Bullish on MU; believes it is undervalued due to strong fundamentals and LTAs, though capex caused short-term pressure.

Steve, you excited for Micron? >> Super excited for Micron. And I feel like we're in a situation where Nvidia had to validate the hyperscalers. Broadcom had to validate Nvidia. Now Micron has to validate everything.

And I think we hear more of everything from Micron today. Micron, given the nature of the the the sort of poster child it is for pick and shovels, I agree with you, Tanner. They've got to show these LTAs.

They've got to show that there's a ceiling or a floor to to what their margins look like over the next couple years. got to show there's a real long-term trajectory because it I I I still can't figure out why Micron is discounted this heavily against other semiconductor names that have worse margins, worse growth, and are just as cyclical.

So Wall Street has 51 billion consensus and then 86.1% margins and then EPS of 31.82. On those numbers, Tanner, what are you thinking? Uh, it actually comes out to be. So, um, my current estimates I honestly think are conservative, but I'm saying essentially 56 billion in revenue and $34 in EPS.

Um, which is roughly around a 7 to 9% beat on both those numbers, uh, versus Wall Street expectations.

But if you look back at the previous quarters, like I think the first quarter all caught us off guard and then we're like, okay, well, Wall Street's going to be better at pricing where this where this next quarter is.

And then they ended up beating that by like 24%. So I'm not counting it out of the realm of possibility that like Micron could show up and say, "Hey, $60 billion in revenue." Like I I it sounds unbelievable, but they've done it twice, like two times in a row.

Have you seen the new estimates from Wall Street for 29 and 30 yet for Micron? They're now saying 189 and 282 and we ain't going down.

We are only going up year-over-year. There's no falling off a cliff in 29. They're calling for almost $300 per share. uh of EPS in 2030.

Yeah, these are the analysts. These just came in yesterday from what I can tell because I built a new tracking system for it and three analysts have it.

This was not the case last week. Yeah. Even if it's close to those levels, obviously the stock will be a lot higher from here. Yeah, it's pretty wild. I don't even think, by the way, I'm going to try to find this, but I'm pretty sure in 2028 the high end of revenue is actually higher than I think you have yours at 320 billion.

I thought it was almost 390 billion. Let me check that.

Oh, sorry. Sorry. Okay. So revenue I have for 28 292 and then 351 and then 465 in 2030.

Yeah. See this is the crazy part about their um revenue. Like take a look at this micron in 2028 Wall Street is saying anywhere between 127 billion and 396 billion. Like have you ever seen a range that big?

They don't know how to price it. They don't know how to project it. Yeah, I'm excited. I mean, Micron gives us a lