10.5%, plus or minus 250 basis points; and operating expenses to be approximately $845 million, plus or minus $15 million. We expect tax expenses of approximately $40 million. Based on a share count of approximately 1.1 billion shares, we expect EPS to be a loss of $1.19, plus or minus $0.07. In closing, we continue to act quickly and tenaciously to navigate this downturn, making the investments to maintain our leading capabilities across technology, products, and manufacturing while preserving our solid balance sheet. In this environment, we remain sharply focused on improving our profitability and free cash flow. As market conditions improve, we will continue to drive efficiencies to hold on productivity gains. Despite the impact of this downturn and effects of the CAC decision, we remain confident in our financial model and our ability to deliver long-term profitability, cash flow and shareholder returns. I will now turn it back over to Sanjay. Sanjay Mehrotra: Thank you, Mark. I am proud of the execution of the Micron team and the progress we made this quarter. The leadership products we released and qualified are strengthening Micron's portfolio across multiple key markets. While there are near-term headwinds, I am excited about the new product introductions that we have planned for the next several quarters, which will further enable us to leverage the dramatic growth in AI that is ahead of us. I am confident that this portfolio momentum, combined with our technology capability, manufacturing excellence, financial discipline, and excellent customer relationships, will position us well for the future. I also want to call attention to Micron's 2023 sustainability report, which published yesterday. The report underscores our continued commitment to innovation, the environment, our people and the communities where we operate, outlining our progress and aspirations across our environmental, social and governance programs. I encourage you to review the full report on Micron's website. Thank you for joining us today. We will now open for questions. Operator: Certainly. [Operator Instructions] And our first question comes from the line of C.J. Muse from Evercore ISI. Your question please. C.J. Muse: Yes, good afternoon. Thank you for taking the question. I guess first question, with inventory expected to normalize in the coming months -- quarter, how are you seeing customer purchasing behavior perhaps change given that we're clearly hitting a pricing trough very soon? We'd love to hear kind of how those discussions might be changing. Sanjay Mehrotra: Thanks, C.J., for that question. We, of course, continue to work closely with our customers. And as we said that customer inventories are improving. Except for data centers, inventories are close to normal in most of our other end markets. Data center, we said by end of this year or somewhat thereafter -- shortly thereafter, data center customer inventories we expect to improve as well. And we continue to work closely with our customers. Some of the customers definitely interested in some of the longer-term outlook for the business and other customers operate on month-to-month basis. And overall, of course, we continue to mitigate through some of the impact of the China decision as well. But the value that we are bringing to the customers for our products continues to strengthen and Micron is very much focused on navigating through the current downturn and working closely with our customers to address their future demand. And as we said in my remarks that some of the customers, given the low pricing that exists in the industry today, and before prices begin to increase substantially, some of the customers may be looking at purchasing additional volumes at this time. But in general, the trajectory is of continuing improvement in their inventory levels end-to-end across the supply chain, add the customers directly as well as third parties who may be supplying to the customers. And as you know, inventories at the suppliers are coming down as well. C.J. Muse: Very helpful. If I could just follow-up real quickly on HBM3, you guided to meaningful revs in fiscal '24. Can you give us a sense of what that means? And over time, what size kind of could that look like for you guys looking at kind of three to five years? Thank you. Sanjay Mehrotra: Well, with respect to HBM3, we are very excited about this product. Micron has focused on bringing an industry-leading product and HBM3 product that is in early stages of sampling and we expect to begin production volume ramp of this product in early 2024. It is a product that has significantly higher performance, bandwidth and significantly lower power. In fact, as a product, it is close to a generational leap ahead of anything else that is in the market. We have received a strong endorsement for this product in the market and we expect the volume ramp of this product for us to be rapid, to be steep ramp and this will bring in, in our fiscal year 2024, strong revenue growth opportunity for us. So we are very excited about this standout product. It will be a significant growth driver for Micron. And everything that we have done here is of course built on our industry-leading 1-beta technology and applying to it, of course, advanced packaging, differentiated packaging and TSV capabilities. So this is we believe going to be a standout product for us. And we expect -- we target a share with HBM with this kind of industry-leading product that would be higher than our average DRAM share in the industry as well. Operator: Thank you. One moment for our next question. And our next question comes from the line of Timothy Arcuri from UBS. Your question please. Timothy Arcuri: Thanks a lot. I had two. Mark, the first one is for you. I was wondering if you can sort of lay out what the fiscal Q4 guidance would have looked like net of the ban. I know you said that the impact from the ban gets worse actually in the fiscal first half. So is it as simple as maybe fiscal Q4, you had said low double-digit bit impact, but it sounds like it's probably that big in fiscal Q4. So something less than that in fiscal Q4 and then you sort of expand to a number something in that range in the first half of fiscal 2025 -- '24 rather? Can you sort of handicap that for us and shape it for us? Mark Murphy: Yes. We had a small impact -- very small in Q3. It's a more material impact in Q4. We do expect the impact to increase. However, our actions to mitigate that will help offset the effect. But really, at this time, it's a headwind, but there's -- and that's clear. However, we are taking mitigating actions and it's very uncertain, continues to evolve on what the impact will be. And again, the impact that we see in the fourth quarter, it's contemplated in our guidance. Timothy Arcuri: Got it. Maybe I'll ask you in the follow-up. But my second question is for Sanjay. So, Sanjay, I asked you this last call, too. So you alluded to the smartphone customers at least wanting to kind of get out in front of what they see maybe could be some tightness and maybe they're opportunistically trying to take advantage of pricing being so low. Can you just talk more broadly about what might change in your relationship with your customers coming out of this downturn? I mean, could we be headed toward a situation where maybe the data center customers that pushed you and your peers so far during the downturn that maybe we can talk about LTAs at some point. I know that this is a ways away, given kind of where we are today. But can you just talk about maybe over the past three months, when I asked you last time, how the tone of the discussion with the data center customers in particular has changed? Thanks. Sanjay Mehrotra: Well, our customers, of course, work with us on LTAs. And as we have said, LTAs relate to their forecast for the year, generally. And while some customers may be operating on shorter term or other customers longer term, but generally speaking, they operate on yearly LTAs and LTAs involve supply and demand commitments from the two sides. Of course, sometimes with the changing industry environment on either side, on the supply or on the demand side, there can be adjustments made to those LTAs, and we work closely with our customers in those regards. And we have had close relationships with the customers. We have a very strong product momentum. You are particularly inquiring about data center. And let me tell you that our product momentum in data center with strong portfolio of solutions, particularly addressing the growing interest in AI, in data center, generative AI, becoming a big opportunity, and we look at it for 2024 as a big year for AI and for memory and storage and Micron will be well positioned with this product. And these are all parts of our discussions when we address their requirements on their future purchases when we address LTA requirements. And of course, we need the necessary investments related to our production mix in terms of die requirements, in terms of our assembly and test requirements, and we really work closely with our customers to help manage these. And just keep in mind that -- as I mentioned, that a lot of new product considerations go into the LTAs as well, as well as, of course, the volume and overall demand and supply considerations. So LTAs, at the end, really help both the parties. They help us plan our engineering, our product roadmap, alignment on that, our investments in things such as back-end capacity because products like HBM, product like high-density modules and, of course, in the mobile sector, products like MCPs, et cetera, have all different considerations at the back end. And these are the kind of things, LTAs really help us plan with our customers. Timothy Arcuri: Thanks so much. Operator: Thank you. One moment for our next question. And our next question comes from the line of Krish Sankar from TD Cowen. Your question please. Krish Sankar: Thanks for taking my question and congrats on the good results. Sanjay, the first question I wanted to ask you was you spoke about AI servers having 6 to 8 times more DRAM content and that demand is strong while traditional data center server demand is weak. There's a view that some of these AI servers are replacing over 10 of the DCs -- regular DC servers. So I'm just kind of curious how to think about overall DRAM demand as AI grows but probably cannibalizes some of your regular data center server DRAM content? And then, I have a follow-up. Sanjay Mehrotra: So look, when we look at the overall DRAM demand, the DRAM TAM, of course, the AI is driving growth. Automotive, certainly driving growth. Other end markets, such as we mentioned, mobile and PC, in terms of -- or consumer, in terms of their end demand, has been somewhat lackluster. The AI demand that is driven in data center, whether it is in the enterprise definitely drives healthy trends for memory growth. Yes, enterprise server and some of the data center demand has been recently somewhat impacted by the macro trends, but the trend of AI and more memory is absolutely continuing. And that's what -- when we look at our overall 2023 demand growth and the projections of CAGR that we have ahead of us, we have taken those into account. This is very, very early innings for AI, and AI is really pervasive. It's everywhere in, of course, cloud applications, enterprise server applications, applications such as generative AI would be in enterprises too. Because due to confidentiality of data, enterprises will be building their own large language models. And as you know, while the enterprise large language models may not be as large as the large language models you may see, and examples such as super clusters, et cetera, but all of them are really tending towards greater number of parameters. Now we are talking about parameters with generative AI getting into even trillion parameter range. Not too long ago, these used to be in 100 millions of range. That requires more memory. So regardless of the applications, whether it is on the enterprise side or on the cloud server side, the memory requirements are continuing to increase. And I'll just point out that 6x to 8x that we have mentioned is the multiple of DRAM requirement in AI server versus standard server. And of course, as we highlighted in the script, there are many compute configurations, such as the supercluster example that we gave you, where the DRAM content that is required is few hundred times higher than a standard server. So really, I think the journey here ahead of us will be very exciting. And when we look at machine-to-machine communication, when we look at opportunities for the virtuous cycle for the ever-increasing data that training applications, that inferencing at scale and various edge applications, including automotive, are driving the requirements for memory and storage will continue to grow well, and Micron is going to be well positioned with our products. And we consider 2024 to be a big banner year for AI, for memory and storage. And Micron will be well positioned to capture this with our strong portfolio of products from D5 to LP5 to HBM to high-density modules, even including graphics. Krish Sankar: Got it. Very helpful, Sanjay. And then a follow-up for Mark. You said no inventory write-down in the current quarter expected. And if remember right, Mark, you also mentioned in the past that inventory write-down is tight to your view on pricing three quarters out. So is it fair to assume that you're expecting a pricing drop pretty much this quarter? And if the CAC decision does get really worse that 15% to 25% of your sales gets impacted, is there any more risk of inventory write-down, or is that agnostic to the inventory write down? Thank you. Mark Murphy: Yes. Thanks, Krish. Maybe I'll spend a few minutes just covering because it's a very complicated topic with a lot of moving parts, maybe spend a bit of time on the topic. So our reported gross margin, our outlook, it's a function of many factors, including pricing. The inventory write-downs, which do include or incorporate our forward view of pricing. The effects of utilization, which you heard today, we've increased -- or reduced our wafer starts further. And then just volumes and associated leverage on period costs as discussed in previous quarters, and of course, mix. These factors are continuously changing due to market environment and our actions. And as I've stated before at these lower levels of profitability, our margin forecast and results are more sensitive to slight changes in assumptions such as price. Now given price trends and our current view on pricing and costs, we took a material write-down in the second quarter as we reported $1.4 billion, took another $400 million this quarter. And with these write-downs, we've pulled forward inventory costs, thus lowered the carrying value of on-hand inventories. Yes, as this lower cost inventory clears in the future quarters, we'll realize more income in those quarters than we would have otherwise without the charge. So as an example, we took this $400 million of additional write-downs in third quarter for inventories produced. And considering our latest views on volume mix, we also realized a benefit of near $300 million from selling through the lower cost inventories impacted by the second quarter write-down. So I do want to call out that it's -- with all the uncertainty, complexity and sensitivity at these profitability levels, our write-down and the benefits that we had in the third quarter were not far off what we estimated in our guide. So I think that's a good reflection of our handle of what's happening in the business. Now we've also got underutilization effects, which are creating higher costs in inventories and adding period costs. We project roughly $1.1 billion of underutilization impact in FY '23 associated with the front end. Most of that will impact the P&L this year. Some of it will carry over to next year. But because of the effect of the write-down accounting, less of it will carry over to next year than would have otherwise. Beyond this period of write-down effects, the impact of lower wafer starts between the period cost and the higher cost inventories, the effect is higher single digits on margins, then down to mid and lower single digits on margins as revenues increase. So considering all this, just to give you a sense of profile of margin and in turn pricing, to your question, we said last quarter that we expect -- or as we said last quarter, we expect -- we had a reported second quarter margin to be the trough, and that was driven by the $1.4 billion write-down. With a much lower inventory charge forecasted in the third quarter, which happened, that margin improved about 15 points. And then also, as mentioned last quarter, we said that fourth quarter would be better than third quarter on a lower write-down, hence, we guided today 5 points better than the third quarter. Again, these estimates are sensitive to pricing changes. And -- but in our current view, we expect a gradual improvement on margin to continue sequentially on a reported basis. Now if you take our non-GAAP third quarter gross margin of negative 16%, and we were to strip out the write-down effects in third quarter, both the write-down portion and the realized benefit, and also to normalize, you strip out the insurance settlement which we had in the third quarter, we would still be -- those two things largely offset, so we'd be still at about 16% negative gross margin. So again, over $100 million net inventory effects, the $400 million write-down less than $300 million realized benefit and then the roughly the same over $100 million insurance settlement. So -- and this is a function of the pricing environment, which we, I think, properly captured in our guide. Now that adjusted 16% -- that adjusted margin 16% is down clearly versus the adjusted second quarter margin, which, as I recall, is about 7%, so down 23 points. So under this adjusted view, we would trough on gross margin over the next few quarters, and then we would improve off these low levels through FY '24. So this is a profile that's consistent with what we've discussed before, though the levels are a bit lower and a bit delayed. And so hopefully, that provide you some color both on how we see pricing and how we see gross margin playing out with all the puts and takes. Krish Sankar: Yes. Thanks a lot, Mark. Thank you. Operator: Thank you. One moment for our next question. And our next question comes from the line of Harlan Sur from JPMorgan. Your question please. Harlan Sur: Hi, good afternoon. Thanks for taking my question. I guess as a follow-up to that, Mark, on your gross margin guidance for the fourth quarter, I know there are no inventory write-downs, but is it contemplating a step-up in underutilization charges or period costs associated with underutilization charges sequentially? And because you cut your wafer starts another 5 percentage points right to 30%, if you could maybe quantify that step-up in underutilization charges? And then as a follow-up, is the incremental 5% cut in utilization is primarily a result of the CAC restrictions? Mark Murphy: It is not. It's more of an industry dynamic and our intent to get supply discipline in the market. Supply needs to come out of the market given inventory levels, and that's the principal driver. As far as the effects of utilization, it is already incorporated in this guide. The period costs in the fourth quarter are about $200 million. And again, they're contemplated in the guidance. Harlan Sur: Perfect. Thank you. Operator: Thank you. One moment for our next question. And our next question comes from the line of Ambrish Srivastava from BMO Capital Markets. Your question please. Ambrish Srivastava: Hi. Thank you very much. Mark, I wanted to come back to the gross margin. When you had given the guidance for this quarter, you had walked us through in detail. And you had said that stripping out all the adjustments and the industry write-down, 3Q would be at 7.5%. Am I reading this right that now we stripped out as negative 16%, right? So it's much worse than what you were thinking? Mark Murphy: No, I don't think it's much worse than what we're thinking. If you strip out just the underutilization effects, but you keep in the insurance settlement, you're close to what we said, sort of that 7%, 8%. So that you need to consider. We had said that was in there. Ambrish Srivastava: Okay. Got it. And then a follow-up either for you or for Sanjay. On the 15% [big round] (ph) number, 15% of bit loss -- share loss in China, how do you recoup that? Is that based on the assumption that bit growth or bit supply will be constrained, and so if the other two suppliers are able to meet the China demand, they'll leave some demand out here -- in other regions for you to basically go after? Is there a pricing element to that? I'm just not pretty sure I understand how [you hit that] (ph). Sanjay Mehrotra: I will take that. So what we have said is that approximately 50% of our business in China is at risk of getting impacted. And of course, we are focused on mitigating any share loss with CIIOs or as a result of CAC decision, with those customers -- global customers who are not impacted by CAC decision. So keep in mind that our share in DRAM is approximately 23% and our share in NAND is approximately 12%. So obviously, we have opportunities to gain share with other customers. And this is what we are focused on. It will take some time, and the CAC decision can -- I mean, as we have said, it is hurting our business. It is slowing our recovery. It can result in quarter-to-quarter variations as well. But over longer term, our target is to maintain our share. So while near term, CAC decision is challenging, longer term, we will work with customers who are not impacted -- our global customers who are not impacted by CAC decision to increase our share. And we have a long history of working with our customers. We have brought tremendous value of our innovation, our supply, our product portfolio supporting their innovation and roadmaps in the marketplace. Our customers want to see a strong Micron. Our strategy of keeping our target share consistent over longer term with our current share is understood by our customers because, again, they want to see a strong Micron, so they are supportive of this. And we will continue to work with our customers. And of course, as we bring value to our customers with our products and our product portfolio, we will focus on ROI on our investments, and we'll certainly focus on improving the profitability of our business from current levels as well. So we will, of course, keep profitability in mind. And again, it's important that Micron is a strong partner to our customers. And I think customers understand that multiple strong players in the industry is a benefit for multiple reasons to our customer ecosystem. Ambrish Srivastava: All right. Makes sense. Thank you, Sanjay. Operator: Thank you. One moment for our next question. And our final question for today comes from the line of Tom O'Malley from Barclays. Your question please. Tom O'Malley: Hey, guys. Thanks for taking my question. Recently, we've been picking up that there is a change in some of the A series where you're starting to see some HBM2E use just given the fact that there's limited capacity of HBM3. I guess part one is, are you seeing an ability to service that market today? And then, the second part of the question is, you're saying that AI servers see about 6x to 8x DRAM content. I assume that contemplates HBM, but you guys are talking about some AI tailwinds today when you're really not servicing that market as much. So could you talk about what you're seeing ex-HBM as the multiplier effect on DRAM today, just so we can get a picture of how you guys are seeing the improvement in data center where they are today ex that product? That would be really helpful. Sanjay Mehrotra: So certainly, we have had HBM2E product in the marketplace that actually gave us strong experience in bringing up our technology and production capability with HBM. The market, as I mentioned, is -- has shifted -- is shifting to HBM and Micron's HBM3+ product, which I called as a generational leap ahead of anything in the industry is going to position us well as we bring that into volume production during the course of our fiscal year '24, starting early part of calendar '24, contributing to several hundred million dollars of revenue opportunity over time. And with respect to AI part of the market, I want to be very clear that, yes, with respect to high-density modules and with respect to high bandwidth, HBM3 solutions, that part of the market is growing this year, and it's an opportunity that we want to capture, and I believe that we'll be well positioned to capture, as I mentioned, that we will be targeting share in HBM with our absolute industry-leading product that's higher than our DRAM industry average share. So -- but it's important to understand is that AI is being served not only by HBM or high-density DRAM modules, but it is also being served by D5 memory and by LP DRAM as well. And this is where with the D5 and LP DRAM products, we gave you some examples in our script as well. A large amount of LP DRAM being used in industry-leading high-performance compute platforms. In fact, the 144 terabyte that we mentioned in DGX, GH 200, about 122 terabyte of that is LP DRAM. And Micron is very well positioned with a differentiated solution of our LP DRAM there today. So I think it's important to understand that the AI server market is made up of HBM, it's made up of high-density DRAM modules, includes -- it also is made up of DDR5, LP5 and some element of graphics memory as well. So, we do have a broad portfolio. And in 2024 with HBM and high-density DRAM modules getting into production, I really believe we'll be extremely well positioned to capture the growing opportunity in AI. And 75% of DRAM on AI servers today is DDR5. And as I emphasized, and as I'm sure you well know, we participate very well in D5. In fact, we led the industry with our D5 products, again, built on 1-beta technology here. Tom O'Malley: Thank you, Sanjay. And I appreciate you guys sneaking me in. Operator: Thank you. This does conclude the question-and-answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.

Operator: Thank you for standing by, and welcome to Micron's Second Quarter 2023 Financial Call. [Operator Instructions]. I would now like to introduce your host for today's program, Farhan Ahmad, Vice President, Investor Relations. Please go ahead, sir. Farhan Ahmad: Thank you, and welcome to Micron Technology's Fiscal Second Quarter 2023 Financial Conference Call. On the call with me today are Sanjay Mehrotra, our President and CEO, and Mark Murphy, our CFO. Today's call is being webcast from our Investor Relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website, along with the prepared remarks for this call. Today's discussion of financial results is presented on a non-GAAP financial basis, unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures may be found on our website. We encourage you to visit our website at micron.com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending. You can also follow us on Twitter, @MicronTech. As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, our expected results 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 you to the documents we filed with the SEC, including our most recent Form 10-K and 10-Q, for a discussion of the risks that may affect our future 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. I'll now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Farhan. Good afternoon, everyone. Micron delivered fiscal second quarter revenue within our guidance range, and excluding the impact of inventory write-downs, margins and EPS were also within the guidance range. The semiconductor memory and storage industry is facing its worst downturn in the last 13 years with an exceptionally weak pricing environment that is significantly impacting our financial performance. We have taken substantial supply reduction and austerity measures, including executing a company-wide reduction in force. We now believe that customer inventories have reduced in several end markets, and we see gradually improving supply-demand balance in the months ahead. Excluding the impact of inventory write-downs, we believe our balance sheet DIO has peaked in fiscal Q2, and we are close to our transition to sequential revenue growth in our quarterly results. We are navigating the near-term difficult environment with our strong technology position, deep manufacturing expertise, strengthening product portfolio, solid balance sheet and incredibly talented team. Beyond this downturn, we anticipate a return to normalized growth and profitability in line with our long-term financial model. Micron continues to lead the industry in both DRAM and NAND technology. We are investing prudently to maintain our technology competitiveness while managing node ramps to reduce our bit supply and align it with demand. In DRAM, 1-alpha represents most of our DRAM bit production, and we continue to make great progress in initiating our transition to 1-beta. In NAND, 176-layer and 232-layer now represent more than 90% of NAND bit production. We also continue to lead the industry in QLC. QLC accounted for over 20% of our NAND bit production and shipments in fiscal Q2. The Micron team's solid execution and implementation of smart manufacturing has driven superb yield enhancement across our leading-edge nodes. Yields on 1-alpha DRAM and 176-layer NAND have reached levels that are now higher than any node in our history. In addition, both our 1-beta DRAM and 232-layer NAND have reached targeted yields ahead of schedule and faster than any of our prior nodes. We are well positioned to qualify these leading-edge nodes across our product portfolio and will ramp them based on customer demand. We are also making good progress towards the introduction of our EUV-based 1-gamma node in 2025. Similar to our 1-alpha and 1-beta nodes, we expect this node to provide us with competitive performance, power, cost and density improvements. Now turning to our end markets. As a result of inventory adjustments across our end markets, slowing demand growth and an extremely challenging pricing environment, revenue was down year-over-year in all end markets. While our industry faces significant near-term challenges, we believe that the memory and storage TAM will grow to a new record in calendar 2025 and will continue to outpace the growth of the semiconductor industry thereafter. Recent developments in AI provides an exciting prelude to the transformational capabilities of large language models, or LLMs, such as ChatGPT, which requires significant amounts of memory and storage to operate. We are only in the very early stages of the void split deployment of these AI technologies and potential exponential growth in their commercial use cases. As more applications of this technology proliferate, we will see training workloads in the data center supplemented with voice spread influence capabilities in the data center as well as in end user devices, all of which will drive significant growth in memory and storage consumption. In data center, we believe that our revenue bottomed in fiscal Q2, and we expect to see revenue growth in fiscal Q3. Data center customer inventories should reach relatively healthy levels by the end of calendar 2023. We continue to see AI as a secular driver of demand growth in the data center. An AI server today can have as much as 8x the DRAM content of a regular server and up to 3x the NAND content. We are well positioned to capture the memory and storage opportunities that AI and data-centric computing architectures will provide. Our product roadmap includes exciting HBM3 and CXL innovations, and I look forward to sharing more details about these solutions in the future. In fiscal Q2, we expanded shipments of CXL DRAM samples to OEM customers that service enterprise, cloud and HPC workloads. Micron is leading the industry with world-class DDR5, or D5 technology. We are shipping D5 in high volume to data center customers and achieved our first customer qualification for our 1-alpha 24-gigabit D5 product. The latest generation of server processors, AMD's Genoa and Intel's Sapphire Rapids, require D5 DRAM. Servers using these new processes will drive higher D5 industry bit demand in second half of calendar 2023, towards mix crossover with D4 in mid-calendar 2024. In fiscal Q2, we also began volume production and shipments of the fastest PCIe Gen4x4 NVMe SSD in the market, our 9400 176-layer performance NVMe data center SSD, which excels in AI and high-performance computing workloads. In PCs, we now forecast calendar 2023 PC unit volume to decline by mid-single-digit percentage, returning PC unit volume to pre-COVID levels last seen in 2019. Although still elevated, client customer inventories have improved meaningfully, and we expect increased bit demand in the second half of the fiscal year. With our strong product lineup, we are well positioned for the ongoing industry transition to D5. Client's D5 adoption is expected to gradually increase through calendar 2023, with D4 to D5 mix crossover in early to mid-calendar 2024. In fiscal Q2, our NAND QLC bit shipment mix reached a new record for the second consecutive quarter, driven by growth in both client and consumer SSDs. We qualified our Micron 2400 SSD, the world's only 176-layer QLC SSD qualified at OEMs, across the client customer base. In graphics, industry analysts continue to expect graphics TAM growth CAGR to outpace the broader market supported by applications across client and data center. Customers' inventory adjustments are progressing well, and we expect demand in the calendar second half of 2023 to be stronger than the first half. As the performance leader in graphics, we are excited to see our proprietary 16-gigabit G6X featured in the recently launched NVIDIA RTX 4070 Ti. In mobile, we now expect calendar 2023 smartphone unit volume to be down slightly year-over-year. While some customer inventories are back to normal levels, other OEMs' inventories remain elevated. In aggregate, we expect mobile customer inventory to improve through the remainder of calendar 2023, and we expect growth in mobile DRAM and NAND bit shipments in the second half of our fiscal year versus the first half. In fiscal Q2, we continued sampling and qualifying our industry-leading 1-beta 16-gigabit LP5X, receiving very positive feedback on its power, performance and quality from customers. We expect to generate revenue on this 1-beta product later this fiscal year. We showcased our leading products earlier this month at Mobile World Congress, where we displayed 8 flagship mobile customer design wins. Last, I'll cover the auto and industrial end markets, which now represent over 20% of our revenue and contribute more stable revenue and profitability. Micron is the market share leader in these important and fast-growing markets. In fiscal Q2, auto revenue grew approximately 5% year-over-year. Our leadership in automotive was evidenced by several milestones in Q2. We reached a new record customer quality score, qualified the industry's first 176-layer e.MMC 5.1 automotive product, and began shipping the industry's first 176-layer UFS 3.1 automotive solution. We expect continued growth in auto memory demand for the second half of calendar 2023, driven by gradually easing nonmemory supply constraints and increasing memory content per vehicle. The industrial market continued to soften in Q2, as our distribution channel partners reduce their inventory levels and end demand weakened for some customers. Inventories are starting to stabilize at the majority of our customers, and we expect demand to improve in the second half of our fiscal year. In our fiscal second quarter, Micron achieved advanced startup sampling and design-in across automation OEMs, ODMs and integrators with our latest generation of products. Now turning to our market outlook. Our expectations for calendar 2023 industry bit demand growth have moderated to approximately 5% in DRAM and low-teens percentage range in NAND, which are well below the expected long-term CAGR of mid-teens percentage range in DRAM and low-20s percentage range in NAND. The reduction in calendar 2023 demand from our prior forecast is driven by an assessment of customer inventories as well as some degradation in end market demand. We expect that improving customer inventories will support sequential bit demand growth for DRAM and NAND through the calendar year. China's reopening is also a positive factor for calendar 2023 bit demand. Public reports indicate that there have been significant CapEx cuts throughout the industry, and utilization rates have declined at all DRAM and NAND suppliers. We now expect that the industry bit supply growth for DRAM and NAND in calendar 2023 will be below demand growth, which will help improve supplier inventories. While the supply-demand balance is expected to gradually improve due to the high levels of inventories, industry profitability and free cash flow are likely to remain extremely challenged in the near term. Market recovery can accelerate if there is a year-to-year reduction in production or, in other words, negative DRAM and NAND industry bit supply growth in 2023. In response to the industry environment, Micron has taken a number of decisive actions in fiscal 2023. First, we are further reducing our supply. We have made additional reductions to our fiscal 2023 CapEx plan and now expect to invest approximately $7 billion, down more than 40% from last year, with WFE down more than 50%. In fiscal 2024, we expect WFE to fall further as we ramp 1-beta and 232-layer nodes in a capital-efficient manner. We have further reduced DRAM and NAND wafer starts, which are now down by approximately 25%. As a result, for calendar 2023, we now expect Micron's year-on-year bit supply growth to be meaningfully negative for DRAM. We also expect to produce fewer NAND bits in calendar 2023 than in calendar 2022. Excluding the impact of inventory write-downs, we expect Micron's DIO to decline sequentially going forward from its peak in the second quarter. Second, we have made further reductions to our operating expenses beyond the executive salary cuts and suspension of Micron's fiscal 2023 bonuses company-wide. We now expect our overall headcount reduction to approach 15%. This will occur through a combination of workforce reductions, which are now largely complete as well as anticipated attrition through the remainder of the year. Third, Micron continues to execute to a strategy of maintaining flat annual bit share in both DRAM and NAND. While we have had to reduce price to remain competitive in the market, we have not done so in an attempt to gain share. As such, share changes at customers are generally transitory. Lastly, we have taken additional steps to ensure ample liquidity. Mark will go into further detail. Micron continues to have the strongest balance sheet among the pure-play memory and storage companies, and our strong liquidity will enable us to weather this downturn while ensuring our product and technology competitiveness. I will now turn it over to Mark. Mark Murphy: Thanks, Sanjay. Fiscal Q2 results reflected challenging market conditions with continued deterioration in pricing and profitability. Total fiscal Q2 revenue was approximately $3.7 billion, down 10% sequentially and 53% year-over-year. Fiscal Q2 revenue included $114 million from an insurance settlement disclosed at the time we provided guidance. Fiscal Q2 DRAM revenue was $2.7 billion, representing 74% of total revenue. DRAM revenue declined 4% sequentially, with bit shipments increasing in the mid-teens percentage range and prices declining by approximately 20%. Fiscal Q2 DRAM bit shipments benefited from the timing of shipments between fiscal Q1 and fiscal Q2. Fiscal Q2 NAND revenue was $885 million, representing 24% of Micron's total revenue. NAND revenue declined 20% sequentially, with bit shipments increasing in the mid- to high-single-digit percentage range and prices declining in the mid-20s percentage range. Now turning to revenue by business unit. Compute and Networking Business Unit revenue was $1.4 billion, down 21% sequentially. And on a sequential basis, cloud revenue was down while client revenue was stable. Revenue for the Mobile Business Unit was $945 million, up 44% sequentially. Mobile revenue benefited from the timing of some shipments between fiscal Q1 and fiscal Q2. Embedded Business Unit revenue was $865 million, down 14% sequentially. On a sequential basis, automotive markets were relatively stable following industrial and consumer end markets experienced weakness. Revenue for the Storage Business Unit was $507 million, down 25% sequentially and impacted by challenging conditions in the NAND market. Consolidated gross margin for fiscal Q2 was negative 31.4%. This result was negatively impacted by approximately $1.4 billion or 38.7 percentage points of inventory write-down recorded in the quarter. These noncash write-downs, which lower the cost basis of inventory, resulted -- results from projected selling prices falling below the cost of inventory and are not the result of obsolescence. Operating expenses in fiscal Q2 were $916 million, down roughly $80 million sequentially. We continue to aggressively manage our operating expenses and expect them to decline sequentially in both fiscal Q3 and fiscal Q4. We had an operating loss of roughly $2.1 billion in fiscal Q2, resulting in an operating margin of negative 56%, down from negative 2% in the prior quarter and positive 35% in the prior year. The operating loss included the $1.4 billion inventory write-down recorded in the quarter for a 39 percentage point impact to operating margin. Fiscal Q2 taxes were $53 million. As mentioned in previous quarters, despite a consolidated loss on a worldwide basis, we still have taxes payable in certain geographies due to taxable income levels reported in those geographies. Non-GAAP loss per share in fiscal Q2 was $1.91, down from a loss per share of $0.04 in the prior quarter and earnings per share of $2.14 in the prior year. Fiscal Q2 EPS included approximately $1.34 of losses from the impact of the inventory write-down. Turning to cash flows and capital spending. We generated $343 million in cash from operations in fiscal Q2, representing approximately 9% of revenue. Capital expenditures were $2.2 billion during the quarter. We expect fiscal 2023 CapEx to be 2/3 front-half weighted, with a higher mix of construction spend in the second half. Free cash flow was negative $1.8 billion in the quarter. Our ending fiscal Q2 inventory was $8.1 billion and reflects the impact of the $1.4 billion write-down. Average days of inventory for the quarter was 153 days, and excluding write-downs, 235 days. Inventory levels and days are higher in NAND than DRAM. Our actions on supply reflect our intent to work down days of inventories from these levels. At quarter end, we held cash and investments of $12.1 billion and had total liquidity of $14.6 billion when considering our untapped credit facility. Given macroeconomic uncertainty and the market environment, during the quarter, we bolstered our liquidity further through the addition of $1.9 billion of long-term debt. Our fiscal Q2 ending debt was $12.3 billion. Under a net debt position, our net interest income moves to net interest expense in Q3. Micron's balance sheet is solid with ample liquidity, low net debt and a weighted average maturity on debt of December 2029. Now turning to our outlook for the fiscal third quarter. Market conditions remain extremely challenging. However, we expect that for the rest of this calendar year, DRAM and NAND bit shipments will continue to increase and supply-demand balance will gradually improve. Included in the fiscal third quarter guide is an insurance recovery, separate and unrelated to that recognized in fiscal Q2 of approximately $110 million, $70 million of which we expect to recognize as revenue. In fiscal Q3, we expect gross margins to be negatively impacted by pricing, write-down of inventory, cost of underutilization and a higher mix of NAND. On write-down of inventory, our guidance assumes a write-down of approximately $500 million associated with inventory produced during fiscal Q3. Small changes to price expectations beyond fiscal Q3 could have a substantial positive or negative impact to the inventory write-down amount in fiscal Q3. Potential variances of inventory write-downs are not factored into the guidance ranges for gross margin and EPS. As market conditions remain weak, we will continue to aggressively manage our expense profile. As Sanjay mentioned, we increased our headcount reduction target to approach 15% from our previous target of approximately 10%. We now expect OpEx to fall below $850 million in the fiscal fourth quarter of 2023. For nonoperating items, we expect net interest expense of approximately $5 million in fiscal Q3. We now project fiscal 2023 taxes to be less than $140 million. We expect profitability to remain extremely challenged in the near term. We do project profitability to improve sequentially due to lower inventory write-downs and free cash flow to improve slightly, driven by reduced capital spend. But we forecast operating margin and free cash flow to remain significantly negative through the fiscal year. With all these factors in mind, our non-GAAP guidance for the fiscal Q3 is as follows. We expect revenue to be $3.7 billion, plus or minus $200 million; gross margin to be in the range of negative 21%, plus or minus 250 basis points; and operating expenses to be approximately $900 million, plus or minus $15 million. We expect tax expense of approximately $50 million. Based on a share count of approximately 1.09 billion shares, we expect EPS to be a loss of $1.58, plus or minus $0.07. In closing, we continue to aggressively manage through this period of challenging market conditions, preserving our competitive technology and product positions, strong operational capability and solid balance sheet. Following this downturn, we expect to capitalize on the secular demand trends and growth in memory and storage. We believe we are close to a transition to sequential revenue growth in our quarterly results. We are focused on significantly improving profitability and returning to positive quarterly free cash flow within fiscal 2024. We remain confident in our financial model, and we'll continue to operate the business in a disciplined manner to generate long-term profitability, cash flow and shareholder returns. Sanjay Mehrotra: Thank you, Mark. We are carefully managing our business to weather this industry downturn, preserving our technology and product portfolio competitiveness and manufacturing capabilities. Micron is the leader in DRAM and NAND process technology and one of only a handful of leading-edge semiconductor manufacturers in the world. Our team continues to drive new breakthroughs for our customers. Memory and storage are at the heart of systems and solutions that fuel the global economic engine, drive new efficiencies, create higher productivity and spud advances that make life better for people around the world. We look forward to a normalization of market conditions, and we remain confident in the long-term demand for our solutions based on the value they create across multiple end markets. Thank you for joining us today. We will now open for questions. Operator: [Operator Instructions]. And our first question comes from the line of C.J. Muse from Evercore ISI. Christopher Muse: I guess I was hoping to get your sense of how you're thinking about the shape of the recovery. Obviously, things don't look great today, but you've been through this before and will get through it. And so would love to hear your thoughts around how you think will come out of this. And given the CapEx cuts we've seen across the industry, it certainly looks like we're going to be an undersupply situation, at least for DRAM in calendar '24. I'm curious what some of your largest customers are saying today, particularly in the data center as they start to consider this likelihood. Sanjay Mehrotra: Thanks, C.J., for the question. So I think we can look at the question from the demand and the supply point of view. And from the demand side, as we have indicated that we are seeing that the customer inventories are improving while still elevated, but in aggregate, customer inventories are improving. And we do expect that the volume of shipments, both for DRAM and NAND, will continue to increase on a sequential basis from here on. And of course, on the supply side, you have heard actions from industry players and through various reports, you have seen that the CapEx reductions are being made as well as underutilization is being made in the industry. And that is going to be taking out a chunk of – it will take a bite at the supply in the industry. So basically, the supply trend will also begin to improve. So the demand and supply balance will gradually improve through the course of the year. We have said that inventory -- we believe also days of inventory will continue to improve as well. For us, days of inventory peaked in Q2, and exclusive of inventory adjustments, we would expect days of inventory to continue to improve from here on. We have talked about for our business that we see being close to transition to sequential growth in revenue going forward. So overall the industry environment, with the demand and supply gradually improving, we expect the trajectory of pricing also to be improving. So this then ultimately means that while the profitability remains challenged, and yes, free cash flow remains challenged, but the fundamentals of the industry are beginning to improve. And certainly, with the actions that have been taken, it could be that in 2024 timeframe that there could be shortages in the industry. But overall, Micron, I think, is taking decisive actions, as we have discussed, with respect to managing our CapEx, managing underutilization in the fab, managing OpEx and really focusing on supply growth as well. And in terms of some of the market trends and the customer trends that you've talked about, basically, we have shared that PC inventories are meaningfully better and will continue to improve over the next couple of quarters. Smartphones, some customers may have high inventory versus other customers, but inventories continue to improve in the smartphone market over a couple of quarters as well. Cloud revenue for us, we think, has bottomed in -- at Q2 timeframe. While inventories in cloud remain at elevated levels, inventories in data center remain at elevated levels. We do expect them to improve through the course of the year towards -- and get to normalized levels by the end of the year as well. And in cloud, the new CPUs do drive new D5 deployment, and Micron is well positioned with DDR5 with our strong position with the product. So we think that DDR5 is also tailwinds for the cloud demand with increased memory per server content that it will be driving as well. So these are all positive trends. And while we are navigating the business through an extremely challenging environment, I hope you see that Micron is responsibly managing its supply and continuing to focus on improving the demand supply environment for us. Of course, as we have said, the recovery in the industry could be accelerated if the demand -- if the supply for DRAM and NAND in terms of year-over-year growth was negative. We, of course, have taken our actions to bring our DRAM and our NAND supply growth for the year to be negative. Operator: And our next question comes from the line of Timothy Arcuri from UBS. Timothy Arcuri: I had a 2-part question. First, Sanjay, I was curious -- just following on the last question, what are the lasting changes that you think that the industry is going to implement coming out of the cycle? I mean it's been so much worse than I think any of us thought it would be. Do you think that the industry and you -- I mean, certainly, you, it sounds like, but do you think the industry is going to be more draconian about adding bit supply? Do you think you can engage customers in more LTAs, given that the writing clearly is on the wall about where pricing is going to go after all this? And then I guess also then for Mark, a question on the write-down for May. Why keep on producing if you're going to immediately write-down $500 million worth of inventory? Is it that you've hit some sort of floor in terms of utilization where you can't go below that? I'm just curious why you'd produce and you'd immediately write that down. Sanjay Mehrotra: So I think with respect to the industry environment, you have to look at that over the course of last 3 years, the world faced once-in-100-years kind of pandemic, once-in-multiple-decades kind of Russia-Ukraine war and its impact on the economy, 40-year-high inflation and its impact on the macro. And all of these really resulted in an environment that created a material dislocation in terms of the demand, the surge in demand, and then the inventory adjustments that took place and resulted in a material dislocation in the customer behavior as well. And now you are seeing the process of recovery that is starting, the process of recovery with respect to the supply growth reductions actions that are being implemented. We talked about ours today. And so this will ultimately lead to the industry to recover to healthier levels. The profitability levels in the industry today are simply not sustainable. So the demand and supply environment has to improve in the industry. And keep in mind that before this period of last 2 to 3 years with all these events that I just mentioned, the industry for 10 years plus has been disciplined particularly in DRAM. So I do believe that the investments in the future that require healthy levels of profitability and, of course, supply discipline will be back and the industry will grow. And particularly, keeping it in mind the strong demand trends. I talked about 2025 being -- we think will be a record revenue year for the industry because last 2 years have been slow demand growth in terms of shipments. We think '24 and '25 will be strong years that will drive strong growth. You are seeing actions on the supply side. The health of the industry will be restored in the future quarters. And no doubt that AI -- and we talk about generative AI, right? I mean this is very, very early stages of generative AI, and these are the trends that ultimately really drive greater demand for a long time to come for memory and storage. I mean when you look at really the future, it equals AI and AI equals memory, and Micron is well positioned with our technology and product roadmaps to address the growing opportunities there. Mark Murphy: Yes. Tim, on your second question, we have been actively taking supply out of the market. We took utilization levels down late summer. We increased that more in the fall. And as you heard on the call today, we've taking utilization down even further. And it's -- we're at levels now that none of us have seen before on underutilization at Micron and maybe in the company's history. So it's a significant reduction. I'll add that we do, as you know, build principally to WIP. So we're able to then finish those products later and minimize the amount of build. We've also very thoughtfully, when we've reduced utilization, done it in the way that we can maximize the cash benefits reductions that we get when we reduce. And then it's important to note that in the time horizon that we're looking at, we are seeing bit volumes increase sequentially from here on out. Now in the third quarter, I will note just some housekeeping that DRAM volumes were up modestly in the third quarter, and NAND is up sharply -- as strongly, I should say. And while both are price-challenged, NAND is more challenged. But again, we are seeing growth in bits, and we expect that too is the beginning of supply/demand getting into better balance. Operator: Our next question comes from the line of Chris Danely from Citi. Christopher Danely: Just a couple of specific questions on the expected recovery. Is your base case -- I guess in terms of the PC and cell phone demand for the second half of this year, is your base case expecting those end markets to get back to normal seasonality? And how should we expect utilization rates to trend as you continue to increase DRAM and NAND shipments? Should we expect you to get back to full utilization rates in a couple of quarters? Or is there some sort of revenue or bit level that you could give us that would indicate that you're back to full utilization? Sanjay Mehrotra: So with respect to the utilization rates, of course, we will continue to monitor the industry demand, and it's important for us to continue to work on bringing our days of inventory down, and utilization could continue into fiscal year '24 as well. We'll make decisions regarding utilization as a function of, again, our latest status in the future around our inventory position and assessment of demand. Regarding your question on the smartphone market, as we have said that in calendar year '24, we expect that smartphone unit volume will decline on a year-over-year basis, and Q2 growth for us was above seasonal. And as customers' inventory levels normalize over the course of the year, then normal demand trends will also be restored in the smartphone market. And regarding the smartphone market, even though the unit volume may be down on a year-over-year basis, important thing is that the smartphone market is shifting its mix more towards flagship phones, and flagship phones require more memory as well. So these are some of the trends that will play out as the demand grows over the course of the year for -- in the smartphone market. Operator: And our next question comes from the line of Harlan Sur from JPMorgan. Harlan Sur: On the underutilization charge, I know last call the team had articulated roughly $460 million of charges recognized primarily in fiscal Q3 and Q4. So how much of this is embedded in your Q3 numbers and Q3 guidance? And given the lower utilization, tick it down to 25% or cut it by 25%. If you continue to drive lower utilization through the second half of this calendar year, like how do we think about some of the utilization charges in fiscal Q4 and second half of this calendar year? Mark Murphy: Yes. Harlan, so I'll answer it briefly here at the beginning and then maybe take the opportunity to just talk through gross margins and effective utilization gross margin. So based on what we told you last quarter and I went into some length last quarter about the charges and period costs and so forth. But last quarter, we thought we'd have around $900 million in fiscal '23 and about $460 million would hit FY '23 COGS. With the underutilization that we've stepped up here, we see now about $1.1 billion in '23, and this is a combination of cost and inventory and period costs, and we actually see about $900 million of that flowing into FY '23. And that's driven by not only the increase in utilization costs -- underutilization cost is driven by the effects of the write-down and the accounting -- or inventory write-downs and the pull forward of cost. So if we step back and we look at our reported gross margin and our outlook, their a function of many factors, including pricing, inventory write-downs, which incorporate our forward view of pricing, the effects of utilization, volumes and the associated leverage on period costs, as we discussed last quarter, and of course, mix. These factors are continuously changing due to the market environment and our actions. And then further, I'll add that at these lower levels of profitability, the margin forecast and the results are more sensitive to slight changes in assumptions, importantly, such as price. So on price, given the recent price trends that we've seen and our current view on pricing, as we reported in Q2, we took a material write-down of inventories of $1.4 billion. And then the Q3 guide contemplates a write-down of $500 million on these additional inventories produced. With these write-downs, we pulled forward inventory costs and thus, we've lowered the carrying value of on-hand inventories. And as those lower cost inventory clears in future quarters, we'll realize more income in those quarters than we would have without the charge. So as an example, we expect around a $300 million benefit in Q3 from the Q2 charge as a portion of these lower cost inventories sell through. So as per your question, we also now have the underutilization effects creating higher cost inventories and then adding additional period costs. And as mentioned, we see about $1.1 billion of underutilization impact in FY '23, and most of that, as I mentioned, we expect to hit the P&L this year and some of it will carry over to next year. Now because of the effective write-down accounting, less of it will carry over to next year than would have otherwise. Now considering all this, we expect our reported second quarter gross margin to be the trough, so that 31.4%. And that, again, is driven in large part by the $1.4 billion write-down. With a much lower inventory charge forecasted in the third quarter, you see that we guided about 10 points better relative to Q2. Now again, these estimates are very sensitive to pricing changes, but in our current view, Q4 would be better than Q3 in the sense of a lower charge, if any. And then over time, as bit volumes grow as I talked about in the last call and we talked about today, we get leverage on our period costs and utilization improves. First, it will improve in the back end, then we'll have better utilization on the front end. And most importantly, as customer inventories continue to improve, inventories come down and supply/demand balance is better, we would expect reported margins to improve through FY '24. But again, a lot of factors at work here. If you were to just strip out the impairment charges or the write-downs in second and third quarters, Q2 would be a 7.3% gross margin, 3Q would be a negative 7.5% margin, so down considerably. And again, this is a function of the pricing environment and the cost of underutilization, including period costs, which, again, I discussed last quarter. Under this view, we would trough in the second half on gross margin, then would improve off these low levels through FY '24. So the -- in the end, the profile of the outlook is similar to what we discussed last quarter, though, of course, levels are lower with the pricing environment we've seen and the recovery is a bit delayed because of a bit lower volumes. But again, trough in the second half and some improvement expected through FY '24. Operator: Our next question comes from the line of Toshiya Hari from Goldman Sachs. Toshiya Hari: One question on the NAND business end market. You talked about your bit production being down year-over-year in calendar '23, which I believe is a little bit more draconian than most of your competition. Just curious how you're thinking about the strategy in NAND. Could this cause permanent damage to your relative competitiveness? And kind of related to that, one of your competitors has significant capacity in China. Wondering if you had customers come to you and express concerns around that, and if that could be a potential relative positive for you over the medium to long term. Sanjay Mehrotra: So with respect to NAND, we are well positioned with our technology and product roadmap. We shared with you today that 176-layer NAND yields are doing exceptionally well. 232-layer NAND, we have begun shipping in the market already. And with 176, as well as 232-layer, we have been well ahead of any competitor in the industry. 90% plus of our supply today in NAND that we are shipping is 176 plus 232-layers. So overall, we are well positioned with our technology. Our underutilization actions, we really believe are -- is what is needed to bring supply in line with demand, and we think these are the actions that are needed to restore the health of the business. And we have said in our prepared remarks that the industry recovery could be accelerated if NAND and DRAM supply growth, production growth, is negative on a year-over-year basis. And we certainly are taking our actions accordingly. And regarding China, I can't really comment on the part of other customers. But what I can tell you is that our customers really do see a strong technology execution, a strong product execution from Micron, and it's our product portfolio. We have done well with leveraging our NAND and DRAM in mobile markets with multichip packages. In automotive, I talked about some of the NAND product portfolio expanding and creating opportunities to strengthen our leadership position in automotive markets. And certainly, in the data center market, SSDs is also an opportunity. And our Gen4 NVMe SSDs have been continuing to do well in the client market as well. So our customers see our execution and innovation capabilities in technology and products, and that's what is bringing us stronger relationships with our customers for the NAND business. And of course, in terms of market opportunities, those continue to be healthy in terms of NAND-displacing HDDs in the data center, and Micron having the right products to grow those opportunities in the future. This has been -- we have been -- with NVMe SSDs and data center, we have been absent in the past, and now we have a healthy product portfolio, and we look forward to growing our opportunities in that space in the future. So NAND overall, in combination with DRAM, enables us to have a strong differentiated value for our customers. And Micron is well positioned with our technology and product roadmap, and certainly, we believe that our supply actions here are prudent. Operator: And our next question comes from the line of Aaron Rakers from Wells Fargo. Aaron Rakers: So Mark, I apologize, I just want to go back to the inventory discussion a little bit. Is there any way to bridge the prior comment of the $460 million, again, that Harlan had brought up relative to that? It sounds like $900 million for fiscal '23. I'm just curious on what's embedded in the gross margin for underutilization this quarter. And I guess on inventory, is there any risk of obsolescence of inventory? Or is the inventory good, it just gets sold through at a lower cost of goods at this point? Mark Murphy: Yes, the inventory is still good. It just gets it -- the cost basis is lower on the inventories. And then as far as your question on underutilization charges. So we do have, as just bridging it from what we said last time, last time we had total underutilization charges of about $900 million that were incurred in FY '23, of which we believe that $460 million would pass through to the P&L in FY '23. And that $460 million was a combination of costs and inventories that clear and then also period costs. Now our view with the increased underutilization, our view is $1.1 billion of costs in FY '23. And the amount that we believe will pass through in the second half year is $900 million. Again, that is a combination of costs that are in inventory and period costs. Now the reason it's a higher percent of the total FY '23 cost that we saw is because of this write-down accounting where that -- those inventory charges are pulled forward. So I hope that clears up the question. Operator: And our next question comes from the line of Joseph Moore from Morgan Stanley. Joseph Moore: Sorry if I missed this, and I appreciate the detailed puts and takes on gross margin. With regards to the lower cost or market adjustment, can you walk through the mechanics of how you got to this number for the February quarter? I guess a little over $1.4 billion. Is that -- I know you pull the inventory and then you compare that to the market price. How far out in time does that market price assessment take you? And I guess, to the extent that you're -- there's more than one quarter of sell-through that's being adjusted, how are you making the determination of what the price will be there? Mark Murphy: That's right, Joe. You did a decent job of sort of answering the question. But if you -- I would refer you to our public filings, but as a reminder, we evaluate the recoverability of inventory as a single pool. This method we've applied consistently and as disclosed, we analyzed the recoverability of our inventory based on quantities and values on hand at the end of each quarter. We project the period over which that inventory will be sold based on our most recent forecast and consider the expected selling prices during that forecast horizon. Since the pre-write-down inventory, days of inventory were about 235 days. That projection covers nearly 3 quarters. The amount by which our inventory carrying cost exceeds expected sales values adjusted for selling expenses determines the charge. And in this case, that yielded a $1.4 billion write-down in the second quarter, and we expect that same process to result in a $500 million charge in the third quarter. Operator: Our next question and final question for this session comes from the line of Krish Sankar from Cowen. Hadi Orabi: This is Eddy for Krish from TD Cowen. It seems you adjusted the language regarding your DDR4 and DDR5 crossover date from mid-2024 to mid-to-early 2024, so slightly better than prior outlook. It's a bit surprising given that data center inventory for DDR4 is pretty high. Is that improved outlook driven by better-than-expected demand for new CPUs from Intel and AMD? Or is it a function of you seeing higher share than expected in DDR5? Or is it more of data center customers buying ahead and taking advantage of low price environment? Any color regarding the improved outlook would be helpful. Sanjay Mehrotra: Regarding the mix of D4 to D5 transition, the comments that I made were for the industry trends, and those have not really changed versus our prior expectations. Of course, there are functions -- they are a function of deployment of the new CPUs, such as AMD Genoa and Intel Sapphire Rapids into the servers, into the data center infrastructure. And those -- and you are seeing that those CPUs are now starting to get broadly deployed and will continue to increase through the course of '23 and '24. So our expectations in terms of transition timing for D4 to D5 for the industry have not changed, and yes, we remain well positioned with our D5 product in the market. Operator: Thank you. This does conclude the question-and-answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.

Operator: Good day, and welcome to Micron's First Quarter 2023 Financial Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Farhan Ahmad, Head of Investor Relations. Please go ahead. Farhan Ahmad: Thank you, and welcome to Micron Technology's Fiscal First Quarter 2023 Financial Conference Call. On the call with me today are Sanjay Mehrotra, our President and CEO; and Mark Murphy, our CFO. Today's call is being webcast on our Investor Relations site at investors.micron.com including audio and slides, in addition, the press release detailing our quarterly results has been posted on the website along with the prepared remarks for this call. Today's discussion of financial results is presented on a non-GAAP financial basis, unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures may be found on our website. We encourage you to visit our website at micron.com throughout the quarter for the most current information on the Company, including information on the financial conferences that we may be attending. You can follow us on Twitter at MicronTech. As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, our expected results 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 you to the documents we filed with the SEC, including our most recent Form 10-K and 10-Q for a discussion of the risks that may affect our future 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. I'll now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Farhan. Good afternoon, everyone. Micron delivered fiscal first quarter revenue and EPS within our guidance range despite the pricing environment, which deteriorated significantly from our prior call. The industry is experiencing the most severe imbalance between supply and demand in both DRAM and NAND in the last 13 years. Micron is exercising supply discipline by making significant cuts to our CapEx and wafer starts while maintaining our competitive position. We are also taking measures to cut costs and OpEx across the Company. Customer inventory, which is impacting near-term demand, is expected to continue improving, and we expect most customers to have reduced inventory to relatively healthy levels by mid-calendar 2023. Consequently, we expect the fiscal second half revenue to improve versus the first half of our fiscal year. We expect our days of inventory to peak in our current fiscal Q2 and gradually improve over the next few quarters as our bit shipments improve and our supply growth is significantly reduced. Despite this improving bit shipment and revenue trajectory, we expect industry profitability to remain challenged through calendar 2023. The combination of our technology leadership, manufacturing expertise, diverse product portfolio, a strong balance sheet and our decisive actions provide a solid footing to navigate this challenging near-term environment. I'll start today with an overview of our technology position. Micron continues to lead the industry in both DRAM and NAND technology. We are first to market with 1-beta DRAM and 232-layer NAND. While both on 1-beta DRAM and 232-layer NAND offer strong cost reductions, we have slowed their ramps to better align our supply with market demand, as we previously indicated. Yield trajectory for these nodes is on track, and we are continuing to qualify these nodes across our product portfolio and will be well positioned to ramp these nodes when industry conditions improve. Our 1-beta DRAM node, which we introduced in fiscal Q1 delivers around a 15% power efficiency improvement and more than 35% bit density improvement versus 1-alpha. 1-beta will be used across our product portfolio, including DDR5, LP5, HBM and graphics. Now turning to our end markets, across nearly all of our end markets, revenues declined sequentially in fiscal Q1 due to weaker demand and steep decline in pricing. Shipment volumes were impacted by our customers' inventory adjustments, the trajectory of their end demand and macroeconomic uncertainty. We believe that aggregate customer inventory while still high, is coming down in absolute volume as end market consumption outpaces shipping. In data center, we expect cloud demand for memory in 2023 to grow well below the historical trend due to the significant impact of inventory reductions at key customers. End demand at cloud customers is not immune to macroeconomic challenges, but should strengthen once the economic environment improves. DDR5 is extremely important for data center customers as the industry begins to transition to this new technology in calendar Q1. As modern servers pack more processing cores into CPUs, the memory bandwidth per CPU core has been decreasing. Micron D5 alleviates this bottleneck by providing higher bandwidth compared to previous generations enabling improved performance and scaling. Feedback from our customers across the x86, and ARM ecosystem suggests that Micron leads the industry with the best D5 products. We expect server D5 bit shipments to become more meaningful in the second half of calendar 2023, with crossover expected in mid-calendar 2024. Building on our existing D5 products, in fiscal Q1, we began qualifying 1-alpha 24-gigabit D5, and we announced availability of D5 memory for the data center that is validated for the new AMD EPYC 9004 series processors. In addition, we are also making progress on CXL, and in fiscal Q1, we introduced our first CXL DRAM samples to data center customers. In data center SSDs, we are continuing to proliferate our 176-layer SSD, and in fiscal Q1, we nearly doubled the number of customers where we are qualified. We have also completed qualification of our 176-layer QLC with an important enterprise customer. In PCs, we now forecast calendar 2022 units to decline in the high-teens percentage and expect 2023 PC unit volume to decline by low to mid-single-digit percentage to near 2019 levels. Client D5 adoption is expected to gradually increase through calendar 2023, with crossover in mid-calendar 2024 and we are well positioned for this transition with leading D5 products. We also continue to lead the industry in QLC, and it is an important competitive advantage for us. In fiscal Q1, client and consumer QLC SSDs had very strong growth which helped increase our NAND QLC mix to a new record. Earlier this month, Micron began shipping the world's most advanced client SSD, featuring 232-layer NAND technology. As the world's first client SSD to ship using NAND over 200 layers, the Micron 2550 NVMe SSD demonstrates superior speed, density and power savings enabled by our industry-leading NAND node. In Graphics, we expect bit growth to outpace the broader market in calendar 2023. Micron continues to drive the industry's fastest graphics memory with 24 gigabit per second, 16-gigabit GDDR6X shipping in high-volume production. In mobile, we now expect calendar 2022 smartphone unit volume to decline 10% year-over-year versus our high single-digit percentage decline projection last earnings call. We forecast calendar year 2023 smartphone unit volume to be flattish to slightly up year-over-year driven by improvements in China following the reopening of its economy. Micron continues to build on a strong product momentum in mobile. As of fiscal Q1, 1-alpha comprised nearly 90% of mobile DRAM base and 176-layer made up nearly all of our mobile NAND bit shipments. We are also well positioned for the LP5 transition and in FQ1, the majority of our mobile DRAM bit shipments were LP5. In fiscal Q1, our LP5X was validated for Qualcomm's latest platform and integrated into Snapdragon 8 Gen 2 reference designs. In addition, we shipped the industry's first 1-beta DRAM qualification samples with our 16-gigabit LP5. Last, I'll cover the auto and industrial end markets. Micron is well positioned as a leader in automotive and industrial markets, which offer strong long-term growth and relatively stable margins. In fiscal Q1, auto revenues grew approximately 30% year-over-year, just slightly below our quarterly record in fiscal Q4 2022. The automotive industry is showing early signs of supply chain improvement and auto unit production continues to increase. The macro environment does create some uncertainty for the auto market but we see robust growth in auto memory demand in fiscal 2023. This is driven by the volume ramp of advanced next-generation in-vehicle infotainment systems as well as the broader adoption of more advanced driver assistance systems. Over the next five years, we expect the bit growth CAGR for DRAM and NAND in autos to be at approximately twice the rate of the overall DRAM and NAND markets. The industrial market saw continued softening in Q1 as our distribution channel partners reduced their inventory levels and end demand weakens for some customers. The fundamentals of industrial IoT, AI, ML, 5G and Industry 4.0, all remain intact, and we expect volumes to improve in the second half of our fiscal year. In our fiscal first quarter, Micron continued to collaborate closely with customers and achieved advanced product sampling and design-in across automation, OEMs, ODMs and integrators with our latest generation of D5, LP5 and 3D NAND solutions. Now turning to our market outlook. We expect calendar 2022 industry bit demand growth in the low to mid-single-digit percentage range for both DRAM and NAND. For calendar 2023, we expect industry demand growth of approximately 10% in DRAM and around 20% in NAND. For both years, demand in DRAM and NAND is well below historical trends and future expectations of growth largely due to reductions in end demand in most markets, high inventories at customers, the impact of the macroeconomic environment and the regional factors in Europe and China. Near term, over the next few months, we expect gradually improving demand trends for memory as customer inventory levels improve further, new CPU platforms are launched and China demand starts to grow as the economy reopens. Longer term, we [Audio Gap] have declined from our expectation earlier this year primarily due to lowered growth expectations from PC and smartphone markets and some moderation in the strong long-term growth in the cloud. Turning to industry supply growth. Industry supply growth in calendar 2022 for DRAM and NAND is closer to their respective long-term demand CAGRs and well above the industry demand growth in calendar 2022. Given the current pricing and resulting industry margins, we expect a significant decline in industry capital investments as well as a reduction in utilization rates for the industry. We expect that DRAM and NAND industry supply growth in calendar year 2023 will be well below their long-term CAGR and also well below expected demand growth in 2023. Due to the significant supply/demand mismatch entering calendar 2023, we expect that profitability will remain challenged throughout 2023. The timing of the recovery in profitability will be driven by the rate and pace at which supply and demand are brought into balance and inventories are normalized across the supply chain. We believe that negative year-on-year calendar 2023 industry DRAM bit supply growth and flattish year-on-year calendar 2023, industry NAND bit supply growth would accelerate this recovery. Micron is taking a number of decisive actions in this environment to align supply with demand and to protect our balance sheet. First, we are reducing our CapEx investments to reduce bit supply growth in 2023 and 2024. Our fiscal 2023 CapEx is being lowered to a range between $7 billion to $7.5 billion from the earlier $8 billion target and the $12 billion level in fiscal year '22. This represents approximately a 40% reduction year-on-year and we expect fiscal 2023 WFE to be down more than 50% year-on-year. We are now significantly reducing our fiscal 2024 CapEx from earlier plans to align with the supply-demand environment. We expect fiscal 2024 WFE to fall from fiscal 2023 levels even as construction spending increases year-on-year. Second, we have reduced near-term bit supply through a sharp reduction in wafer starts. As we have previously announced, we reduced wafer starts for DRAM and NAND by approximately 20%. Through a combination of these actions, we expect our calendar 2023 production bit growth to be negative in DRAM and up only slightly in NAND. Given the manufacturing cycle times, the full impact of the wafer start reductions on supply will be realized starting in our fiscal Q3. Due to our reductions to our fiscal 2024 WFE CapEx, our bit supply levels in 2024 will be materially reduced from the prior trajectory. We continue to target a relatively flat share of industry bit supply. Third, in response to the decline in expected long-term CAGR for DRAM and NAND bit growth, we are slowing the cadence of our process technology node transitions. This change will help us align our long-term bit supply CAGR investments. Given our decision to slow the 1-beta DRAM production ramp, we expect that our 1-gamma introduction will now be in 2025. Similarly, our next NAND node beyond 232-layer will be delayed to align to the new demand outlook and required supply growth. We expect these changes to the technology node cadence to be an industry-wide phenomenon. With our industry-leading technology capability, we expect to remain very well positioned. Fourth, we are taking significant steps to reduce our costs and operating expenses. We project our spending to decrease through the year driven by reductions in external spending, productivity programs across the business, suspension of 2023 bonus company-wide, select product program reductions and lower discretionary spend. Executive salaries are also being cut for the remainder of fiscal 2023, and over the course of calendar 2023, we are reducing our headcount by approximately 10% through a combination of voluntary attrition and personnel reductions. We expect to exit fiscal 2023 with quarterly OpEx of around $850 million with additional savings and cost in our P&L. Although we have taken these aggressive steps, we are prepared to make further changes and remain flexible to exercise all levers to control our supply and manage our cost structure. I will now turn it over to Mark. Mark Murphy: Thanks, Sanjay. Fiscal Q1 revenue and EPS came within our guidance ranges despite worsening market conditions over the course of the quarter. Total fiscal Q1 revenue was approximately $4.1 billion, down 39% sequentially and down 47% year-over-year. Fiscal Q1 DRAM revenue was $2.8 billion, representing 69% of total revenue. DRAM revenue declined 41% sequentially with bit shipments decreasing in the mid-20% range and prices declining in the low 20% range. Fiscal Q1 NAND revenue was $1.1 billion, representing 27% of Micron's total revenue. NAND revenue declined 35% sequentially with bit shipments declining in the mid-teens percent range and prices declining in the low 20 percentage range. Now turning to revenue by business unit. Compute and networking business unit revenue was $1.7 billion, with weakness across client, data center, graphics and networking. Embedded business unit revenue was $1 billion, with automotive staying stronger than consumer and industrial markets. Storage business unit revenue was $680 million, while QLC mix increased to a new high. Mobile business unit revenue was $655 million, a low level, partly due to the timing of shipments between fiscal Q1 and fiscal Q2. We expect mobile revenue to grow through the rest of the fiscal year. The consolidated gross margin for fiscal Q1 was 22.9%, down approximately 17 percentage points sequentially, primarily due to lower pricing. Operating expenses in fiscal Q1 were down roughly $50 million sequentially to $101 billion. We are taking significant additional actions to reduce our operating expenses through the remainder of this fiscal year. We reported an operating loss of $65 million in fiscal Q1, resulting in an operating margin of negative 2%, down from operating margins of 25% in the prior quarter and 35% in the prior year. Fiscal Q1 adjusted EBITDA was $1.8 billion, resulting in an EBITDA margin of 45%, down 9 percentage points sequentially. Fiscal Q1 taxes were $1 million as a result of profit before tax being close to breakeven. Non-GAAP loss per share in fiscal Q1 was $0.04, down from earnings per share of $1.45 in fiscal Q4 2022 and $2.16 in the year ago quarter. Turning to cash flows and capital spending. We generated $943 million in cash from operations in fiscal Q1, representing approximately 23% of revenue. Capital expenditures were $2.5 billion during the quarter, and we see CapEx trending down from these levels through fiscal '23. Free cash flow was negative $1.5 billion in the quarter. Under a 10b5-1 plan in place during the quarter, we completed share repurchases of $425 million or 8.6 million shares at an average price of $49.57. Our ending fiscal Q1 inventory was $8.4 billion, and average DIO for the quarter was 214 days. The rapid decline in bit shipments in fiscal Q4 and fiscal Q1 has driven inventories well above our target levels, and our actions reflect our intent to work these down. We expect our DIO to peak in our fiscal Q2 and then gradually improve. We ended the quarter with $12.1 billion of total cash and investments and $14.6 billion of total liquidity. Given macroeconomic uncertainty and the market environment, we bolstered our liquidity in the quarter through $3.4 billion of added debt, bringing our total fiscal Q1 ending debt to $10.3 billion. With this additional debt and net of income on our deposits, we project net interest income of approximately $15 million in the fiscal second quarter. We project and intend to maintain ample liquidity while maintaining leverage consistent with our investment-grade rating. Now turning to our outlook for the fiscal second quarter. The near-term market environment remains challenging and negatively impacts our profitability outlook. For both DRAM and NAND, we expect bit shipments to be up in fiscal Q2, but revenue to be down. Included in the fiscal second quarter guide is an insurance recovery of approximately $120 million, most of which will be recognized as revenue. This insurance recovery is related to an operational disruption in 2017 and settlement occurred in fiscal Q2. Beyond fiscal Q2, we expect revenue and free cash flow to improve in our fiscal second half as we anticipate a continued recovery in demand. Related to announced wafer start reductions, we forecast approximately $460 million of headwinds to our cost of goods sold in fiscal '23, most of which we expect to incur in the second half. Excluding these underutilization effects, we expect fiscal 2023 cost per bit reduction to be healthy in DRAM but to be challenged in NAND, primarily due to inflation and energy costs unique to Singapore. As higher cost inventory sell-through, we expect these underutilization impacts to continue into fiscal 2024. In this environment and considering the outlook, we continue to aggressively manage costs. And as Sanjay mentioned, we see OpEx trending down from approximately $1 billion in fiscal Q1 to around $850 million by fiscal Q4. Below the operating line, we will have lower net interest income, as previously mentioned. While there is still a fixed level of tax, as we discussed last quarter, due to the geographic mix and level of income, we now see fiscal 2023 taxes coming in at less than $250 million. We are reducing our planned capital expenditures in fiscal 2023 to be in the range of $7 billion to $7.5 billion with the spending weighted towards the first half of the fiscal year. Fiscal 2023 CapEx includes an increased level of construction for long-term capacity planning. WFE CapEx will be down more than 50% year-over-year. We are also significantly reducing CapEx in fiscal 2024 compared to prior plans. Until market conditions and our cash flows improve, we will focus our capital return on dividends and have suspended our share repurchases for now. With all these factors in mind, our non-GAAP guidance for fiscal Q2 is as follows. We expect revenue to be $3.8 billion, plus or minus $200 million. Gross margin to be in the range of 8.5%, plus or minus 250 basis points; and operating expenses to be approximately $945 million, plus or minus $15 million. We expect tax expense of approximately $60 million. Based on a share count of approximately 1.09 billion shares, we expect EPS to be a loss of $0.62, plus or minus $0.10. As we work through this period of challenging market conditions, Micron has the benefit of best-in-class technology, a competitive product portfolio, strong operations, a solid balance sheet and most critically, a tenacious team. Beyond this downturn and over the long term, we are confident that memory and storage revenue growth will outpace the broader semiconductor industry. This is supported by the combination of strong secular trends, memory content growth and better supply-demand balance. Micron is focused on operating and investing in a responsible and disciplined manner to achieve profitable growth and free cash flow generation consistent with our long-term model. I will now turn it back to Sanjay. Sanjay Mehrotra: Thank you, Mark. In the last several months, we have seen a dramatic drop in demand. Micron has responded quickly to reduce our CapEx and supply output, and we are taking strong enterprise-wide actions to control our expenses. We have increased liquidity on our balance sheet and adjusted our operational plans. While the environment remains challenging, we currently expect second half fiscal 2023 revenue to improve from the first half. We are confident that the broad advantages enabled by data-centric technologies will create long-term growth for our industry and expect the total available market to reach approximately $300 billion by 2030. Thank you for joining us today. We will now open for questions. Operator: [Operator Instructions] Our first question will come from the line of Tim Arcuri with UBS. Please go ahead. Tim Arcuri: Sanjay, I had a question about the market outlook for DRAM. You have already said that your DRAM production will be down mid- to high singles year-over-year in calendar '23. And then you said in your remarks, you said that if the industry production was down, this would accelerate the recovery in profitability. But at this point, I guess, I have two questions. One, do you think the industry will be down in terms of production for DRAM? There's some concern about what your big core income competitor is going to do. So I'm just sort of curious, do you think that they are cutting such that the industry production in DRAM will be down just like yours is down year-over-year? Sanjay Mehrotra: So Tim, I would like to point out that what we said is that our DRAM supply growth would be slightly negative in fiscal year '23. So not mid- to single high single digits -- supply growth for Micron would be negative. That's because we have taken the actions. We are taking the actions in terms of supply -- wafer output reduction reducing supply through underutilization in the fab. And as you know, we have also CapEx reduction. We have pushed out our 1-beta DRAM production in the fab so that we can bring our supply closer to demand. So the industry is oversupplied, and we do believe that actions need to be taken as reflected in Micron's actions with respect to supply reduction. And of course, the rate and pace of the industry supply cuts would affect the recovery of the industry in terms of bringing supply and demand balance closer together. So look, I mean, we cannot specifically comment with respect to the -- our competitors. But what we can tell you is that if the industry supply is -- supply growth in calendar year '23 is negative, and for DRAM and flattish for NAND, it will accelerate the recovery in the industry. Operator: Thank you. One moment for our next question and that will come from the line of C.J. Muse with Evercore ISI. Your line is open. C.J. Muse: I guess the question is your -- you've -- in the last few years, really taking the leadership role both in DRAM and NAND. And so as you think about hitting the worst downturn in 13 years and taking the appropriate reductions in supply and cost. How can you, at the same time, make sure that you maintain your leadership? What are you doing on that front? Such that when we do go into the next upturn that you are in that lead position, lead role and can really take advantage of technology again. Sanjay Mehrotra: Thank you, C.J. Of course, Micron is in a strong technology position. We feel very good about our technology capabilities and our road map. Our -- if you look at our 1-alpha DRAM that compared to our prior 1-z node gave us a 40% bit efficiency gain per wafer. And now if you look at our 1-beta, industry, you would expect less, but what you see in our 1-beta node is a 35% improvement in terms of bit efficiency per wafer versus our 1-alpha node. And our 1-beta DRAM node is well designed for D5, DDR5 deployment as well with good performance and good power efficiency improvements over prior products. So it's really 1-beta is a very good node when you compare it to any other even EUV nodes that are out there in the industry. So it's an industry-leading node. We are well positioned with our 1-beta node. And of course, our 1-gamma node will be well positioned as well. And we are timing the production of these nodes to maximize the ROI in our R&D and manufacturing. And of course, to bring supply and demand in balance overall and keeping in mind the longer-term CAGR for DRAM growth and adjusting our technology cadence accordingly. So I think we are managing our technology node development and manufacturing plans our supply plans in a highly responsible fashion, and we'll be well positioned with our technology. And same thing on NAND side, our 232-NAND is in very good shape. Both 1-beta and 232-layer NAND in terms of cost, in terms of quality and in terms of, of course yields, we are well positioned with them and continuing to work with customers in qualifying those products. So not only just 1-beta and 232 layer, we feel good about our technology road map, capabilities and position with our plans for 1-gamma and the node beyond the 232-layer in NAND. And just to point out that Micron, I was recently talking to a leading customer and executive there, and the customer was facing Micron's as being the best in the industry. And same kind of accolades we get from customers on LP5, on GDDR6 on our QLC NAND. And of course, we are broadening our portfolio of products too. So not only with respect to technology, we are well positioned. I think we are well positioned with respect to our product momentum as well. Operator: Thank you. One moment for our next question, that will come from the line of Chris Caso with Credit Suisse. Your line is open. Chris Caso: Question is on the pace of gross margins as you go through the year. And you spoke about revenue and free cash flow being better in the second half. Do you believe that's the case for gross margins as well? Do you think gross margins are bottoming here? And if you can comment about some of the impact of the unutilization charges and how they flow through the year and beyond Q2? Mark Murphy: Chris, this is Mark. I'll take that. A few comments on the profile. We did say that Q1 would be the bottom for bits, and we expect bits to be up in the second quarter and revenue down. So that points to continued challenges around the market conditions. We also expect 2Q to be peak on DIO, but 3Q will be the peak on inventory dollars. So the industry remains in an oversupply situation. But customers are depleting inventories, and we expect them to be in a better position by the second quarter of the calendar year. But profit is going to be challenged through the year, and that will challenge gross margins. Now the utilization effects specifically maybe I'll talk just costs generally first. In FY '22, and historically, Micron has strived and achieved cost downs in line or better than the industry, node advancements, manufacturing, productivity and other factors. But fiscal year '23 is going to be challenging in the near term as these utilization effects and low volumes weigh on the cost per unit and weigh on margins. And there are three principal drivers that will help explain that. One is maybe an overlooked factor is just simply the effects of routine period costs that run through the business on a normal basis, scrap preproduction volumes, pre-qual volumes, freight, royalties, these sort of things. And when you add this sharp decline in volumes and revenue, those period cost effects are going to impact margins. And so we're seeing that. The second driver is the much lower volumes are creating underload issues in the back end. And of course, that creates higher cost inventories that some is period cost, but most of it still hangs up in inventory and creates higher inventory costs. And that also is a significant factor early in the year, especially weighing on our costs. And then third, most visible has been our announcements to lower utilization on the front end. And that is a significant cost -- and we have -- most of those costs are going to be in inventories also versus period cost. And we said that $460 million of -- which is over -- just over half of the total fixed costs that will need to be applied will impact FY '23. Now the rest of those costs will flow through in FY '24. Now if our volumes are better than expected, those higher cost inventories will be pulled through earlier, if volumes are less than expected than more of those costs will flow through in FY '24. But right now, we're seeing about $460 million in FY '23. So in summary, we expect cost per bit to be up modestly in Q1. Again, that's mostly just the period cost effects that are normal and then some back-end effects and that's related to just low volumes. That's going to be a bit more cost in the second quarter. Again, and this is more back-end effects as those inventories clear. And then the third quarter, we're going to have the back-end effects of underutilization and the front-end effects as that inventory starts to clear. But then in the third quarter and then especially in the fourth, we have offsets. In fact, we get -- we resume cost down in the fourth quarter, as volumes have been -- as volumes pick up and absorption occurs. It's not a permanent condition. This is just a function of volumes that are unseen drops in volumes, and you see -- and actually the steps that we're actively taking to reduce supply. And I think it's worth noting that cost is certainly important. It's a great focus. We're managing the details. But the largest impact to the profitability and financial outlook for us is the supply-demand balance -- and the rate and pace of this improvement is going to be a function of aligning supply with demand, and we're taking decisive actions on CapEx and utilization to address it. Operator: Thank you. One moment for our next question, that will come from the line of Tom O'Malley with Barclays. Your line is open. Tom O'Malley: My question is really on the demand side. I think that you did a good job of calling out what you saw from an end market perspective into next year. But I just wanted to ask specifically on the data center. You've called out inventory in the past, but versus where you guys talked about the data center last quarter, do you think that inventory at customers was worse than you initially thought? Or do you think that you're seeing a weakening in terms of data center and demand? Sanjay Mehrotra: So inventories with data center customers including cloud is higher than what we thought. So that inventory adjustment has begun, and it has some wood to chop in that area. And of course, the end demand for cloud operations that are driven by consumer-related activities given the overall consumer environment and the macro trends, some portions of cloud and demand may be weaker as a result of that as well. And also in the macro environment that exists today, there is -- given the higher interest rates and other macro trends, companies do become somewhat cautious in terms of managing their overall expenses and any long-term agreements, et cetera. So that can impact some of the current environment for end demand in cloud. But what I would like to point out is that digitization trends ultimately do remain positive. Cloud definitely helps drive that efficiency that businesses seek in an environment like this. We do absolutely expect that once we get past the current macroeconomic environment and macroeconomic weakening, longer-term trends for cloud will remain strong. In terms of the current environment, yes, inventory adjustments and some impact of cloud and demand weakening as well. that's impacting our overall data center outlook. Operator: Thank you. One moment for our next question, that will come from the line of Krish Sankar with Cowen. Please go ahead. Krish Sankar: I just have a quick question for Mark. Mark, you said inventory base to peak in the second quarter and inventory dollars in F3Q. What kind of inventory days should we expect in F3Q? And what is the risk of inventory write-down? Kind of wondering what is your inventory write-down methodology? Mark Murphy: Sure. I think I got the question. So the -- as mentioned, the DIO peak, we expect to be in 2Q, the dollars in 3Q. And from both those peaks, we expect it to gradually improve, which is consistent with profiles that we've said before, though the conditions have worsened and volumes are a bit lower. Yes, we do expect customers to be in better shape by the second quarter of calendar year, and that's encouraging. And then you've seen the steps we've taken on supply to get inventories down. But I did cover this recently at a conference, bears repeating. Inventory is -- it's obviously a risk where we carefully and thoroughly monitor and with the lower utilization we have and the higher costs associated with that per unit. And then the weak market conditions we have, the margin of safety we have has decreased from where it was. We did a thorough quarter-end analysis as we always do. And of course, that includes the outlook. And in that, we determined that there are no write-downs to the lower of cost or net realizable value warranted. We perform extensive reviews of project -- projected pricing. We analyze customer trends, and there are a number of other factors. If our estimates did change, further, there could be risk of write-off in future quarters but none this in the November quarter. I do refer you to our inventory policy that's disclosed in our 10-K. We have a long-standing policy of evaluating inventory as a single pool, and we evaluate this policy regularly, and we apply consistently. Operator: Thank you. One moment for our next question, that will come from the line of Mehdi Hosseini with Susquehanna. Please go ahead. Mehdi Hosseini: Yes. Sanjay, I want to go back to your, the color you provided on the demand trend by end customer or by end application. You've highlighted that the PC unit are expected to be down 5% to 10%. If I just take the current build rate in December and apply a seasonal decline in Q1, it suggests to me that PCs as the end market application would bottom by March, April time frame, let's say, post-Chinese New Year. Could that be a catalyzed -- could that actually catalyze a more improved visibility with pricing for DRAM and NAND? And I asked you because it was the PC end market that rolled over. And I'm just trying to better understand whether PCM market could help stabilize certain part of the DRAM and NAND segments? Sanjay Mehrotra: Well, of course, the markets where DRAM and NAND are well diversified. PC is one of the markets. And we already talked about the decline in PC units. Actually, in calendar year '22, high teens decline in PC units. This is the sharpest decline in the history of the PCs, and smartphones, another area where unit sales of smartphones globally down 10% as well. And that, too, historically, in terms of a decline is high. So these are, of course, impacting the end consumer demand and then inventory adjustments on top of it impacting the demand. And of course, as I spoke about earlier, that inventory adjustments are happening in other parts of the market as well. I think with respect to our outlook for next year in terms of demand, we expect about 10% demand growth for DRAM in calendar year '23. And when you look at mid-single digits, low- to mid-single-digit demand growth in '22 and approximately 10% in '23 that over a two-year time period is really significantly lower growth rate compared to the years in the past, the CAGRs that have been prevalent over time. So, I think what's important here is that the supply has to be reduced. The biggest factor here really would be the supply reduction. Of course, once inventory adjustments, we are able to get past and the macroeconomic environment improves. The long-term trends for demand, driven by all the factors we have spoken about before, AI, 5G, industrial IoT, autonomous, all of those long-term factors will drive that demand along the lines of the CAGR that we have discussed today. But in the near term, the biggest factor to really address the demand supply is a reduction in supply in the industry. And of course, the rate and pace of the financial performance improvement will very much depend on how fast supply comes into balance. And as we have discussed, we have taken our actions in terms of CapEx reduction, in terms of underutilization, in terms of adjusting the technology node cadence. And we do believe that with the supply actions, the industry environment will improve. I do see that in fiscal year '24, the revenue, the profit and the free cash flow profile would be much better than '23. And of course, again, will be a function of how quickly the supplier just to demand. Operator: Thank you. One moment for our next question, that will come from the line of Toshiya Hari with Goldman Sachs. Your line is open. Toshiya Hari: I had one quick clarification and then a question, clarification for Mark. You talked about the $460 million of headwind related to the underutilization of your fabs. When you throw out that estimate, what assumptions are you making for utilization rates for the next couple of quarters? You obviously talked about the 20% cut as of today. But are you assuming you stay at that 20% rate for Feb, May and perhaps August? Or are you assuming production rates or utilization rates kind of step up as you progress through the remainder of the fiscal year. And then the question is on the demand side. Sanjay, in your prepared remarks, you talked about customer inventory normalization and new server CPU platforms in China reopening as some of the key drivers for bit growth over the next couple of months or few months. How much visibility do you have into those three dynamics? You talked a little bit about inventory, but we're hearing customer inventory in some cases, might be increasing given some of the deals, not just you specifically, but the industry is striking, the server platforms could be a little bit more skewed to the second half of calendar '23 and China reopening still seems pretty gray. So curious what kind of visibility you have there. Mark Murphy: Yes, Toshi, I'll just briefly touch on the first one. We're expecting these elevated underutilization levels through most of -- well, through fiscal year '23. And beyond that, we're just going to always be evaluating the market conditions and then we'll update you and the market accordingly. Sanjay Mehrotra: And on your questions regarding customer inventory, what I would like to point out is that customer inventory in aggregate -- and that means in terms of volume in bits, we believe it has come down, although still at high levels. And you can see that in Q2, we are guiding to increase bit shipments. And just keep in mind that where demand used to be in terms of or the industry shipments used to be a few quarters ago versus now, they have come down substantially. And even though there may be some end market weakening in demand that points to that some of the inventory is being consumed by the customers. Basically, some of the inventory that the customers are holding is being consumed by them to address their end demand. So basically, the ship out by customers is greater than the ship in, in terms of purchases by customers from suppliers. And this trend of inventory improvement, gradual inventory improvement we believe will continue. And by mid calendar '23, we are projecting even though we don't have perfect visibility, but based on all of our discussions with our customers, we are projecting that inventory at customers will be in relatively healthier position by that time. And that's where we say that our second half of fiscal year revenue will be greater than first half, and we would expect continued improvements beyond the second half as well. And regarding the question on China, of course, China reopening has to be monitored closely, and it may be choppy. In terms of the near term, we are assuming that China is reopening for the second half of the calendar year, will result in benefit in terms of increased demand coming from the China markets. And of course, China reopening is not just issue to be monitored in terms of Chinese customer demand, but also any impact on global electronics system supply chains. And of course, we have assembly and test operations in China as well, and we are continuing to monitor those as well with respect to some of the recent COVID cases there. So, I think China, COVID cases and reopening will have to be -- continued to be closely monitored. Toshiya Hari: And Sanjay, Sapphire Rapids in Genoa, the new server CPU platforms, visibility there in terms of the ramp? Sanjay Mehrotra: So our products are well positioned, and we expect that these will be ramping during the course of '23 and, of course, continue to ramp in '24 as well. And these are the ones that will drive a greater D5 attach with the servers. And as we said, we expect that for servers, D5 in 30s percentage range in terms of deployment by end of calendar '23 and somewhere around 50% by mid-calendar. So our products are well positioned, and we are looking forward to deployment of those new CPU platforms and that will drive healthier dynamic with respect to D5 deployment. These new processors, they work with more cores. They increase the attach rate for memory because they are bandwidth hungry and that just points to greater adoption of DRAM, particularly D5 memory with those processors. Toshiya Hari: Thank you so much. Sanjay Mehrotra: So of course, it has been pushed out. I mean compared to the plans last year or over the last few months, some of those new processor deployments have been pushed out, but we look forward to them getting broadly adopted as the year progresses in '23. Operator: Thank you. And we do have time for one final question. And that will come from the line of Aaron Rakers with Wells Fargo. Your line is open. Aaron Rakers: I'll make just a quick question. I'm just curious, as you guys kind of thought about the guidance for this current quarter and given the pace of change that we saw in the pricing environment through the course of this last quarter. I guess, when you roll up your assumptions for DRAM and NAND, is it as simple to think that you guys are assuming kind of a similar pricing environment our pace of pricing declined this quarter as we saw last quarter? Or are you kind of factoring in any kind of acceleration of price degradation? Sanjay Mehrotra: So look, we don't comment specifically on pricing, but I can certainly tell you that both DRAM and NAND are experiencing challenging environment. And again, it is about oversupply in the market and decisive actions that we have highlighted today are the kind of actions that are important to make progress towards bringing supply and demand into balance. Operator: Thank you. Thank you all for participating. This concludes today's conference call. You may now disconnect.

Operator: Thank you for standing by, and welcome to Micron's Fiscal Fourth Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program may be recorded. And now, I'd like to introduce your host for today's program Farhan Ahmad, Vice President, Investor Relations. Please go ahead, sir. Farhan Ahmad: Thank you, and welcome to Micron Technology's fiscal fourth quarter 2022 financial conference call. On the call with me today are Sanjay Mehrotra, our President and CEO; and Mark Murphy, our CFO. Today's call is being webcast from our Investor Relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website along with the prepared remarks for this call. Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of the GAAP to non-GAAP financial measures may be found on our website. We encourage you to visit our website at micron.com throughout the quarter for the most current information on the company, including information on the financial conferences, which we may be attending. You can also follow us on Twitter at MicronTech. As a reminder, the matters we are discussing today includes forward-looking statements regarding market demand and supply, our expected results 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 you to the documents we file with the SEC, including our most recent Form 10-K and 10-Q for a discussion of the risks that may affect our future 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. I'll now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Farhan. Good afternoon, everyone. Micron delivered record annual revenue in fiscal 2022 with solid profitability and free cash flow, despite the challenging environment in the latter part of the year. In 2022, we ramped our industry-leading 1-alpha DRAM and 176-layer NAND nodes across our portfolio and returned a record amount of cash to shareholders. We strengthened our product portfolio significantly during the year, as evidenced by record revenue in mobile, auto, industrial and networking end markets. Our share gains in client and data center SSDs contributed to record revenue in SSDs and also in our consolidated NAND business. We also ramped new product categories like high-bandwidth HBM2e memory and GDDR6X. In addition, a record number of customers recognized Micron as the industry leader in product quality. Our fiscal Q4 financial results were impacted by rapidly weakening consumer demand and significant customer inventory adjustments across all end markets. We are responding decisively to this weak environment, by decreasing supply growth through significant cuts to fiscal 2023 CapEx and by reducing utilization in our fabs. We are confident that the memory industry supply-demand balance will be restored, as a result of reduced industry supply growth combined with the long-term demand growth drivers for memory. Micron's technology and manufacturing leadership, deep customer relationships, diverse product portfolio and strong balance sheet put us on a solid footing to navigate this industry down cycle and position the company for strong long-term growth. Our industry-leading 1-alpha DRAM and 176-layer NAND nodes drove strong cost reductions in fiscal 2022. In fiscal Q4, we led the industry again in introducing our 232-layer NAND, becoming the first company to enter volume production on a node with more than 200 layers. We also remain on track to begin the ramp of our 1-beta DRAM node in manufacturing by the end of calendar 2022. Both the 1-beta DRAM node and 232-layer NAND node will provide us with robust cost reduction when they ramp in high volume. Artificial intelligence, cloud computing, electric vehicles and the ubiquitous connectivity offered by 5G are strong long-term demand drivers for memory and storage. As we have discussed previously to support memory demand in the second half of the decade and beyond, we will need to add new DRAM wafer capacity. The recently passed CHIPS and Science Act will help to reduce the memory manufacturing cost disparities that exist between the U.S. and Asia. Following passage of the CHIPS Act, Micron announced our intent to invest $40 billion through the end of the decade in leading-edge memory manufacturing in the U.S., contingent on CHIPS Act support. These investments will ultimately create tens of thousands of American jobs, strengthen U.S. supply chain resiliency and further diversify our global fab footprint. Earlier this month, we announced that we have chosen Boise as one of two leading-edge DRAM manufacturing fab sites that we are planning in the U.S. and we expect to invest approximately $15 billion at the site, through the end of the decade. The co-location of this new manufacturing facility with our existing R&D site at our headquarters in Boise, provides multiple strategic benefits including improving efficiency across both R&D and manufacturing, simplifying technology transfer and reducing time to market for leading-edge products. We will soon announce a second high-volume U.S. DRAM manufacturing site. These new fabs will fulfill our requirements for additional wafer capacity starting in the second half of the decade and beyond. We plan to build these sites in stages. Tool installation and production output will be ramped in line with industry demand growth, which is consistent with our goal to maintain stable bit supply share as well as supply discipline. Now turning to our end markets, Micron's product portfolio has become significantly stronger and contributed to our momentum in the most attractive markets. In fiscal 2022, data center and graphics revenue grew approximately 35% and auto, industrial and networking revenue grew approximately 40%. The combined revenue mix of these important markets grew from approximately 45% of our total revenue in fiscal 2021 to 52% in fiscal 2022, putting us on track to hit our target of 62% by fiscal 2025 as outlined at our Investor Day earlier this year. This portfolio transformation will increase our exposure to the most attractive and stable profit pools in the industry. In fiscal Q4, data center revenue was down both sequentially and year-over-year, driven primarily by declines in ASP. In fiscal 2022, we set a new revenue record for our cloud revenues, which grew more than 30% year-over-year. Cloud end demand remains healthy, driven by secular growth in AI and the digital economy. However, the data center market, including both cloud and enterprise continues to face some supply constraints that are limiting server bills and customers are reducing memory and storage inventory due to macroeconomic uncertainties. With a diverse set of products across DDR4, DDR5, graphics memory, high bandwidth memory and data center SSDs, Micron offers a wide portfolio of solutions targeting this market with industry-leading quality. Building on our recent momentum of market share gains in data center SSDs, in the first half of calendar 2022, we continue to make solid progress in ongoing qualifications of our 176-layer NVMe data center SSDs at hyperscalers and OEMs around the world. Fiscal Q4 client revenue was down both sequentially and year-over-year, as PC unit end-demand declined and customers reduced inventory. We now forecast calendar 2022 PC unit sales to decline by an approximately mid-teens percentage year-over-year. In fiscal Q4, we began ramping 16-gigabit DDR5 in high volume production ahead of anticipated client platform launches. We also commenced volume production of Gen4 QLC NVMe client SSDs and are the only company with a full portfolio of 176-layer TLC and Gen4 QLC NVMe SSDs qualified and shipping to PC OEMs. In fiscal Q4, graphics revenue declined both sequentially and year-over-year. Micron continues to hold an excellent position as the performance leader in the graphics market. In fiscal Q4, we began shipping the industry's fastest graphics memory with 24 gigabits per second GDDR6X shipping in high-volume production. We are excited to see our proprietary GDDR6X memory featured in the recent launch of NVIDIA's GeForce RTX 4090 and 4080 GPUs. Fiscal Q4 mobile revenue declined both sequentially and year-over-year. Despite the weakness in end unit sales, we achieved two consecutive years of record mobile revenue in fiscal 2021 and 2022. We now project calendar 2022 smartphone unit volume to decline by a high-single digit percentage year-over-year. 5G continues to drive greater content per device and we project 5G penetration to exceed 50% of the smartphone unit TAM in calendar 2022. We continue to execute well on our mobile product roadmap. In fiscal Q4, 1-alpha comprised over 70% of our LPDRAM mobile bit shipments and 176-layer made up approximately 95% of our mobile NAND bit shipments. Micron is exceptionally well positioned as a leader in automotive and industrial markets, which are attractive because of strong long-term growth and relatively stable margins. In fiscal Q4, our automotive business delivered another record revenue quarter and fiscal 2022 auto revenues grew 30% year-over-year, setting a new all-time high. In fiscal Q1, we see some slowdown in our automotive demand as our customers rebalanced DRAM and NAND inventory levels as they deal with non-memory semiconductor shortages and production challenges. However, we see continued strong growth in our second half of fiscal 2023 with volume ramp of advanced next generation, in-vehicle infotainment systems as well as the broader adoption of more advanced driver-assistance systems. We are extremely excited by the long-term prospects for memory and storage in the automotive market and expect long-term CAGR for DRAM and NAND in autos to be at about twice the rate of the overall DRAM and NAND markets. While long-term fundamentals remain strong, our industrial IoT business saw sequential and year-over-year revenue declines in fiscal Q4. Softening macroeconomic conditions have led some customers to reduce overall purchases of DRAM and NAND. Nevertheless, our long-term outlook remains strong for our Industrial business, driven by the proliferation of factory automation and digitization. Turning to the market outlook. The memory and storage industry environment has deteriorated sharply since our last earnings call. Calendar 2022 industry bit demand growth for DRAM is now expected to be in the low-to-mid single digit percentage range, and for NAND, slightly higher than 10%. An unprecedented confluence of events has affected overall demand including COVID-related lockdowns in China, the Ukraine War, the inflationary environment impacting consumer spending and the macroeconomic environment influencing customers' buying behavior in multiple segments. In addition, inventory adjustment at customers across all end markets are also contributing to demand weakness. These factors are depressing demand for DRAM and NAND to well below end market consumption levels. We are also seeing an extremely aggressive pricing environment. Due to the sharp decline in near-term demand, we expect supply growth to be significantly above demand growth in calendar 2022, contributing to very high supply inventories for both DRAM and NAND. Looking ahead in calendar 2023, while macroeconomic uncertainty is high and visibility is low, we currently expect demand growth to be closer to the long-term growth rates of both DRAM and NAND bouncing back from very weak levels in calendar 2022. We expect the inventory at our customers to improve in early calendar 2023 causing demand to rebound starting from the second quarter of calendar 2023. We expect calendar 2023 industry DRAM supply to grow well below demand growth. We are modeling a mid-single digit percentage growth in DRAM industry supply in 2023, which would represent the lowest ever industry supply growth. NAND supply growth in calendar 2023 is also expected to fall below demand growth. Given the elevated supplier inventories entering calendar 2023, we expect industry profitability to remain challenging in 2023. Following a weak first half of fiscal 2023, we expect strong revenue growth in the second half of fiscal 2023 as bit demand rebounds following substantial improvement in customer inventories. Projections for long-term demand trends remain strong across multiple end markets. We expect long-term demand bit growth to be in the mid-teens percentage slightly lower than our prior expectation of mid- to high-teens due to a moderation in the expectation of long-term PC unit sales. We continue to expect the NAND market, which benefits from elasticity to grow around 28% over the long term. Turning to our supply. Given the change in market conditions, we have been taking immediate action to reduce our supply growth trajectory and align it to market demand. We made significant reductions to CapEx and now expect fiscal 2023 CapEx to be around $8 billion, down more than 30% year-over-year. CapEx would be lower if it were not for more than doubling our construction CapEx, year-over-year to support the supply growth required to meet the demand for the second half of this decade, as well as investment for EUV lithography systems to support 1-gamma node development. WFE CapEx will decline nearly 50% year-over-year and reflects a much slower ramp of our 1-beta DRAM and 232-layer NAND versus prior expectations. Fiscal 2023 WFE CapEx is focused on developing the technology capability of our leading nodes and new product introductions. To immediately address our inventory situation and reduced supply growth, we are reducing utilization in select areas in both DRAM and NAND. Our CapEx and utilization actions will have an adverse impact on our fiscal 2023 costs, but they are necessary to bring our supply and inventory closer to industry demand. We will aim to grow our DRAM and NAND supply in line with demand over time while continuing to optimize our costs and portfolio to improve our profitability. Before passing it over to Mark, I want to reflect on the tremendous progress that the Micron team has made over the last few years. Today, we are technology leader in both DRAM and NAND with a very competitive cost structure. We have leadership products and a strong portfolio that is transitioning towards high value solutions and we are gaining share in products that represent a more attractive profit pool in our industry. Our balance sheet is strong and allows us to invest appropriately to maintain technology, product and manufacturing leadership going forward. Our world-class quality and manufacturing expertise is recognized by our customers worldwide. We have delivered record revenues in multiple end markets in fiscal 2022, while returning record levels of cash to our shareholders. While the near-term environment is challenging, we are confident in our ability to emerge stronger and deliver financial performance in line with our long-term financial model. The long-term manufacturing investments we are making will further strengthen our diversified fab footprint and position us to capitalize on the exciting long-term opportunities ahead of us. I will now turn it over to Mark. Mark Murphy: Thanks, Sanjay. Our fiscal Q4 revenues came in consistent with our August 9 update, while EPS was within the original guidance range. Fiscal Q4 capped off a strong fiscal year in which we set a record for total revenue, generated substantial free cash flow and returned $2.9 billion to shareholders. Total fiscal Q4 revenue was $6.6 billion, down 23% sequentially and down 20% year-over-year. Fiscal 2022 total revenue was a record at $30.8 billion, up 11% year-over-year. Fiscal Q4 DRAM revenue was $4.8 billion, representing 72% of total revenue. DRAM revenue declined 23% sequentially and was down 21% year-over-year. Sequentially, bit shipments decreased by roughly 10% while ASPs declined in the low-teens percent range. For the fiscal year, DRAM revenue increased 12% year-over-year to $22.4 billion, representing 73% of total fiscal year revenue. Fiscal Q4 NAND revenue was $1.7 billion, representing 25% of Micron's total revenue. NAND revenue declined 26% sequentially and was down 14% year-over-year. Sequential bit shipments declined in the low 20% -- percentage range and ASPs declined in the mid- to high-single digit percentage range. For the fiscal year, NAND revenue increased 11% year-over-year to a record $7.8 billion, representing 25% of total fiscal year revenue. Turning to our fiscal Q4 revenue trends by business unit, revenue for the Compute and Networking Business Unit was $2.9 billion, down 25% sequentially and down 23% year-over-year. The sequential decline was primarily driven by client, while declines in server and graphics were less pronounced. Networking revenue hit a new record in fiscal 2022. Revenue for the Mobile Business Unit was approximately $1.5 billion, down 23% sequentially and down 20% year-over-year. Mobile revenue for fiscal 2022 to set a new record. Revenue for the Storage Business Unit was $891 million, down 34% sequentially and down 26% year-over-year. For the fiscal year, NAND revenue in the Storage Business Unit was its highest ever with share gains in both client and data center SSDs. Finally, revenue for the Embedded Business Unit was $1.3 billion, down 9% sequentially and down 4% year-over-year. For fiscal 2022, EBU delivered $5.2 billion of revenue, supported by revenue records in automotive and industrial markets. The consolidated gross margin for fiscal Q4 was 40.3%, down approximately 7 percentage points sequentially. Lower pricing was the primary driver of the decline. For the fiscal year, the consolidated gross margin was 45.9%, up approximately 6 percentage points year-over-year. Operating expenses in fiscal Q4 were just over $1 billion and below the guidance range provided on our last earnings call due in part to lower variable compensation in the quarter. Sequentially, OpEx was up around $60 million due primarily to the timing of technology development spend. For the fiscal year, operating expenses were $3.8 billion, up approximately $500 million year-over-year, driven by R&D to support our product and technology roadmaps. Fiscal Q4 operating income was $1.7 billion, resulting in an operating margin of 25%, down approximately 11 percentage points sequentially and down 12 points from the prior year. Fiscal 2022, operating income was $10.3 billion, resulting in an operating margin of 33.4%, up approximately 6 percentage points from the prior year. Fiscal Q4 adjusted EBITDA was $3.6 billion, resulting in an EBITDA margin of 53.5%, down 390 basis points sequentially. For the fiscal year, adjusted EBITDA was $17.4 billion resulting in an EBITDA margin of 56.7%. Fiscal Q4 taxes were $74 million or over 4% of pre-tax income. Our fiscal 2022 total taxes were $793 million or approximately 8% of pre-tax income. Non-GAAP earnings per share in fiscal Q4 was $1.45, down from $2.59 in fiscal Q3 and $2.42 in the year ago quarter. Non-GAAP EPS was $8.35 for the fiscal year, up from $6.06 in the prior year. Turning to cash flows and capital spending. We generated $3.8 billion in cash from operations in fiscal Q4, representing 57% of revenue. For the fiscal year, we generated $15.2 billion of cash from operations, representing 49% of revenue. Capital expenditures were $3.6 billion during the quarter and $12 billion for the fiscal year. We generated $196 million of free cash flow in fiscal Q4 and $3.2 billion for the fiscal year. Fiscal year 2022 was the sixth consecutive year of positive free cash flow for Micron. During the quarter, we completed share repurchases of $784 million or 13.2 million shares. For the fiscal year, we completed share repurchases of $2.4 billion, representing 35.4 million shares. Including our dividend payments, we returned $2.9 billion to shareholders in fiscal 2022 representing 90% of free cash flow. We remain committed to returning 100% of free cash flow across the cycle through a combination of share repurchases and dividends. Our ending fiscal Q4 inventory was $6.7 billion and average days of inventory for the quarter was 139 days, reflecting weaker market conditions during the quarter. Our balance sheet is rock solid with strong liquidity, low leverage ratio and a net cash position. We ended fiscal 2022 at $13.6 billion of liquidity, exceeding our mid-30's percentage of revenue target. Fiscal Q4 ending cash and investments were $11.1 billion and total debt was $6.9 billion. Now turning to our outlook for the fiscal first quarter. As a result of the demand challenges described by Sanjay earlier, we expect fiscal Q1 bit shipments and pricing to decline in both DRAM and NAND. We expect that inflationary pressure will continue to be a headwind to costs in Q1 and fiscal 2023. We remain disciplined in our expense management and have taken specific actions with more planned. As we look ahead, macroeconomic uncertainty is high and visibility is low. In fiscal Q2, we currently expect revenue to be in a similar range as fiscal Q1 with bit shipments up, but still weak for both DRAM and NAND. We also expect a recovery in volumes and revenues in the second half of the fiscal year. We expect our inventory to increase in the fiscal first half of 2023 and days of inventory to improve as demand recovers in the second half of the fiscal year. As Sanjay mentioned, we expect our fiscal 2023 capital spending to be around $8 billion, down more than 30% year-over-year, driven by a near 50% decline in wafer fab equipment CapEx. We expect capital spending to be weighted toward the first half of the fiscal year. And as a result, we project to be over $1.5 billion negative free cash flow in the November quarter. We continue to evaluate ways to improve free cash flow, including reducing CapEx, lowering expenses and managing working capital as we respond to market conditions. In fiscal 2023, we expect our tax rate to be elevated. Unless Congress appeals or delays recent changes to R&D deductibility, recent legislation requires that for tax purposes, we capitalize and amortize R&D expense this fiscal year. In addition based on our income mix and U.S. and foreign tax rules, our taxes become more fixed at these lower profitability levels. These factors resulted in an estimated tax of approximately $300 million at a minimum. Beyond this level the actual tax expense will depend on the level of operating income through the year. So in this lower pre-tax profitability fiscal year 2023, we expect to materially higher tax rate. Long term, as our profitability normalizes, we expect our tax rate to be in the low to mid-teens percentage range. With all these factors in mind, our non-GAAP guidance for the fiscal Q1 is as follows: We expect revenue to be $4.25 billion, plus or minus $250 million. Gross margin to be in the range of 26% plus or minus 200 basis points and operating expenses to be $1 billion, plus or minus $25 million. Based on a share count of approximately $1.12 billion, fully diluted shares, we expect EPS to be $0.04, plus or minus $0.10. In closing, we had many meaningful accomplishments in fiscal 2022, including delivering record revenue, achieving clear technology leadership in both DRAM and NAND, increasing share and client and data center SSDs, further strengthening our balance sheet and returning a record amount of capital to our shareholders. While the near-term environment is challenging, the Micron of today is extremely well prepared to navigate it with our competitive cost structure, strong product portfolio and rock solid balance sheet. Beyond fiscal 2023, a year starting out with a challenging set of external events, we are confident in our ability to deliver financial performance consistent with our long-term cross cycle financial model, including revenue growth of high-single digits, operating margins of 30% and free cash flow margin of over 10%. I will now turn it back to Sanjay. Sanjay Mehrotra: Thank you, Mark. The current macroeconomic environment presents an unprecedented challenge for the industry. Our rapid actions to both moderate utilization and sharply reduced CapEx illustrate our commitment to supply discipline and our focus on bringing our supply and demand back into balance. The Micron team continues to execute with agility to changing business conditions. We remain committed to our strategy of maintaining stable bit share and growing profitability with a portfolio of higher value solutions and we are confident in the long-term technology drivers for memory. New data centric applications and technologies will drive long-term memory demand on the trajectory that outpaces growth in other semiconductor categories. Our strategic investments underscore this confidence and will ensure Micron is able to capitalize on these long-term trends in the decade ahead. Thanks for joining us today. We will now open for questions. Operator: [Operator Instructions] The first question comes from the line of C.J. Muse from Evercore ISI. Your question please. C.J. Muse: Yeah. Good afternoon. Thank you for taking the question. I guess first question, can you provide a little bit more detail on the magnitude of utilization cuts and how we should be taking about any underutilization charges to gross margins in November and February quarters? Sanjay Mehrotra: So I think I can answer the first part and then Mark can take on the second part on the margins. So with respect to the utilization cuts, they are across NAND and DRAM and approximately in the mid-single-digit range. And of course, these cuts are for the products that have been in high inventory. And so we are cutting production of those products and using the equipment that is freed up and the space that is freed up to deploy it toward the new technology transitions. So that actually helps us with CapEx efficiency. And Mark can comment on the gross margin impact. Mark Murphy: Yeah. C.J., as you mentioned, it's going to hit us not in the first quarter, but later in the year and it would be between 1 points and 2 points of impact at this point. And of course, depending on market conditions, we would either dial that back or bringing utilization lower. C.J. Muse: Very helpful. And as a quick follow-up, considering your strong net cash position, but your guidance for free cash flow -- free cash flow negative, well, what's your near-term philosophy around buybacks? Mark Murphy: Well, I think I'll state -- really no change around, we're going to continue to focus on returning 100% of free cash flow to shareholders. We did repurchase in the first quarter and so we will opportunistically repurchase. As you pointed out C.J., we are a cash flow challenged in the first quarter. It's been an unprecedented downturn, sharp and sudden and it has of course associated inventory builds, it's suppressed our income of course and then we've got elevated CapEx as it happened so quickly. So we expect $1.5 billion negative in the first. What we challenge in the second as well as we deal with, with elevated inventory levels and then the revenues that we guided or the bit shipments we talked about. And then the CapEx will take time to work down. We expect it to be weighted in the first half more heavily. We do expect a volume recovery in the back half of the year and lower CapEx and inventories coming down. We do expect to return to free cash flow generation in the second half. And of course, we're working -- continue to work CapEx, continue to work expenses down, working cap -- working our -- managing our working capital best we can to improve from this first quarter projection we have. C.J. Muse: Thank you. Operator: Thank you. One moment for the next question. And our next question comes from the line of Timothy Arcuri from UBS. Your question please. Timothy Arcuri: Thanks a lot. Mark, so it sounds like you're basically calling sort of February as the bottom in the earnings. It sounds like revenue is going to be about flat, but obviously, gross margin is probably going to move lower because you said pricing is going to come down and it sounds like costs are going to go up. But I guess my question is more sort of around the behavior from these cloud customers in light of what's happening to supply. I mean DRAM supply is -- as you said, up only mid-singles, next year most of that has to be coming out of inventory, so production is probably pretty flat across the industry, if not down. So these are pretty sophisticated customers, so I would think that they're going to come back to the table pretty early next year, such that you can see a pretty sharp recovery in pricing. So I'm just sort of wondering if maybe Sanjay or Mark, you can talk about sort of the behavior from these cloud customers and sort of how you think this plays out through the year as you've sort of called February as the bottom? Thanks. Sanjay Mehrotra: So look we are not going to project future pricing trends here, but of course, we will continue to work closely with customers, not just in cloud, but customers across all end market segments. And of course, as we noted that inventories are at our customers are high, across all end market segments and they are adjusting their inventory levels including in cloud. We will of course, most important thing is to take actions and we have taken decisive action with respect to WFE reduction by nearly 50% and reducing our supply growth. We expect the industry supply growth to be in the mid-single digit in 2023 and our supply growth will also be in line with the industry around the same for DRAM. So I think what's important is that the supply growth will be less, while the demand growth once inventory adjustments at customers have normalized or have substantially improved by our second fiscal second half, then demand will go up from customers and we expect that the DRAM demand will be in mid-teens supported by inventory, but the supply growth will be meaningfully less than demand growth and that's what will brings an improving trajectory [Technical Difficulty] of industry supply-demand balance in improving fundamentals for our business as we go through calendar year '23. Timothy Arcuri: Thanks. Can I just clarify on that, Sanjay? So, your supply will be mid-single digits, but your production is actually going to be down year-over-year, correct? Sanjay Mehrotra: What we are saying is that the supply growth will be mid-single digits and -- but the shipments will be in the mid-teens range in line with the demand recovery that we expect. And we are also saying that we expect industries supply growth to be also in the mid-single digit for DRAM next year. Remember, this is -- this would correspond to the lowest on record supply growth for DRAM. Timothy Arcuri: Perfect. Thank you. Sanjay Mehrotra: So again, the supply growth will be in the mid-single digit, inventory will be used to supply the demand, which will be higher than the supply growth. We expect the demand to be in mid-teens next year. Timothy Arcuri: Thank you, Sanjay. Mark Murphy: Yeah. Maybe -- maybe Tim just to maybe provide some color around the quarters. We do expect as we've laid out the bits in ASP will be down in the first quarter and they're down about the same volume, maybe down a little bit more. Costs are slightly up and DRAM and NAND and that's just a combination of volume mix inflation and then just node timing. In the second quarter, as Sanjay mentioned bits will be up, but they'll still be down year-over-year, and then as we said, the revenue range will be similar to the first quarter. And then in the second half, bits will be up sequentially, third to fourth quarter and then second half should be up in bits year-over-year. And then cost for the full year, we would expect DRAM cost downs to be lower than the long-term average. We do get some benefit from FX, but we get some inflation and some other factors that go against us. And then NAND, cost reductions are challenged, combination of mix and inflation and just a more difficult situation there. But I think the important takeaway, first quarter we expect things to improve versus volumes and then the market better in the second half. Operator: Thank you. Our next question comes from the line of Karl Ackerman from BNP Paribas. Your question please. Karl Ackerman: Yes. Thank you. Good afternoon. I have two questions please. I guess the first question is just kind of a follow-up on CapEx. I know in the past you have described capital intensity being in the 30% to 35% range of sales. But it does appear that memory demand for calendar '22 and calendar '23 could still be below your long-term expectations of mid-teens DRAM demand and 20% to 30 % for NAND demand. And so I guess the question is, do you believe that the industries framework for CapEx needs to consider a lower terminal bit growth rate for DRAM and NAND. And I guess, what are your own views on managing long-term capital investment to support bit demand beyond fiscal '23? And I have a follow up please. Sanjay Mehrotra: So our view on long-term DRAM CAGR is mid-teens and NAND CAGR approximately 28%. And we would always be managing our investments to grow our supply in line with demand. Of course, there can be variations through the cycle, but we will overall focus on making adjustments as needed, just like you have seen adjustments now. And just keep in mind that as we look ahead at CapEx considerations, we should keep in mind that the tech transitions are getting more expensive. And of course, tech transitions are taking longer as well. So the capital intensity is higher. Tech transitions and also giving actually lower bit growth, and of course, transition to DDR5 is also contributing to lower bit growth per wafer because of DDR5 die tends to be just bigger than DDR4 die because of the specifications. So our expectation is, cross-cycle on average over long term, our CapEx would be around mid-30s that we had stated earlier, mid 30% of revenue. And of course, any given year there can be variations, but that's across cycle CapEx intensity that we would be expecting. Karl Ackerman: I appreciate that, Sanjay. Thank you. I guess for my follow-up, I was curious, what portion of your unfinished goods inventory is fungible and can be repurposed to either different end markets or different customers, even within that same end markets? Is there any clarity in terms of how you can kind of repurpose on the inventory that you have would be quite helpful? Thank you. Sanjay Mehrotra: Yeah. I think, Karl, most of it, it's designed to the way we build it, designed to be repurposed. I mean there are some limitations, of course, but -- and that, that strategy is going to -- going to yield benefit here because, this downturn was so sharp and sudden, unprecedented that inventories have grown to levels over what we thought just last quarter when we had our earnings call. We ended at 139 days. We should be down around 100, 110 ideally, but we do expect an increase again in the first quarter to be over 150 days and it will be elevated through the second quarter and stay elevated, probably through the balance of the year until the recovery is meaningful and customers replenish their own inventories. But we should see it begin to decline in days over the back half. And of course, this view shape the CapEx as well to take supply out. And -- but we're confident that over time, it's good inventory. I think it's leading node primarily and as you point out, it's fungible in a sense, so we're confident that over time, we'll be able to redeploy or use that inventory and eventually get down to our target 100, 110 days. Karl Ackerman: Very clear. Thank you. Operator: Thank you. One moment for our next question. And our next question comes from the line of Joseph Moore from Morgan Stanley. Your question please. Joseph Moore: Great. Thank you. I wonder if you could talk about the November quarter. At the midpoint, it looks like your cost of sales comes down almost $900 million sequentially and I think of that is being kind of depreciation labor overheads things like that. What's happening there that the sort of fixed cost elements of that are coming down so much and is that sustainable beyond the November quarter? Mark Murphy: Joe, we're -- I mean we're clearly, we're running the fabs and that's being absorbed into inventories. So I think that's the short answer to your question. Joseph Moore: Okay. Sanjay Mehrotra: And volumes down are down of course, so... Joseph Moore: Yeah. Okay. So you built $1 billion worth of inventory in August quarter, almost that much and you had $4 billion cost of sales, and it's going down $3.1 billion next quarter. So I guess it is a pretty significant inventory build is what we would readout? Mark Murphy: Yeah. I think as I answered in the last question, we're -- our inventory levels are high and they're going to be higher. There'll be over 150 days we believe. And again, it's a function of this unprecedented period and we're doing what we can do, affect future supply, our future capacity being in a position to work those inventories down, they're high quality inventories. So, though -- they will be usable and we're managing working capital expenses, cash flow all of them aggressively at this time. Joseph Moore: Got it. Okay. Thank you very much. Operator: Thank you. One moment for our next question. And our next question comes from the line of Mehdi Hosseini from SIG. Your question please. Mehdi Hosseini: Yes, sir. Thanks for taking my question. Mark, just a quick follow-up. You commented that February revenue could track flattish, but gross margin would at least be down 2 points, because you said the under-utilization charges would have a gross margin impact later, is that -- should I assume that that will happen in February? Mark Murphy: Yeah. It would be -- it depends on when the inventory is clear, but yes, later in the year, Mehdi. And then you've got, gross margin of course is going to be a function, it's not just that cost element, it's going to be pricing and -- at that point in the market. We think volumes are recovering and we're just -- we're not guiding out at that point on the rest of the P&L or the elements of the P&L. Mehdi Hosseini: Should I spread 200 basis point of gross margin hit due to under-utilization throughout the remainder of fiscal '23? Mark Murphy: Yeah, Mehdi. We're not -- I mean that's going to be a headwind in the back half of the year. Mehdi Hosseini: Got it. Mark Murphy: But its -- but we're not guiding those quarters at this point. Just we gave a framework for how we see our business recovering along with the broader industry and what we believe will be the demand activity with our customers. Mehdi Hosseini: Sure. Fair. And I guess my follow-up question is also related to under-utilization rates. You've laid out a very conservative view on bit shipment for '23, especially, on the supply side, but you're also assuming demand would inflect to be after February quarter. Would there be a scenario that given actually the demand improvement is not as significant and would you be willing to take additional under-utilization like charges? Sanjay Mehrotra: So Mehdi, I would say that we would of course continue to monitor the macro trends as well as the trends in our industry and the overall business. And of course, we will be prepared to take necessary actions as appropriate to address the short term as well as the long-term needs. So we will continue to look at, just like we have moved decisively here with respect to under-utilization, looking at products that have excess inventory and leveraging that utilization -- under-utilization as I said before toward -- using the tools towards, deferring CapEx requirements and we'll continue to look for those opportunities as needed. Mehdi Hosseini: Got it. Thank you. Operator: Thank you. One moment for our next question. And our next question comes from the line of Vivek Arya from Bank of America. Your question please. Vivek Arya: Hello. Thanks for taking my question. I think Sanjay in your prepared remarks, you mentioned calendar '23 bit demand will be in line with historical trends. I'm curious, what are your assumptions about the PC and the smartphone market next year that would support bit demand growth to be in line with historical trends? Sanjay Mehrotra: So with respect to PC, this year, PC -- overall PC unit demand is down, as I mentioned in the script mid-teens percentage points. And next year in calendar year '23, we expect it to be flat to slightly down. And with respect to smartphones, we certainly expect that China would be opening up and China economy would be rebounding. The COVID lockdowns have had significant impact on China demand. So overall smartphone unit sales this year, down -- on a year-over-year basis down high-single digits, and we would expect that next year there would be some rebound in the smartphone unit sales. Again, I think what's important is that the content continues to be the biggest driver of growth, 5G phones need more, memory need more storage. And as we also highlighted in our prepared remarks, of course, we are extremely focused on shifting the business away from what used to be of 55% in consumer side, including PC and smartphone in fiscal year '21 towards going to 38% by fiscal year '25. So we are really marching along well on that strategy. In fact, in fiscal year '22, we reduced that percentage to 48%. So we are increasing the mix of more attractive and more stable markets such as, of course, data center and automotive, industrial, networking, graphics and we are successfully delivering on that strategy. Vivek Arya: Got it. Very helpful. And then on the range of WFE cuts for next year, are you expecting your competitors to also reduce spending by the same level? And where I'm going with that question is that at what point does it become a competitive concern, because historically most of your spending has been on technology. So if you're cutting that by 50%, at what point does that impact your competitive capabilities and impact your cost down capabilities? Sanjay Mehrotra: So look, historically, the DRAM industry in recent years has been disciplined in terms of CapEx management and supply growth management. Of course, the current environment is unprecedented with respect to the confluence of factors that we discussed, that have impacted demand, and the unprecedented level of inventory adjustments by our customers as well. We will take the necessary actions to bring our supply in line with demand. We think it is prudent. It is important to be rational in this regard. Of course, as we highlighted that this is a headwind to costs, with respect to delaying the technology transitions for our 1-beta and for our 232-layer NAND, as well as using under-utilization. But this is the right thing to do for the business to bring supply growth in line with demand growth and this is what will restore the healthy trajectory of demand-supply balance. So this is the right thing to do and I just want to also highlight that we would, of course, maintain our share as well and that is important, but as part of that strategy, we will also continue to shift towards part of the market, as I highlighted in my prior comments, where the profit pool is greater. So we will maintain share, but we will also continue to shift towards strengthened profitability. And I think you've seen that from Micron over the course of last few years, whereas we used to be significantly behind our competitors in margins. Today, we are matching the margins, if you look at past few quarters. So I think that just shows that we remain disciplined and we remain focused on continuing to shift our portfolio towards greater pools of our profitability. Mark Murphy: And then maybe just to add, Vivek is, I think we made the point that of the remaining spend we have, its focus is on technology. So to your point, we appreciate the need to invest in advancing the technology into business, so the remaining spend we have will be focused on that. And then, we still can maintain our position in the market with the inventories that we have -- that we talked about in the prior question, well over 150 days as we enter the next or the next quarter and we'll have that drawn for some period of time. Vivek Arya: Thank you very much. Operator: Thank you. One moment for our next question. And our next question comes from the line of Brian Chin from Stifel. Your question please. Brian Chin: Great. Good afternoon, and thanks for sneaking us in to ask a question. It is related to the last question, but -- what that is your assumption for industry memory WFE decline in 2023 -- calendar '23, that translates into a mid-single digit increase in DRAM bit supply next year? Sanjay Mehrotra: Look, we have shared with you what we are implementing in terms of our WFE, but we certainly can't be commenting on parts of others in the industry with respect to their WFE actions. But as I pointed out, historically, the industry has been disciplined, has been prudent in terms of taking actions to manage supply growth, especially when it gets ahead of the industry demand. Brian Chin: Okay. Yeah. I was just curious what that is, even not knowing what company plans are, but that assumption is because there must be a particular assumption that drives sort or that mid-single-digit supply growth for DRAM bits. Maybe closer to how maybe just one follow -- quick follow-up, if start kick -- you kick start 1-beta DRAM and 232-layer NAND in the second half of this year. Just curious how long -- how many quarters do you think until that, those two products crossover 50% of bit shipments and if it's a bit slower than originally planned, how does that compare to a typical timeframe to ramp the new technologies? Sanjay Mehrotra: So I think it's important to understand that we are delaying the ramp off 232-layer and 1-beta technologies versus our prior plans. And most of the CapEx -- the $8 billion CapEx that we have talked about or the WFE CapEx that we are talking about is actually going toward preparing those technologies for engineering learning and producing the products for new -- in production for customer qualifications. In turn, these technologies will really not be contributing to the revenue shipments through our fiscal year '23 until late in fiscal year '23, they will be the primary drivers of bit growth and revenue growth and of course, cost reductions in fiscal year '24. Because we will be again relying on using the inventory to supplement our reduced supply growth to meet the uptick in demand that we expect in fiscal year '23. Brian Chin: Okay. Fair enough. Thank you. Operator: Thank you. And this does conclude the question-and-answer session as well as today's program. Thank you ladies and gentlemen for your participation. You may now disconnect. Good day.

Operator: Thank you for standing by, and welcome to Micron Technology’s Fiscal Third Quarter 2022 Financial Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference may be recorded. [Operator Instructions] I would now like to hand the call over to Farhan Ahmad, Vice President, Investor Relations. Farhan Ahmad: Thank you, and welcome to Micron Technology’s fiscal third quarter 2022 financial conference call. On the call with me today are Sanjay Mehrotra, our President and CEO, and Mark Murphy, our CFO. Today’s call is being webcast from our Investor Relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website, along with the prepared remarks for this call. Today’s discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures may be found on our website. We encourage you to visit our website at micron.com throughout the quarter for the most current information on the Company, including information on financial conferences that we will be attending. You can also follow us on Twitter at MicronTech. As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, our expected results, and other matters. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer you to the documents we file with the SEC, specifically our most recent Form 10-K and 10-Q, for a discussion of the risks that may affect our future 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. I’ll now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Farhan. Good afternoon, everyone. Micron delivered record quarterly revenue with strong profitability and free cash flow, enabled by our team’s excellent execution and our industry-leading technology and product portfolio. Micron achieved revenue records in the auto, industrial and networking markets, and in SSDs for both data center and client. Our NAND business delivered record quarterly revenue, and our Embedded Business Unit and Storage Business Unit NAND revenues also hit all-time highs. Our 1-alpha DRAM and 176-layer NAND ramps are several quarters ahead of the industry and progressing well as we continue to qualify new products that use these nodes. The Micron team delivered these excellent results despite supply chain challenges and COVID-19 control measures in China, which impacted our business on both the demand side and the supply side. There are consumer demand and inventory-related headwinds impacting the industry and consequently our fiscal Q4 outlook. However, we remain confident about the secular demand for memory and storage, the attractiveness of our market opportunity, Micron’s excellent competitive position and strong execution capabilities, and our cross-cycle financial model. Micron is leading the industry in both DRAM and NAND technology, and we are also well-poised to continue this lead into calendar 2023. In DRAM, our 1-alpha node ramp is several quarters ahead of the industry, and in fiscal Q3, 1-alpha represented the largest DRAM node in our shipment mix. Our newest node, 1-beta, is on track to ramp in manufacturing by the end of calendar 2022. In NAND, our industry-leading 176-layer node continues to grow in mix of sales, having previously reached the majority of our NAND bit shipments in fiscal Q2. This technology node is contributing to a competitive cost structure across our product portfolio, and in FQ3, we achieved several important 176-layer product qualifications. We are also making excellent progress on our 232-layer node and expect to ramp production by the end of calendar 2022. Across the industry, there are cost challenges stemming from supply chain and inflationary pressures; however, we continue to expect our cost reductions to outpace those of the industry this year, driven by excellent productivity improvements in our fabs and the well-executed ramp of our world-class 1-alpha DRAM and 176-layer NAND nodes. Despite COVID-19 control measures in China that created challenges for the global electronics supply chain, Micron’s strong execution enabled record assembly output in fiscal Q3, supporting record quarterly revenue. However, these COVID-19 control measures in China impacted our outsourced assembly and test subcontractors and led to some impact to fiscal Q3 results. Now turning to our end markets. AI, ongoing cloud adoption, EVs and the ubiquitous connectivity offered by 5G are strong secular demand drivers, enabling the memory and storage industry to outpace the broader semiconductor industry. Micron’s product portfolio has become significantly stronger, and we have established product momentum in several attractive growth markets. We are also driving a portfolio mix shift toward higher growth and more stable markets. Fiscal 2021’s 55 to 45 revenue split in favor of the more mature mobile, PC and consumer markets is expected to shift, by fiscal 2025, to a 38 to 62 split in favor of the higher growth data center, auto, industrial, networking and graphics markets. Several of these end markets also exhibit more stable profitability. Our fiscal Q3 new product launches and customer qualifications reflect solid execution toward this portfolio transformation. Data center is the largest market for memory and storage today, and the rapid growth of AI and memory-intensive workloads ensures that it will sustain strong growth through the end of the decade. Corporations around the world are investing in digitization and extracting more value from data, and this approach remains one of the primary ways of improving efficiency and driving competitive advantage. Data center fiscal Q3 revenue grew by a double-digit percentage sequentially and well over 50% year-over-year. Data center end demand is expected to remain strong in the second half of calendar 2022, driven by robust cloud CapEx growth. Despite the strong end demand, we are seeing some enterprise OEM customers wanting to pare back their memory and storage inventory due to non-memory component shortages and macroeconomic concerns. In fiscal Q3, we achieved several product and customer milestones. We began volume shipments of HBM2E, one of the fastest-growing product categories, driven by the growth in AI and machine-learning workloads. Micron continues to lead in DDR5; however, delays in the rollout of new server CPU platforms have slowed the industry DDR5 ramp versus prior expectations. In data center SSDs, we more than doubled revenue year-over-year and achieved a new revenue record in the fiscal third quarter. We are excited by the strong reception of our industry-leading 176-layer data center NVMe SSDs, which are already in volume production, and in fiscal Q3, we completed qualifications with three OEMs. We recently launched the world’s first 176-layer data center SATA SSD, which will help sustain our industry leadership in this product category. In fiscal Q3, we achieved client revenue growth in the mid-teens percentage range sequentially, driven by DRAM shipments and share gains in client SSD. A number of factors have impacted consumer PC demand in various geographies. As a consequence, our forecast for calendar 2022 PC unit sales is now expected to decline by nearly 10% year-over-year from the very strong unit sales in calendar 2021. This compares to an industry and customer forecast of roughly flat calendar 2022 PC unit sales at the start of this calendar year. We expect PC per unit memory and storage content growth trends to remain healthy in calendar 2022, driven by a mix shift toward enterprise PCs and the increasing content in new architectures such as Apple’s M1 Ultra platform, which features up to 128 gigabyte of DRAM. Micron has a strong product portfolio and is well-positioned in this market. We are leading the DDR5 transition and expect our DDR5 revenue to continue to grow as multiple client customers launch next-generation notebooks. Increased availability of non-memory bill of materials will also improve our ability to ship DDR5-based modules. In addition, we continue to lead the industry in client QLC SSD technology and expect QLC to increase as a percentage of 176-layer bit output in fiscal Q4 and beyond. In fiscal Q3, graphics revenue grew at a strong double-digit percentage rate sequentially and year-over-year, driven by the strength of Micron’s products and customer relationships. Micron continues to be the industry performance leader in graphics. We announced volume shipments of our new 1z 16 gigabit GDDR6X in fiscal Q3, which features twice the capacity and up to 15% higher performance than the previous 1y generation. The 24 gigabit per second peak bandwidth of GDDR6X is made possible by Micron’s groundbreaking PAM4 signal transmission technology. No other memory vendor offers this capability or level of performance. We also began volume shipments of our newest 1z 16 gigabit GDDR6 product to our largest graphics customers. Fiscal Q3 mobile revenue declined slightly year-over-year but grew quarter-over-quarter due to strong customer partnerships and product execution. Smartphone unit sales expectations have declined meaningfully for calendar 2022. We are now projecting smartphone unit volume to decline by mid-single-digits percent range year-over-year in calendar 2022, well below the industry and customer expectation earlier in the year of mid-single-digit percentage growth. 5G unit sales are expected to grow and reach approximately 50% penetration of the smartphone unit TAM this year. The growth of 5G units will also drive higher DRAM and NAND content. We continue to deliver key mobile customer qualifications and strong mobile product ramps on our leading nodes. In fiscal Q3, we expanded our 1-alpha LPDRAM leadership with the industry’s first ramp of 1-alpha LPDDR5. In addition, 176-layer NAND made up over 90% of our mobile NAND bit shipments. Micron is the market share and quality leader in the fast-growing auto and industrial end markets, and in fiscal Q3, we achieved record revenue in both. These markets also exhibit higher stability in their gross margin profile through the cycle. Auto growth has been driven by robust demand that remains constrained by auto unit production. We see robust auto content growth as OEMs adopt significant architectural changes to support ADAS, infotainment and electric vehicles. In fiscal Q3, there were announcements of several new EVs featuring content-rich ADAS, including the Ford F-150 Lightning, Mercedes EQS SUV and EQE sedan, and BMW iX1. We expect the auto market to have a strong long-term bit growth CAGR in DRAM and NAND that is roughly twice the CAGR of the overall DRAM and NAND markets, and consequently our strength in this market will become increasingly important. Industrial IoT achieved record revenue in fiscal Q3, demonstrating broad-based growth with various end market applications. We continue to see tailwinds from secular growth drivers as industrial customers invest in increasing factory automation and digitization. Turning to the market outlook. Our expectations for calendar 2022 industry bit demand growth have moderated since our last earnings call. Near the end of fiscal Q3, we saw a significant reduction in near-term industry bit demand, primarily attributable to end demand weakness in consumer markets, including PC and smartphone. These consumer markets have been impacted by the weakness in consumer spending in China, the Russia-Ukraine war, and rising inflation around the world. COVID-19 control measures in China have exacerbated supply chain challenges for some customers, and the macroeconomic environment is also creating some caution amongst certain customers. Several customers, primarily in PC and smartphone, are adjusting their inventories, and we expect these adjustments to take place mostly in the second half of calendar 2022. While end demand in the mobile, PC and consumer markets has weakened, cloud, networking, automotive and industrial markets are showing resilience. Due to weaker demand in the second half of calendar 2022, we now expect year-over-year calendar 2022 industry bit demand growth to be below the long-term CAGRs of mid-to-high-teens percentage for DRAM and high-20s percentage for NAND. Despite the near-term weakness, secular demand trends remain strong, and our view of long-term DRAM and NAND bit demand CAGR remains unchanged from prior expectations. Turning to supply. Given the change in market conditions, we are taking immediate action to reduce our supply growth trajectory. To protect profitability, we will maintain pricing discipline, manage capacity utilization, and use inventory as a buffer to navigate through this period of demand weakness. Additionally, we are planning for a reduced level of bit supply growth in fiscal 2023 and will use inventory to supply part of the market demand next year. This approach will enable us to reduce wafer fab equipment CapEx for fiscal year 2023 versus our prior plans, and we now expect our fiscal 2023 wafer fab equipment CapEx to decline year-over-year. Overall industry supply is also being impacted. Manufacturing equipment shipment delays, challenges for some in the industry in ramping new nodes of technology and DRAM supply discipline evident in the industry are all expected to limit supply growth over the next few quarters. These supply reductions will help offset some impact of the weaker demand. I will now turn it over to Mark Murphy, Micron’s Chief Financial Officer. Mark Murphy: Thanks, Sanjay. Micron delivered strong results in fiscal Q3, marked by record quarterly revenue and $1.3 billion of free cash flow. Total fiscal Q3 revenue was $8.6 billion, up 11% sequentially and up 16% year-over-year. Growth was strong across most end markets. Fiscal Q3 DRAM revenue was $6.3 billion, representing 73% of total revenue. DRAM revenue increased 10% sequentially and was up 15% year-over-year. Sequentially, bit shipments increased by slightly over 10% while ASPs declined slightly. Fiscal Q3 NAND revenue was $2.3 billion, representing 26% of Micron’s total revenue. NAND revenue increased 17% sequentially and was up 26% year-over-year. Sequential bit shipments increased in the high-teens percent, and ASPs declined slightly. Now turning to our fiscal Q3 revenue trends by business unit. Revenue for the Compute and Networking Business Unit was $3.9 billion, up 13% sequentially and up 18% year-over-year. Data center, graphics and networking contributed to both year-over-year and sequential growth. Revenue for the Mobile Business Unit was approximately $2 billion, up 5% sequentially and down 2% year-over-year. Strong execution and product momentum allowed MBU to deliver sequential growth in a challenging smartphone market demand environment. Revenue for the Storage Business Unit was $1.3 billion, up 15% sequentially and up 33% year-over-year. We achieved record SSD revenue, with both data center and client SSD revenues reaching all-time highs. Data center SSD revenue more than doubled year-over-year. Finally, we achieved record revenue for the Embedded Business Unit at $1.4 billion, up 12% sequentially and up 30% year-over-year. Both automotive and industrial revenues set records in the quarter. The consolidated gross margin for fiscal Q3 was 47.4%, down approximately 40 basis points sequentially. An increasing mix of NAND contributed to the decline. Operating expenses in fiscal Q3 were approximately $950 million, below the low end of the guidance range and down approximately $20 million sequentially. OpEx benefited from the timing of our technology and product qualifications and from lower variable compensation. Although we are taking actions to reduce OpEx in light of current market conditions, we expect OpEx to increase sequentially due to the timing of technology and product qualifications. Fiscal Q3 operating income was $3.1 billion, resulting in an operating margin of 36.4%, up approximately 110 basis points sequentially and up 450 basis points from the prior year. Fiscal Q3 adjusted EBITDA was approximately $5 billion, resulting in an EBITDA margin of 57.4%, down approximately 40 basis points sequentially and up over 400 basis points versus the prior year. Non-GAAP earnings per share EPS in fiscal Q3 were $2.59, up from $2.14 in fiscal Q2 and up from $1.88 in the year-ago quarter. Turning to cash flows and capital spending. We generated $3.8 billion in cash from operations in fiscal Q3, representing 44% of revenue. Capital expenditures were $2.5 billion during the quarter. We expect fiscal 2022 CapEx to be approximately $12 billion. Our free cash flow for fiscal Q3 was $1.3 billion. During the quarter, we completed share repurchases of $981 million or approximately 13.8 million shares. Including our dividend payment, we returned $1.1 billion to shareholders in fiscal Q3. Since the share repurchase program’s inception in fiscal 2019 through the end of fiscal Q3, we have deployed $5.7 billion toward repurchasing 108 million shares at an average price of approximately $53 per share. As we discussed at Investor Day, we are committed to returning to shareholders all of the free cash flow generated over the cycle through a combination of dividends and share repurchases. Share repurchases will be both programmatic and opportunistic, and we expect to purchase more as the stock trades at bigger discounts to intrinsic value. On dividends, our Board of directors approved a quarterly dividend of $0.115 per share, a 15% increase over the prior dividend, to be paid on July 26th to shareholders of record on July 11th. Our ending fiscal Q3 inventory was $5.6 billion, and average days of inventory for the quarter were down to 109 days from 113 days last quarter. We ended the quarter with $12 billion of cash and investments and $14.5 billion of total liquidity. Our fiscal Q3 total debt was $7 billion. Now turning to our outlook for the fiscal fourth quarter. Long-term demand trends remain constructive; however, select market weakness and macroeconomic uncertainty are impacting our near-term outlook and visibility. Currently, we do project sequential bit shipments to be down for both DRAM and NAND in fiscal Q4. We intend to maintain pricing discipline and walk away from business which doesn’t meet our pricing objectives. While we are taking proactive steps to control OpEx and CapEx, we expect the impact of these actions to be limited in fiscal Q4 and to become more material in fiscal year ‘23. With all these factors in mind, our non-GAAP guidance for the fiscal Q4 is as follows. We expect revenue to be $7.2 billion, plus or minus $400 million; gross margin to be in the range of 42.5%, plus or minus 150 basis points; and operating expenses to be approximately $1.05 billion, plus or minus $25 million. We expect our non-GAAP tax rate to be approximately 9% for fiscal Q4. Based on a share count of approximately 1.13 billion fully diluted shares, we expect EPS to be $1.63, plus or minus $0.20. We remain on track to deliver record revenue and solid profitability and free cash flow in fiscal year 2022. In closing, we delivered strong results in our fiscal Q3, but near-term headwinds are impacting our fiscal Q4 outlook. Beyond the near term, we project secular growth drivers such as data center, automotive and other areas to support robust DRAM and NAND growth and strong cross-cycle financial performance by Micron. At our Investor Day event last month, we laid out a cross-cycle financial model for the Company that reflects the key attributes of our business: a strong revenue growth CAGR of high single digits, robust cross-cycle operating margins of approximately 30%, and healthy free cash flow margins that exceed 10% of revenues. Given our long-term financial outlook and the strength of our balance sheet, we see the current share price as very attractive and, at these levels, intend to repurchase shares more aggressively in fiscal Q4. I will now turn it back to Sanjay. Sanjay Mehrotra: Thank you, Mark. The memory and storage TAM is expected to grow to $330 billion by 2030 and become an increasing portion of the semiconductor market. The near-term market environment notwithstanding, we are executing extremely well on all aspects of the business that are within our control. Micron’s continuing technology, product and manufacturing leadership puts us in an excellent position to capitalize on the long-term opportunity and to extend the frontiers of what is possible with memory and storage. We will continue to exercise supply discipline and take appropriate actions to navigate through the near-term headwinds, and we remain focused on creating value for shareholders and generating healthy free cash flow cross cycle. Thanks for joining us today. We will now open for questions. Operator: [Operator Instructions] Our first question comes from the line of Harlan Sur of JP Morgan. Harlan Sur: Good afternoon. Thanks for taking my question. On the data center business, as you guys mentioned, I mean, enterprise CIOs are concerned on the macro outlook and pulling back on their spending budgets. Cloud remains strong. But within that, we’ve heard that continue -- there’s continued strength from the U.S. cloud service providers, but a pullback in spending from the China cloud customers. Are you guys seeing these dynamics within your cloud segment? And then, on the supply side, again, within your cloud business, can you discuss the level of inventories in the channel and at customers that feed into the cloud segment? Because we’re hearing that kind of similar to enterprise that inventories in the cloud channels are also pretty elevated, but wanted to get your views. Sanjay Mehrotra: Thanks, Harlan, for the question. And before I answer the question, I just wanted to note here that we have Sumit Sadana, our Executive Vice President and Chief Business Officer here as well. As you may recall, Sumit was with us in the last earnings call. And in the given environment, I thought it would be good to have him here to add any color to the market environment related specific questions. So, with respect to the question you asked regarding the enterprise server OEM side of the business. There, yes, as we noted that we have seen some inventory adjustment, particularly given their concerns on the macro environment as well as certain supply chain shortages that they may be experiencing. However, on the enterprise server OEM side, the end market demand continues to be healthy as well. And same thing on the cloud side as well that the end market demand for cloud is healthy, cloud demand to us is relatively healthy as well. Of course, cloud also carries elevated levels of inventory versus the pre-COVID level of investments versus the pre-COVID level of inventory. And of course, the cloud investments in CapEx continued to be at a strong clip in their infrastructure, and that bodes well for memory and storage. And I think what’s important is that the overall trend of digitization and use of data to help drive greater productivity and efficiency in businesses, particularly in the backdrop that the world is facing today with the macroeconomic uncertainties is helpful in driving greater technology adoption across industries, and that’s where memory and storage plays out well as well. And specifically, with respect to China and U.S., of course, in China, as we have pointed out earlier, we have seen overall weakness and certainly weakness on the consumer demand side from China as well as some other parts of the world. But we are not really breaking it down between China and U.S. at this point. But again, the overall cloud trends continue to be healthy in terms of the end demand. Sumit, do you want to add any comment on channel customers in terms of inventory? Sumit Sadana: Yes. I mean, I think the inventory level, as Sanjay said, is higher on the cloud customer side and generally on the data center side compared to where it was pre-COVID. The channel business on the cloud side is relatively in a better place compared to the consumer business challenges that Sanjay highlighted. But of course, different customers have different strategies on how they manage their particular inventory. And the smaller customers in the channel that focus on data center products have had more challenges getting their hands on some of these products that are in shortage like NIC cards to complete server builds, and the smaller customers are getting more impacted there than some of the bigger customers. Sanjay Mehrotra: And Harlan, I’ll tell you that we work very closely with our customers. I mean our team here, Sumit, myself, I mean, we really engage very closely with our customers across our ecosystem partners here - in China as well as here in the U.S. and worldwide. So, of course, we are keeping close tabs on how the business environment is evolving. Operator: Our next question comes from C.J. Muse of Evercore. C.J. Muse: I guess, first question, can you speak to the magnitude of the correction for both DRAM and NAND, how you see that playing out? I’m assuming here that it’s a much larger impact on the DRAM side for you and should be thinking maybe bits down kind of in the low teens. Is that the right way to think about it? Sanjay Mehrotra: So certainly, on the -- in terms of inventory adjustments that are primarily happening in the smartphone and the PC market. Of course, those inventory adjustments are happening in NAND as well as in DRAM. And clearly, as we have said that in terms of overall demand projection for this year, we definitely see it below -- for DRAM below the guidance we had provided earlier as well as the longer term CAGR for DRAMs mid-teens to high teens. So, we see that below that trajectory. And in terms of NAND, same thing that earlier we had said that the CAGR is high 20s, and we see that in calendar year ‘22 coming in below that. Again, adjustments are happening with respect to inventory both in smartphone and PC market. And just keep in mind that compared to earlier in the year estimation for PC growth, we now are projecting that PC year-over-year in calendar year ‘22 will be down nearly 10%. Similarly, smartphone at the start of the year was expected to grow in mid-single digits in terms of total unit sales worldwide year-over-year and now, one is looking at a decline of mid-single digits. So, a swing of 10% in smartphones as well. If you were to translate it into units, it amounts to like 130 million units reduction versus expectation earlier in the year for smartphone. And similarly for PC, let’s say, 30 million kind of reduction in terms of total units versus the projections earlier in the year. And of course, PC and smartphone combined represent half of the memory and storage worldwide demand in terms of bits, right? So, with this adjustment primarily happening in the second half of this year in these two markets, clearly that is resulting in a year-over-year change versus prior expectations in DRAM as well as NAND demand growth. C.J. Muse: Very helpful. As a follow-up, Mark, you talked about WFE trending lower in fiscal ‘23. Can you give an idea of the magnitude there? And then, how should we think about overall CapEx trending into fiscal ‘23? Mark Murphy: Yes. C.J., as mentioned in the prepared remarks, we expect to end fiscal ‘22 at around $12 billion, so -- on total CapEx. So that would be an uptick in Q4. And that’s consistent with previous statements. Now, with bit supply growth assumptions coming off versus previous group -- the view, we’re actively working to bring spend down. And as you say, we’re confident that as we sit here today, WFE spend will be down in fiscal ‘23. We’re also evaluating construction and other large areas of spend. We’re looking to reduce utilization on some older nodes to maintain supply and drive CapEx for use and shift production to more cost-effective nodes, doing a number of things. And the market is dynamic. So, this is real time. I’m not going to size the reduction next year just at this point because it’s still moving. But at this point, we’re confident that WFE will decline year-over-year. Operator: Our next question comes from Krish Sankar of Cowen and Company. Krish Sankar: I have two quick ones. First one, Sanjay or Sumit, I kind of have different way of asking the cloud question. As you mentioned, mobile and PC are slow, but it seems like data center the next year to drop, but yet, you seem optimistic about data center to remain strong in the second half 2022, but you also said cloud inventory is high. So, it seems like if consumer spending slows, which it is, data center CapEx is a drift. So, love to hear your thoughts why you think overall, the U.S. cloud trends, one, drop in the second half of this year? And then a quick follow-up question for maybe Mark was on the impact of the China Shanghai COVID-19 lockdown. Is there a way to quantify what it was in the May quarter and what it means to second half output for Micron? Sanjay Mehrotra: So earlier, I provided some color regarding our view on cloud. I think I will ask Sumit just to add some further color on that. And Sumit, maybe you can just take the China question as well. Sumit Sadana: Yes, sure. So, Krish, very quick on the cloud discussion. As Sanjay mentioned, the CapEx trends for our customers in the cloud space continue to be pretty strong and the end demand for cloud services and the growth in those cloud services continues to be robust. And so, of course, like you also pointed out, I mean, the inventory levels are higher compared to where they were pre-COVID. Now, it remains to be seen how the macroeconomic environment is going to cause the cloud spending trends to modulate over time. But if anything, we think that the cloud spending trends are going to be pretty secular, pretty strong. Even if there is some kind of an impact, it will come back strongly as things stabilize. And even companies that do focus on tightening their belt in this macroeconomic environment will continue to look for ways to become more efficient, become more profitable, improve their competitive positioning. And that means extracting more value from data, digitization trends to continue. So, those kind of things, we feel are going to be well sustained through the environment that may happen. But of course, a lot depends on how the macroeconomic environment evolves, and that’s why we are staying very close with customers. Switching to your China question. China has been a pretty significant impact to our FQ4 trajectory. This time last quarter when we were contemplating our FQ4 trajectory compared to that to our latest guidance that we have provided. Our view for China revenue has come down by approximately 30%. And that reduction in the China revenue has caused roughly a 10% reduction in our consolidated company-wide revenue. And so, that’s the impact to the Q4. It’s pretty substantial. And the China impact is largely driven by, of course, smartphone weakness, PC weakness, the general consumer environment there has been weak due to the COVID shutdowns, and that has percolated to different parts of the economy. So, the economic environment is weak. Now, we do feel like given the weakness in that economy, as you know, China does tend to provide stimulus to improve the financial and economic conditions, and we are hopeful that that kind of stimulus and improvement in the economy will be forthcoming in the quarters ahead. The timing of that and how it plays out with further COVID-related issues in China is unclear. But we remain optimistic that over time, the consumer demand will come back and improve things. Operator: Our next question comes from Timothy Arcuri of UBS. Timothy Arcuri: I guess I had two questions. The first one is for you, Mark. The buyback this quarter was great. But I guess -- and you did say that you’re going to buy back more in August. But I guess I had a bigger picture question around sort of you have an opportunity now with the stock where it is. You have leadership in terms of technology. Where would you be willing to take cash balance to take advantage of this price weakness? I mean, is there a sort of a minimum cash balance that we can think of where you could sort of opportunistically buy back a fairly significant piece of the Company? Mark Murphy: Yes. Tim, I’m not going to comment on definitively about our rate and pace. As you point out, the balance sheet is stronger than ever. And I think what’s most important there is we’re in a great position to sustain long-term investments as the markets a bit softer here. We’ve got $14.5 billion of liquidity, which you point out, $12 billion of that’s in cash. And that is above a liquidity target that we had set of about 35%. We’re 10 points over that. Leverage is low, 0.4% on gross and we’re in a net cash position. So, no near-term maturities, average debt maturity out 2031. So we’re in great shape. I think we want to maintain a balance sheet to be able to focus on the long term of the business. As you point out, we did return historically high levels to shareholders in third quarter. At these share price levels, we project opportunistic repurchase to increase. And then from there, we’re just focused on free cash flow growth, returning excess cash to shareholders and importantly, maintaining investment-grade rating. So, I’d say, we have ample liquidity now to repurchase at a higher rate this quarter. Timothy Arcuri: Cool. Thanks for that. And I guess, second question also, Mark, for you. What does the guidance assume for your inventories in August? And sort of how do you think about sort of the balance between holding some inventory if you believe that data center will stay strong and sort of how should we think about inventory in August and sort of your bigger picture strategy around keeping some inventory on the bet that cloud does remain strong? Mark Murphy: It’s a good question, Tim. And you heard Sanjay talk about this briefly in his prepared remarks. Our strategy is to manage supply through inventory as a buffer and we did talk about reducing bit supply growth assumptions a bit. We are starting this sort of softer period in a pretty good place. We ended the third quarter $5.6 billion of inventories, 109 days, down from 113 days in 2Q. So, we do expect inventories to go up this quarter. And that will build in some flexibility as we work to optimize price on our products. I want to note, it’s cost-effective inventory, much of it built on leading nodes. And so, it will be competitive for a long time. And then, we’ll also use this inventory build to revisit some CapEx decisions and defer CapEx, optimize the manufacturing footprint where we can. And to CJ’s earlier question, it gives us more confidence that we can lower WFE spend next year. So, in the -- we expect it to go up a couple of weeks and days in the fourth quarter. From there, we’ll have to see how the market develops and which way it moves. We are -- we do have more complex wafer processing and more complex module products that are sort of adding some pressure on the days, but we’re also offsetting that with better cycle time, lower stock levels and so forth. So, I think the days that we would be uncomfortable with is a number that we’ve talked about in the past, around 150 days where we start to -- that’s too high a level. So, we would definitely go up in the fourth quarter, and then we’ll see where inventory levels go from there. Operator: Our next question comes from Vivek Arya of Bank of America. Vivek Arya: Sanjay, I’m curious, do you think this Q4 outlook is the bottom of the cycle, or do you think the risks can extend into Q1? Because you mentioned that the consumer headwinds could continue to play out during the second half of the calendar year and also because cloud inventory is at elevated levels. So, I guess, my specific question as much as I realize you don’t guide out more than a quarter is, do you think Q1 sales and margins are more likely to be flat, up or down sequentially? Sanjay Mehrotra: So clearly, we don’t guide to Q1 here. But as I pointed out in the prepared remarks that we expect these inventory adjustments to be working themselves out over the course of second half of the year. We have pointed out that the inventory adjustments primarily are taking place in PC and the smartphone market. And I’ll just point out that from the past history as well, that once inventory adjustments begin in a certain part of the segment, then it takes a couple of quarters for them to work out. And here, we, of course, have macroeconomic uncertainties as well. It has been a rapidly changing and uncertain environment. And this is what we have to keep in mind when we look at when does normally see return in terms of demand. And that’s why, just like Mark pointed out here in response to the last question, we will be using inventory to address the demand next year. And we will continue to closely with our customers to understand their overall demand environment. We think that sometime in fiscal ‘23 is when -- in our fiscal ‘23 is when demand will rebound, but more importantly, it’s really about the supply-demand balance. And with respect to supply-demand balance, you can see, that we are taking actions immediately in terms of curtailing our supply growth for fiscal year ‘23 by sharing the plans with you that we are bringing down our CapEx versus our estimations earlier. So, that’s an important step. And of course, industry has shown that in DRAM that it has CapEx discipline as well. We believe our actions will also contribute toward returning the industry health sooner. So, I would expect that sometime in our fiscal year ‘23 demand will rebound as well as industry demand supply environment, there’s a store to a healthy level. But again, I will point out that, look, this is a highly uncertain rapidly changing environment. We are, of course, responding fast and -- in terms of any changes we see. So we are not been pointing to any specific quarter at this time. And again, I think what’s also important is that Micron execution continues to be really strong. I mean, whether you look from technology, product, manufacturing, customer relationships and of course, our strong balance sheet, we are well poised to emerge stronger on the other side of this downturn. So, we are really executing well, working closely with our customers to understand the latest demand trends in various end market segments and adjusting our plans as necessary and as fast as we can, and really positioning the Company for overall healthy growth in the long term. And again, the long-term trends -- as Sumit also pointed out earlier, and I shared with you, the long-term trends absolutely bode well for memory and storage. Vivek Arya: How much is cloud inventory above a normal level, $100 million, $200 million? Any kind of rough estimation of how much of incremental headwind is that, so we can take that into account? Thank you. Sanjay Mehrotra: Look, I mean, it really varies by customer to customer, right? So I mean, we can’t exactly give you some of those details here. Operator: Our next question comes from Ambrish Srivastava of BMO. Ambrish Srivastava: Sanjay, good to see the financial and the CapEx discipline. With respect to supply growth and you’re ramping down supply growth heading into fiscal -- for fiscal ‘23. What’s the right way to think about demand growth? And so, within the supply meeting demand, how much do you think will be production growth, production supply versus coming from the inventory from the industry? Because I think the industry seems to be consistent in that, at least what we heard a week or two ago from one of your large competitors is also lowering CapEx. So, that’s the good part. But what -- how should we think about inventory on the balance sheet of the three participants adding to the production supply growth? And then, I had a quick follow-up for Mark as well, please. Sanjay Mehrotra: So look, I mean, we are in the process of firming up our plans. And when we have our FQ4 earnings call in September, of course, we will share with you some more details around calendar year ‘23. That will be more appropriate time for us to be talking about it, as well as our fiscal year ‘23. But again, the important thing to note is that our inventory is highly cost effective. I mean, Micron is leading the industry with our DRAM and NAND production nodes, right? We are several quarters ahead. So, this is a highly cost-effective inventory. Our manufacturing operations are running well. So, we will be using this inventory in fiscal year ‘23 and of course, continue to adjust our plans as necessary on the CapEx and front-end wafer technology ramps, et cetera, to bring balance into demand and supply, and which is what I pointed out earlier that overall, the combination of our inventory as well as new production growth that’s how we’re positioned to bring that into balance to meet the demand sometime in fiscal ‘23. Ambrish Srivastava: Got it. And Mark, real quick one on the WFE versus non-WFE, what’s the percentage? And I respect the fact that plans are still in flux, so you can’t give us a number for ‘23. But what’s the number expected to be for this year, please? Thank you. Mark Murphy: I’m sorry, Ambrish. I couldn’t hear the question. Ambrish Srivastava: Sorry. My question was, what’s the wafer front end versus non-wafer front end spend in the CapEx for this year? Mark Murphy: Okay. I got the mix of spend. I won’t give an exact number because the mix varies from year-to-year and depends on product cycles, availability of fab space and facilities and other factors. Over half of CapEx generally is manufacturing WFE, and then, the other half is split between development CapEx and construction. Ambrish Srivastava: So, when you say you will be -- you could take down construction as well, that means construction as well as development, or what’s the right way to think about the kind of the playbook is what everybody is looking for if things continue to… Mark Murphy: Just to be specific, we’re talking about WFE for manufacturing, and that’s what I was addressing would go down year-over-year. We did not commit to going down year-over-year on construction, nor on technology development. I did say though that depending on how the market plays out here and inventory levels and supply bit growth and so forth, we continue to look at our footprint. That’s a continuous process to optimize the amount of spend. So, again, just to make sure that’s clear, WFE over half, and then the rest is construction spend -- equipment spend for R&D and assembly and test. Ambrish Srivastava: Got it. Thank you. And again, I apologize if misinterpreted your comments. Thank you. Operator: Our next question comes from Aaron Rakers of Wells Fargo. Please go ahead. Aaron Rakers: I just wanted to ask in this environment, these last couple of quarters and at the Analyst Day, you emphasized how much of your business you had kind of line of sight in terms of kind of the long-term agreements that you’ve established. I’m curious, as we’ve gone through this kind of correction or downturn, how would you characterize your discussions on those long-term commitments? Have they changed at all? Have customers pushed back on taking the amount of previously committed supply from you guys. How has that changed at all as we go through this kind of correction right now? Sanjay Mehrotra: That’s a great question, and I will have Sumit address it. Sumit Sadana: Yes. Happy to talk about that. So, the long-term agreements, generally, we go out four quarters, talk about volume in each quarter. And as I have pointed out in the past, these are not meant to be take-or-pay agreements, but more meant for planning and shared assumptions and so on. We have had extensive discussions. We keep having ongoing dialogue with our customers about the environment. We obviously continue to press our customers to stick with the agreements and the quarterly SKU, et cetera, as much as possible. But, when there are such significant extraneous events that are happening, exogenous shock sometimes to the environment and such unpredictable type of situations that Sanjay was highlighting, fast-changing environment that is causing impact to the end demand, especially given some of the consumer spending shifts that are happening in the world that are causing reductions in purchasing of certain electronics products, PCs, smartphones, et cetera. Then it is not possible for our customers to purchase based on the LTAs that were established when the assumptions around the industry were very different. And so, our goal then is to work with our customers to come up with the best approach and figure out how best to position ourselves in terms of the forward-looking views of their purchasing patterns. And this is where I feel like the product momentum that we have had has played out really well. We just mentioned that our data center SSD revenue doubled in the most recent quarter year-on-year. We have tremendous product portfolio momentum across all of our products. We are shipping in volume, HBM products. We have the world’s fastest graphics DRAM product, first to market with low power DRAM and mobile and really strong capability in automotive, number one share in auto, industrial and networking. So, these all play to our strengths with our customers. So, in the areas where we want to improve our portfolio position, improve our share because they are more stable segments in the market or they are more profitable portions of the industry profit pool. That’s where we focus on. And then our portfolio strength really helps enable that transition with customers to make our own business more optimized and more profitable, more steady over time. So, that’s the engagement that we have with customers. And we use those LTAs to then drive those longer-term goals that we have with customers. Operator: Thank you. Ladies and gentlemen, we have reached our time. That does conclude today’s conference call. Thank you for participating. You may now disconnect.

Operator: Thank you for standing by, and welcome to Micron Technology's Fiscal Second Quarter 2022 Financial Conference Call. [Operator Instructions] Please be advised that today's call may be recorded. [Operator Instructions] I would now like to hand the call over to Farhan Ahmad, Head of Investor Relations. Farhan Ahmad: Thank you, and welcome to Micron Technology's Fiscal Second Quarter 2022 Financial Conference Call. On the call with me today are Sanjay Mehrotra, President and CEO; and Sumit Sadana, our Chief Business Officer and Interim CFO. Today's call is approximately 60 minutes in length and is being webcast from our Investor Relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website along with the prepared remarks for this call. Today's discussion of financial results is presented on a non-GAAP financial basis, unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures may be found on our website. We encourage you to visit our website at micron.com throughout the quarter for the most current information on the company, including information on the financial conferences that we will be attending. You can also follow us on Twitter, @MicronTech. As a reminder, the matters we are discussing today include forward-looking statements. 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 you to the documents we file with the SEC, specifically our most recent Form 10-K and 10-Q for a discussion of risks that may affect our future 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 after today's date to conform these statements to actual results. I'll now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Farhan. Good afternoon, everyone. Micron delivered an excellent performance in fiscal Q2 with results above the high end of our guidance. We grew revenue and margins sequentially while driving favorable mix and cost reductions amid ongoing global supply chain challenges. We saw broad-based demand for our products with our SSD products achieving record revenue and our auto market revenue also reaching an all-time high. Execution was outstanding with our industry-leading 1-alpha DRAM and 176-layer NAND technology node ramps delivering strong cost reductions. Our portfolio transformation continues to gain momentum as we lead the industry on the DDR5 transition and grow our mix of NVMe data center SSDs. Following a solid first half, we are on track to deliver record revenue and robust profitability in fiscal 2022 and remain well positioned to create significant shareholder value in fiscal '22 and beyond. In fiscal Q2, 1z and 1-alpha DRAM combined represented the majority of our DRAM bit shipments, while 176-layer NAND represented the majority of our NAND bit shipments. Our 1-alpha DRAM and 176-layer NAND products are achieving excellent yields, providing us with solid front-end cost reductions and contributing meaningful revenue. We qualified additional products on these advanced nodes with a broad set of customers, which sets us up for continued strong revenue ramp in the second half of the fiscal year. We are tracking several quarters ahead of the industry in ramping products based on these leading-edge process technologies. We are also investing to maintain technology leadership for the next decade and making good progress in the development of future technology nodes. Micron is not only a technology leader, but also the industry leader in quality with the majority of our customers ranking us #1. Our leadership in quality is an important differentiator for Micron, particularly in fast-growing data center and automotive markets, where our quality scores are excellent. We have also strengthened our position as a strategic supplier to our customers as demonstrated by our commitment to supply continuity amid ongoing semiconductor supply chain challenges this past quarter. In late December, a government-mandated COVID-19 lockdown impacted production output at our back-end facility in Xian, China. The Micron team executed with tenacity to return the Xian site back to normal output levels post lockdown. As a result of this outstanding effort, we mitigated the lost output from Xian and delivered on our customer commitments for the quarter by leveraging our global manufacturing network. Additional COVID-19-related lockdowns in the region present a risk to the global electronic supply chain, and we continue to monitor the situation closely. The global semiconductor supply chain is experiencing pressure due to impact of Russia's invasion of Ukraine. The region is an important source for the global supply of noble gases and other critical minerals that are used in semiconductor manufacturing. We have strategically diversified our supply chain over the last several years and maintained appropriate inventories of materials and noble gases. We currently do not expect any negative impact to our near-term production volumes because of the Russia-Ukraine war, but we do expect an increase in our costs as we secure supply of certain raw materials that could be at risk. We also remain vigilant in this dynamic situation and are engaged with our key suppliers to ensure continuous availability of materials to support our operations. Now let's review our end markets. Demand for memory and storage is broad, extending from the data center to the intelligent edge and to a growing diversity of user devices. Memory and storage revenue has outpaced the rest of the semiconductor industry over the last 2 decades, and we expect this trend to continue over the next decade, thanks to ongoing advancement of AI, 5G and EV adoption. Our team's execution on strengthening our product portfolio has been outstanding with several new product launches and customer qualifications in fiscal Q2, achievements that we are very proud of. Last year, data center became the largest market for memory and storage, eclipsing the mobile market. Looking ahead, we expect data center demand growth to outpace the broader memory and storage market over the next decade, fueled by secular drivers in cloud and healthy enterprise IT investment. Memory and storage share of server bond costs already exceeds 40%, and this number is even higher for servers optimized for AI and ML workloads. This growth is supported by new heterogenous computing architectures, the increase in data-intensive workloads and ongoing displacement of HDDs by SSDs. In the fiscal second quarter, data center revenue grew more than 60% year-over-year, supported by robust demand across our DRAM and SSD portfolio. We have broadened the qualifications for our 1-alpha DRAM products and are well positioned to support the data center DDR5 transition driven by new CPU platforms, which are targeted to begin ramping later this calendar year and gain momentum in 2023. Following the introduction of our 7400 SSD, in fiscal Q2, we introduced the 7450, which is the industry's first 176-layer vertically integrated data center NVMe SSD. These Gen4 NVMe data center drives are generating an enthusiastic response from our customers. We are making robust progress in our qualifications of these drives with data center customers, which has contributed to a doubling of our fiscal Q2 data center SSD revenues year-over-year. We expect strong growth of data center SSD revenues to continue for the remainder of this fiscal year. In fiscal Q2, we saw recovery in our client revenue driven by strength in enterprise PCs, which more than offset softer consumer and Chromebook demand. We expect that calendar '22 PC unit sales will be flattish versus last year's sales, but we expect solid growth in DRAM and NAND content driven in part by increasing mix of content-rich enterprise desktops and laptops. We are leading the industry's client to DDR5 transition, and our DDR5 revenue continues to increase as multiple PC customers launch next-generation notebooks. Client DDR5 demand continues to outstrip supply, and we are seeing meaningful price premiums over DDR4 alternatives. Building on our QLC leadership, in fiscal Q2, we also launched our 2400 NVMe SSD, the world's first client SSD built on 176-layer QLC NAND. Micron maintains a leading position in the fast-growing graphics market. We have a broad product portfolio, featuring industry-leading product performance and deep partnerships with leading GPU suppliers. In fiscal Q2, revenues grew year-over-year driven by strong demand for the latest generation of gaming consoles and graphics cards. Our advanced GDDR6X continues to lead the industry in performance. And in fiscal Q2, we began revenue shipments of our next-generation GDDR6X solutions. Fiscal Q2 mobile revenue grew slightly year-over-year as the 5G transition continues in smartphones. We see some weakness in the China market as the local economy slows, smartphone market share shifts and some customers take a more prudent approach to inventory management. Mobile memory and storage demand continues to be supported by content-hungry applications and the ongoing transition from 4G to 5G, which is driving 50% higher DRAM content and the doubling of NAND content. 5G smartphone sales are expected to grow to 700 million units in calendar year '22. In fiscal Q2, we achieved the first qualification of our 1-alpha LP5 DRAM, which delivers more than a 15% power improvement over the previous generation, enabling our customers to offer an improved 5G experience with better battery life. We are also seeing a very strong revenue ramp for our 176-layer NAND UFS products, which are now qualified in nearly 50 different OEM platforms. The automotive and industrial segments are expected to be the fastest-growing memory and storage markets over the next decade. Today, more than 10% of our revenue comes from these end markets, and we are exceptionally well positioned as a market share leader. In fiscal Q2, our auto revenue set a new record driven by robust demand for memory and storage. Auto unit production remains below demand constrained by numerous supply chain challenges, including logic and analog semiconductor component shortages. The Russian invasion of Ukraine has also impacted auto bills. Nevertheless, the demand for memory and storage remains strong driven by auto content growth. New EVs are becoming like data center on wheels, and we expect over 100 new EV models to launch worldwide in this calendar year alone. These new EVs include advanced ADAS and in-vehicle infotainment features that have significantly higher memory and storage requirements. In fact, some of these Level 3 autonomous EVs have about $750 in memory and storage content, which is 15x higher than the average car. In Industrial IoT, we saw approximately 60% year-over-year revenue growth, fueled by the continued ramp in applications such as factory automation and security systems. Turning to the market outlook. Our expectation for calendar '22 industry demand is largely unchanged from our last earnings call. We expect calendar '22 industry bit demand growth to be in the mid- to high teens for DRAM and at approximately 30% for NAND. We anticipate underlying demand in calendar '22 to be led by data center, ongoing adoption of 5G smartphones and continued strength in automotive and industrial markets. Currently, we see a healthy supply-demand balance across both DRAM and NAND given these demand trends, supply discipline across the memory industry, long semiconductor manufacturing equipment lead times and reduced NAND supply from some of our competitors that experienced a contamination issue in their fab. Nonmemory component shortages are improving, and we expect that further improvements should support memory and storage demand growth for the rest of this year. However, there are some pockets where semiconductor shortages have not improved as fast as we had expected, and these shortages are likely to continue into calendar year 2023. We are mindful of increased macroeconomic uncertainty and remain vigilant of any changes in market conditions. Turning now to Micron's bit supply growth expectations for the year. Consistent with the rest of the industry, we are experiencing a challenging environment for equipment and material suppliers. However, due to strong execution by Micron's operations team, our calendar year '22 bit supply growth for DRAM and NAND remains unchanged from prior expectations and will be in line with industry demand. We are on track to deliver record revenue with solid profitability in fiscal year '22, and we continue to expect strong bit shipment growth in the second half of the fiscal year. We expect our cost reductions to outpace that of the industry this year driven by the exceptionally well-executed ramp of our world-class 1-alpha DRAM and 176-layer NAND nodes. However, across the industry, there are cost challenges stemming from supply chain and inflationary pressures, which will limit cost reductions this year for the industry. We remain confident in our long-term technology road map and our ability to drive competitive cost reductions for years to come. I will now turn it over to Sumit. Sumit Sadana: Thanks, Sanjay. Micron delivered excellent fiscal Q2 results marked by record revenues across multiple products and markets, strong profitability and generation of over $1 billion in free cash flow. I'm particularly excited by the execution of our industry-leading 1-alpha DRAM and 176-layer NAND technology ramp and the accelerating momentum of our product portfolio transformation. Fiscal Q2 revenue was approximately $7.8 billion, up 1% quarter-over-quarter and up 25% year over year. Revenue was particularly strong in client and cloud markets. Fiscal Q2 DRAM revenue was $5.7 billion, representing 73% of total revenue. DRAM revenue increased 2% quarter-over-quarter and was up 29% year-over-year. Sequentially, bit shipments increased in the high single-digit percentage range, while ASPs declined in the mid-single-digit percentage range. Fiscal Q2 NAND revenue was $2 billion, representing 25% of Micron's total revenue. NAND revenue increased 4% quarter-over-quarter and was up 19% year-over-year. Sequential bit shipments were flat, and ASPs increased in the mid-single-digit percentage range due to stronger mix of SSDs, more than offsetting like-for-like price declines. Our ongoing portfolio transformation and a solid front-end cost reduction drove sequential gains in gross margin in NAND despite sequential price declines in most products. Now turning to our fiscal Q2 revenue trends by business unit. Revenue for the Compute and Networking Business Unit was $3.5 billion, up 2% sequentially and up 31% year-over-year. Cloud generated record DRAM revenue, and client DRAM revenues also performed well in the quarter. Revenue for the Mobile Business Unit was $1.9 billion, down 2% sequentially and up 4% year-over-year. Our Mobile business continues to perform well, building on our leadership in managed NAND and MCPs as well as our strong relationships with all smartphone customers. Revenue for the Storage Business Unit was $1.2 billion, up 2% sequentially and up 38% year-over-year. We achieved record SSD revenues, which were up approximately 80% year-over-year. Our storage business is gaining momentum, growing revenue as well as profitability as we become the first in the industry to ramp several 176-layer NAND SSDs from QLC and TLC client products to vertically integrated data center SSDs. Finally, revenue from the Embedded Business Unit was $1.3 billion, up 5% sequentially and up 37% year-over-year. Our Embedded Business Unit saw strong demand across automotive and industrial markets, with auto revenue hitting a new record. The consolidated gross margin for fiscal Q2 was 47.8%, up approximately 80 basis points quarter-over-quarter. Gross margins benefited from improvements in our portfolio mix as we ramped several high-value solutions and from manufacturing cost reductions. Operating expenses in fiscal Q2 were $974 million, near the midpoint of our guidance range. Fiscal Q2 operating income was strong at $2.8 billion, resulting in an operating margin of 35%, flat quarter-over-quarter and up from 20% in the prior year. Fiscal Q2 adjusted EBITDA was $4.5 billion, resulting in an EBITDA margin of 58%, up from 57% in the prior quarter and up from 45% in the prior year. Non-GAAP earnings per share in fiscal Q2 were $2.14, down slightly from $2.16 in fiscal Q1 and up more than 100% from the $0.98 in the year ago quarter. The sequential increase in fiscal Q2 tax rate impacted Q2 EPS by $0.04 per share. Turning to cash flows and capital spending. We generated $3.6 billion in cash from operations in fiscal Q2, representing 47% of revenue. Net capital spending was $2.6 billion during the quarter. We continue to expect fiscal 2022 CapEx to be in the range of $11 billion to $12 billion with the CapEx being roughly even between the first and second half of the fiscal year. Our free cash flow for fiscal Q2 was strong at slightly over $1 billion. We remain confident in our ability to generate significant free cash flow in the second half of the fiscal year, substantially higher than that in the first half. We completed share repurchases of $408 million or approximately 4.8 million shares in the quarter. Including our dividend payment, we returned around $520 million to shareholders in fiscal Q2. From the inception of the share repurchase program in fiscal 2019, we have deployed $4.7 billion towards repurchasing 94 million shares at an average price of $50 per share. In addition, we have deployed approximately $800 million towards settling convert premiums, which reduced our diluted share count by 19 million shares. Combining the share repurchases, convert premiums and dividends, we have returned to shareholders $5.8 billion or 64% of our cumulative free cash flow in this time frame. We remain committed to returning more than 50% of the cross-cycle free cash flow through a combination of dividends and buybacks. As we have mentioned before, we will be opportunistic in share repurchases and more aggressive when the shares are trading at larger discounts to intrinsic value. Our Board of Directors approved a quarterly dividend of $0.10 to be paid on April 26 to shareholders of record on April 11. Our ending fiscal Q2 inventory was $5.4 billion, and average days of inventory for the quarter was 113 days. Our fiscal Q2 DIO increased sequentially due to an increase in raw materials and WIP to support demand for the second fiscal half. Finished goods inventory declined quarter-over-quarter in both DRAM and NAND. We ended the quarter with $11.9 billion of total cash and investments and $14.4 billion of total liquidity. Our fiscal Q2 total debt was $7.1 billion. Now turning to our outlook for the fiscal third quarter. Our overall business is tracking ahead of our plans a quarter ago, and demand is strong across most end markets with some regional challenges that Sanjay referenced earlier. Near term supply and pricing trends are constructive. Our improved fiscal year financial outlook is increasing our variable compensation expenses, which will impact our costs in fiscal Q3. We are also seeing cost impacts from continuing inflationary pressures and from supply chain mitigation actions resulting related to industry-wide shortages. Additionally, due to the pull-in of cost reductions in Q2, we expect more modest front-end cost reductions in Q3 on a sequential basis. We do expect both DRAM and NAND gross margins to increase sequentially in fiscal Q3. A higher mix of NAND revenue in our consolidated total will affect our consolidated gross margin as our DRAM gross margins are substantially higher than our NAND gross margins. With all these factors in mind, our non-GAAP guidance for fiscal Q3 is as follows. We expect revenue to be $8.7 billion, plus or minus $200 million, which will represent a new record for quarterly revenues; gross margin to be in the range of 48%, plus or minus 100 basis points; and operating expenses to be approximately $1.05 billion, plus or minus $25 million. We expect our non-GAAP tax rate to be approximately 10% for fiscal Q3. Based on the share count of approximately 1.14 billion fully diluted shares, we expect EPS to be $2.46, plus or minus $0.10. We remain on track to deliver record revenue and solid profitability and free cash flow in fiscal 2022. In closing, Micron continues to deliver strong cross-cycle performance. Revenue growth has significantly outpaced the broader semiconductor industry, gross margins have averaged over 40%, and operating margins have averaged around 30%. Micron's financial foundation and outlook have never been stronger as we build on the momentum created by our portfolio transformation, leadership technology road map and manufacturing excellence. I will now turn it back to Sanjay. Sanjay Mehrotra: Thank you, Sumit. I'm proud to note that earlier this month, Micron was named one of the world's most ethical companies by the Ethisphere Institute. This recognition reflects our global team's dedication to holding ourselves the highest ethical standards both in how we operate and how we pursue environmental and social responsibility. We continue to manage our business with a discipline and foresight that is driving industry-leading technology ramps, improving our product portfolio and strengthening our customer relationships. A strong first half performance and our guidance for an all-time record quarter show our continued progress toward delivering record fiscal '22 revenues and robust profitability. Given our technology leadership, Micron is in an excellent position to capitalize on the broad trends that are driving demand for DRAM and NAND solutions, solutions that transform data into better customer experiences and greater business value. I look forward to seeing you at our Investor Day presentation on May 12 in San Francisco, where we will discuss the technology drivers behind these trends in greater depth and detail Micron's strategies to seize the opportunity ahead. Thanks for joining us today, and we'll now open for questions. Operator: [Operator Instructions] Our first question comes from the line of C.J. Muse of Evercore. C.J. Muse: I guess first question, as I look at your results, the mix and operational performance is excellent. And as you look ahead to the second half, you did talk about a pull-in of costs in the February quarter, but would be curious to hear how you're thinking about mix, both like-for-like in DRAM and NAND into the second half of the fiscal year and how we should think about kind of the gross margin trajectory from here. Sumit Sadana: All right. So in terms of the gross margins and the mix, I'll just point out that for FQ2, for example, we had exceptionally strong performance in gross margin due to the ramp of our 1-alpha and 176-layer NAND and our portfolio mix. And our NAND gross margins actually improved due to mix effects alone. And of course, we had good cost reductions in 176-layer NAND. So that momentum is continuing. So as I look forward to FQ3, you have seen that the gross margin guidance at the midpoint is sequentially higher. So we are very positive on our gross margin trajectory going forward. I want to point out a couple of things that are important here. So both NAND and DRAM gross margins are expected to improve sequentially in FQ3. And as you highlighted, we have spoken about some cost improvements that got pulled into FQ2, so that’s going to have little bit of a dampening effect on the cost improvements we will see sequentially. But there are a couple of important factors that are going to affect our FQ3 gross margin by about 100 basis points. The first one is that our variable compensation accrual is increasing sequentially from FQ2 to FQ3 because our overall profitability forecast for the year -- for the fiscal year is quite a bit higher than we were expecting originally. So that is increasing our bonus accrual. That impacts costs in the following quarter. We have already taken that impact in the OpEx for FQ2, but it will impact costs in FQ3. So that's an impact on gross margin sequentially in FQ3. And the other aspect is that our NAND business in FQ3 will grow faster than our DRAM business in FQ3. So that has a little bit of an impact on the consolidated gross margin. So both NAND and DRAM businesses will have sequential improvement, but NAND will grow faster. So mathematically, it will just have a little bit of an impact. So the 2 of these issues between the bonus accrual and the NAND mix has about just over a 100 basis point impact on gross margin going from FQ2 to FQ3. And in spite of that 100 basis point impact, we are forecasting improvement in gross margin in going from FQ2 to FQ3. So overall, really strong margin performance, I feel. And you asked a question about mix. You see that our data center SSD revenue is improving substantially. Sanjay mentioned in his prepared remarks that in FQ2, our revenue doubled year-on-year in the data center. We expect continued growth in the data center in the next couple of quarters as well. So that's a positive for our gross margins. We also have leadership in DDR5. That kind of mix improvement is also good for us because we do have good gross margins there. So overall, we feel positive about the trajectory into FQ3 and very constructive about FQ4 profitability as well. Of course, we are not going to guide for FQ4, so we'll leave it at that for now. Operator: Our next question comes from Vivek Arya of Bank of America Securities. Vivek Arya: Interesting to see that the strong outlook, and you're maintaining the full year kind of industry view unchanged also even though there have been some recent kind of softer data points and deceleration in PC and smartphone demand. Is this just the case of data center strength overpowering those headwinds? And what are you doing to make sure that you don't oversupply to the data center? Sanjay Mehrotra: So certainly, let me take this question. Regarding PC, what I would like to point out is that in PC, enterprise and desktops are strong. Chromebooks and consumer PCs have had some weakness as is well known, but enterprise and desktops are strong. And that's a favorable mix for us because enterprise and desktops take higher content of both DRAM and NAND. So while we look at PC unit growth on a year-over-year basis to be flattish, the enterprise and desktop mix is favorable in terms of DRAM and flash content requirements there. And data center, certainly a strong market for us. Second half of calendar year '22 should be strong for data center because of new CPUs that are expected to be launched, which will be driving greater content in the servers. So data -- and you have heard about various hyperscalers talking about their investments -- their CapEx investments in data center as well. And again, all the workloads related to AI/ML are just driving greater content within the data center space. But it's not just about data center or the aspects of PC that we just discussed. Of course, 5G smartphones continuing to drive strong DRAM and NAND content as we mentioned; and automotive market, strong growth driver as well. So the point is that the demand is broad-based and demand, we expect to be strong going forward as well. And of course, on the aspect of supply, of course, the supply is contained in the industry because of the discipline on CapEx that has been exercised by the various players. And of course, on the NAND side, the aspect of the contamination issue that impacted a competitor's fab and impacted the supply in NAND in a big way there, too. So overall, healthy environment that we see for -- in terms of DRAM and NAND supply and demand balance through the year. Operator: Our next question comes from John Pitzer of Credit Suisse. John Pitzer: Congratulations on the strong results. Sanjay, you've spent the last several years trying to reposition the NAND portfolio to higher-value products. I'm kind of curious, relative to the May guide of NAND growing faster sequentially than DRAM, can you help us better understand what products and end markets are really driving that? And is this really the fruits of some of your qualification labors? And as you answer the question, I'd be curious, when you think about NAND gross margins, what's the impact as the mix continues to improve? How much of the gap between NAND and DRAM do you think you can close over time? Or how much more upside do you think there is in the NAND gross margin business over time as you optimize the portfolio? Sanjay Mehrotra: So certainly, in NAND, I think our team has done a great job in leading the industry by several quarters with 176-layer NAND technology and now deploying it into various products. We talked about in our prepared remarks some of the SSDs that we have introduced now for data center as well being the first ones to introduce data center NVMe SSDs with 176-layer NAND technology with vertically integrated solutions, including our own controllers. Our manufacturing ramp has been excellent as well. They are really exceptionally executed in terms of our yields, in terms of production ramp, in terms of quality. And all the work that we have been putting in over the course of last several years absolutely is coming to fruition here. We have had -- we have enjoyed already the gains in share with respect to mobile-managed NAND solutions both on the MCP side that contain DRAM and NAND solutions as well as on the discrete NAND side. And you have seen how we have grown our share from low single digits a few years ago to now in the high teens in terms of our share in the market. So strong performance already enjoyed on the mobile NAND side of the business. And now SSD is getting absolutely into high gear here. Our client SSDs, our introduction of QLC, 176-layer SSD, our data center NVMe SSDs, all the work that we have vertically integrated solutions with our own controllers, all this work that we have been doing for quite some time is hitting the market now, and we are well positioned to gain share in the SSD space in the client as well as on the data center side. And all of this being built on the foundation of leading, highly cost-effective 176-layer NAND technology positions us well for improvements in our revenue outlook for NAND as well as for our profitability outlook for NAND. And in terms of the differences between DRAM and NAND, of course, as Sumit was just earlier highlighting that there are significant differences in the industry margins of DRAM as well as NAND and certainly for Micron as well. But the point is that our margins in NAND are improving given the accelerating portfolio of momentum we have and our ability to really address wide range of end-market applications from smartphone to client SSDs to data center SSDs as well as strong position in the channel markets as well. Operator: Our next question comes from Timothy Arcuri of UBS. Timothy Arcuri: I just had a quick question on cost as well. So if I look at the slide, Sanjay, where you're talking about the current outlook, the verbiage change to basically reflect the fact that you're costing down better this year than the industry. And of course, there are headwinds on cost for the industry this year. But I'm wondering whether your ability to outpace the industry's cost down will also extend into next year. Because if I look at the verbiage on the slide, last quarter, you said that you think that you'll be competitive with the industry over the longer term. So I'm just wondering whether you think that this is a 1-year thing where you're costing down better than the industry? Or is this -- can this be sustained into next year? Sanjay Mehrotra: We feel really good about our technology road map. And just like we have led the industry with our 1-alpha DRAM as well as with our 176-layer NAND, we certainly plan to lead the industry with our future generation nodes as well, and we are making good progress on those. And those nodes will be introduced sometime in calendar year '23 time frame as well. So really, it's our technology leadership position and our ability to successfully ramp it into production across a broad range of products, is key to our strength in continuing our cost position in the industry. So we feel very good about our cost position versus our competitors going forward as well. Operator: Our next question comes from Pierre Ferragu of New Street Research. Pierre Ferragu: I have, first, like very quick simple one on the mobile market. So it's slowing sequentially now. What kind of visibility do you have there? Do you think we are reaching like a -- kind of like plateau in content increase in the kind of growth that 5G generated in that market? Or is that something different and more temporary? And then I have like a broader question for you guys. Your peers in logic are very active on, I would say, the geopolitical front, investing in the U.S., investing in Europe to create a more balanced manufacturing footprint in the world. And we don't hear much about that in the memory market. And so I was wondering if there could be a topic there, if there are conversations and is that something that could benefit Micron at some point. Sanjay Mehrotra: So it's a great position to be in today that we have Sumit here as interim CFO as well as our Chief Business Officer. So I will actually let him address the first question of yours, and then I will take the second question. Sumit, go ahead with the first one. Sumit Sadana: Sure, Sanjay. So Pierre, thanks for that question. So in terms of the model average capacities node, we don't see this anywhere close to a plateau of any kind. We are very positive on average content growth in mobile. The 5G transformation in the industry continues in the handset portfolio. So if you think about an industry of about 1.4 billion smartphones approximately being sold on an annual basis, about 500 million or so in calendar 2021 were sold as 5G. We expect a 40% growth to 700 million being sold as 5G handsets this year. And a 5G handset has typically 50% more DRAM content, more than double the NAND content of a 4G handset. So that trend has a lot to run still. And I think on the -- even beyond that, we do expect applications to come up that take advantage of 5G in ways that are going to continue to drive the average capacities for both DRAM and NAND hire. So there's plenty of room to run there. Yes, the smartphone business, we do expect a low single-digit sort of unit volume growth in this calendar year overall for the smartphone volumes, consolidated volumes overall. And average capacity is then on top of that. So the overall growth is going to still be robust. And keep in mind, we are going to enter a seasonally stronger period when new handsets get introduced in the fall for the mobile business. So that's going to be another catalyst as well. So with that, I will pass it over to Sanjay. Sanjay Mehrotra: Thank you, Sumit. And Pierre, regarding your second question, so of course, as you know, Micron has made investments over the course of last few years in our clean rooms in the U.S., in Taiwan, in Singapore as well as Japan. In terms of cleanroom expansions in these locations, again, leveraging our globally well-diversified manufacturing footprint, these cleanroom expansions position us to implement the technology transitions in our production. And we have not added new wafer capacity, but we have invested really prudently over the course of last few years in cleanroom expansion, positioning us well to deliver on technology transitions, which are -- which is what is positioning us to drive our cost reductions as well as bit growth in line with the demand growth. As we look ahead, we have announced in October of last year that we would be looking at investing more than $150 billion over 10 years in leading-edge memory manufacturing and R&D on a global basis. So of course, we have also, as part of that, highlighted that in '25-'26 time frame, we would be needing to add new wafer capacity for DRAM in order to continue to meet the increase in demand for the later half of this decade through the 2030 time frame. In that regard, of course, we are evaluating the new expansion on a global basis. And certainly, in the U.S., the discussions that have been proceeding related to chips and the FABS Act, which are about upfront support for investments, new manufacturing capacity as well as ongoing investment tax credits, these are important aspects to help the U.S. bridge the gap with Asia operations. And these are the things that we will, of course, continue to monitor. And we will be making our decisions regarding future expansions once again that is more about the second half of this decade because until then, we are well positioned with our cleanroom situation in our diversified footprint in various countries, including the U.S. today. And in this regard, we are very much engaged with the U.S. government related to passage of CHIPS and investment tax credits. Operator: Our next question comes from Mehdi Housseini of SIG Mehdi Hosseini: One follow-up for Sanjay. How should I think about DDR5 contribution, especially to the operating profit this year, which -- it seems to me mostly driven by the PC end market versus next year where the server application picks up. Sanjay Mehrotra: So I think we mentioned in our prepared remarks that DDR5, of course, it is a bigger die because of the specs of DDR5. By the way, that has an effect in terms of moderating the supply bit growth in the industry as well as DDR5 continues to ramp in client and, in the future, in the data center space as well. So DDR5, we noted in our remarks, that has a pricing premium in the industry as well. And Micron actually is leading in terms of DDR5 supply capability in the industry today as well. So it is a positive contribution to our overall DRAM margins with DDR5. And certainly, we are getting pricing premium for DDR5 in the industry. And as new processors get deployed widely in the data center space that can make use of DDR5, which are expected to begin later this year, you will see DDR5 continuing to ramp rapidly during calendar year '23 as well. We are well positioned with our DDR5 road map for client as well as for data center market. Mehdi Hosseini: But there will be a pricing premium for server application versus desktop, correct? Sanjay Mehrotra: DDR5, as we noted, has pricing premium, yes. Operator: Our next question comes from Chris Danely of Citi. Chris Danely: So just specifically to DRAM, can you just talk about how the 3 main end markets did relative to your expectations? And then on the guidance, how they did -- or how they're -- you expect them to do relative to the expectations as far as PC, server, data center and mobile? Sumit Sadana: All right. So Chris, yes, I can take that. So in terms of our end markets, FQ2 was a really good quarter. When we think about PCs, PCs performed well. Mobile performed well. Data center continues to be strong. And in fact, a lot of the gross margin upside that we experienced in FQ2 came from pricing improvements that were driven out of actually both DRAM and NAND, but definitely in DRAM as well versus our expectations. So those markets have been strong in FQ2. And as we look ahead in FQ3, most of our sequential growth in FQ3 is being driven out of the compute market, which is mostly DRAM; and then the storage market, which is mostly NAND. So our Storage Business Unit and our Compute and Networking Business Unit, these 2 business units are going to be the primary drivers of growth. All 4 business units are likely to grow well, but these 2 are going to be exceptional growth drivers sequentially in FQ3. So we do expect continued strength in PC. As Sanjay mentioned, the average capacities are increasing because of the mix improvements in PCs due to the shift towards corporate PCs and laptops away from lower-end consumer. So that's helping there. Data center continues to be robust. We expect the rest of calendar '22 to be robust for data center because a lot of demand growth there at our customers who are allocating significant CapEx increase. And the mobile 5G shift continues to be positive for average capacities. And even though mobile is not going to be a big driver of growth sequentially in FQ3, we do expect it to pick up sequentially in FQ4 because of seasonality and these continued trends. Operator: Our next question comes from Joe Moore of Morgan Stanley. Joe Moore: You touched on the impact of the contamination issue in NAND at your competitor. Can you talk about how much of a change that was, how tight you think the NAND market may be because of that? And do you expect that -- the impact of that to be durable beyond the current period? Sanjay Mehrotra: It certainly brought down the year-over-year supply growth for the industry. It had brought it down based on some of the estimates that are out there by a couple of percentage points in terms of, again, the year-over-year industry supply growth. And certainly, that's -- in terms of the demand-supply dynamic in the industry, that's favorable because the demand for all the reasons that we have just discussed, whether it's in data center or in the client applications or on the mobile phones or even in the automotive markets, the demand for NAND along with demand for DRAM continues to increase. And we fully expect a healthy demand-supply balance for the NAND industry as we look ahead. Operator: Our next question comes from Toshiya Hari of Goldman Sachs. Toshiya Hari: I had a question on NAND ASPs and how to think about the evolution going forward. I think in the February quarter, your ASPs were up mid-single digits sequentially despite the industry environment still being relatively soft from a pricing perspective. Sanjay, just given your comments around your success in data center SSDs and winning some of those important designs, is it fair to assume that your sequential ASP expansion going forward should outperform the industry throughout the year? Is that a fair assumption to be making? And then separately, Sumit, you talked about the headwinds associated with inflationary pressures and the supply chain mitigation actions. I think you said 100 basis points. At what point could that reverse? I know that's a hard question to answer, but should we expect those headwinds to persist for a couple of quarters? Or could those headwinds turn into tailwinds eventually? Sanjay Mehrotra: Sumit, why don't you go ahead? Sumit Sadana: Yes. In terms of our cost pressures, certainly, if you look at the overall environment out there, things are continuing to be challenging. And this is an industry-wide statement. So whether you look at the price of oil and natural gas that are important commodities that impact even the price of electricity, to a lot of the other raw materials and commodities that we purchase, noble gases, a lot of these things, even the pricing of OSAT external subcon services. And of course, you're seeing inflation and even foundry logic prices. So there are lots of vectors. And then, of course, we are also seeing wage inflation happening. So there are lots of vectors through which inflation is getting transmitted into the business. And of course, we are, I believe, doing a really extraordinary job of containing our costs. But of course, these inflationary pressures are there. So we are planning for these pressures to persist for several quarters. We are not thinking that these will let up anytime soon. And so our work is focused on continuing to find efficiencies, continuing to ramp our new technology as fast as we have been doing in an excellent way. So the rest of it comes from, of course, considering these costs as we think about how we price our products, and of course, driving stronger mix of products so we can get not only good ASPs, but also have positive gross margin benefit of products that have higher ASP, better high-value mix in our portfolio. And that mix improvement is happening on the NAND side. It's also happening on the DRAM side with examples like DDR5. So with that, I'll turn it over to Sanjay. Sanjay Mehrotra: So I think Sumit touched on the next aspect, which was the first part of your question. And as I think Sumit had highlighted in his prepared remarks that for NAND, even though there was a like-for-like price decline, our -- overall due to the mix, our pricing went up in FQ2. And again, this is just highlighting that how mix is playing an important role. The new products that we are launching with SSDs as well as our mobile-managed NAND solutions and shifting away from components into greater and greater mix of high-value solutions positions us well for continuing to improve the profitability of the business here. Operator: Our next question comes from Ambrish Srivastava of BMO. Ambrish Srivastava: Sumit, I'm a bit confused. I just wanted to make sure I understood the headwind that -- in the prior question. I thought the cost headwind, the 100 bps you called out, that was from the variable comp and had nothing to do with all the mitigation costs that are going on, which should continue for the next several quarters. Is that the case, the 100 bps is mainly -- Sumit Sadana: Yes. Yes, that is -- your understanding is correct. Yes, your understanding is correct. The 100 basis points impact to sequential gross margin in FQ3 versus FQ2 stemmed from the variable comp increase that I mentioned that's going to impact FQ3 as well as the NAND revenue mix that is going to increase in FQ3 and caused an impact to the consolidated gross margin just mathematically. So the sum of the 2 is over 100 basis points and -- Sanjay Mehrotra: On the gross margin. Sumit Sadana: On the gross margin side, that's right. Ambrish Srivastava: Got it. Got it. So then the question is then -- I'm just trying to unpack this because you talked about inflationary costs. We all understand that. We're feeling it in our own homes. But as you look at the business, you also said that some of the component availability is improving, and that has been a headwind as well to the back-end costs. So I'm just trying to unpack these comments. So on the one hand, you have -- and then you're also having to secure raw materials. I'm assuming neon is part of that. So can you just help us understand kind of what's the right way to think about these costs that could sustain for the next several quarters? So that was my first question. The second one is, thanks for providing that commentary on the inventory. That was very helpful. We had to wait for the Q. The finished goods being down quarter-over-quarter for both DRAM and NAND. That was very helpful. The question is, is that seasonal? Or is there something going on that finished goods system? Sumit Sadana: Sure. So in terms of the first question about costs, yes, we do expect that the availability of components is going to improve the overall shortages that we have been experiencing quite significantly over the last several quarters. The situation is improving. And as Sanjay said in the prepared remarks, it's not improving to an extent that all of those issues will be gone this year. We expect continuous improvement through the course of calendar '22. And we expect that because of those improvements in availability, the full demand will be experienced in terms of memory and storage because our customers can now order match sets of products. They can get their hands on all of the components that are short. We can get our hands on more components to build our products. And so that is improving through the calendar year, but there is going to be some components that will shift into -- in calendar '23 in terms of when we expect further improvement. There will be still some shortages. And even though the availability of some of these components is improving, there is a level of cost pressure across the supply chain. And these cost pressures are coming across a range of commodities that we buy, a range of input costs in the way we operate our fabs in back-end facilities. So it's an industry-wide pressure across a range of issues, and they will continue despite the improvements of availability of some components. And now switching to your question about inventory. We have been managing our inventory tightly. So our finished goods inventory is down quarter-on-quarter by design. We have higher levels of WIP, mainly staging for a pretty robust growth in FQ3 sequentially. And you can see that in our guidance. We are growing very robustly in FQ3 compared to FQ2. So we do expect inventory to come down in FQ3 and to end up in pretty much the normal range that we have for the year at the end of FQ4. So we do still have that expectation that we would -- as we had mentioned last quarter as well, we would build inventory ending FQ2 and then reduce inventory in FQ3, FQ4. So that is continuing to be the plan, and that's the set of numbers that you see. Just one last point I last point is part of the inventory increase is to just ensure supply continuity, right? I mean this has been a challenge in terms of getting our hands on all the components we need. So part of it is just ensuring that we have adequate supply on hand to meet our customer demand as we ramp revenue. Ambrish Srivastava: And so WIP has been going up consistently in the last 2, 3 quarters as a result of that rate? Sumit Sadana: Yes. Exactly. Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for participating. You may disconnect.

Operator: Hello. Thank you for standing by, and welcome to Micron's First Quarter 2022 Financial Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Farhan Ahmad, Vice President of Investor Relations. Please go ahead. Farhan Ahmad: Thank you, and welcome to Micron Technology's fiscal first-quarter 2022 financial conference call. On the call with me today are Sanjay Mehrotra, President and CEO, and Dave Zinsner, Chief Financial Officer. Today’s call will be approximately 60 minutes in length. This call, including the audio and slides, is also being webcast from our Investor Relations website at investors.micron.com. In addition, our website contains the earnings press release, and the prepared remarks filed a short while ago. Today’s discussion of financial results will be presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures may be found on our website. As a reminder, a webcast replay will be available on our website later today. We encourage you to monitor our website at micron.com throughout the quarter for the most current information on the Company, including information on the various financial conferences that we will be attending. You can follow us on Twitter at MicronTech. As a reminder, the matters we will be discussing today include forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer you to the documents we file with the SEC, specifically our most recent Form 10-K and 10-Q, for a discussion of risks that may affect our future 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 after today’s date to conform these statements to actual results. I’ll now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Farhan. Good afternoon, everyone. Micron delivered outstanding results in fiscal Q1, achieving strong year-over-year revenue growth and solid profitability. Our strong start to the year and our product portfolio momentum keep us on track to deliver record revenue and robust profitability in fiscal 2022. We are rapidly ramping our industry-leading 1-alpha DRAM and 176-layer NAND products and achieving excellent yields, and these products are now shipping across our major end markets. We achieved significant product advancements and customer wins, including launching our first DDR5 solution, introducing our vertically integrated Gen4 NVMe data center SSD, validating the world's first low-power DDR5X with MediaTek and shipping our GDDR6X for AMD's Radeon RX 6000 graphics card. The secular demand for memory and storage, along with Micron's focus on building our technology and product leadership and deepening our customer relationships, continues to strongly position us to create significant shareholder value in fiscal year '22 and beyond. With the successful ramp of 1-alpha DRAM and 176-layer NAND products across major end markets, we are several quarters ahead of the industry in market deployment of these leading-edge process technologies. The combination of 1-alpha and 1Z DRAM nodes represents the majority of our DRAM bit production and 176-layer NAND now accounts for the majority of our NAND bit production. Our strong execution on these advanced nodes sets us up for the successful fiscal year '22. We are also investing to scale our technology for the next decade. We are planning for volume DRAM production on EUV in 2024 with our 1-gamma node. Integrating EUV with our existing multi-patterning immersion lithography expertise will help us maintain DRAM technology leadership for many years to come. And in NAND, we have successfully transitioned to replacement gate and have a road map to scale for several generations while leveraging our leadership in CMOS and early and QLC to maintain a bit density leadership. In addition to being a technology leader, Micron is the industry quality leader with two-thirds of our customers ranking us number one in quality. As a technology and quality leader and as an innovation partner with strong global manufacturing network, we have become a strategic supplier to our customers. And its ongoing semiconductor supply chain challenges, Micron has leveraged our deep related partnerships with customers and suppliers to support DRAM, NAND and NOR supply continuity. On the customer side, we are seeing greater commitment and collaboration on supply planning, including the use of long-term agreements. Today, over 75% of our revenue comes from volume-based annual agreements, a significant increase from five years ago when they accounted for around 10% of our revenue. On the supplier side, we have entered into strategic agreements to secure supply of certain components that we need to manufacture our products. As a result of these agreements, the current tight supply of these components is expected to gradually improve for us throughout calendar 2022. Now let us review our end markets. Demand for memory and storage is broad, extending from the data center to the intelligent edge and to a growing diversity of user devices. Memory and storage revenue has outpaced the rest of the semiconductor industry over the last two decades, and we expect this trend to continue for years to come, thanks to AI, 5G and EV adoption. In addition, the build-out of immersive virtual worlds often referred to as the Metaverse will offer even more opportunity due to the intensive use of significant memory and storage in these applications. Our team's execution on strengthening our product portfolio has been outstanding, with several new product launches and customer qualifications in FQ1, achievements we are very proud of. I will highlight some of these achievements as I discuss our end markets. Data center is the largest market for memory and storage, and we expect it to outpace the broader memory and storage market over the next decade. Memory and storage is growing as a portion of server BOM supported by new and heterogenous computing architectures; the growth of data-intensive workloads and AI; and the ongoing displacement of HDDs by SSDs. In the fiscal first quarter, data center revenue grew more than 70% year-over-year as a result of continued cloud demand and the resurgence of enterprise IT investments. Our strengthening product portfolio also contributed to strong profitability. In Q1, we launched the 7400SSD the first data center NVMe SSD to utilize our internally developed controller and firmware, along with our DRAM and NAND. This Gen4 NVMe product has already been qualified by two key customers. Looking ahead, we expect a strong ramp in our data center SSD revenues in FQ2 driven by increased sales of our NVMe SSD products. In addition, we launched the industry's leading DDR5 and see strong demand as customers prepare for new server product launches in calendar '22. While PC end demand remains strong, our clients revenue declined sequentially due to the PC production impact from ongoing non-memory component shortages and related customer inventory adjustments of DRAM and NAND products. Consistent with the expectations we articulated in our last earnings call, the inventory adjustment at most PC customers is now largely behind us, and we are seeing signs of stabilization in demand in this end market. As we enter calendar year 2022, we expect PC unit sales to be in line with those for calendar year 2021. Mix of enterprise PCs in calendar year 2022 is projected to be higher as companies invest to support hybrid work environments. This shift in the mix of PC unit shipments should increase average PC DRAM and NAND content. Low-power DRAM has grown to 20% of the PC industry DRAM bit demand today and is projected to become the majority of the PC market in five years. Given our industry-leading solutions in low-power DRAM, we are well positioned to benefit from this trend. In FQ1, we achieved qualifications and volume production of our 176-layer Gen4 PCIe client SSD at several PC OEMs as well as our first revenues for DDR5 memory. Across the PC industry, demand for DDR5 products is significantly exceeding supply due to non-memory component shortages impacting memory suppliers' ability to build DDR5 modules. We expect these shortages to moderate through 2022, enabling bit shipments of DDR5 to grow to meaningful levels in the second half of calendar 2022. We are poised to take advantage of this transition with industry-leading DDR5 solutions for PCs. In the fast-growing graphics market, Micron holds an excellent position with a broad product portfolio featuring our proprietary GDDR6X product line and the partnerships with leading GPU suppliers. We increased our revenue sequentially and year-over-year. Our proprietary GDDR6X continues to have market success, including integration on NVIDIA's high-end gaming cards. In FQ1, we were pleased to announce availability of our GDDR6 memory solutions on AMD's Radeon RX 6000 graphics card, extending the value of GDDR6 memory to the entire gaming market. FQ1 mobile revenue increased more than 25% year-over-year. Mobile memory and storage demand continues to strengthen, supported by content-hungry applications and the continued transition from 4G to 5G, recent 5G phones, which had more than 50% higher DRAM and double the NAND content versus 4G phones. 5G smartphone sales are forecast to exceed 500 million units in calendar year '21, with 700 million units forecast for calendar year '22. We expect mobile content to continue increasing as 5G phones benefit from further innovation in 5G-enabled applications. Following several industry-first last year in FQ1, our 1-alpha-based LPDDR5X, the world's fastest mobile DRAM, was sampled and validated with MediaTek, further demonstrating Micron's leadership in the mobile market. We expect automotive and industrial to be the fastest-growing memory and storage markets over the next decade and we are exceptionally well positioned as a market share leader with over 10% of our revenue coming from these end markets. In the near term, non-memory component shortages are limiting calendar year '21 auto unit production to be flat year-over-year, significantly below end-consumer demand. However, our FQ1 year-over-year auto revenue growth remained strong at 25% as a result of content growth from in-vehicle infotainment and driver assistance applications, which are advancing rapidly, especially as EV adoption accelerates. New EVs are becoming like a data center on wheels, and we are already seeing examples of 2022 model year EVs supporting level three autonomous capability with over 140 gigabytes of DRAM and also examples with over 1 terabyte of NAND. In addition to continued content growth, we expect calendar year '22 auto unit production to increase as non-memory component shortages ease. We entered into a new supply agreement with UMC to improve our ability to support our automotive customers with NAND solutions as market demand strengthens in calendar year '22. In industrial IoT, we saw more than 80% year-over-year revenue growth, fueled by the continued ramp in applications such as factory automation and security systems. In consumer IoT, we saw more than 40% year-over-year revenue growth, driven by applications such as VR headsets and smart home devices. We expect IoT demand trends to accelerate further as 5G speeds the adoption of data-intensive applications powered by intelligent edge infrastructure. Our view of calendar 2021 and calendar 2022 industry bit demand and supply growth is largely unchanged from last quarter. We expect calendar 2021 DRAM industry bit demand growth to be in the low 20% range and industry NAND bit demand growth to be in the high 30% range. We expect calendar 2022 industry bit demand growth to be in the mid to high teens for DRAM and approximately 30% for NAND, in line with our view of the long-term bit demand growth CAGRs for each. We anticipate underlying demand in calendar 2022 to be led by increasing volume of data center server deployments, 5G mobile shipments and continued strength in automotive and industrial markets. Non-memory supply shortages have constrained customer bills and pushed out some demand across many end markets. While these shortages may cause some variability to our demand, we expect them to ease through 2022, supporting memory and storage demand growth. Turning to our bit supply expectations for the year. Given prudent industry CapEx and very lean supplier inventories, we expect a healthy industry supply-demand balance in calendar year '22. Micron's calendar year bit supply growth for DRAM and NAND will be in line with industry demand. We are planning to deliver record revenue with solid profitability in fiscal year '22, with stronger bit shipment growth in the second half of the fiscal year. The stronger second half bit shipments will be aided by the easing impact of non-memory component shortages on our supply and on customer demand, together with additional product qualifications of our 1-alpha DRAM and 176-layer NAND-based products. As expected in fiscal year '22, the continued ramps of 1-alpha DRAM and 176-layer NAND are providing us with good front-end cost reductions. As we mentioned before, our efforts to increase supply chain resilience and provide business continuity to our customers are headwinds for our assembly and packaging costs, consistent with the broader industry. Overall, we expect annual cost per bit reductions to be competitive with the industry in fiscal year '22 and over the long term. Turning to capital expenditures. We expect fiscal year '22 CapEx in the range of $11 billion to $12 billion. For both DRAM and NAND, we plan to achieve bit supply growth with no transitions alone through the middle of the decade. Beyond this time horizon, we anticipate the need to add greenfield wafer capacity for DRAM. However, for our NAND supply growth, we expect continued 3D scaling to be sufficient to meet industry demand growth without the need for wafer capacity additions. We recently announced our intent to invest more than $150 billion globally over the next decade in leading-edge memory manufacturing and R&D. As part of our commitment to investing in R&D, we announced plans to establish a state-of-the-art memory design center in Atlanta. These announcements reflect our confidence in persistent long-term demand growth for memory and storage and our ability to generate returns on these investments. We look forward to working with governments around the world, including in the U.S., as we consider sites to support future expansion. I will now turn it over to Dave. Dave Zinsner: Thanks, Sanjay. Micron delivered outstanding results to start the fiscal year with revenue, margin and EPS all coming in within our guidance ranges while also generating healthy free cash flow. Total FQ1 revenue was approximately $7.7 billion, down 7% quarter-over-quarter and up 33% year-over-year. The sequential revenue decline was predominantly attributable to weakness related to non-memory component shortages at our customers, as Sanjay discussed earlier. FQ1 DRAM revenue was $5.6 billion, representing 73% of total revenue. DRAM revenue declined 8% quarter-over-quarter and was up 38% year-over-year. Sequentially, bit shipments declined in the mid-single-digit percentage range, while ASPs declined in the lower single-digit percentage range. FQ1 NAND revenue was approximately $1.9 billion, representing 24% of Micron's total revenue. NAND revenue declined 5% quarter-over-quarter and was up 19% year-over-year. Sequential bid shipments were approximately flat and ASPs declined in the mid-single-digit percentage range. Now turning to our FQ1 revenue trends by business unit. Revenue for the Compute and Networking Business Unit was $3.4 billion, down 10% quarter-over-quarter and up 34% year-over-year. Cloud, enterprise and graphics performed well in the quarter, while client revenues declined sequentially. Revenue for the Mobile Business Unit was $1.9 billion, up 1% sequentially and up 27% year-over-year. Micron continues to lead in managed NAND and MCP revenue surpassed 50% of Mobile revenue in FQ1 for the fifth consecutive quarter. Revenue for the Storage Business Unit was $1.2 billion, down 4% from the prior quarter and up 26% year-over-year. SBU profitability benefited in FQ1 from the strong progress made in ramping our 176-layer node. Finally, revenue for the Embedded Business Unit was $1.2 billion, the second highest in our history. EBU revenue was up 51% year-over-year and down 10% from record levels in the prior quarter. EBU gross margin and operating margin improved sequentially, driven by strong execution. The consolidated gross margin for FQ1 was 47% at the midpoint of our guidance and down approximately 85 basis points from the prior quarter. A higher mix of NAND sales was a headwind to FQ1 gross margin. Operating expenses in FQ1 were $891 million. We continue to expect FY '22 R&D to be up approximately 15% over FY '21 as we invest to strengthen our portfolio. FQ1 operating income was strong at $2.7 billion, resulting in an operating margin of 35%, down slightly from 37% in FQ4 and up from 17% in the prior year. FQ1 adjusted EBITDA was $4.4 billion, resulting in an EBITDA margin of 57%, flat from the prior quarter and up from 43% in the prior year. Non-GAAP earnings per share in FQ1 were $2.16, down from $2.42 in FQ4 and up from $0.78 in the year ago quarter. EPS included approximately $0.01 of gains from Micron Ventures investments. Turning to cash flows and capital spending. We generated $3.9 billion in cash from operations in FQ1, representing 51% of revenue. Net capital spending was $3.3 billion during the quarter. We continue to expect fiscal 2022 CapEx to be between $11 billion and $12 billion, and it will be front-end loaded in the fiscal year. Due to the strong revenue and profitability, we generated approximately $671 million in free cash flow. In addition, we received approximately $900 million from the sale of the Lehi fab, which closed in the quarter. We completed share repurchases of approximately $260 million or approximately 3.6 million shares in FQ1. Including our dividend payment, we returned around $371 million to shareholders in the quarter, which represented more than 50% of the free cash flow generated during the quarter. In addition, our Board of Directors approved a quarterly dividend of $0.10 to be paid on January 18 to shareholders of record on January 3. We remain committed to returning more than 50% of the cross-cycle free cash flow through a combination of dividends and buybacks. As we've mentioned before, we will be opportunistic in share repurchases and more aggressive when the shares are trading at larger discounts to intrinsic value. Our ending FQ1 inventory was $4.8 billion, and average days for the quarter were 103 days within our normal target range of 95 to 105 days. We expect to exit FY '22 with days of inventory at less than 100 days as we expect our DRAM and NAND supply to be tight for the year. We ended the quarter with $11.5 billion of total cash and investments and $14 billion of total liquidity. Our FQ1 total debt was $7 billion. Following our successful sustainability-linked credit facility in May and continuing with our strong commitment to enhancing our environmental and social performance in FQ1, we achieved two important milestones for Micron: our inaugural green bond and inaugural long bonds. The total proceeds from these bonds were $2 billion, and several nationally recognized minority disabled veteran and women-owned financial institutions participated. The $1 billion green bond proceeds will finance eligible sustainability-focused projects, including reducing the Company's greenhouse gas emissions, energy and water use and waste generation. The $1 billion proceeds from the long bonds, along with cash on hand, were used to redeem Micron's senior notes maturing in 2023 and 2024. The net result from the green and long bond offering was essentially leverage-neutral for Micron, while improving our net interest expense and increasing the weighted average maturity of our notes and bank debt from four years to nine years. Now turning to our outlook for the fiscal second quarter. We're starting to see stabilization in demand for PC customers and end demand remains solid across our markets. On the margin front, we expect that mix improvements are a positive factor for gross margins in NAND. While we continue to have cost headwinds due to COVID-19 mitigation expenses and above normal assembly, test and component costs, our front-end costs continue to benefit from our ramp of 1-alpha DRAM and 176-layer NAND. We expect operating expenses to increase sequentially as we invest in next-generation technologies and products for both DRAM and NAND and accelerate our new product road map. With all these factors in mind, our non-GAAP guidance for FQ2 is as follows. We expect revenue to be $7.5 billion, plus or minus $200 million; gross margin to be in the range of 46%, plus or minus 100 basis points; and operating expenses to be approximately $975 million, plus or minus $25 million. We expect our non-GAAP tax rate to be approximately 10% for FQ2. Based on a share count of approximately 1.14 billion fully diluted shares, we expect EPS to be $1.95, plus or minus $0.10. Our FQ1 results and FQ2 outlook keep us on track to deliver record revenue and solid profitability and free cash flow in FY '22. In closing, our business is delivering strong cross-cycle performance, revenue growth has significantly outpaced the broader semiconductor industry, gross margins have averaged over 40% and operating margins have averaged around 30%. The strong product and technology momentum and Micron's solid execution give us confidence that we can sustain solid financial performance in the future. I'll now turn it back to Sanjay. Sanjay Mehrotra: Thank you, Dave. Micron's culture has played a significant role in driving our strong results. Our vision to transform how the world uses information to enrich life for all serves both as an inspiration for our team and is a foundation for everything we do. Earlier this month, we released Micron's 2021 DEI report entitled For All, which highlights significant accomplishments across the six DEI commitments that we introduced last year. These accomplishments include achieving comprehensive global pay equity as well as increasing representation of underrepresented groups among new college graduate hires by 7%. We also publicly disclosed consolidated equal employment opportunity or EEO-1 data for the first time. This report is available on our website. Demand for memory and storage remains strong. The broad integration of AI, proliferation of the intelligent edge, continued data center growth, EV adoption and 5G deployment are creating expanded opportunities for Micron to innovate and deliver new value to our customers. The strategic importance of semiconductors to economic growth has never been more clear and ensuring the security of supply for customers across all industries has never been more important. We look forward to working with governments and initiatives to invest in domestic production both here in the U.S. through the CHIPS Act and FABS Act and in the other countries around the world. It is a truly exciting time in the industry. Our business is robust and growing, and our team is energized to seize the opportunities ahead of us. We'll now open for questions. Operator: [Operator Instructions] Our first question comes from C.J. Muse with Evercore. You may proceed with your question. C.J. Muse: I guess first question would be around more depth from you on kind of the current supply-demand environment as this cycle is really different from any other cycle. Obviously, in the last quarter, we've seen PC kitting issues. Now that appears to be largely resolved. You've talked about shortages in auto. Curious how you're thinking about kind of normal seasonality, if at all, into first half and middle part of 2022, where you're seeing ongoing tightness and how we should interpret that in terms of the sequential bit growth into the second half of fiscal '22 and beyond in calendar '22? Sanjay Mehrotra: Thank you, C.J. So happy holidays to you, too, and to all our listeners on the call. With respect to the demand trends, we -- as we said, we see second half to be strong bit growth supported by the easing of shortages across our customer base. These shortages that our customers have experienced have constrained demand for us. And of course, their end demand trends have been strong. So as the supply chain shortages ease during the course of 2022, that will be a tailwind for demand for us, for memory and storage products. And of course, there is some aspect of seasonality, as you know, in the current quarter, particularly in some segments that are more consumer-oriented parts of our business. So second half, yes, there will be a stronger seasonality aspect as well. Then is the product cycles of our customers. New products in data center with new processors, with new architectures that are enabled with more memory channels, more cores in those processor, more AI and big data workloads driving greater demand for memory and storage in the -- during calendar year '22. We expect calendar year '22 to be a strong year for data center demand. 5G, with respect to smartphones continues to drive strong content increases as well as, of course, more 5G phones are being sold. And automotive, we talked about some of the trends of new vehicles that will have more content. And certainly, EVs with more than 140 gigabytes of DRAM and some EVs having a terabyte of NAND content, this is the trend that's starting to build up as well. So overall, the devices have more content. And actually, in automotive, if you think about it, we have 90 million automobiles versus servers at about 15 million. So 6x of automobiles with increasing content. So of course, this will be a strong demand driver, not just for 2022. I mean, beyond that as well. So the demand trends are secular here in nature. And of course, we work closely with our customers, and we understand how they are looking at their own demand rolling out through calendar '22. So demand trends are strong. We expect healthy demand supply environment in calendar year '22. On the supply side, of course, it has been disciplined CapEx. And as we have highlighted, we expect DRAM to be in mid-teens to high teens in terms of year-over-year supply growth and NAND approximately 30%. And of course, on the supply side, the CapEx has been disciplined by the suppliers, but also equipment constraints, the long lead time that is there. That, too, gives us confidence regarding calendar year '22 supply outlook. So overall, we believe we are well positioned to deliver a strong second half based on all the demand aspects as well as supply aspects that I just described here as well as a strong profitability for record fiscal year '22 revenue and robust profitability. C.J. Muse: That's very helpful. As a quick follow-up, Dave, can you speak to the cost side? You highlighted expectations for strong front-end cost down. Curious how are you thinking about normalization of COVID-related expenses? And how should we be thinking about any mix shifts in your product portfolio in calendar '22? Dave Zinsner: Sure. Thanks, C.J. and happy holidays as well. Let me join Sanjay, in telling everybody happy holidays. Yes. So from a cost perspective -- let me just step back a little bit on the margin front because I think it's worth touching on it just for a second. So we delivered very strong gross margins, as you saw in the first quarter, 47%, right in line with where we thought we'd be. Just keep in mind that just a year ago, our gross margins were just a little bit over 30%. So this is a pretty significant improvement in the gross margins. And of course, some of that obviously comes from pricing, but it also comes from a good cost discipline and the beginnings of the ramp of 1-alpha and 176-layer that we saw last year and into this year. As we look into the second quarter, we do expect to continue to see a tailwind from cost reductions associated with both 176-layer and 1-alpha node, and that should continue through the year. Also, as Sanjay mentioned, we have a lot of product calls ahead of us for this year that will improve the mix of our business into high-value solutions, and so we also expect that to be beneficial. The question -- the root of your question is these costs that we're seeing in terms of COVID mitigation and some inflationary pressure. Those are likely to continue through the year. Hard to say when they abate, but we do expect that they will continue through the year. But other than that, the other areas that -- where we have good control over I think we're executing very well in terms of delivering good cost reductions. And at these levels of profitability, the ROI for us, ROIC for us from a business perspective is quite high. So, we're in a good -- what I think is a really good place. Operator: Our next question comes from Vivek Arya with Bank of America. You may proceed with your question. Vivek Arya: You mentioned, Sanjay that you are starting to see PC customers less constrained from a component perspective. I'm curious, is that a near term? Or is that an expectation of second half of fiscal year '22 comment? So when do you expect your shipments to PC customers as to start to improve? Sanjay Mehrotra: So, the comment is relative to what we saw three months ago. And as we had highlighted in our earnings call -- last earnings call, we have seen that certain PC customers had their supply chain challenges, making it hard for them to get all non-memory components, thereby limiting their production of PCs, even though their end demand of PCs was still strong. So yes, compared to that, what we have seen is that their inventory adjustment that was as a result of their non-component shortages, is now largely behind them, and we are certainly seeing recovery of demand on the PC front compared to the levels that existed three months ago. And overall, as I noted that for calendar year '22, we expect total PC unit sales to be similar calendar year '21 level. So PC, we expect will be recovering for us in terms of demand as we go forward here in calendar year '22. Vivek Arya: Right. Very helpful. And for my follow-up, Sanjay, you mentioned 75% of your revenues are now based on these long-term agreements. What kind of assumptions goes into that? Are these take-or-pay arrangements? Just given the cyclical nature of the industry, how fixed or dependable are these contracts from a price or volume or margin perspective? Sanjay Mehrotra: So again, I would like to remind you that about four years ago, five years ago, we used to have about 10% of our revenue based on these LTAs. And today, we have more than 75% of our revenue based on LTAs. What the LTAs have done is bring us closer to the customer and really enable us to have a much closer dialogue on their planning, their forecast and enables us to plan our supply and the mix of supply appropriately as well. These LTAs are nonbinding in nature, but they do help build greater visibility, greater transparency. And over the long haul, build greater trust and accountability between us and partners because value of memory is just continuing to increase. And there is sentiment of course wanting to make sure that there is sufficient supply of memory available to our customers. So we work closely with them, and it helps us decide our product portfolio as well and manage our overall product portfolio and the mix of the product. So these agreements are volume-targeted agreements. They're not generally based on pricing, but they do help us as well as our customers plan our business far better and give us greater visibility. And again, these have been worked on, improved upon over the course of last few years, and we continue to look forward to continuing to strengthen these LTAs going forward as well. Operator: Our next question comes from John Pitzer with Credit Suisse. You may proceed with your question. John Pitzer: Congratulations on the solid results. Sanjay, I want to go back to your expectation for industry bit demand growth for DRAM in calendar year '22 of mid-to-high teens. While that's in line with kind of your long-term view for bit demand, it would be a relatively big deceleration from this year despite the fact that it sounds like you've got a lot of good tailwinds next year, whether it be PC mix improving, smartphone mix and units improving or new architectural shifts on the server side that are going to significantly increase DRAM density per server. And so I'm kind of curious, when you look at that expectation for next year. Is that being gated by what you and your peers can supply to the industry? Is it being gated by your view of demand? Is it being gated by components outside of your control? Sanjay Mehrotra: So I think you're right to note that certainly, supply is limited. As I highlighted earlier, CapEx in the industry has been disciplined. And of course, as you know, that exiting 2020, there was inventory in the industry. Supplier inventories are at lean levels as well. And of course, in terms of supply growth, given the various aspects of supply chain shortages across all industries that have been discussed, equipment today has long lead time as well. So overall, when you really look at calendar year '22, overall supply is rather limited. And of course, demand trends are strong. What I would like to highlight is that you really have to look at long-term CAGR. The long-term CAGR on DRAM of mid-teens to high teens is really driving strong growth, and it is there because of all of the demand trends we have discussed. And so you can't just look at one year, you have to continue to look at longer-term trends. These are secular trends in nature, driving more demand for memory and storage. And of course, what we have provided here is our estimation regarding the bit growth, this is what we expect, and we'll continue to monitor this. Essentially, we expect a healthy industry demand supply environment in calendar year '22, particularly on the side of DRAM. John Pitzer: That's helpful. And then, Dave... Sanjay Mehrotra: And I think, again, it's my supply comments are based on some of the CapEx that we have ourselves said is in DRAM is guided down, but also by our other suppliers in other suppliers that have DRAM in the industry. John Pitzer: That's helpful. And then Dave, as a quick follow-up just on the OpEx line, both this quarter and last quarter, you sort of characterized fiscal year '22 as an investment year, but you kind of came in at the low end of OpEx for the fiscal first quarter. Were there any sort of pandemic issues that are preventing you from investing at the rate you want? And as you think about the balance of the fiscal year, how do we think about linearity of OpEx? And what are the two or three big buckets of incremental spend? Dave Zinsner: Yes. So it's right to note that there's a little bit of tightness in the labor market, which, of course, it makes it challenging. But I'd say the biggest single contributor of the OpEx this quarter -- in the first fiscal quarter was just lower R&D expenses and related to prequalification expenses. And those can be a little lumpy and sometimes you just fall over the transom between the first and second quarter of a year. And so it just turns out that they didn't hit in the first quarter, but we feel very confident that they will hit in the second quarter. And we will really spend in absolute terms for the year at the same level as we were predicting last quarter. It's more of a timing situation. So we'll have this kind of step-up in OpEx for the second fiscal quarter. And then it's a much lower sequential rate of growth in the third and fourth fiscal quarter that will get us to roughly, call it, 15% for R&D and SG&A will be a bit below that. But overall, we drive the number we're in. Operator: Our next question comes from Timothy Arcuri with UBS. You may proceed with your question. Timothy Arcuri: Dave, my first question is for you. Can you walk us through the impact from the Lehi sale? I think there were some underloading charges and there was maybe like $100 million a quarter worth of OpEx. So can you sort of bridge that for us as it relates to Lehi between the fiscal Q1 results and the fiscal Q2 guidance? Dave Zinsner: Sure. So we had about $100 million of revenue in the first fiscal quarter related to wafer sales. It was somewhat accelerated because we closed at the end of October. That's a little bit higher than we've actually been running for the last couple of quarters. So that does actually go away in the second quarter. On the margin front, it was actually pretty close to the corporate average. We -- normally, that's lower, but we moved the assets to a held-for-sale status, I think, at the end of the second fiscal quarter of last year. And so that discontinued the depreciation expense there. And so, we saw margins generally -- relatively similar levels once you kind of factor that in. So a lot of the underloading got somewhat removed over the course of the third and fourth fiscal quarter -- or let's call it the fourth -- first fiscal quarter, such that it won't have a meaningful impact to gross margins in the second fiscal quarter. Timothy Arcuri: Got it. And then, Sanjay, for you, just back on the topic of long-term agreements with your customers. Obviously, there's been quite a change in the tenor of sort of how you engage with them. And my question is sort of where do you see this all heading? I mean when you talk to your customers, they're very, very concerned about procuring DRAM at a reasonable price. So for example, do you envision a scenario where maybe you can get them to prepay you for bits? Sanjay Mehrotra: As we highlighted, I mean, our discussions with our customers and LTAs are more around the requirements of supply. And of course, these lead to closer discussion in terms of understanding their product portfolio, their road map and how our road map gets defined and how our portfolio fits in with their requirements. So as I mentioned earlier, I mean, these discussions, these relationships with our customers have continued to evolve over the course of last few years, taking us from yes, that 10% LTAs to now 75% LTAs. But they're also continuing to evolve in terms of the relationship that is based on value as well. So of course, we will continue to look for opportunities, as I mentioned earlier, to strengthen these LTAs in the future as well. And I would just like to highlight that we are in this good position with the customers in terms of gaining greater visibility to their requirements and being able to drive these LTAs through a lot of good work that our team has done here. The sales teams, our business unit teams and, of course, supported by strong technology, product portfolio and supply chain execution that just gives these customers and other partners the confidence in engaging in these LTA discussions with us. Operator: Our next question comes from Mehdi Hosseini with SFG. You may proceed with your question. Mehdi Hosseini: Yes. Sanjay, my first question is for you. I was wondering if you have any thoughts as to how you see the mix of DDR5 as a percentage of overall server DRAM trending throughout 2022? And I have a follow-up for David. Sanjay Mehrotra: So with respect to 2022, as the new processors that are able to use DDR5 gets rolled out into the marketplace, that will drive adoption of DDR5 in the server space as well. As we noted, in the PC space, DDR5 adoption has already started, and we have begun to shape the DDR5 product. DDR5 currently is in high demand. Actually, supply there is limited for DDR5 in the industry. So when I look at PC as well as for server, we expect that DDR5 will be ramping up first in PC. And as the processors, with DDR5 new processors become available in the industry. We particularly see that ramping up later in calendar year '22. I expect that we will be exiting calendar year '22 with approximately 20% the mix of DDR -- I'm sorry, with approximately 20% of the mix of DRAM in compute space, at approximately 20% there, okay? Mehdi Hosseini: Got it. Sanjay Mehrotra: And so, a stronger ramp in the second half versus the first half because, again, as those new processors ramp up into production with our customers, that will drive a ramp of DDR5 in the second half in the server space. And in PC, as I mentioned, it's happening well throughout calendar year '22. Mehdi Hosseini: Got it. And for David, I'm just trying to better understand the supply-demand environment. And when I look at your guide -- revenue guide and what you reported for DRAM and NAND ASP, seems to me the underlying assumption is based on moderate decline in blended prices. And I'm not asking you for a guide, but is that a fair observation? Dave Zinsner: For second fiscal quarter, you're talking, Mehdi? Mehdi Hosseini: Yes. Dave Zinsner: Yes. So obviously, we can't comment on pricing on a forward-looking basis. I would just reiterate Sanjay's comments that we see a healthy supply/demand dynamic for the fiscal year for both DRAM and NAND, and we continue to ramp 176-layer and 1-alpha, which gives us a good cost structure going forward. We're going to continue to drive the mix. All of those assumptions are built into our margin guidance. Of course, there's a high and a low to that margin assumption based on how things can play out. Operator: Our next question comes from Joe Moore with Morgan Stanley. You may proceed with your question. Joe Moore: I wonder if you could talk about the role of sort of just in case philosophy that you talked about a couple of quarters ago. Clearly, you're comfortable with your customer inventory levels now. But how are they feeling? And do you expect there to be a higher level of inventory on a sustained basis from here? Sanjay Mehrotra: So inventory strategy is clearly vary from customers to customers. And some definitely, given what pandemic introduced in terms of supply chain shortages, are looking at strategically higher level of inventory. Some may also be doing it for geopolitical considerations. So we don't really yet see customers going back to pre-pandemic levels, but the strategy around inventory does vary from customer to customer. And overall, as I said, for -- on an industry-wide level, while there may be some pockets of some customers carrying extra inventory overall, given the current environment, customer inventory levels are in a decent shape. And just look at us, Micron itself is also, in our own manufacturing, we are holding a lot more inventory of raw materials just to make sure that our supply chain has assuredness with respect to our ability to supply our customers. And our operations planning just in the current environment of somewhat higher uncertainty on the geopolitical front as well as pandemic-related front is operating with greater levels of inventory -- with non-memory components inventory. And similarly, customers have similar approach as well in terms of managing their inventory. Operator: Our next question comes from Toshiya Hari with Goldman Sachs. You may proceed with your question. Toshiya Hari: I guess my first one is on the supply side. Sanjay, you talked about constraints in the equipment space a couple of times. Are you actually seeing delays or sort of decommits from your suppliers at all? I guess you've maintained your full year CapEx guidance, so perhaps not, but I just wanted to clarify that. And then my part two of my supply question, were there any -- was there any impact from the earthquake in Taiwan in the quarter, whether it be from a bit perspective or in terms of your ability to reduce costs? Sanjay Mehrotra: So our procurement team and our supply chain team works closely with equipment suppliers in terms of long-term planning and securing of slots for equipment. And we continue to drive that. And yes, we have, of course, seen lengthening lead times, but those have also been factored in, in terms of our overall planning. And as I mentioned, I mean, we are really seeing a lot more collaboration with these suppliers in terms of driving our own demand -- timing of equipment. So, no, I would not say that we have seen any push outs versus our own expectations. But again, those expectations of equipment delivery are built based on our collaboration with the suppliers and with the visibility that we have provided and with a lot of good planning work between us and our suppliers. And your second part of your question, I forgot now, what was the second part of the question? Can you please repeat that? Toshiya Hari: Earthquake in Taiwan, any impact to bid shipments in the quarter or cost downs? Sanjay Mehrotra: So the earthquake in Taiwan, at the time of the earthquake, certainly did reduce some of our bid production. By end of the quarter, our impact to our overall output was meaningfully reduced. Toshiya Hari: Got it. And then as a follow-up, I wanted to ask about your business in automotive and industrial. You talked about the two businesses or the two end markets combining for more than 10% of your overall revenue. In a fairly normal environment, whatever that is, both in automotive and industrial, how are you thinking about the sustainable growth rate in those two end markets? You threw out a couple of growth rate numbers for the quarter, but curious how you're thinking about both auto and industrial on a cross-cycle basis? Sanjay Mehrotra: The auto and industrial certainly will be high-growth drivers for us across the cycle. I spoke to all the demand drivers in the automotive market. Micron is clearly an automotive leader in this space. And we said that auto and industrial combined, over 10%. If you look at automotive itself, our share of the market is somewhere mid-single digits. And this year, we would expect to continue to grow based on all our experience in this market, our share leadership, the high quality we provide and increasing demand for memory and storage content in these markets. And of course, industrial is also growing for us with 5G enabling tremendous demand in the industrial segment with industrial IoT, market drones with surveillance, equipment, with automation in the factories. All of this is tending to drive greater demand as well. So we expect solid growth in both of these markets. We expect the -- overall, if you look at DRAM content CAGR in the automotive market, that's approximately 40% over the course of next three years, NAND CAGR in the automotive power kit, above 50% as well over the course of next three years. So, this really has legs in terms of sustainable growth. And again, we are well positioned in these markets, and we expect our percentage of revenue in this market to continue to increase over the course of next several years. Operator: Our next question comes from Shannon Cross of Cross Research. You may proceed with your question. Shannon Cross: I have one and then a follow-up. I realize it's early in what's going on with regard to the current variants. But I'm wondering if you've seen any impact from it? And also given here as the first company, at least that I cover that has had to provide guidance in light of some of the changes. I'm curious how you approach thinking about the variant? And then I have a follow-up. Sanjay Mehrotra: So first of all, with respect to our focus on the business, with respect to our people and Micron has been proactive all throughout the pandemic in taking actions to protect the safety of our team members, whether it is managing strict protocols with our operations -- on-site operations with respect to masking, physical distancing as well as vaccination. And of course, as a result of that, we have been successful in continuing to run our operations all throughout the pandemic. And despite various industry-wide challenges on supply, we have been overall generally quite good in terms of our ability to support our customers. With respect to the Micron, of course, we will continue our stringent focus on safety of our team members as well as continuing to run our operations. We will not let our guard down in this regard and of course, continue to monitor all the trends and developments here. I would like to point out that even with Delta, all our operations continued to run well. And of course, as you saw, the demand for our products continued to be strong as well. And of course, we saw in some parts of the business, higher demand as a result of COVID for certain periods of time, whereas other parts may have had lower demand for certain periods of time as well. So of course, we will continue to monitor the trend. And to the extent that Omicron has any impact on the macroeconomic environment, of course, that might impact some of our business. However, you have seen that we have been extremely adaptive. We have been extremely agile, and we will continue to do so. Shannon Cross: Okay. And then I'm just curious, you mentioned higher OpEx, obviously, in fiscal 2022. And that would be accelerating the road map. I'm wondering if you can elaborate a little bit on what we can expect, and is that more sort of a 2023 comment in terms of road map benefit? Dave Zinsner: Well, you're already seeing a lot of the benefit. We'll have a lot of good products coming out through 2022, which were the benefit of the investments that we made in prior years. It's -- to a large extent, it's a continuation of the progression of our products in all markets. Obviously, there's more that we have to do in the SSD front to fully capture all of the opportunity from an NVMe perspective. So there's going to be investment there. There's obviously the next set of process technologies, which will include continued investment in EUV for the 1-gamma that Sanjay mentioned. So lots of different products that we think will be necessary to address the whole market plus continued investment on the process technology side to keep our pace in terms of a leadership position and cost leadership position. Operator: Thank you. And that concludes our Q&A session. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Latif Masud: Good afternoon. My name is Latif, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Micron's Fourth Quarter 2021 financial release conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer period. If you would like to ask a question during this time [Instructor Instructions]. [Operator Instructions]. Thanks. It is now my pleasure to turn the floor over to your host, Farhan Ahmad, Vice President of Investor Relations. You may begin your conference. Farhan Ahmad: Thank you, And welcome to Micron Technology's fiscal fourth-quarter 2021 financial conference call. On the call with me, today are Sanjay Mehrotra, President, and CEO, and Dave Zinsner, Chief Financial Officer. Today's call will be approximately 60 minutes in length. This call, including the audio and slides, is also being webcast from our Investor Relations website at investors.micron.com. In addition, our website contains the earnings press release, and the prepared remarks filed a short while ago. Today's discussion of financial results will be presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures may be found on our website. As a reminder, a webcast replay will be available on our website later today. We encourage you to monitor our website at micron.com throughout the quarter for the most current information on the Company, including information on the various financial conferences that we will be attending. You can follow us on Twitter @MicronTech. As a reminder, the matters we will be discussing today include forward-looking statements. 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 you to the documents we filed with the SEC. Specifically, our most recent Form 10-K and 10-Q, for a discussion of the risks that may affect our future 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 achievement. We are under no duty to update any of the forward-looking statements after today's date to conform these statements to actual results. I will now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Farhan. Good afternoon, everyone. We delivered outstanding results in Fiscal Q4, achieving robust profitability and the second-highest quarterly revenue in Micron's history. Strong execution drove healthy results across segments, including record quarterly revenue in NAND, as well as in our embedded business. Fiscal 2021 was a year of many records for Micron. We achieved our highest ever mobile revenue driven by all-time high managed NAND revenue and MCP mix. Our embedded business had a tremendous record-breaking year, with auto and industrial businesses both had substantial new highs. Another crucial advantage is consumer business and overall QLC mix and NAND, all hit records in fiscal 2021. Through the year, we successfully navigated multiple obstacles brought on by the pandemic and reached several key milestones. For the first time in Micron's history, we established technology leadership concurrently in both DRAM and NAND. Micron's 1-alpha DRAM and 176-layer NAND are the industry's most advanced nodes in high-volume production. And we further strengthened our product leadership by becoming the first to introduce LP5x DRAM and uMCP5 managed NAND in mobile and the industry's first functional safety capable LP5 for automotive applications. The secular demand for memory and storage, combined with Micron's focused execution and have a rock-solid balance sheet, position us well to deliver strong financial performance and create significant shareholder value in fiscal 2022 and beyond. Demonstrating our confidence in our business trajectory, we initiated a quarterly dividend that we aim to grow over time. Memory is at the leading edge of semiconductor manufacturing, and Micron has leadership in both DRAM and NAND technology. This quarter released maturities in our ramp of 1-Alpha DRAM, 176-layer NAND, 20% to 30% faster than prior nodes, and delivered performance and featured improvements, that will help unleash customer innovation. We believe we are several quarters ahead of the industry in the deployment of these process technologies. Additionally, through deeper customer collaboration, we have further accelerated the time-to-market for value-added solutions built using these nodes. 1-Alpha and 1-DRAM nodes combined now represent the majority of our DRAM bit production, driven by strong growth of 1-Alpha production. And by the end of the calendar year or 176-layer NAND will make up the majority of our NAND bit production. Looking beyond 1-Alpha DRAM and 176-layer NAND, we are investing to sustain scaling in both technologies for the next decade. Adding momentum to our years of R&D and EUV, we recently took delivery of the industry's latest E UV system, NXE 3600 at our Boise headquarters, where we operate one of the world's most advanced centers for semiconductor research and development. The delivery of this tool is an important milestone towards our previously disclosed plan of implementing EUV in high-volume manufacturing, in the 2024-time frame. We expect that the integration of EUV with our existing multi-patterning immersion lithography expertise will help us maintain DRAM technology leadership for many years to come. In addition to being the technology leader and an innovation partner, we are uniquely positioned as a strategic supplier to our customers. Micron is the only U.S.-based memory Company, and our strong global manufacturing network provides us with a diversified source of supply, which has become increasingly critical to ensure that we continue to deliver products reliably to our customers. The advantages of this unique position have been proven throughout the past 18 months, as we have successfully navigated the challenges of COVID-19 across our global manufacturing network while maintaining continuity of supply to our customers. Now let us review our end markets. The demand for memory and storage has evolved dramatically from the PC - centric era. Today, demand for memory and storage is driven by diversified end markets that extend from the data center to the intelligent edge, and to a growing diversity of user devices. As a result of growing memory and storage containers for devices DRAM and NAND now account for an ever-increasing portion of the bill applications for our customers. DRAM and NAND stem share of the semiconductor industry has steadily grown over the last two decades, from around 10% to approximately 30% today. The AI and 5G revolution are only in their infancy. And as these secular growth drivers gain further traction, we expect new data-intensive applications to continue to fuel significant increases in DRAM and NAND stem. In the fiscal Fourth Quarter, data center revenue grew sequentially and year-over-year, fueled by secular drivers in cloud demand and the resurgence of enterprise IT investment linked to improving economic growth. The data center has become the largest market for memory and storage, driven by the rapid growth in the cloud. With our broadening portfolio of differentiated products across memory and storage, we are in a strong position to drive strong growth and profitability in this important segment. We have been engaged on DDR5 from initial specification development, and are very pleased to support customer transitions to DDR5-enabled platforms starting later this calendar year. We're also enhancing our NVMe SSD portfolio and we'll soon introduce PCIe Gen four datacenter SSDs with Micron-designed controllers and leveraging the full benefit of vertical integration. These SSDs will strengthen our market position over the course of the coming quarters and years in the fast-growing data center, NVMe storage market. Work and learn from anywhere trends are driving the second consecutive year of double-digit PC unit sales growth in calendar 2021. In the fiscal fourth quarter, PC DRAM revenue was up significantly year-over-year. We're making strong progress transitioning our PC DRAM to our 1-alpha node, which represented a meaningful portion of our FQ4 PC big shipments. Client QLC SSD bit mix hit a new effort and made up the majority of our client SSD bit shipments in FQ4. Our QLC leadership enhances our bit supply capability and product profitability. We also have continued momentum ramping 176-layer NAND products for the PC markets, and we qualified our 176-layer NAND-based Gen 4 NVMe client SSDs with several PC OEMs during the quarter. In graphics, revenue increased sequentially and year-over-year, driven by a continuation of last quarter's strong next-generation game console and graphics card shipments. Micron holds an excellent position in the fast-growing graphics market with a broad product portfolio featuring our proprietary GDR 6X product line, and deep partnerships with leading GPU suppliers. FQ4 mobile revenue increased more than 25% year-over-year, driven by continued unit sales and content growth. We expect overall smartphone unit sales to grow this year, with sales up over 500 million 5G mobile phones forecasted. These contents 5G phones featured more than 50% higher DRAM and doubled the NAND content than 4G phones. We expect 5G and AI to drive new innovation in applications such as AI optimized video capture and editing, that will fuel DRAM and NAND content growth for years to come. Our 1-alpha LP4 16 - gigabit design is now fully qualified and ramping at multiple OEMs. While our 176-layer NAND achieved its first UFS 3.1 qualifications at two OEMs. These wins demonstrate Micron's leadership in the mobile market and our continued strength in managed NAND products where MCP sales surpassed $1 billion for the third straight quarter. We are continuing to see strong demand in our edge markets, which includes automotive and industrial IOT. We expect our automotive and industrial markets to be the fastest-growing memory and storage markets over the next decade. As the number one player in these markets, Micron is exceptionally well-positioned to benefit from these secular growth trends. Other automotive businesses delivered a fourth consecutive record quarter, driven by continued recovery in auto manufacturing and the growth of memory and storage content driven by in-vehicle-infotainment and driver assistance applications. Industrial IOT revenues also set records in the Fiscal Fourth Quarter, benefiting from the continued growth of applications, such as point-of-sale devices, factory automation, and surveillance. We expect industrial demand trends to accelerate further, at 5G speeds, that adoption of data-intensive applications powered by Intelligent Edge infrastructure. We're also seeing an acceleration in other consumer IOT businesses driven by rapid growth in device sales such as VR headsets, smart exercise equipment, and smart speakers. Turning to market outlook calendar 2021 is shaping up to be a strong year. We expect calendar 2021 industry DRAM, bit demand growth to be in the low 20% range. And industry NAND width demand growth to be in the high 30% range. Overall, our preliminary view is that calendar 2022 industry width demand growth will be consistent with long-term industry bit demand growth categories. In the mid to high teens for DRAM, and approximately 30% for NAND. We anticipate underlying demand in calendar 2022 to be led by increasing datacenters, server deployments, 5G mobile shipments, and continued strength in automotive and industrial markets. Additionally, non-memory supply shortages that are constraining customer bills across various end market segments and that are pushing out some demand should ease throughout 2022 supporting demand growth during the year. Given prudent industry CapEx and very lean supplier inventories, we expect healthy industry supply-demand balance and robust profitability for both DRAM and NAND in the year. In the near term, our FQ1 big shipments will decline modestly in both DRAM and NAND from very strong levels in FQ4. Some PC customers are adjusting their memory and storage purchases due to shortages of non-memory components that are needed to complete PC bills. We expect this adjustment for our PC customers to be largely resolved in the coming months. We're also seeing constraints within our supply chain for certain IC components, which will some work limit our big shipments in the near term. Big shipping growth will resume in the second half of the fiscal year, and we're planning to deliver record revenue with solid profitability in fiscal 2022. Our calendar year '22, big shipment growth for DRAM and NAND will be in line with the industry. However, due to the strong shipments in fiscal year '21, and our below normal current inventory level, for fiscal year '22 our big shipment growth for DRAM and NAND will somewhat lag the long-term CAGR. In fiscal year '22, the continued ramp of 1-alpha and 176-layer NAND should provide us with good front-end cost reductions. Our efforts to increase supply chain resilience and provide business continuity to our customers will cause headwinds to our assembly and packaging costs, consistent with the trend in the overall industry. Overall, we expect the annual cost-per-bit reductions to be competitive with the industry in fiscal year '22 and over the long term. Turning to capital expenditures, we expect fiscal year '22 CapEx in the range of $11 billion to $12 billion. The year-on-year increase in CapEx is driven by our continued 176-layer NAND transition pilot line enablement for next-generation NAND and DRAM and continued infrastructure and prepayments to support the introduction of EUV. Fiscal year '22 DRAM equipment CapEx for manufacturing will decline from fiscal year '21 as we benefit from the capital efficiency of our mature 1-alpha node. For fiscal year '22, our big supply growth will be achieved through node transitions alone, as we are a few years away from needing wafer start additions to keep up with the industry demand. We also expect to increase fiscal year '22 R&D investment by approximately 15% from fiscal year '21 to deliver bold product and technology innovations designed to fuel the data economy, as well as to expand our portfolio to capitalize on opportunities such as high bandwidth memory and CXL solutions. Our leadership portfolio, [Indiscernible] quality, supply chain agility, and deep customer relationships make us a preferred partner in many of our markets. And we are confident in our ability to continue to create long-term, sustained profitability, and returns built on that leadership. I will now turn it over to Dave. Dave Zinsner: Thank you, Sanjay. Micron delivered excellent FQ4 results, highlighted by our second highest quarterly revenues, strong gross and operating margins, and our substantial positive free cash flow. Total FQ4 revenue was approximately $8.3 billion, up 11% quarter-over-quarter, and up 37% year-over-year. As a reminder, FQ4 last year was a 14-week quarter and impacts our year-over-year comparisons. FQ4 revenue growth was broad-based with solid demand and price increases in both DRAM and NAND. Our robust growth in FQ4 contributed to strong performance in FY-21, with revenue of $27.7 billion which was up 29% from the prior fiscal year. That Q4 DRAM revenue was $6.1 billion, representing 74% of total revenue. DRAM revenue increased 12% sequentially and was up 39% year-over-year. Bit shipments increased in the low-single-digit percentage sequentially, and ASP s increased in the high-single-digit percent range, quarter-to-quarter. For the fiscal year, DRAM revenue increased 38% year-over-year to $20 billion, representing 72% of total fiscal year revenue. FQ4 NAND revenue was approximately $2 billion, an all-time high, and representing 24% of the total revenue. NAND revenue increased 9% sequentially and was up 29% year-over-year. its shipments increased by low-single-digit percentage sequentially, while ASP s increased in the mid-single-digit percent range, quarter-over-quarter. For the fiscal year, we achieved a new Company record for NAND revenue of $7 billion, an increase of 14% year-over-year. NAND revenue represented 25% of our total fiscal year revenue. Now, turning to our FQ4 revenue trends by business unit. Revenue for the compute and networking business unit was $3.8 billion up 15% sequentially, and up 26% year-over-year. Growth was led by the data center and graphics markets. Revenue for the mobile business unit was $1.9 billion down 5% sequentially, and up 29% year-over-year. Mobile demand remained healthy in the quarter with continued momentum from the rollout of 5G. NBU revenue for fiscal '21 exceeded $7 billion and set a new record. Revenue for the Storage Business Unit was $1.2 billion, up 19% from the prior quarter, and up 32% year-over-year. Datacenter SSDs had strong growth in the quarter driven by enterprise and cloud strength. QFC shipments set a new record in the fiscal year in terms of the percentage of our NAND shipments. Finally, the embedded business unit generated record revenue of $1.4 billion, which was up 23% sequentially. And more than doubled year-over-year. We continued to experience strong demand across the automotive and industrial markets. For the fiscal year, EVU revenue easily exceeded $4 billion, setting a new revenue record. The consolidated gross margin for FQ4 was 47.9% up 500 basis points from the prior quarter. Pricing increases across DRAM and NAND, as well as strong execution in our ongoing product portfolio transformation, drove margin expansion in the quarter. Operating expenses in FQ4 were $891 million on the lower end of the range we provided in last quarter's earnings call. F Q4 operating income was $3.1 billion, resulting in an operating margin of 37% up from 32% in F Q3, and up from 21% in the prior year. FQ4 EBITDA was $4.7 billion, resulting in an EBITDA margin of 57.1% compared to 53.3% in the prior quarter, and 47.4% in the prior year. For the fiscal year, total EBITDA was $14 billion up from $9 billion in the prior fiscal year and represented 50.4% of revenues. Non-GAAP earnings-per-share in FQ4 were $2.42, up from $1.88 in FQ3, and up from $1.08 in the year-ago quarter. EPS included approximately $0.02 of gains from investments in our venture arm, Micron Ventures. For the fiscal year, total EPS was $6.06, up more than 100% from the $2.83 achieved in the prior fiscal year. Turning to cash flows and capital spending, we generated $3.9 billion in cash from operations in FQ4, representing 47% of revenue. For the fiscal year, cash from operations totaled $12.5 billion, up from $8.3 billion in the prior fiscal year. Net capital spending was $2 billion during the quarter and $9.7 billion in fiscal '21. We generated a positive free cash flow of $1.9 billion in FQ4 and over $2.8 billion for the fiscal year. The increased cash flow was driven by strong revenue growth, increased profitability, and efficient work in capital management. As Sanjay mentioned, we expect our fiscal '22 capital spending to be between $11 billion and $12 billion. Like fiscal '21, we expect our capital spending to be weighted more to the first half of the fiscal year, which will constrain free cash flow in FQ1 and FQ2. We do expect to generate healthy free cash flow in fiscal '22, but weighted towards the back half of the year. We also expect to close our Lehi Fab sale within FQ1, and we will receive approximately $900 million in proceeds from the sale. We completed share repurchases of $1.1 billion or approximately 13.9 million shares in FQ4. For the fiscal year, we repurchased $1.2 billion, or approximately 15.6 million shares. From Fiscal '17 to Fiscal '21, we generated over $20 billion of free cash flow. During this period, we used approximately $5 billion of that cash flow to retire debt, and $7 billion towards buying back stock and eliminating the dilution from convertible debt, reducing our share count by 148 million shares. We also improved our total cash and investment position by $5.5 billion. We expect that we will continue to generate strong free cash flow in the future. And as we discussed on our capital return strategy call in early August, we are committed to returning more than 50% of cross-cycle free cash flow to shareholders, through a combination of buybacks and a quarterly dividend that we expect we can grow over time. But first dividend payment of $0.10 per share will be paid on October 18th to shareholders of record as of October 1st. The initiation of a dividend is an important milestone that reflects the structural transformation, Micron has undergone over the last several years and it shows our confidence in the sustainability of our cash flow generation. Our ending of Q4 inventory was $4.5 billion, and the average days of the quarter were 94 days, below our normal range of 95 to 105 days. FQ4 finished goods, dollar inventory ended at the lowest levels since the [Indiscernible] acquisition in 2013. We ended the fiscal year with $10.5 billion of total cash and investments and $13 billion of total liquidity. Our FQ4 total debt was $6.8 billion. Now turning to our outlook. In demand across our major markets remain strong. As Sanjay mentioned, our bit shipments are expected to decline modestly in FQ1, as we normalize our inventory position and work with PC customers as they manage through their supply chain challenges. And on the gross margin side, our outlook is similar to how we viewed FQ4. While we will benefit from our no transitions on both DRAM and NAND, we will continue to see near-term headwinds from COVID-related expenses in assembly and packaging. As a result, we expect the gross margin in FQ1 to be largely a function of the mix. With all these factors in mind, our non-GAAP guidance for FQ1 is as follows. We expect revenue to be $7.65 billion-plus or minus $200 million, gross margins to be in the range of 47%, plus or minus 100 basis points, and our operating expenses to be approximately $915 million, plus or minus $25 million. Excluding the impact of any potential new tax legislation, we expect our non-GAAP tax rate to be approximately 10% for FQ1. Based on a share count of approximately 1.14 billion fully diluted shares, we expect EPS to be $2.10, plus or minus $0.10. In closing, fiscal 2021 was a year of considerable growth and success for Micron. Looking at four-year average metrics reveals the sustained cross-cycle performance of our business. Over the last four years, our gross margins have exceeded 40% and our operating cash flow margins have been approximately 50%. Despite the challenges stemming from the ongoing pandemic, we have continued to generate significant positive free cash flow while making substantial investments to grow our business. Our technology, product, and financial position provide strong momentum as we enter the new fiscal year. I'll now turn it back to Sanjay. Sanjay Mehrotra: Thank you, Dave. I would like to share the recent accomplishments that make me especially proud of our Company. Our strong Micron culture has played a significant role in driving our results aligned to our broader vision to transform how the world uses the information to enrich life for all. Our Company culture, community leadership, and business performance have been recognized globally, earning multiple industry awards and recognitions this year. This month, we were ranked by Fortune as one of the top 20 best places to work in manufacturing and production. The only semiconductor Company to earn this recognition. Fiscal '21 was an excellent year for Micron. As our fourth-quarter results clearly demonstrate, we are delivering strong financial results. We are planning to deliver record revenues and solid profitability in fiscal year '22. Demand for memory and storage is solid across market segments. Industry trends like the broad integration of artificial intelligence into all computing, proliferation of the Intelligent Edge, continued data center growth, and deployments of 5G networks create new and expanding opportunities for Micron. The importance of semiconductors to these markets is underscored by government initiatives to invest in domestic semiconductor production, both here in the U.S. through the chipset and in other countries around the world. We're focused on building our technology leadership to deliver broad new solutions, that offer unique value to our customers. Our business is robust and we are energized to seize the opportunities ahead of us, as a truly exciting time in the semiconductor industry. We will now be open to questions. Farhan Ahmad: Operator can you please open the line for questions? Operator: At this time, [Operator Instructions] we have your first question from Harlan Sur with JP Morgan, your line is open. Harlan Sur: Good afternoon. Thank you for taking my question. There are a lot of concerns on inventories in all of your end markets, especially PCs, just given the non-memory component shortages that are limiting notebook and desktop shipments in the second half of the year. Can you guys just qualitatively describe customer and channel inventories in the PC, server, and smartphones segments of your business? And also, as you normalize your inventories through the first half of this fiscal year, do you guys anticipate a normal level of inventories on your Balance Sheet as you entered the second half of the fiscal year? Sanjay Mehrotra: I will have Dave comment on the second part of your question, and on the overall inventory question, I would say that by and large, inventory among our customers is in decent shape. Of course, we talked about the PC market, where due to semi-conductor component shortages, our PC customers, some of them are not able to fulfill all of their end demand, and therefore they have made some adjustments in their purchases, impacting some of our demand in the near-term into the PC market. And we think this is short-lived, and over the course of the next few months, this will work itself out. And on the smartphone side, of course, you know that new full-cycle, new full launches are coming up, and this tends to be a seasonally strong quarter for new smartphone shipments as well. While some customers may because of geopolitical considerations or through the lessons learned during the pandemic, or their own supply chain considerations of supply chain shortages, maybe having a strategy of carrying more inventory than some other customers. Overall, the smartphone market continues to be driven by 5G transition smartphones over the course of calendar year '22 with 5G increasing by 50% from the 2021 levels. And on the data center side, of course, the investment cycle is strong on the data center side, and of course, the pandemic has driven strong acceleration in digital transformation, and that certainty extending into the cloud, cloud services, video streaming, e-commerce, all of these trends, along with new architectures, new processors that are being introduced that actually enable greater AI capability into the workloads and greater usage of data attach of memory in the servers. All of these also are creating new demand, so overall data center inventory levels are also in decent shape. So, what -- inventory in our markets today is in much better shape than it was back in the 2018-time frame. Again, some customers may have higher levels due to their strategic considerations and they may choose to continue to do so in the longer term as well. Given the challenges faced by the supply chains during the pandemic, as well as given geopolitical considerations. This is what I would like to share with you on inventory and Dave; you can add a second part of the question. Dave Zinsner: So just as a reminder, we look at our optimal level of inventory, we like to see it be 100 plus in terms of days, we can operate slightly below that. We're definitely below the optimal level, it's at 94 days. I'd say the -- for us we never like to see it go is below 95 days. And so, we think we will make a little bit of improvement next quarter on -- in terms of days, it will probably be up a few days. But I think it's going to be still below that 100-day figure. As we look through the year its -- assuming we can make some progress on inventory. We think we can get it more into, what we would call the optimal stage, which is 100 to 105 days of inventory. Probably going to exit the year somewhere in the 100 days of inventory. As we already talked about, finished goods inventory is really where we're particularly lean. And we do have to make some progress in that space to get ourselves into a better position. But overall, I would say the back half of the year will probably be in the optimal range. Harlan Sur: Thank you for the insights, Daron. And you mentioned in your prepared remarks, seeing constraints within your supply chain for certain IC components, which is going to limit some of your bit shipments also here in the near term. Can you just give us some examples of some of these IC components both in DRAM and NAND? I assume, for example, you have some NAND controller constraints, but what about in DRAM? Sanjay Mehrotra: So, the Harlan -- you are right to note that some of the controller shortages are there with respect to FSD, and particularly impacting the data center FSD. We also have certain shortages of analog, ICs. And these shortages are impacting our ability to ship to the full demand level that we are seeing from the customers. And if you look at controllers, some of the analog ICs as well as in general, the overall supply chain is running tight. And we have done a great job by our supply chain team in addressing these needs in the past and they continue to work on securing the supply for the future. And we would expect that over time, this will get better. Harlan Sur: Thank you, Sanjay. Latif Masud: Thank you. Our next question comes from the line of C.J. Muse of Evercore. Your question, please? C.J. Muse: Yeah. Good afternoon. Thanks for taking the question. I was hoping to drill into your gross margin. Pretty impressive despite the topline guide. So, I guess a couple of parts here. First, in terms of the costs down within the November quarter, I'm assuming more DRAM than NAND. Can you speak to that? Can you also speak to mix shifts in the quarter? And then, for all of fiscal '22, how should we be thinking about the type of cost downs across both DRAM and NAND? Should we think 10 plus percent is sustainable year-over-year for DRAM and similar type number, if not higher, on NAND, or how should we think about that? Thank you. Dave Zinsner: Okay. Let me start with the near-term outlook. I would say the cost declines for the November quarter are going to be pretty minimal. We obviously are getting a benefit from both our 1-alpha node and our 176-layer node in NAND. But we are running into some cost headwinds as it relates to the back end mostly a function of the pandemic and the disruptions that are caused to the supply chain and so forth. And actually, both NAND and DRAM comment quite honestly. So, no specific direction either way on DRAM and NAND. As it relates to mixing, we have a range, it can go a couple of different ways obviously. But there could be a little bit of a mix shift between DRAM and NAND that could impact where the gross margins end up. Also, by business unit, we could see some mix shifts within the business units, which could impact our margins as well even down to the product level. So, it's hard to call within a couple of 100 basis points, so that's why we gave this range, as I've mentioned, in the prepared remarks. It's pretty similar to the range we gave back as the same that we gave in the prior quarter. So, we're roughly seeing things pretty similar to what we saw in the fourth fiscal quarter. And I agree with you, these are great gross margins, we're pretty happy with them. The operating margins that this generates are in the mid-to-high 30s, we're expecting something similar for the First Fiscal Quarter. So, I think we're executing very well on the profitability side of the business. In fiscal '22, we do expect really good cost declines on the front-end side for both DRAM and NAND. Again, a function of 1-alpha in DRAM and 176-layer in NAND. When we look at kind of longer-term cost declines for DRAM, we see them as being with the high-single-digit percent cost declines for the industry. We think from a front-end perspective for DRAM, we'll do better than that next year. On the NAND front, we see cost declines over time being more in the mid-teens and we think the 176-layer next year will drive cost declines in that range next year as well. Obviously, 21, 22 will likely have these cost headwinds as it relates to the pandemic and the supply challenges, so those things might impact us in the first couple of quarters, but hopefully, over time, that starts to go away and we'll start to see the benefit also on the back-end. We've made a lot of investment on the back-end to improve our cost structure and I think once we get behind this or get this behind us, I should say, as it relates to the pandemic, we'll start to experience a lot of the cost benefits that we've put in place on the back end as well. I'd also note that when we look at our cost structure today, and as we're looking into next year, all the way through the year, we think the cost reductions that we're seeing are very competitive with the industry. And the cost headwinds we're seeing are very similar to the cost headwinds that others within the industry, not only in memory but also across the entire semi-conductor space are seeing. So, we think this sets us up for, as Sanjay mentioned, very good profitability for next year. And I think that pretty much covers it. C.J. Muse: Thank you. Latif Masud: Thank you. Our next question comes from Shannon Cross of Cross Research. Your line is open. Shannon Cross: Thank you very much. The first question I have is with regard to pricing. Can you talk about some of the pricing dynamics, especially with the pullback in demand from the PC vendors? Are you expecting to see any more aggressive moves from your competitors? Although given your comments on gross margin, I'm guessing the answer, maybe no. And then my second question is, just with regard to your PC OEM partners, how are you tracking confidence that they're going to actually see the demand come through in the second half of the year. Because I get a lot of questions from people about double ordering, even just from their end customers. So, I'm just wondering if you've changed any methodology in how you're tracking what your partners are seeing or how you're providing guidance as you lookout. Thank you. Sanjay Mehrotra: With respect to pricing, we do not provide comments on pricing, but you look at our FQ4 of those and of course, we reported that both for DRAM and NAND in FQ4, pricing increased. And you are right to note that our gross margin guidance for FQ1 is strong. In fact, same, as Dave earlier pointed out, as our FQ4 guidance was at the time of our June call. And as you look at not only just FQ1 for fiscal year '22, we're projecting a record year for the Company, with solid profitability for the full year as well. And just remember the pricing is always a function of the mix overall as well. And with respect to your questions around PC, again, as I mentioned, the PC customers have been impacted by their own semiconductor shortages and their supply chain constraints. Their end demand -- their end-user demand is very strong. In fact, they have an unfulfilled backlog. Generally, among these customers, which is quite extensive. And you know that even in the PC industry, while prices have gone up if the customers are able to maintain a strong backlog that speaks to the end strong demand. It really is all driven by work from home, learn from home, that demand acceleration that has taken place through the pandemic will continue to support a healthy environment for PC in calendar year '22 as well. Of course, in 2020 and 2021, PC has gone through a double-digit unit growth on a calendar year basis. We expect that to moderate in calendar year '22 to perhaps from flat to low-single-digit year-over-year growth in terms of PC units sold, yet it will be a healthy market. Again, driven by the trends, such as the economy's opening, businesses opening, workers coming back, that drives a greater mix of enterprise PCs, commercial PCs. While some of the consumer PC, such as Chromebox, maybe -- compared to last year, maybe less than demand today. But the commercial PC demand is getting stronger as well. So overall basically -- continues to be a healthy market and we work closely with our customers and today they are really constrained by their supply chain shortages. And that's what is adjusting their purchases. And as I've said before, we believe this is going to be short-lived. And we look forward to continuing to support our customers with our products. And as we highlighted, our new technologies, new products, [Indiscernible] for transitions, PC customers are qualifying them fast and we are focused on delivering those in calendar year '22, as well as fiscal year '22-time frame. Shannon Cross: Thank you. Latif Masud: Thank you. Our next question comes from Toshiya Hari of Goldman Sachs. Your line is open. Toshiya Hari: Hi, good afternoon. Thanks so much for taking the question. I was hoping you could provide a little bit more context around your fiscal '22 CapEx guidance of 11 billion to 12 billion. If you can speak to WFE within that number for fiscal '22 and then differentiate between DRAM and NAND that would be super helpful. And then just to remind us what bit supply growth are you expecting purely from transitions in both DRAM and NAND as you think about calendar '22? Thank you. Dave Zinsner: [Indiscernible] I'll go through the CapEx for you. So as Sanjay mentioned, and as I reiterated, we expect CapEx to be in the 11 to $12 billion range. We were roughly a little bit less than 10 billion, $9.7 billion in fiscal '21. If you look at it by the element of CapEx, we are going to invest more in pilot enablement this year. Last year was a relatively low year for us in terms of pilot enablement. So that's going to be a reasonable step-up in our CapEx spending. We feel CapEx equipment in DRAM will be down year-over-year. We think we've made a good investment in fiscal '21 and we don't need to invest as much in fiscal '22, so that will be down. NAND will actually step up pretty meaningfully in fiscal '22 versus '21, if you remember, we took CapEx, way down in fiscal '20, boost it up a little bit in 21. Now we're up to kind of a full investment level in '22 to support 176-layer. And that was caused because of this transition from floating gate to replacement gate when we made a pause in terms of our CapEx investment to get the first line out at relatively minimal levels. Back-end, we should be up a bit in back-end spend as we make -- continue to make investments on the back-end to put that cost structure into better places I intimated before. We've been making investments to improve our cost structure there. The cleanroom will be down a little modestly. And, of course, we have EUV spending that also will impact our CapEx in fiscal '22 as well. One other thing just to remind you, so we will be 60% of our CapEx weighted to the first half, probably 40% to the second half. So, this was similar to what we saw in fiscal '21. We're likely to see in fiscal '22, which is our -- haven't --is been our typical pattern over the last couple of years. Toshiya Hari: Okay and Dave, the transitions, you guys talked about calendar 22, a bit strong mid to high teens on the DRAM side and approximately 30% of the NAND side in line with the industry. What portion of that growth? Are you guys expecting purely from transitions to 1-alpha -- Dave Zinsner: Forget that again. It's all from no transitions, we're not adding wafers. We don't see, for the foreseeable future, adding wafers in either DRAM or NAND. In the next few years, we might be adding wafers in DRAM as Sanjay mentioned. But NAND, we think we can continue with no transitions to support the growth. Toshiya Hari: Thank you. Latif Masud: Thank you. Our next question comes from Aaron Rakers of Wells Fargo. Your question, please. Aaron Rakers: Yeah. Thanks for taking the question. I wanted to ask a little bit more about the end demand dynamics, particularly around the data center. I'm curious as we move forward, how you are thinking about the bit demand profile of the data center and the server market. And what are you seeing as far as kind of the progression of memory to compute ratio as we move forward to next-generation CPUs? I'm just curious about how you're rolling forward the expectations over the next year and that growth profile from a bit perspective. Sanjay Mehrotra: Within the data center both for DRAM and NAND, demand trends would be strong. In fact, data center today has become the largest market for DRAM and NAND, and will continue to grow faster than the average of the industry, both for NAND and DRAM in the foreseeable future as well. So, it's really being driven at the trend of AI driving a greater need for memory in addressing data-intensive workloads. The BOM is going from about the memory and storage part of the BOM in the servers in data centers is going from about 30% a few years ago to around 40% now, and going to 50% in few years’ time frame as well. And new architectures, new processors, are enabling more cores, and then more cores mean more memory attached per core, therefore, greater gigabytes per server for DRAM, as well as for NAND. DDR5, is a transition that will be occurring towards the course of the next couple of years, as well as new CPUs, get launched into production. And DDR5 is a higher bandwidth solution. Of course, enable more value, higher performance in the applications. So that adoption will be going on, and over the course of the year is, of course, CXL and HBM, these ultra-bandwidth solutions. These will also be continuing to grow in the data center space. So average content per server for both DRAM and SSD will also be growing over 20% on a CAGR basis in each of these applications. So, a strong opportunity ahead, and Micron is very well placed with respect to our own product portfolio in terms of SSDs displacing HDDs, in terms of us providing higher density memory modules for server and data center applications. So as the cloud gets bigger, the data center market gets bigger for us, and we are very well-positioned. And this is an area we are focused on and continue to focus on expanding our product portfolio, particularly on the side of the data center SSDs. So, we look at this as a strong growth opportunity for the industry, as well as for Micron. The value that memory and storage solutions providing in this space, is really critical for the services that our cloud customers are providing, and just keep in mind that enterprise as well while it grows at a slower rate compared to the cloud, we are seeing a resurgence in enterprise applications as well driving for overall healthy demand trends in data centers in Calendar year '22, Fiscal year '22, as well as beyond. Aaron Rakers: And then as a quick follow-up, Dave, I'm just curious as you start the last quarter, implement some share repurchases. How do you think about the liquidity on the balance sheet or managing the Company from a cash-on-hand perspective versus continuing to learn more in on share repurchases? How much cash do you need operationally to comfortably run the Company? Dave Zinsner: We roughly are holding about did the 30s as a percent of revenue in terms of liquidity, but $2.5 billion of that liquidity is our unused revolver, so cash is obviously less than that. We obviously have more liquidity than we need, which of course is a good opportunity as it relates to the buyback. As I mentioned, we're also going to receive $900 million from the sale of our Lehi Fab that also can be utilized for returns to shareholders. And we are expecting healthy free cash flow in fiscal '22 as well. And so, we'll be able to leverage that. We've committed to return at least 50% of it in the form of dividends and buyback, mostly buyback. And we could obviously go higher than that. Our authorized plan, we still have $6 billion left in our authorized plan for repurchases. And if we see the stock be weak, which of course is how we viewed it in the Fourth Quarter, we'll be aggressive about buying back stock. Aaron Rakers: Perfect. Thank you. Latif Masud: Thank you. Our next question comes from Joe Moore of Morgan Stanley. Please go ahead. Joe Moore: Great. Thank you. I wonder if you could address what transitions going on in both DRAM and NAND to 1-alpha and our G2. Are there any issues that that creates from a mix standpoint in terms of it seems like it's quite a bit demand for the older products? Where are you in terms of getting qualified for the newer products? How is that affecting you guys? Sanjay Mehrotra: Actually, we are doing very well with respect to ramping up these new nodes in production. Right on our plan in fact, in terms of yields ahead of our plans, I highlighted that the yields in these 176 layers NAND as well as 1-alpha DRAM, have ramped 20 to 30% faster than our prior 1Z generation node and the prior FG node, the last FG node. And customer qualifications actually are going very well that these nodes, as well as I, mentioned earlier, that we are already shipping our 1-alpha in the PC space, as well as broadening its shipments to other parts of the markets as well. In fact, customers are working closely with us in qualifying these projects. 176-layer NAND-based mobile product went are from just introduction to 1-million-unit shipments in a record time. Fastest RAM in the history of the Company. So, with all these norms in production, as well as in terms of deployment in the marketplace are doing very well for ourselves. And, of course, this is all baked into the guidance that we have provided in terms of our revenue, as well as our cost expectations. Joe Moore: Great. Thank you very much. Latif Masud: Thank you. Our next question comes from John Pitzer of Credit Suisse. Your line is open. John Pitzer: Thanks, guys. Thanks for letting me ask questions. Congratulations on the solid execution. Sanjay, you're characterizing the current environment as relatively short-lived, are we supposed to read into that as we go into the February quarter, your business might normally buck normal seasonal headwinds and I guess importantly upturn to date, this memory cycle has been very different than prior memory cycles. Typically, you have eight quarters at unabated ASP, growth, and margin expansion. The least plateaued in year three quarters into it. What's different about this cycle? And I guess what makes you confident this is just a pause and not something more? Sanjay Mehrotra: So with respect to the comment on the short-lived just to be clear what I was mentioning was that with respect to the PC part of the market where our customers, some of our customers in the PC market, have experienced semiconductor shortages impacting their decisions on purchases of memory, that's what I was mentioning short-lived because their end-user demand on PCs is still very strong and lot of unmet demand that actually stretches the demand over time and make the demand longer, stronger for longer. But my comment regarding short-lived and adjusting it in the next few months was related to the PC part of the market and outside of that, in other markets, as we discussed earlier, we see strong demand trends, strong end-user demand trends. And of course, the supply chain shortages that are being experienced in PC, are also being experienced in other parts of our markets as well by our customers. Whereby, of course, different customers handing them an overall different fashion, but the underlying demand trends are driven by AI and 5G from the data center to the Intelligent Edge, to the user devices are strong, they are circular in nature. COVID, further accelerated it, semi-conductor supply chain shortages are only stretching the demand out as -- because some of the demand gets pushed out. So, as I said, making those demand growth drivers actually stronger for longer as well. So, you can call it pent-up demand, but that's what I'm referring to. So, on the demand side, things are here overall strong on the supply chain aspects. Of course, this is something that the lead time in the semiconductors is long, and this will take several quarters to continue to improve. Parts of the semiconductor supply chain have already seen improvements. Our expectation is that these will continue to improve as well over the course of the coming quarters. Also keep in mind that our industry, the memory industry, over the course of the last couple of years has stepped into the inventory to ship beyond the supply growth. And this is a phenomenon that has occurred across the industry, certainly you're seeing that how Micron has brought its inventory to the leanest level in many years, in fact, below our target inventory levels. So, this is something that is common to all suppliers in the memory industry. And as we look ahead, the supply growth will not only have to meet the customer requirements, but it will also have to replenish the inventory that has been taken to such low levels, inventory has to be replenished in order to make sure that we are able to service our customers and meet their demand requirements, which from time-to-time change. So, these are all factors as well, very lean levels of inventory by the suppliers, as well as need to replenish that inventory will drive for a healthy demand-supply balance in calendar year '22-time frame as well. So yes, some of this is in terms of our own supply chain shortages and some that are being experienced by our customers. We expect to be addressed over the course of time and some of these shortages on the semi-conductor ecosystem may take through the '22-time frame. By the end of 22 maybe some of them will be [Indiscernible]. However, we expect them to continue to be improving through the course of time all the way through calendar year '22. But the demand dynamics of the underlying strong drivers and the supply dynamics that I discussed including the prudent CapEx investments that have gone on in the industry and the lean supply, all of this will lead to a healthy supply-demand environment in the industry. So, it's really the combination of the demand drivers and their suppliers - supply capabilities and shipment capabilities, that combination, I think really sets us up well as an industry for revenue growth and strong profitability in '22, and of course, we have projected based on our expectations, that we will have record revenue in fiscal year '22 and solid profitability as well. John Pitzer: Sanjay, those inventory comments were very helpful. I'm just curious as a quick follow-on, your guidance for bids to be down in the November quarter. How much is that a conscious decision by you to hold bits off the market to help me be pushing pricing, and how much of that is just being driven by there's no demand for those bits and that's why bits are down? Sanjay Mehrotra: Again, keep in mind that our inventory is very lean. It is at the leanest level and below our target levels, and that is impacting some of our ability to meet the demand as well. And overall, our projection of this, the respect to FQ1, is really a function of our own supply chain capabilities in terms of where our inventories and what we can ship at this point to the customers certainly impacted by some of the component shortages, non-memory components shortages that we are seeing in the marketplace as well, and our assessment of overall demand. And the main thing there is really is around the PC, where some of the demand is impacted. But overall, when you look at our guidance for FQ1, which takes into account any aspects of seasonality as well. But the guidance for FQ1 at this midpoint is about 32%, 33% higher than the same quarter last year. So, our inventory capability is also overall impacting some of the ability for our customers, in terms of what we can ship. John Pitzer: Perfect. Thank you. Latif Masud: Thank you. Our last question comes from the line of Timothy Arcuri of UBS. Your line is open. Timothy Arcuri: Thanks a lot. I appreciate that. Dave, I guess I had a question on gross margin. I wanted to go back to a question asked earlier. It's down on the 100 basis points on your guidance; I would like a deep percent down revenue quarter NAND it sounds like you're only down modestly at both DRAM and NAND. So, it sounds like the delta is probably pricing. I would think more on the DRAM side. And then somebody asked you about costs and you said, well, costs aren't coming down very much. So, I guess I'm trying to figure out how gross margin is so good? Is this going back to some of the mixed comments that you made ASP quarter? It seems like a more sustainable trend that maybe people were missing. So, I'm wondering if you can flip that for us next. Dave Zinsner: Yes, sure Tim. So cost declines are going to be relatively muted. Remember that. There will be some mix changes that might impact gross margin to bring it down somewhere within the range that we gave. Obviously, the rest is a function of pricing, and you have to infer what you can't out of pricing. Obviously, if the mix is the predominant factor in driving gross margin, pricing and cost will not be major factors in driving gross margins. Maybe that's the best way to say it. Timothy Arcuri: Got it. Okay. And then I guess just last thing. So just on the cost curve, so you reached -- you said you’re reached production crossover on 176 and on 1-alpha and 1Z. So how much -- like what's the lag effect in terms of when that really starts to bend the cost curve in a favorable direction, given that you've had production crossover on those things. Thanks. Dave Zinsner: Well, to be clear, 1-alpha and 1z, we've hit crossover 136, we hit at the end of the year. By the way, benefiting us from a cost perspective, it's hard to see it may be as much just because we're getting a little bit impacted obviously on the back end, which is impacting the cost declines. But next year, we do anticipate that both of them will drive good cost reductions for us on the front-end side. So, they will be good. Good notes for us in terms of cost structure and I think we'll see that from a front-end perspective every quarter. Again, I think the first couple of quarters, may not be as noticeable in our cost per bit calculations because of this, more of a headwind on the back-end side of the cost structure. But after we get behind that, I think you'll see that show up on the cost per bit basis as well. The only other factor will obviously be mix as well and we're going to drive like heck, to get our mix to be more -- to be a richer mix of higher-value products and -- which is always our goal. And of course, with higher-value products, you get higher costs, but higher profitability, higher gross margins. So that's a good strategy, but that also kind of distorts the picture and will distort the picture over the course of the year as well. Timothy Arcuri: Perfect. Awesome. Thank you. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Operator: Good afternoon. My name is Josh, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Micron’s Third Quarter 2021 Financial Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. It is now my pleasure to turn the floor over to your host, Farhan Ahmad, Vice President of Investor Relations. You may begin your conference. Farhan Ahmad: Thank you, and welcome to Micron Technology’s fiscal third quarter 2021 financial conference call. On the call with me today are Sanjay Mehrotra, President and CEO; and Dave Zinsner, Chief Financial Officer. Today’s call will be approximately 60 minutes in length. This call, including the audio and slides, is also being webcast from our Investor Relations website at investors.micron.com. In addition, our website contains the earnings press release and the prepared remarks filed a short while ago. Today’s discussion of financial results will be presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures may be found on our website. As a reminder, a webcast replay will be available on our website later today. We encourage you to monitor our website at micron.com throughout the quarter for the most current information on the Company, including information on the various financial conferences that we will be attending. You can follow us on Twitter at MicronTech. As a reminder, the matters we will be discussing today include forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer you to the Form 10-K and 10-Q that we file with the SEC, for a discussion of risks that may affect our future 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 after today’s date to conform these statements to actual results. I’ll now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Farhan. Good afternoon, everyone. We delivered outstanding results in FQ3. Our strong execution enabled us to achieve the largest sequential EPS improvement in our history and to set multiple revenue records. NAND hit record revenue, propelled by a record mobile MCP, consumer SSD, and client SSD revenues. Our embedded business exceeded $1 billion for the first time, with record revenue across automotive and industrial markets. We also achieved key technology and product milestones, with our industry-leading 1-alpha DRAM and 176-layer NAND, reaching a meaningful portion of our bit production and QLC NAND accounting for a majority of our client SSD bit shipments. We expect DRAM and NAND supply to remain tight into calendar 2022 as the global economy rebounds. The strong demand for memory and storage across the data center, intelligent edge and user devices puts Micron in the best position ever to fully capitalize on these exciting opportunities. We continue to make solid progress on our goals to deliver industry-leading technology and improve our cost structure, to bring differentiated products to market and improve our product mix, and to grow our share of industry profits while maintaining stable bit share. I will start with an update on our operations. Despite shortages across the semiconductor ecosystem in various assembly materials and assembly capacity, Micron delivered record assembly output this quarter, which helped fuel our strong revenue performance. Our assembly and test success was the result of a strategic decision we made several years ago to increase our captive footprint and strengthen relationships with suppliers and partners. We successfully mitigated the impacts of the drought in Taiwan with no reduction in our production output. Taiwan’s rainy season has begun, bringing with it sufficient water supply to support our manufacturing requirements. While the drought in Taiwan is behind us, the rise in COVID-19 cases in Malaysia, India, and Taiwan are a risk to our manufacturing operations and R&D activities in these regions. We are also working with local governments to facilitate on-site testing and vaccination for Micron team members where possible. Additionally, in order to protect Micron team members at our Muar, Malaysia back-end facility, we temporarily reduced our on-site workforce early in FQ4, which reduced output levels. We have since started bringing back team members to the site as the situation has improved. While we ramp back toward full production levels in Muar, we will utilize our global supply chain, including subcontractor partners, to meet our customer commitments and minimize any disruption to delivery schedules. Earlier this year, we announced our decision to exit 3D XPoint development and manufacturing and to reprioritize our R&D investments toward new CXL-enabled memory solutions. CXL, or Compute Express Link, is a new industry standard interface that will significantly change data center architecture through high-performance connectivity between compute, memory and storage. We are developing exciting CXL-enabled products and will have more to share on our roadmap in the future. As part of our exit from the 3D XPoint business, we announced our intent to sell our Lehi, Utah, fab. Today, I’m pleased to report that Micron has reached an agreement to sell the fab to Texas Instruments in a transaction that we expect to close later this calendar year. We see this transaction as positive for our team members, the Lehi community and our shareholders. The Lehi site has been an important part of the Micron network and responsible for many technology and manufacturing innovations across NAND and 3D XPoint products. Texas Instruments will offer all Lehi team members the opportunity to become TI employees at the Lehi site upon closing. After the sale closes, we will be able to eliminate the remaining underloading costs we were incurring at Lehi, enhancing our efficiency and strengthening our profitability. Dave will provide additional details. Now for an update on technology and products. Our industry-leading 1-alpha DRAM and 176-layer NAND process technologies are now in production and ramping according to plan. These nodes accounted for a meaningful portion of our bit production in FQ3 and are on track to become a meaningful portion of our revenue in FQ4. We expect that, by end of calendar 2021, the combination of 1-alpha and 1z DRAM nodes will represent the majority of our DRAM bit production, and at the same time, 176-layer NAND will be the majority of our NAND bit production. In fiscal year 2022, we expect these workhorse nodes to fuel bit growth and provide us with good front-end cost reduction on a like-for-like basis. However, there are two factors that will create cost headwinds for us next fiscal year. The first is driven by our strategic portfolio migration toward more advanced and higher-value products such as DDR5 memory, high-density server modules and SSDs. While this portfolio shift helps us increase profit share, it will also impact our costs next fiscal year. The second cost headwind is driven by several actions we have taken in our supply chain to increase resilience and provide business continuity to our customers across all product lines. While these actions will allow us to capitalize on robust market demand, they will also impact our costs. We are on track to support customers as they begin to introduce DDR5-enabled platforms in the second half of calendar 2021. DDR5 was designed to meet modern data center requirements, including improved performance through doubling of memory bandwidth and improved reliability and efficiency through integration of on-die ECC. DDR5 features a larger die size compared to DDR4, limiting DRAM industry supply growth and cost reduction as it ramps, starting from the second half of calendar 2021. In storage, we introduced the industry’s first UFS 3.1 solution for automotive applications this quarter. We also announced volume production of client PCIe Gen4 SSDs built on the world’s first 176-layer NAND and available in a variety of form factors. We are delivering 176-layer NAND in volume to OEM and channel customers across multiple markets and have several products in customer qualifications. We are also driving an increased mix of QLC NAND, which brings down the cost of SSDs, accelerating the replacement of hard drives. QLC SSD adoption continues to grow, and we delivered record QLC SSD revenue and bit mix in FQ3. Turning to end markets. In the data center, integration of AI into data-centric workloads will drive long-term growth, with memory and storage becoming an increasing portion of server BOM cost. Propelled by the transition to DDR5, strong capabilities in graphics memory and the introduction of HBM and NVMe SSD product offerings, Micron’s strong product roadmap across DRAM and NAND positions us for success in the data center. We will enhance our NVMe SSD portfolio with the introduction of new products with internally designed controllers in the coming months. In FQ3, data center DRAM revenue grew quarter-over-quarter, driven by strong demand from cloud customers and increases in module density. Data center SSD bit shipments and revenue grew sequentially, driven by both cloud and enterprise. Data center demand is expected to be strong in the second half of calendar 2021 as cloud demand picks up and enterprise demand improves due to broad economic recovery. In addition, we expect that the new CPUs featuring more memory channels will accelerate server memory demand starting later this year and continuing into 2022. The PC market continues to benefit from the trend toward greater mobility as people embrace a work or learn-from-anywhere culture. Industry expectations for calendar 2021 PC unit demand growth have increased to the high teens, driven by robust notebook sales and a recovery in the desktop market. In the fiscal third quarter, we achieved several customer qualifications for our 1-alpha-based DDR4 products across various PC platforms. Our client SSD bit shipments were up sharply quarter-over-quarter and year-over-year. In graphics, bit shipments increased sequentially and year-over-year, driven by strong next-generation game console and graphics card shipments. Micron has an excellent position in the graphics market, with a broad product portfolio and deep customer partnerships. Mobile business achieved record MCP quarterly revenue. We made strong progress with our 1-alpha LPDRAM products and 176-layer UFS 3.1-enabled solutions. We have already completed customer qualifications for some of these products. While COVID-19 has softened mobile demand in parts of Asia, supply shifts to address stronger demand in other regions are keeping the global market in tight supply-demand balance. Mobile unit sales are expected to show healthy growth this year, with some variability across geographies, driven by an expected doubling of 5G units in calendar 2021 to more than 500 million units. These 5G phones also feature rich content demanding significantly higher DRAM and NAND. We are also encouraged to see bold OEM innovation in new devices like gaming smartphones featuring 18 gigabyte of DRAM. Our automotive business delivered a third consecutive record quarter, driven by continued manufacturing recovery and increased LPDDR4 and eMMC content for in-vehicle infotainment and driver assistance applications. Auto unit sales are expected to grow significantly from last year. Auto memory and storage content growth trends remain strong, particularly as EVs, which have significantly higher memory and storage content requirements, grow much faster than the broader auto market. We are continuing to see record automotive and industrial segment demand, yet despite our best efforts, we may be unable to meet all the demand from these customers over the next few months due to certain non-memory semiconductor component shortages in our supply chain. Turning to our market outlook. While the pandemic remains a risk factor, calendar 2021 is shaping up to be a strong year fueled by the macroeconomic recovery combined with secular drivers, such as AI and 5G, that are creating sustained demand increases across broad end markets. As a result, our expectations for calendar 2021 DRAM and NAND bit growth have increased since our last earnings call, and we now expect calendar 2021 DRAM bit demand growth to be somewhat above 20% and NAND bit demand growth in the mid 30% range. There is currently unmet demand for DRAM and NAND due to end market strength. This unmet demand would have been even larger had it not been for the non-memory component shortages influencing our customers’ ability to manufacture their products, particularly in the PC, automotive and industrial markets. These shortages can cause variability in demand patterns as customers experience challenges sourcing matched sets of non-memory components. We are hopeful that foundry capacity coming online can begin to alleviate some of the component shortages in the second half of calendar 2021 and support robust memory and storage growth. Additionally, as a result of strong end market demand trends, the lessons of the pandemic and ongoing geopolitical uncertainty, some customers will change their inventory management strategy from just-in-time to just-in-case and increase the target level of what they consider normal inventory levels. Long term, we see a DRAM bit demand growth CAGR of mid to high teens and a NAND bit demand growth CAGR of approximately 30%. Turning to Micron supply, we are targeting to align our long-term bit supply growth CAGR with the industry bit demand growth CAGR across DRAM and NAND. However, we expect year-to-year variability caused by node-transition timing. In both DRAM and NAND, we expect our calendar 2021 bit supply growth to be below the industry bit demand growth, and we have used our inventory to add to our bit shipment growth this year. Before handing over to Dave, I have one more important announcement to share regarding our DRAM technology and manufacturing strategy. Based on our assessment of the progress EUV has been making and aligned with our technology strategy and industry-leading DRAM scaling roadmap, we plan to insert EUV into our DRAM roadmap starting in the 2024 timeframe. Micron has placed purchase orders for multiple EUV tools from ASML as part of a long-term volume agreement. The pre-payments for these systems will contribute towards the fiscal year 2021 and fiscal year 2022 CapEx. We have increased our fiscal year 2021 CapEx to be somewhat above $9.5 billion, mostly from areas that do not impact calendar 2021 and fiscal year 2022 bit growth, such as these EUV pre-payments, construction spending and other R&D and corporate items. I will now turn it over to Dave. Dave Zinsner: Thanks, Sanjay. Micron delivered outstanding FQ3 results. Revenue and EPS grew by a record amount sequentially on an organic basis, and we generated over $1.5 billion in free cash flow in the quarter. Total FQ3 revenue was approximately $7.4 billion, up 19% quarter-over-quarter and up 36% year-over-year. Revenue growth was driven by stronger DRAM and NAND pricing and by robust customer demand for Micron’s products. FQ3 DRAM revenue was $5.4 billion, representing 73% of total revenue. DRAM revenue increased 23% sequentially and was up 52% year-over-year. Bit shipments increased in the low single-digit range sequentially, and ASPs were up approximately 20% quarter-over-quarter. FQ3 NAND revenue was approximately $1.8 billion, representing 24% of total revenue and an all-time high for the Company. NAND revenue increased 10% sequentially and was up 9% year-over-year. Bit shipments increased by low single digits sequentially while ASPs increased in the high single-digit percentage range quarter-over-quarter. Now turning to our revenue trends by business unit. Revenue for the Compute and Networking Business Unit was approximately $3.3 billion, up approximately 25% sequentially and 49% year-over-year. CNBU revenue growth was driven by broad-based sequential pricing increases. Revenue for the Mobile Business Unit was $2 billion, up 10% sequentially and 31% year-over-year. Mobile demand remained healthy as 5G handset sales continue to ramp. Revenue for the Storage Business Unit was $1 billion, up approximately 19% from the prior quarter and approximately flat year-over-year. Both client and consumer SSD revenues set records. And finally, the Embedded Business Unit generated record revenue of $1.1 billion, which was up 18% sequentially and 64% year-over-year. Automotive and industrial revenues were at an all-time high for the Company. The consolidated gross margin for FQ3 was 42.9%, up 10 percentage points from the prior quarter. DRAM and NAND price increases helped drive the margin expansion in FQ3. Gross margins also benefited by 100 basis points from $75 million less depreciation at our Lehi fab, which is classified as “assets held for sale.” Operating expenses were $821 million in FQ3, which we continue to tightly manage. Operating expenses also benefited from approximately $21 million of gains from the sales of certain assets. FQ3 operating income was $2.4 billion, resulting in an operating margin of 32%, compared to 20% in the prior quarter and 18% in the prior year’s quarter. FQ3 EBITDA was $4 billion, resulting in an EBITDA margin of 53%, compared to 45% in the prior quarter and 44% in the prior year. Net interest expense was $31 million in FQ3, and we expect it to be roughly flat going forward. Our FQ3 effective tax rate was 8.4%. We expect our tax rate to be in the high single digits for FQ4. Non-GAAP earnings per share in FQ3 were $1.88, up from $0.98 in FQ2. The $0.90 sequential improvement was the largest in Micron’s history. EPS included approximately $0.05 from the sale of certain assets, investment gains from Micron Ventures and one-time tax items. Turning to cash flows and capital spending. We generated approximately $3.6 billion in cash from operations in FQ3, representing 48% of revenue. Net capital spending was approximately $2 billion during the quarter. As Sanjay mentioned, we now expect our FY21 capital spending to be somewhat higher than $9.5 billion. Most of this CapEx increase that we are highlighting today will not increase our CY21 and CY22 bit supply. We expect that while we invest in the EUV infrastructure and initial deployment, our capital intensity will increase to mid-30% of revenues. Once we get past the investment period of EUV adoption, we expect that these tools will boost our competitiveness and help drive productivity of our fabs. As a result of the strong market environment and Micron’s extraordinary execution, we generated positive free cash flow of $1.5 billion in FQ3. The increased cash flow was driven by strong revenue growth, higher margins and efficient working capital management. We expect free cash flow to continue to improve in the fourth quarter, driven by continuing growth in revenue and earnings. We completed share repurchases of $150 million, or approximately 1.7 million shares, in FQ3. From the inception of the share repurchase program, we have repurchased $3 billion worth of Micron stock, representing 55% of our cumulative free cash flow. In addition, since FY19, we have used approximately $2 billion in cash to settle conversions of our convertible notes, including approximately $800 million to settle the convert premiums. Combining the share repurchases and convert premiums, we have used $3.8 billion or 69% of our cumulative free cash flow toward reducing our share count. We plan to continue repurchasing shares in FQ4. Ending FQ3 inventory was $4.5 billion or 98 days. We remain in a very lean inventory position as demand continues to outstrip our supply. We ended the quarter with total cash and investments of $9.8 billion and total liquidity of approximately $12.3 billion. FQ3 ending total debt was $6.7 billion. Our balance sheet is rock solid, with investment-grade ratings from all three rating agencies. In the last three months, Fitch and Standard & Poor’s both raised their outlook from stable to positive for Micron debt. These upgrades to the outlook for our debt ratings are further evidence of the financial transformation underway at Micron. Before providing the financial outlook, I want to cover the financial implications of the sale of our Lehi fab. We are pleased with this transaction and believe that it is good for our shareholders, as it frees up capital and enhances our ongoing profitability. The economic value for Micron from the sale is $1.5 billion, comprised of $900 million in cash resulting from the sales transaction and approximately $600 million in value for select tools and other assets that Micron will retain for redeployment to its other manufacturing sites, or that are sold to other buyers. We are taking an impairment charge of approximately $435 million, or approximately $330 million on an after-tax basis, as the $900 million sale price is below our book value of the assets being sold. Note that the tools that we are keeping have largely been depreciated but have substantial future value in our manufacturing network. As we have previously disclosed, we stopped depreciation of the Lehi fab assets last quarter and this benefited our costs by approximately $75 million in FQ3. Once the sale is completed, we will further improve our profitability by entirely eliminating our underload charges. Now turning to our near-term outlook. Both DRAM and NAND markets are tight, and we expect pricing increases for both markets in the fiscal fourth quarter. In FQ4, we’re qualifying 1-alpha and 176-layer nodes with several customers. We expect these nodes to support a modest level of bit growth and face cost headwinds that are common at this stage of the ramp. Additionally, we also expect cost headwinds from product mix and COVID mitigation. Despite cost headwinds, we expect strong improvement in our financial performance in FQ4. Our growth opportunity is healthy, and market momentum heading into fiscal year 2022 is strong. With all these factors in mind, our non-GAAP guidance for FQ4 is as follows: We expect revenue to be $8.2 billion, plus or minus $200 million; gross margin to be in the range of 47%, plus or minus 100 basis points; and operating expenses to be approximately $900 million, plus or minus $25 million. Finally, based on a share count of approximately 1.15 billion fully diluted shares, we expect EPS to be $2.30, plus or minus $0.10. Micron’s relentless focus on execution positions us well to generate solid returns for our shareholders. Measuring our performance trough to trough across the cycle from FY16 to FY20, we substantially improved our EBITDA margin, and our revenue grew by more than 70%. During this time, we delivered average gross margins of 40%, EBITDA margins of 50% and return on invested capital of 20%. We believe Micron’s strong financial performance will continue cross-cycle, and over the long term, our revenue growth will outperform the broader semiconductor industry. Our industry-leading technology, dramatically improved product portfolio and financial strength position us well to capitalize on the long-running demand trends driving the memory and storage industry. I will now turn it back to Sanjay. Sanjay Mehrotra: Thank you, Dave. Micron’s fiscal third quarter results demonstrate the strength of our business, and we expect to achieve continued strong results in the future. Demand for memory and storage is solid across market segments, and industry trends like artificial intelligence, edge computing and 5G continue to create new opportunities for Micron. Our team is building on our technology leadership to deliver bold new solutions that offer valuable differentiation for our customers. Micron’s business is healthier and more robust than ever, and we’re energized to seize the opportunities ahead at a truly exciting time in the semiconductor industry. We are also leveraging our success to deliver results for all our stakeholders. In April, we released our sixth annual sustainability report, highlighting progress towards our environmental, social and governance goals. I am pleased to report that we are on track to achieve the environmental and sustainability goals we set last year, despite the challenges posed by the pandemic. In fact, our ESG risk scores have improved to the top 10% of the semiconductor industry according to the third-party rating agency Sustainalytics. We are also making good progress on achieving 100% renewable energy consumption in the U.S. by the end of 2025. In calendar 2021, we continue to focus on emissions abatement, transition to renewable sources, water restoration and increased efforts to reduce, reuse or recycle waste. We will pursue these goals with the same focus with which we have created sustained momentum in the business, and I look forward to providing updates on our progress on future calls. We will now open for questions. Operator: Thank you. [Operator Instructions] Our first question comes from C.J. Muse with Evercore. You may proceed with your question. C.J. Muse: Yes. Good afternoon. Thank you for taking the question. I guess, end-market demand question. There’s clearly fears out there around PC speaking volatility around handsets and –whether there’s any inventory build on the cloud side. Yet here, you’re talking about DRAM and NAND remaining tight into calendar 2022. So, I guess, can you walk through what you’re seeing out there from a demand perspective? And then also, I think very importantly, particularly to the DRAM side, how you’re thinking about supply, which clearly seems to be constrained both this year and next year? Sanjay Mehrotra: Thanks, C.J. So, on the demand side, we certainly see strong demand across almost all end markets. PC, on a year-over-year basis in calendar year 2021, the growth is in high-teens. And, of course, the SSD attach rate average content continues to increase on the NAND side and continue -- PC continues to drive healthy demand for DRAM as well. Our data center, after the digestion period earlier in the year in the second half, driving strong demand for us as well. Smartphone, 5G trends driving unit sales as well as average content growth. Automotive, we can’t meet the supply. We can’t meet the demand that is strong there. Industrial markets, the demand is strong. So, across the Board, almost across all end markets, we are seeing strong demand. In fact, in the industry, there is unmet demand. And you know that there is semiconductor shortage across the technology ecosystem. And as that semiconductor shortage gets alleviated over time, that actually is going to create more demand for memory and storage because every end application today, whether it’s analog IC-related or memory, CPU cores-related, all of them actually required memory and storage. So semiconductor shortage, which is actually impacting some of the demand, as that gets alleviated over the course of next seven quarters, that too will bring about increased demand. So, demand trends are strong. The supply, as we see through the year, through the end of the year and into calendar year 2022, is tight as well. And you know that CapEx in the industry has been on the DRAM side, extremely disciplined. The producer inventories, the supplier inventories are running extremely lean as well. I can certainly speak for our inventory. Our days of inventory are at 98, extremely low as well. And capital intensity is increasing as well in the industry, and that all bodes well for disciplined supply growth as well. We talked about that how DDR5 as a spec that is there in the industry, as a JEDEC spec, actually requires more on chip ECC that results in bigger die sizes for everybody in the industry for DDR5 over DDR4. So that, again, as you can well understand, as the industry transitions to DDR5 over the course of next several quarters in 2022 as well as in 2023, that too means less supply growth availability from the wafers, even with technology transitions, and so, all of those trends from the demand side as well as from the supply side bode well for our industry. C.J. Muse: That’s very helpful. If I could follow-up on the gross margin side, Dave, you talked in the prepared remarks around higher cost mix and investment in the supply chain. Can you walk through the moving parts there for fiscal 2022 gross margins? Dave Zinsner: So obviously, one of the bigger components of the margins for fiscal 2022 is going to be around pricing. And we don’t provide pricing beyond the next fiscal -- beyond this quarter, other than to say that we think pricing will be up next quarter, and we are suggesting that it would be tight at least into 2022. So, that’s as much as I can give you on the pricing side. On the cost front, when you look at the front-end cost reductions that we’ll see next year on a like-for-like basis, driven by, as Sanjay mentioned in the prepared remarks, the ramp of 1-alpha and the ramp of 176 on the NAND front, we do feel like those costs will be good. The only counter to that is we will see a higher mix of products that carry higher costs. Sanjay mentioned like DDR5, higher density server modules, as more SSDs, all those things will be a bit of a headwind on the cost front. And we will likely go into the year with some COVID mitigation costs. That also will be a bit of a headwind. Now hopefully, that over the course of the year, alleviates and that starts to help on the margin front. The only other factor is we will have a little bit of a lift in Q4 from Lehi as the full amount of depreciation goes away in the fiscal fourth quarter. And then, once we close on the sale, all the underload charges will also go away. The way I think I’d model it is maybe about $20 million of benefit in the fourth quarter and probably another $20 million in the first fiscal quarter and assuming we close somewhere close towards the end of the first fiscal quarter, we should be -- that should be behind us. C.J. Muse: Thank you. Operator: Thank you. Our next question comes from John Pitzer with Credit Suisse. You may proceed with your question. John Pitzer: Yes, guys. Just two quick questions. Dave, maybe to follow-up on C.J.’s questions about cost. I want to make sure I understand the messaging here. I get that these higher value-added parts have higher costs, but should they also have higher gross margins, or am I thinking about that incorrectly? And then, I have a follow-up. Dave Zinsner: It somewhat depends on the product itself. But I would say, in general, we are trying to drive towards higher value products, which arguably on a like-for-like -- or at least on a comparable basis to other products would carry better gross margins. John Pitzer: Perfect. And then, as my follow-up, two quarters ago, Dave, you didn’t buy back any stock. This quarter, it was $150 million, which was I think 10% of free cash flow, notwithstanding what you’ve done over multiple quarters. I’m just kind of curious as to the message you’re trying to give us here, especially if you look at sort of the cross-cycle risk reward in the stock, why not be more aggressive with the buyback here? And does that portend something about next fiscal year’s CapEx? And as you’ve talked about that CapEx, is next fiscal year a year that you should outgrow bits relative to the industry? Dave Zinsner: Okay. A lot of questions on pack. Okay. So, on the buyback, I wouldn’t read anything into the $150 million. Some quarters, we’ll have higher levels of buyback than others. We were -- we did have an eye on our net cash position. And so, that was something that we were trying to move in the right direction. I think you’ll find in the fourth fiscal quarter that our buybacks are meaningfully higher than our third fiscal quarter. So, nothing to read there. We do feel like this price is obviously a good price to be buying the stock back. And we are committed to what we’ve talked about previously, which is to return at least 50% of our free cash flow in the form of buybacks. And as we -- as I talked about on the prepared remarks, I think the metric we’ve hit so far is 55%. So, we’ve done pretty well. And that doesn’t even account for the converts, which I think by the end of this fiscal quarter, that is the fourth fiscal quarter, will be completely done with converged, conversions will be completely off the balance sheet, and we will remove that dilution as well. As it relates -- no message on the CapEx as it relates to buybacks, other than to say that given the EUV investments, it does appear that we will operate maybe at a little bit of a different level from a percent of sales perspective than perhaps we previously were operating. We were thinking more in the low 30s. I think with EUV, it’s safe to say that we probably are operating in the mid-30s as a percent of revenue for CapEx, at least as we build out the EUV part of the tool set. John Pitzer: Perfect. Thank you very much. Operator: Thank you. Our next question comes from Shannon Cross with Cross Research. Shannon Cross: I had a question about DRAM ASPs. 20% quarter-over-quarter growth was the highest in several years. So, you can talk -- can you talk a bit about the drivers of the growth? How much of it was like-for-like price increases given the current tight supply versus, say, benefit from mix? And how should we think about sustainability? Sanjay Mehrotra: So, certainly, on a like-for-like basis, pricing increased across the board in the DRAM industry, and again, driven by the strong demand, as I mentioned earlier, pretty much across all of the end markets. So, we enjoyed price increases across all end markets. And as we have mentioned that even in FQ4, we see price increases not just in DRAM, but we also see that in NAND. Shannon Cross: Okay. And then, I guess, given the conversation or comments you made about customers moving to just-in-case inventory management, can you unpack that a little bit just in terms of magnitude? I mean, is this sort of a one-off conversations you’re having with people as they’re dealing with the supply issues that are out there right now, or do you think this is something that’s going to be sort of a meaningful transition within the industry? Thanks. Sanjay Mehrotra: So, we see it as an emerging trend in the industry. When you think about it over the course of last couple of years or even maybe a somewhat longer time frame, there have been challenges with respect to geopolitical consolidations. Certainly, COVID brought into stark relief the need for resilient, flexible supply chain. And when you look at all the acceleration of the digital transformation and the surge in demand that has occurred, and on top of it, impose semiconductor industry shortages that are leaving a lot of the unmet demand across multiple industries here, all of that is really leading the customer ecosystem as well as us, the suppliers, to really absolutely prepare for supply chain so that we can meet the demand. I mean, Micron itself has taken actions in this regard in terms of securing capacity, for example, for assembly operations and that has really enabled us, for example, when our Muar operation, we had to bring down our team members there because of the recent COVID outbreak in Malaysia. Because we had made changes to our capacity -- assembly capacity footprint, we have secured more external supply, assembly capacity that enabled us to quickly shift our production to other parts of our manufacturing footprint. These are the kind of considerations that customers, in general, and suppliers, in general, are considering to make sure that they’re able to manage their supply chains to be able to meet the end-customer demand. And that’s why, certainly, some of the just-in-time aspects of inventory management have proved to be costly over the course of last few quarters, particularly, as the world has struggled to respond to the needs during the COVID time frame. And yes, there is an emerging trend towards considering just-in-case, whether it is related to geopolitical considerations, whether it is related to acts of God, that can result in supply chain disruptions or just responding from challenges of COVID. So, this is an emerging trend. And some of the customers may have already reacted faster in terms of building stronger inventory positions. Other customers perhaps still scrambling to meet the requirements, but this is definitely a trend that we think will likely persist with companies as they think about their own supply continuity considerations in the future. Just like Micron itself has taken the steps necessary to address its own customer requirements and fulfilling their demands. Operator: Our next question comes from Timothy Arcuri with UBS. Timothy Arcuri: Thanks a lot. I had two questions, first on EUV and then on cost down. So Sanjay, I guess, the first question on EUV is sort of what’s changed on EUV? I mean, it’s not like there’s been a sea change in progress made on EUV. Is it simply maybe that there’s another big chipmaker trying to get in the queue and taking up some slots and so you felt like you had to get in the queue? So, I’m just sort of curious what changed on EUV? And then, I had a follow-up. Sanjay Mehrotra: So, we had always said that we monitor EUV progress. We have actually engaged in EUV evaluation. We have had EUV tool in the past. So, we had always said that we will intercept EUV in our roadmap at the right time when we see the EUV platform as well as the ecosystem becomes more mature. That’s when we plan to intercept EUV in our roadmap. And that’s what our plan is that in the 2024 timeframe, and again, aligned with our technology and leadership DRAM scaling roadmap that we’ll be implementing this in 2024 timeframe. So, it’s consistent with how we have always approached it. And of course, EUV has continued to make good progress, and we really think that with our EUV technology capability from 2024 onward timeframe, coupled with our multi-patterning expertise that Micron has a leadership in the industry, we really will have unique differentiated capabilities and absolutely feel confident about continuing to lead our DRAM scaling roadmap through our, of course, currently 1-alpha, but then 1-beta and then 1-gamma and beyond. And initially, we will deploy EUV in limited layer count in 2024 timeframe with our 1-gamma node and then we will broaden it to the 1-delta node with greater layer adoption and just keep in mind that we will combine it with our immersion multi-patterning techniques as well. And so, we really believe that we will have a very strong roadmap. And this is pretty much along the lines of how we always intended to insert EUV in our roadmap in the future, basically keeping in track of cost effectiveness, productivity as well as our overall scaling roadmap, and we feel really good about our leadership, DRAM scaling roadmap ahead. Timothy Arcuri: And I guess, Dave, my follow-up is on cost downs. You sound a little more negative or a little more cautious on your fiscal 2022 cost downs than you were last quarter. I think, this year in DRAM, you’re going to be close to roughly 10% this fiscal year. And I think 1-alpha was supposed to help you next year. So, the feeling was that you could do better than 10% next year in fiscal 2022. But, it sounds like maybe some of these mix issues are going to result in you doing worse next year than you did this year? Can you sort of give us what next year is relative to the -- to sort of what you’ve done this year? Thanks. Dave Zinsner: So, I don’t think I’m ready to -- we haven’t completely finished the plans on next year. So, maybe it’s a little premature for me to talk about next year, specifically on cost downs. I would say that when you look at 1-alpha’s cost declines, they are very, very good. The timing in which the 1-alpha ramps is certainly an impact, and when it gets to its mature yield state is certainly an impact. And then, of course, it’s hard to call these mixed elements that drive some headwinds. But suffice it to say, when you kind of think about what our strategy is, we do feel that we’ll see many of these things enter into the equation. So, I think when you look at it on a front-end basis is quite good and quite comparable. I think when you look at it on a mix basis, somewhat dependent on how the market unfolds. But based on our early view into next year in terms of the x, we’d expect some headwinds. Operator: Our next question comes from Joe Moore with Morgan Stanley. Joe Moore: Great. Thank you. I want to follow-up on the just-in-time to just-in-case inventory question. You’re talking about demand not being fulfilled in the short term. So, is the message here that the customers don’t really have inventory, but that they want to put that inventory into place, or are there pockets where there’s inventory kind of waiting for other components? Sanjay Mehrotra: So, again, this really varies from customer to customer. Some customers may have reacted fast and would be carrying adequate level of inventory or inventory in line with their strategy in terms of how to cope with the current environment with respect to demand and supply for their own components, whereas some other customers may have less level of inventory. So, really, it varies from customer to customer. So, what I’m saying is that regarding just-in-time shifting towards just-in-case kind of mindset, it really is that customer focus on managing their supply chain so that they can have sufficient inventory to meet their end-market requirements, some customers may have moved more in that direction. And some other customers may have yet to move in the direction of from just-in-time mindset towards just-in-case. So for example, the car production, we are seeing that auto market has suffered through significant supply chain shortages and, of course, have incurred significant cost to that industry as well in not being able to fulfill all their supply requirements. And of course, that then drives a different mindset on how to avoid this kind of situation in the future. So, it varies from end market to end market. It varies from customer to customer. But overall, what we are saying is that with the lessons of the geopolitical consolidations, with the lessons of the pandemic and the lessons of the recent supply chain shortages, in the backdrop of digital transformation requiring more and more of semiconductor solutions, customer ecosystem, parts of the customer ecosystem likely is approaching their inventory consolidations in a different manner compared to before. And again, we look at it as an emerging trend in the industry. Operator: Our next question comes from Chris Danely with Citi. Chris Danely: Hey. Thanks, guys. Just a follow-up on that previous question. If you look at the three main end markets for DRAM, PC, cellphone server and your, I guess, your best guess of inventory in each, where would you say it’s lowest? And then, when do you think that those end markets will achieve their, whatever the heck normal is, these days level of inventory? Sanjay Mehrotra: So, we’re not going to go there in terms of trying to break it down by market by market. Of course, you sometimes see different moving parts in different parts of the market. For example, in mobile, you saw that with the India COVID situation as well as April and May in China, there was a reduction in demand in certain parts of the smartphone market. However, in other parts of the world, the smartphone suppliers moved to supply the increased demand in the other parts of the world. And of course, some of the demand because supply is in shortage, some of the supply in the industry got shifted toward other parts of the market too. So, we’re not going to break it down. I mean, I gave you mobile just as one example. And this situation can vary from customer to customer. But all-in-all, when you look at the end markets, almost all end markets are seeing shortages. And in aggregate, there is tight supply today. That’s what is resulting in increase in prices in the industry that we reported for FQ3, and we guided to it in FQ4 also for DRAM and NAND, we see price increases. And overall, we see supply tightness continuing through the year and into 2024 timeframe as well. Chris Danely: Well said… Sanjay Mehrotra: I meant 2022. Chris Danely: 2024 as well. 2024 is great. 2026, I’ll take it. Sanjay Mehrotra: We’ll definitely talk about -- we’ll definitely be talking about that one of these days too. Yes. Chris Danely: One quick one, Sanjay. What do you think is going to be the Chips Act impact to Micron and just the memory ecosystem in general? Sanjay Mehrotra: So, I think, when you say chipset impact, yes -- oh, Chips Act, I see. Okay. So with respect to Chips Act, we definitely -- first of all, it’s really great that U.S. government is recognizing the importance of semiconductors and how important semiconductors are to national economic consideration as well as national security considerations. And of course, semiconductors are important to all global economies today. So, we certainly look forward to greater support for U.S. leadership in semiconductor research as well as semiconductor manufacturing in the years to come. And of course, Micron, as the only player in semiconductor memory and semiconductor storage in the industry is well engaged with the U.S. government. And I know that the U.S. government also recognizes the importance of memory and storage as a strategic part of the semiconductor industry. So we really look forward to opportunities in terms of addressing our future needs. We continue to stay engaged. We stay engaged with the governments in all global sites where we have major operations, and we look forward to the opportunities here in the U.S. as well. And we are really glad that the funding has crossed the finish line in the Senate, and we certainly hope that in the House as well, this will pass. And U.S. industry can get on with the business of really strengthening U.S. leadership in research and manufacturing in semiconductor for the years to come. And we definitely remain always committed to growing our own supply in line with the industry demand, and we remain disciplined in that regard. Operator: Our next question comes from Toshiya Hari with Goldman Sachs. Toshiya Hari: Hi guys. Thanks a lot for taking my questions. I have one on DRAM and one on NAND. On the DRAM side, I wanted to ask about your ability to grow bits over the next, call it, four to six quarters. I think, Dave, at a couple of conferences, you talked about bits being flattish into the August quarter, just given where you are in the transition and given low inventories. But as you progress and sort of transition to 1-alpha, at what point should we expect your bit supply to accelerate in the DRAM business? And to the extent you can’t meet demand, call it, over the next couple of quarters, how should we think about your willingness to increase capacity in DRAM? And then, on the NAND side, at a very high level, I think, Sanjay, it feels like you -- to me, it feels like you sound a little bit better on NAND supply-demand or less cautious on NAND supply-demand. Curious what’s changed over the past couple of quarters? Is it purely demand being better? Is it sort of the shortages around controllers? Yields on higher layer count nodes or all of the above? Just curious what’s changed in NAND over the past couple of months, couple of quarters. Thank you. Dave Zinsner: Okay. So I’ll take the DRAM question first. I think, you would model, for sure, we are thinking pretty modest sequential growth in the fourth quarter in terms of DRAM. I think that will carry into the first fiscal quarter, quite honestly. I would expect a relatively gradual increase as we ramp 1-alpha and that there wouldn’t be necessarily an inflection point where we see a big step-up in the growth rates. We’ve been very focused on the supply-demand balance on -- from our perspective. And so, we have been investing in 1-alpha with that in mind. And then, just the follow-on question you had, I almost say the same thing. As we look at DRAM and as we -- actually, as we invest in DRAM and NAND, we take a long-range view in terms of the growth rates of DRAM and NAND. Sanjay mentioned that we think DRAM growth rates are in -- for DRAM, long-term growth rates are in the mid to high-teens, and we think NAND is growing -- should grow around 30% over the long term, and that’s how we invest our CapEx. And we’re always -- now year-to-year, things might be a little different than that, but we’re investing over the long run to grow our supply in relationship to that demand growth. And we have not deviated from that strategy. Sanjay Mehrotra: And on the NAND front, yes, as you noted that we have increased our outlook in terms of year-over-year NAND industry growth to now mid-30s. At the prior discussion, NAND industry was somewhat in oversupply. What we have seen is that NAND certainly has stabilized, and the trends have improved. In fact, we talked about price increases that we experienced in FQ3 for NAND as well as have guided to price increase in NAND in FQ4 as well. So, overall, we see tightness in NAND as well through the remainder of this calendar year and into 2022, and NAND demand is being driven by elasticity and certainly, continuing strength in PCs and also data center and smartphone markets as well. Overall, our outlook has changed because the supply of inventories we believe are healthier. And certainly, Micron inventory in NAND also is running lean. And certainly, our 176-layer NAND industry-leading node is ramping well. And overall, we expect our long-term supply growth CAGR to be in line with the market there as well, so. Operator: Thank you. And that concludes today’s conference call. Thank you for participating. You may now disconnect.

Operator: Good afternoon. My name is Latif and I will be your conference facilitator today. At this time, I would like to welcome everyone to Micron's Second Quarter 2021 Financial Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question-and-answer period. [Operator Instructions] Thank you. It is now my pleasure to turn the floor over to your host, Farhan Ahmad, Vice President of Investor Relations. You may begin your conference. Farhan Ahmad: Thank you, and welcome to Micron Technology's fiscal second quarter 2021 financial conference call. On the call with me today are Sanjay Mehrotra, President and CEO and Dave Zinsner, Chief Financial Officer. Today's call will be approximately 60 minutes in length. This call including the audio and slides is also being webcast from our Investor Relations website at investors.micron.com. In addition, our website contains the earnings press release and the prepared remarks filed a short while ago. Today's discussion of financial results will be presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of the GAAP to non-GAAP financial measures can be found on our website. As a reminder, a webcast replay will be available on our website later today. We encourage you to monitor our website at micron.com throughout the quarter for the most current information on the company, including information on the various financial conferences that we will be attending. You can follow us on Twitter at MicronTech. As a reminder, the matters we will be discussing today include forward-looking statements. 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 you to the documents we file with the SEC, specifically our most recent Form 10-K and 10-Q for a discussion of risks that may affect our future results. Although we believe 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 after today's date to conform these statements to actual results. I'll now turn the call over to Sanjay. Sanjay Mehrotra: Thank you, Farhan. Micron delivered strong FQ2 results above our original projections, driven by solid execution and higher than expected demand across multiple end markets. The DRAM market is in severe shortage and the NAND market is showing signs of stabilization in the near-term. The execution from the Micron team and these strengthened conditions enabled us to set revenue records for mobile MCPs and automotive products and to reach normal levels of inventory ahead of schedule. Following last quarter's introduction of 176-layer NAND into volume production, in FQ2, we began volume production on our 1-alpha DRAM node, solidifying our technology leadership in both DRAM and NAND. We are in an excellent position to capitalize on the strong demand for memory and storage, driven by artificial intelligence and 5G across the data center, the intelligent edge, and user devices. I will start with an update on our operations. The Micron team is doing everything we can to meet customer demand despite the challenges of the pandemic, non-memory component shortages in the electronics industry, and disruptions that occurred in our Taiwan fabs in December. We are confident that our COVID19 safety protocols will allow us to continue at full production levels, and we are encouraged to see vaccines become increasingly available around the world. Micron has been able to mitigate the impact of broad electronics industry shortages to our production output through our proactive supply chain and inventory management strategies. Investments made over the last several years in facilities infrastructure allowed us to minimize lost output caused by the power outage and earthquake at our Taiwan operations in December. Recently, due to the drought in central Taiwan, there has been a reduction in the water supply for one of our DRAM fab sites. To mitigate the water shortage, we are accelerating our water conservation efforts and have secured alternative sources of water. At this time, we do not see an impact to DRAM production output. However, this is a developing situation that we are monitoring closely for the next several months. Now turning to technology and products. We continue to make solid progress on our key goals; first, to deliver industry-leading technology and improve our cost structure; second, to bring differentiated products to market and improve our product mix; and third, to grow our share of industry profits while maintaining stable bit share. I am proud to report that Micron was one of the top 20 U.S. patent registrants in 2020. This achievement attests to the brilliant innovation of our teams and is proof of the tenacious focus we have placed on technology and product leadership over the past several years. Our industry-leading 1-alpha DRAM and 176-layer NAND nodes are in volume production and are ramping on plan. We expect these nodes to be our workhorse for fiscal year 2022, fueling our bit growth and contributing to our long-term cost reduction goals. Across both DRAM and NAND, we target our long-term cost reductions that are in line with the industry. In products, Micron is on track to support customers as they begin to introduce DDR5 in the fiscal second-half of 2021. We are also driving an increased mix of QLC NAND, which helps to make SSDs more cost-effective and accelerates the replacement of HDDs with SSDs. QLC SSD adoption continues to grow, and we achieved a record high QLC bit mix in FQ2. Earlier this month, Micron took a decisive step to exit 3D XPoint development and manufacturing. As mentioned on our recent 3D XPoint update call, Micron is prioritizing investment toward other memory solutions that use the Compute Express Link, or CXL, and we are excited about addressing this market opportunity with differentiated products. Most of the R&D teams previously working on 3D XPoint have already been transitioned to other programs, including accelerating introduction of CXL-enabled memory products. This change will allow Micron to better address future needs of our data center customers and also drive higher ROI and shareholder value. We are running an open process to identify the best acquirer for the Lehi fab, which provides an excellent location for advanced foundry, logic, and analog semiconductor manufacturing, and expect to finalize the sale within calendar 2021. We anticipate that the overwhelming majority of the highly skilled Lehi manufacturing team will find strong career opportunities with the buyer. Turning to end markets. In data center, AI and data-centric workloads will drive long-term growth, with memory and storage becoming an increasing portion of server BOM cost. Micron is positioned for success in this market, with a broad portfolio of high-quality and power-efficient products. Enterprise demand, which had been anemic for the last few quarters, is starting to improve as IT budgets increase in anticipation of economic recovery. Enterprise DRAM bit shipments grew sharply quarter-over-quarter, but were still down year-over-year. Cloud DRAM bit shipments also grew quarter-over-quarter and we anticipate robust demand from U.S. hyperscale customers, especially as we enter the second-half of calendar 2021. In data center SSDs, revenue declined sequentially as customers in certain segments reduced their higher than average inventory levels. We are continuing to expand our data center NVMe SSD portfolio with internally developed controllers and have new product introductions planned in the coming quarters. In PC, we continue to benefit from the remote work and learning trend that drove healthy notebook and Chromebook demand in fiscal Q2. Micron delivered record PC DRAM bit shipments despite pockets of non-memory component shortages experienced in the PC OEM supply chain. We also began sampling 1-alpha-based DDR4 products. In client SSDs, we are on track to begin customer qualification of our next-generation client SSDs using 176-layer NAND in the fiscal second-half of 2021. By the end of calendar 2021, we expect to cover multiple segments of the market, including consumer, value OEM and premium OEM with our 176-layer-based client portfolio. In graphics, revenue declined quarter-over-quarter from an exceptional fiscal first quarter, which benefited from the launch of new gaming consoles. Nevertheless, fiscal second quarter revenue grew significantly year-over-year. Micron has an excellent position in this market with a broad product portfolio and deep customer partnerships. In mobile, revenue grew 21% sequentially, driven by strong execution, coupled with better-than-seasonal demand, due to continuing recovery in smartphone volumes. We achieved record MCP revenue and nearly tripled our LP5 revenue sequentially. We have also begun sampling the industry's first 1-alpha LPDRAM and 176-layer NAND with mobile customers. Smartphone unit sales in China have been robust, and 5G momentum is continuing. In auto, we delivered a second consecutive record-revenue quarter as auto manufacturing recovers around the globe and as memory and storage content per vehicle continues to grow. We have more demand than we can supply and we are working diligently with our customers to address their memory and storage needs. We are also advancing our product portfolio targeted for automotive applications. In FQ2, we completed qualification of our auto-grade LP5 and began sampling the industry's first automotive LP5 that is hardware-evaluated to meet the most stringent Automotive Safety Integrity Level, ASIL D. Turning to the market outlook, calendar 2021 is shaping up to be a solid year, and our overall outlook across DRAM and NAND has improved since our last earnings call, with broad strength across nearly all end markets. The pandemic has driven changes in our economy that we believe will not only benefit us this year, but also serve to accelerate the digital transformation of the economy and drive new opportunities for Micron. Recovery from the pandemic and pent-up demand are expected to drive strong demand growth in markets such as enterprise, cloud, desktop PCs, mobile, auto, and industrial. Data center demand is expected to be strong in calendar 2021, particularly in the second-half of the calendar year, due to a combination of factors. First, enterprise demand has started to come back as the economy recovers and is expected to further strengthen through the calendar year. Second, our opportunity at cloud service providers will continue to strengthen through calendar 2021, driven by robust demand for their solutions and offerings, as well as secular growth in AI and data-centric workloads. And finally, the introduction of new CPUs will support more memory channels and higher-density modules, contributing to increases in server memory content across both cloud and enterprise. Forecasts for calendar 2021 PC unit sales have increased from three months ago and are expected to approach an average of one million units per day. There is robust demand in notebook PCs, especially Chromebooks. We also expect the desktop market to improve as workers gradually return to the office this year. Mobile unit sales are expected to show robust growth this year and we also expect to benefit from higher content in 5G phones, which are forecast to double in calendar 2021 to more than 500 million units. Auto unit sales are expected to grow significantly from last year, while secular memory and storage content growth trends remain strong as EVs proliferate. The strong demand across various end markets, combined with disruptions at certain logic and foundry semiconductor producers, has resulted in a shortage of these non-memory ICs for our customers, and we believe memory demand would have been even greater without these shortages. In DRAM, due to the stronger demand, we now expect calendar 2021 bit growth at 20%, above our prior forecast of high teens. This growth builds on calendar 2020 bit growth, which was in the lower 20% range. As a result of disciplined CapEx investments since the start of the pandemic, we expect industry DRAM supply to be below demand. As a result of the strong demand and limited supply, the DRAM market is currently facing a severe undersupply, which is causing DRAM prices to increase rapidly. We see the DRAM market tightening further through the year. In NAND, we now expect calendar 2021 bit growth in the low to mid-30% range, above our prior expectation of 30%. While we are seeing stabilization in near-term pricing, the elevated levels of industry CapEx are a cause for concern and more CapEx cuts are needed to allow for healthy NAND industry profitability. Long-term, we expect a DRAM bit demand growth CAGR of mid to high teens and a NAND bit demand growth CAGR of approximately 30%. Turning to Micron supply, we target our long-term bit supply growth CAGR to be in line with the industry bit demand growth CAGR for both DRAM and NAND. However, there can be year-to-year variability caused by node-transition timing. In both DRAM and NAND, we expect our calendar 2021 bit supply growth to be below the industry demand growth, and we have used our inventory to add to our bit shipment growth this year. We are targeting fiscal 2021 CapEx to be approximately $9 billion to support our long-term goal of maintaining a stable share of industry bit supply. I will now turn it over to Dave. Dave Zinsner: Thanks Sanjay. Micron delivered very strong fiscal second quarter results, with solid revenue growth, margin expansion, and positive free cash flow. Market conditions improved throughout the quarter, and DRAM and NAND volumes, as well as DRAM pricing, were above our original expectations. Before discussing the details of our fiscal second quarter results, I want to discuss the financial impact of our decision to cease 3D XPoint development and manufacturing. As a result of this decision, we wrote-off $49 million of 3D XPoint inventory in our FQ2 GAAP financial results. This inventory exceeded our needs to fulfill customer commitments. We remain committed to fulfilling our customer commitments to manufacture 3D XPoint wafers and currently expect modest revenues, consistent with recent history until the end of calendar 2021. Our Lehi fab was re-categorized at the end of FQ2 as held for sale on our balance sheet, and beginning in FQ3, depreciation expense for the building and related equipment will stop. As a result, FQ3 gross margins will benefit from approximately $75 million of lower depreciation expense. The remaining costs will continue until the closing of the sale of our 3D XPoint fab in Lehi, Utah. As we discussed on our 3D XPoint update call, Micron will continue to maintain our current R&D investment level and redeploy the 3D XPoint R&D teams to work on technologies and products that align with our vision for memory and storage. We have already made progress on this front since our update call. Now, moving on to our results for the fiscal second quarter. Total FQ2 revenue was approximately $6.24 billion, up 8% quarter-over quarter and up 30% year-over-year. We saw solid growth in most of our end markets, notably in the data center, mobile, PC, auto, and industrial markets. FQ2 DRAM revenue was $4.4 billion, representing 71% of total revenue. DRAM revenue increased 10% sequentially and was up 44% year-over-year. Bit shipments grew in the high single-digit percentage range sequentially, and ASPs were up slightly quarter-over-quarter. FQ2 NAND revenue was approximately $1.7 billion, representing 26% of total revenue. NAND revenue increased 5% sequentially and was up 9% year-over-year. Bit shipments increased in the high single-digit percentage range sequentially, while ASPs declined in the low single-digit percentage range quarter-over-quarter, showing an improvement in trajectory in the NAND pricing environment. Now, turning to our revenue trends by business unit. Revenue for the Compute and Networking Business Unit was approximately $2.6 billion, up approximately 4% sequentially and up 34% year-over-year. Revenue growth was broad-based and driven by a combination of volume and pricing across data center, networking, and client. Revenue for the Mobile Business Unit was $1.8 billion, up 21% sequentially and up 44% year-over-year. Mobile demand remains strong as 5G momentum increases and the mobile market continues to recover from the impact of the pandemic. Revenue for the Storage Business Unit was $850 million, down approximately 7% from the prior quarter and down 2% year-over-year. Both SSD revenue and component revenue declined sequentially. We expect our storage revenue to increase as we introduce our 176-layer client SSDs into volume production. And finally, the Embedded Business Unit generated record revenue of $935 million, which was up 16% sequentially and 34% year-over-year, driven by strong industrial demand and record auto revenue as demand recovered from pandemic-related shutdowns. The consolidated gross margin for FQ2 was 32.9%, up 200 basis points from the prior quarter. DRAM price increases and cost declines drove the margin expansion in FQ2. For fiscal 2021, due to product mix changes, we now expect that our DRAM cost reductions will be somewhat higher than our prior expectations of mid-single-digits, while our NAND cost reductions will be somewhat lower than our prior expectation of low to mid-teens. Operating expenses were $797 million in FQ2. Operating expenses were slightly lower than our expectation as prequal expenses were less than we had anticipated. We continue to expect operating expenses to increase in the second-half of the fiscal year as we incur increased prequalification and labor expenses. As always, we remain committed to tightly managing expenses. FQ2 operating income was $1.3 billion, resulting in an operating margin of 20%, compared to 17% in the prior quarter and 11% in the prior year's quarter. FQ2 EBITDA was $2.8 billion, resulting in an EBITDA margin of 45% compared to 43% in the prior quarter and 40% in the prior year. Net interest expense improved to $24 million, and we expect it to be approximately $25 million in FQ3. Our FQ2 effective tax rate was 10.1%. We expect our tax rate to be in the high single digits for fiscal 2021. Non-GAAP earnings per share in FQ2 were $0.98, up from $0.78 in FQ1 and up from $0.45 in the year-ago quarter. EPS included one cent of non-operating income related to gains from investments in our venture arm, Micron Ventures. Turning to cash flows and capital spending, we generated approximately $3.1 billion in cash from operations in FQ2, representing 49% of revenue. Net capital spending was approximately $2.9 billion during the quarter. Through the first six months of the fiscal year, we have deployed approximately $5.7 billion or slightly less than two-thirds of our expected annual capital spending. As we look ahead to the second-half of the fiscal year, we expect capital spending to decline from the first-half and continue to target approximately $9 billion in total for FY 2021. As a result of our strong cash flow from operations of $3.1 billion, we generated positive free cash flow of $174 million despite the relatively high level of capital spending in the quarter. The increased cash flow was driven by strong revenue growth and efficient working capital management. We expect free cash flow to continue to improve in the second-half of the fiscal year, driven by continued revenue growth, higher margins, and lower capital spending. While we did not have share repurchases in FQ2, we will begin repurchasing shares in the third quarter and remain committed to returning at least 50% of annual free cash flow to shareholders in FY 2021. Ending FQ2 inventory was $4.7 billion or 99 days, which reflects the inventory reporting changes we announced on last quarter's earnings call. We ended the quarter with total cash of $8.6 billion and total liquidity of approximately $11.1 billion. FQ2 ending total debt was $6.6 billion. Now, turning to our outlook. DRAM prices have started to strengthen, and we expect the market to remain undersupplied this calendar year. In addition, NAND conditions are stabilizing. These improving market conditions, combined with our significantly stronger competitive position, set us up to generate stellar financial results in the second-half of the fiscal and calendar year. While demand is strong across both the DRAM and NAND markets, our supply is now constrained as our inventories are very lean, particularly in DRAM. This restricts our ability to serve potential upside to demand. On the cost side, we are facing additional headwinds due to foreign exchange rates and drought mitigation impacting our Taiwan operations and as result our FQ3 DRAM costs could be sequentially up. We are also assuming that there is no impact to our production output due to the Taiwan drought. With all these factors in mind, our non-GAAP guidance for FQ3 is as follows. We expect revenue to be $7.1 billion, plus or minus $200 million; gross margin to be in the range of 41.5% plus or minus 100 basis points; and operating expenses to be approximately $875 million, plus or minus $25 million. Finally, based on a share count of approximately 1.16 billion fully diluted shares, we expect EPS to be $1.62, plus or minus $0.07. In closing, as we reflect on our financial performance for FY 2020, which was a trough year for Micron in this cycle, and compare it to the prior trough in FY 2016, I am amazed by how far we have come. From FY 2016 to FY 2020, we substantially improved our EBITDA margin and our revenue grew by more than 70%. During this time, we delivered average gross margins of 40%, EBITDA margins of 50% and return on invested capital of 20%. We believe Micron's strong performance will continue cross-cycle and outperform the broader semiconductor industry. I will now turn it back to Sanjay. Sanjay Mehrotra: Thank you, Dave. None of our achievements are possible without the great work of our world-class Micron team. We seek to recognize and reward team member performance and to do so fairly. Last week, we announced that we achieved comprehensive global pay equity in total employee compensation across base pay, bonuses, and stock rewards for women and all underrepresented groups at Micron. Pay equity is a key pillar of our diversity, equality, and inclusion strategy and core to creating an environment that attracts and retains the best talent. We continue to strengthen Micron's inclusive, values-driven culture, which is an integral part of our broader transformation. We have come a long way since Micron's founding as a startup in Boise, Idaho more than 40 years ago, and today we are a global technology and product leader. As the United States' only remaining memory and storage manufacturer, we welcome the U.S. government's commitments to enhance America's long-term technology leadership and competitiveness in semiconductor manufacturing. This emphasis on our industry, which is reflected by governments globally, is a recognition of the critical role we play in today's digital economy. Memory and storage represent approximately 30% of semiconductor industry revenue today, up from 10% in the early 2000s, and DRAM and NAND are growing in importance as a critical enabler of the most advanced technologies driving economic growth and well-being. Micron's innovation over the decades has created a strong foundation, and we look forward to delivering value for all our stakeholders as the data economy accelerates. Thank you for joining and for your support of Micron. We will now move to Q&A. Operator: Thank you. [Operator Instructions] Our first question comes from the line of C.J. Muse of Evercore. Your line is open. C.J. Muse: Yes, good afternoon. Sanjay, thank you for taking the question. I guess I was hoping you could compare and contrast what you're seeing this cycle versus previous cycles on the DRAM side? You're talking severe shortages yet, we're really not seeing anyone up-ticking on CapEx. And if you ordered a tool today, you wouldn't get it until Q1 next year at the earliest. So I guess, how are you thinking about things as well as what kind of changes are you seeing in terms of customer behavior and how might that effect your business going forward? Thank you. Sanjay Mehrotra: Thank you, C.J. And in terms of how we see the demand environment today versus what you refer to a few years ago, no question that at that time, the demand was driven with the increases in cloud primarily and today the demand drivers are much more diverse. We are seeing shortages across all end markets. The demand is strong across all end markets. When you look at cloud, while cloud may have gone through some digestion over the course of last couple of quarters. When we look ahead, cloud demand is expected to be healthy, given the refresh with the new CPUs that are driving greater content in the servers. Similarly, mobile with 5G is driving much greater content, a first 5G phone and on a year-over-year basis, the number of smartphones being sold are expected to increase on a double-digit basis as well. So, a strong driver of growth on mobile phones as well. Automotive experienced, of course, big decline last year. But on a year-over-year basis, a mid-double-digit range growth in automotive number of units sold. So, automotive is also driving greater content increase as well as unit increases. So, overall, the industry is experiencing strong demand virtually across all end market segments. The CapEx has been disciplined, particularly in DRAM over the course of last couple of years and the environment is one of severe under supply. So, we are very excited about the opportunities ahead. And we absolutely believe that Micron in this environment in terms of demand and supply considerations and our own execution from a technology point of view, having industry's leading edge, 1-alpha node industries first as well as having industries first 176-layer node, we are well-positioned to drive our growth ahead and really well-positioned to deliver stellar financial results over the course of next several quarters. And in terms of our customers, a question that you asked as well. I mean, customers across the board are seeing that memory DRAM is in short supply and that does affect some of the lead-times that we expect from those customers and by and large, those customers are supportive of those lead-time considerations. And in this environment of extremely tight supply, the flexibility that is available for customers to switch between products is also becoming more limited. And this then does require customers to have longer lead-times as well. Operator: Thank you. Our next question comes from John Pitzer of Credit Suisse. Your line is open. John Pitzer: Yes. Sanjay, Dave, thanks to let me ask questions. Congratulations on strong results. Sanjay, just sticking on the CapEx side, you're characterizing the DRAM market as a severe shortage, the NAND market is stabilizing, which is sort of an uptick of how you've been characterized in the market over the last couple of quarters. You're under growing industry bids and you've got sort of an industry-leading cost position, especially in DRAM with 1-alpha. And yet when I look at your full-year CapEx versus what you've spent fiscal year-to-date, you're going to be down over 40% in the second-half of the year. Why not get a little bit more aggressive on CapEx? What would you need to see? And at these levels, can you maintain your goal of being in line with industry bit share at these CapEx levels? Sanjay Mehrotra: So, I think it is important to understand that we do remain disciplined with respect to CapEx. We want to make sure we manage it prudently. Our goal is that over longer-term in terms of supply growth CAGR to be aligned with the industry demand growth CAGR. And we have made prudent decisions over the course of last few years in terms of CapEx investment. If you look at our fiscal year 2021 CapEx of approximately $9 billion, this is really almost the highest CapEx that the company has spent in its history and we are putting that into positioning us well for the future in terms of, of course, creating more cleanroom expansion, but also investing in leading edge technologies, which is what as we look ahead will drive our supply growth with our 1-alpha node in DRAM as well as with our 176-layer NAND node. So, even last year, while the industry was going through a trough period, Micron actually took the steps to invest for building for the future strength of the company. So, all in all, we believe that our bit share in the industry would stay stable. And overall, it is a good environment for us to operate in, where our demand growth and our supply growth are on a CAGR base is aligned, yes, from quarter-to-quarter there can be variations, but most important thing is that long-term supply growth CAGR is managed in a disciplined fashion. And this is what is Micron's focus and we believe we are well-positioned. As I said before, well-positioned to deliver stellar results over the course of next several quarters. Operator: Thank you. Our next question comes from Timothy Arcuri of UBS. Your line is open. Timothy Arcuri: Thanks a lot. I guess I also had a question on CapEx. Dave, given what you're guiding the back half of the year to, you're going to basically be exiting the year like annualizing roughly $6 billion in CapEx, something like that. So, it requires a pretty big ramp, just to get to that like 30% capital intensity number for next year that you've been kind of talking about. So, is that still the right number to think about that you can get to like low 30s capital intensity for fiscal 2022? Because there's just not a lot of slots that you can get right now, even if you decide that you want to spend more money, those tool shipments slots aren't even really free until start of next year or so? Thanks. Dave Zinsner: All right. Yes, I mean, keep in mind that CapEx can be a little lumpy. There are times where we need to make the investments ahead of our node transitions and though sometimes can get more consolidated into a couple of quarters. And I think that's essentially what you're seeing in fiscal 2021. We're not ready to talk to numbers of our fiscal 2022 yet. We haven't finished fiscal 2021 and we need to do that before we kind of formulate the plan. But I would tell you, over the long-term, we feel very comfortable with our target CapEx spend of low 30s or 30% to 35% of our revenue in terms of CapEx. As Sanjay talked about, we take a very long-term view of CapEx and align that CapEx investment to make sure that supply and demand are in balance for us and we'll continue to do – to approach it that way. Operator: Thank you. Our next question comes from Joe Moore of Morgan Stanley. Your question please. Joe Moore: Great. Thank you. If I look at the sort of quarter-on-quarter bit growth for DRAM, you've given the last four quarters, I get to 40% plus type growth in February versus supply that you're sort of talking about less than 20% I think. So, obviously, there is some deceleration implied there that you unwound inventory a little bit in February. I know you talked about that a little bit after the pre-announcement, but maybe just give us a little bit of color on how you got to that bit growth and how that affects the next couple of quarters? Sanjay Mehrotra: So, of course, if you look at last year, we had said that our supply growth was somewhat greater last year compared to the industry supply growth and the industry demand growth as well. So that positioned us well in terms of using our power inventory this year. And our supply growth this year is expected to be less than the industry demand growth. Industry demand growth we have just raised our estimations to approximately 20% in calendar year 2021. So, our supply growth to be somewhat less than the industry and of course, we have used up in DRAM our inventory to supply -- to meet the growing customer requirements. As we look ahead, it will be -- our supply growth will be driven by our 1-alpha technology in DRAM. We will be ramping it over the course of next few quarters. It will be the workhorse of technology for us in terms of bit growth in fiscal 2022 as well. And, of course, as we bring out our products in this technology node, we have to get them qualified with our customers and that's what we are focused on in terms of getting the ramp up of this technology, 1-alpha technology getting products qualified in time for it to position us to drive our supply bit growth to meet the ultimate customer demand growth requirements during the rest of the calendar year. Joe Moore: Okay that makes sense, but I am I right in thinking that there is an implied kind of decline in kind of sequential bits as you moved a lot of inventory in February, you don't have that inventory to move in May? Sanjay Mehrotra: So, again, our inventory in DRAM is really very lean at this point, and going forward, the growth will come from our 1-alpha node. And I think what's again important is that there can be fluctuations from quarter-to-quarter, but long-term, it is really about having a stable market share driven by technology transitions, which is our focus and which we have delivered successfully, whether you look at our 1z node in DRAM, that was the first 1z node in the industry, now 1-alpha node is the first -- 1-alpha node in the industry as well. So, technology transitions is what we are focused in terms of driving our long-term demand -- supply bit growth CAGR to be in line with the demand growth CAGR. And from quarter-to-quarter depending upon the timing of the technology transitions, there can be fluctuations. Second-half in terms of our year-over-year growth will be lower than the first-half. Yes. Joe Moore: Great. Thank you. Operator: Thank you. Our next question comes from Chris Danely of Citi. Your line is open. Chris Danely: Hey. Thanks guys. Just a bit of a longer-term question. So, Sanjay/Dave, if things continue to be strong for hopefully several quarters like you guys are talking about your cash pile is going to go fairly substantially. So, theoretically speaking for sitting here a year, year and a half out, what are you thinking about as far as the usage of that cash going forward? And could we see a dividend potentially in the future? Dave Zinsner: Yes, well, so our current obviously approach towards returning cash to shareholders is through the buyback. We mentioned in the second fiscal quarter, we didn't buy back stock nor did we buy back stock in the first quarter and that was really a function of the fact that cash flow was negative and we were protecting our cash -- our net cash position. But as you say -- suggest and as we talked about we do expect to have good cash flow in the back half of the fiscal year and we do expect this business to generate good free cash flow over time. So, I think primarily, you can look to us to buy back stock. We're going to return at least 50% of our free cash flow in the form of buybacks and we have in the past returned more than that. So, potentially, we could do that in the future. There is a few things on the balance sheet as it relates to converts and debt that might use some of that cash as well. As far as the dividend, we haven't talked with the Board about that. Certainly, a possibility, but I think we need to get through this year and discuss with the Board if that makes sense. Chris Danely: Great. Thanks guys. Dave Zinsner: Sure. Operator: Thank you. Our next question comes from Toshiya Hari of Goldman Sachs. Your line is open. Toshiya Hari: Great. Thank you for taking the question. Dave you're guiding gross margin up about 900 basis points sequentially for the May quarter. You talked about the exit from 3D XPoint driving lower depreciation. I think it was $75 million. You also talked about DRAM costs potentially being up due to FX and the drought in Taiwan. But outside of those two items, how are you thinking about costs in your NAND business given the transition to second gen replacement gate and what are your thoughts on pricing for both DRAM and NAND? I think for DRAM, most of us are expecting 10%, 15% pricing increases. On the NAND side perhaps up low single-digits, but how are you guys thinking about pricing and how are you thinking about sustainability of pricing into the second-half? Thank you. Dave Zinsner: Okay. Thanks. So, as you point out, we do get the $75 million tailwind in the third fiscal quarter due to the stoppage of the depreciation expense in Lehi that certainly will be beneficial and will help the following quarter. It actually may be a little bit better than that. And so that will be a tailwind again for the fourth fiscal quarter. We talked about DRAM costs. We are affected by a few things. I mentioned the drought mitigation that is causing a little bit of a headwind on our costs on DRAM. We are -- because of the significant tightness in our supply chain, we are seeing some increased spending as it relates to the back end. So, that's certainly a factor as well. And also as I mentioned in the prepared remarks FX has been a bit of a headwind for us in particular to Taiwan dollar which was ahead about a 5% appreciation this year. So, those things are driving a little bit of a cost increase. I would say that's probably kind of a one or two quarter type effect. We're pretty excited about the 1-alpha node. It does have a great cost structure. It will be a workhorse node for us in fiscal 2022 and so we would expect that to certainly help on the cost side on DRAM. On the NAND front, we are expecting cost to improve next quarter, aligned with our kind of annual cost reduction assumptions, which suggests it will be in the low double-digits year-over-year. So, that will certainly be a little bit of a benefit on the gross margins as well. The rest of the gross margin guidance is obviously a function of assumptions around pricing and mix and we avoid specifics around that. Suffice it to say that we feel very good about the pricing environment in DRAM, given the very tight supply situation we're in, in DRAM. And we're cautiously optimistic on the NAND front given the stabilization we've seen more recently. But outside of that, I prefer not to comment more on the pricing side. Toshiya Hari: Thank you. Operator: Thank you. Our next question comes from Harlan Sur of JPMorgan. Your line is open. Harlan Sur: Good afternoon. And great job on the quarter's execution. Just given the DRAM tightness and what appears to be tightness in literally all of your end markets, is the team you allocating your production mix, let's say from mobile towards more higher growth, higher margin segments of the market like enterprise and cloud and gaming as you move towards the second-half of the year, especially on your view of strong cloud demand in the second-half, improving enterprise trends, improving gaming trends in the second-half of the year. Is there any reallocation on the product mix in terms of wafers that you guys are starting today? Sanjay Mehrotra: So, remember the lead-time, the cycle-time of wafers in the fab tends to be in the two to three months range and the wafers that you start today by the time they are shipping to the customers that time ends up being, including the time for assembly and test ends up being three to four months later. So, in this environment of really tightness across all end market segments, planning our wafer starts and dedicating them toward various end markets is really critically important. So, this is the kind of activity that our team is always engaged in, in terms of working closely with customers and understanding their demand mix. So, not just total bit demand, but the bit mix of that demand between various product types, because it's extremely important that we start our wafers in line with the expectation of our customers demand few months down the road, given again the cycle-time considerations. So, we are always managing this mix, but again, we would point out that we are seeing supply shortages for us across all end market segments and across all nodes of DRAM as well. And in this environment, we -- this is why, as I mentioned earlier, the lead-time that customers is important and it is an environment where flexibility in terms of, for customers to switch between one product type to another product type is more limited now. When we had more inventory in DRAM before, that was easier to manage, now that the inventory is running at these lean levels, managing our supply mix, keeping it in line with the customer mix, this is an ongoing activity here at Micron and our team has done I think a great job. Our supply chain team, our business units and our sales teams have done a great job working with our customers, understanding the market requirements, and managing our business well. And you see the result in terms of how well we have been able to bring inventory both in DRAM as well as in NAND. And of course, we are continuing to push for SSDs and multi-chip packages toward our higher density solutions as well, because again, all those considerations are important in this environment of tight supply and the tightness in terms of supply-only increasing as we go through the year. So, this is getting a lot of focus Harlan. Harlan Sur: All right. Thanks for the insight Sanjay. Operator: Thank you. Our next question comes from Aaron Rakers of Wells Fargo. Your line is open. Aaron Rakers: Yes, thanks for taking the question and also congratulations on the strong execution. I wanted to ask you a little bit about the longer term secular growth drivers in the server DRAM market. How do you see kind of content growth on a per server basis progressing? And I know you've talked about CXL, what's the thoughts on what CXL means to that equation and when that starts to matter? Thank you. Sanjay Mehrotra: And so in terms of server content, as we mentioned in the prepared remarks with the new compute platform architectures and the processor that are being introduced, they are all leading toward more cores, more channels and greater usage of higher density modules. And of course, the end market applications when you look at, those workloads are becoming more and more data intensive, more AI-driven and ultimately driving for greater need for data and greater attach rate and greater content on a per server basis. So, enterprise and cloud combined, really when you look at CAGR in terms of demand growth, expected to be a stronger CAGR in terms of big demand growth versus the average of the market. So, this is definitely one of high growth areas. And the average content growth continues to be very strong and at a strong clip in terms of gigabytes per CPU, when you look at it for DRAM that is more like in -- on a CAGR base is more like 20% average capacity growing on a per server basis, growing from something like 200-gigabyte per CPU to growing to 300-gigabyte per CPU over the course of next two to three years. So, DRAM has strong growth and of course, same for SSD as well in terms of cost of ownership benefits that SSDs provide as well. And CXL is a new emerging trend. And this will create a greater opportunity for differentiated solutions. And as we mentioned earlier, that these are opportunities that we believe we'll be very well-positioned to capture with our emerging technology solutions that we are working on which we believe will provide higher ROI as well as high-performance solutions for our customers. So, CXL is again a development where Micron will be well-positioned to really address the memory hierarchy needs of our customers as they evolve over the course of next few years. Aaron Rakers: Thank you. Operator: Thank you. Our next question comes from Mehdi Hosseini of SIG. Your question, please. Mehdi Hosseini: Yes. Just couple of follow-ups for me. I'm going to go back to inventory. Obviously, your commentary about the supply and demand environment suggest that prices are on the rise, but perhaps you want to lean your inventory or you want to continue to reduce because that inventory is now really fungible for new application that you're going to be shipping to in the second-half. Is that the right way to think about this? Dave Zinsner: As it relates to our inventory, it's pretty lean at this point. I mean all the inventory that you're seeing is either WIP or raw materials. There is a bit of finished goods, but it's just the amount of finished goods we need to stage to meet the customer demand. So, I think we're not in a position to lean it out anymore. We are quite lean at this point. Mehdi Hosseini: Okay, got it. So, there is no fungibility question. And then just moving on to NAND and Sanjay, I see the same demand dynamics that are making you very bullish on DRAM also applied to NAND as matter of fact CXL could be a material catalyst for NAND. What is it with your underlying assumption that is still keeping your long-term NAND bit growth to 30%. There is a ton of data created and some of these architectural changes could actually be good for storage especially SSD. And I'm just curious why you're not as upbeat as end market data point would suggest? Sanjay Mehrotra: So, the long-term CAGR for DRAM we have said is approximately 30% and of course, this is something that we constantly evaluate with working with our customers and we do analyze this and as and when needed we update these, but at this point our estimation for long-term DRAM CAGR is approximately 30%. I would like to point out that overall when you look at the price elasticity trends in DRAM and certainly when you look at post pandemic growth and as I mentioned earlier, the cost of ownership benefit for DRAM -- for NAND in the data center market and of course, 5G driving greater content growth with respect to future rich -- increasingly feature rich smartphones as well. So, the demand trends for NAND are robust and I think the important thing to really monitor is the supply to be managed in alignment with the demand expectations and this is where, as we have said before, that industry CapEx can be managed better in terms of supply growth aligned with longer term demand considerations. And I may have misspoken here; I may have said that approximately 30% in terms of the CAGR for demand growth. I may have said DRAM in that context, of course, I was speaking about NAND. So, I just want to correct myself that the 30% demand growth CAGR that I referred to is for NAND. Of course, as we have said for DRAM, the long-term demand growth CAGR we see in high-teens, mid to high teens. Mehdi Hosseini: Thank you. Clear. Thanks. Operator: Thank you. Our next question comes from Tom O'Malley of Barclays. Your line is open. Tom O'Malley: Good afternoon Sanjay and Dave. And thanks for taking my question. This one is more related to Dave. You talked about DRAM costs in the May quarter potentially being up because of a couple of factors, but you also took the full year guide for costs and so that there could be a bit better. Is that a comment on August cost accelerating and being better there? Or can you just walk me through the dynamics of how you're seeing cost up in May and then the full year a little bit better in terms of overall costs? Dave Zinsner: First of all, good question Tom. So, really we saw much better cost in the second fiscal quarter for DRAM. And that really was the trigger to get the overall full-year cost to be higher. Now, that was more a function of mix than you think, but that is what drove kind of the upside on the cost side. Did I say higher, yes, sorry, I meant lower, yes, costs look to be lower -- I meant the higher number, that's what I meant. The May quarter -- or the August quarter then is, we're not yet ready to provide some expectation, but I think the likelihood is that it wouldn't be -- it certainly shouldn't be a step up in terms of sequential cost and likely will be slightly down. Tom O'Malley: Thank you. Operator: Thank you. Our next question comes from Ambrish Srivastava of BMO. Your line is open. Ambrish Srivastava: Hi, thank you for squeezing me in. Sanjay, I had a question on the shortages and then how are you reacting to -- and you talked a little bit about the difficulty in planning and allocating wafers. So, some of the semi companies -- we are hearing companies, they've talked about changing the order cancellation policy from 45 days to 90 days and some companies talking about absolutely no cancellations out. So, how are -- are your long-term -- are your arrangements changing with some of the key customers as a result of this, so that it enables Micron to plan better. Can you just help us provide your perspective on how Micron is dealing with that? Sanjay Mehrotra: Certainly working very closely with our customers and customers across all our end markets. As I mentioned earlier, certainly lead-times with our customers in terms of supply. Commitments are increasing. The flexibility, I think our customers by and large understand that the flexibility in terms of mixing of their bit demand is getting more limited as well given that not only our supply is in very tight situation, but overall the industry -- the semiconductor industry with respect to materials and capacity is also in a tight position. And our supply chain team has done an excellent job over the course of last year in terms of really procuring materials and capacity early on, so that even though we are running tight, we are able to meet our customer requirements, but yes, with less flexibility than before. And as Dave mentioned earlier that some of this procurement of capacity does put some cost pressures in terms of our second-half outlook as well and so of course, for FQ3, that's baked into our guidance. So, our customers understand that this is an environment where we need to work closely with them and overall our teams are doing a very good job in managing this environment of tight supply. And we see this close collaboration that is going to be needed as we go through this year and as we go into 2022 as well, because really we are confident in 2022 demand as well. As the world recovers from this pandemic, technology -- the economies across the globe are expected to be in a strong growth mode and of course technology demand will increase and vaccinations are happening here in the U.S. first, rest of the globe coming in during the latter part of the year. So, the growth will be in 2021 as well as 2022 and we feel good about our outlook in terms of demand drivers even in 2022 timeframe. So, this working closely with customers to help manage the mix of their products and their supply requirements is going to be an important consideration, not just for next quarter or two, I believe well into 2022 timeframe as well. Ambrish Srivastava: Thank you. Sanjay Mehrotra: And this is a great position for us to be in, in terms of, particularly when you look at how we remain focused on our technology and product leadership execution. First with 1-alpha node in DRAM as well as first with 176-layer NAND and remaining focus on bringing those technology nodes into production and customer qualifications over the course of next several quarters. Ambrish Srivastava: Thank you, Sanjay. Operator: Thank you. And ladies and gentlemen that does conclude today's conference call. Thank you for participating. You may now disconnect.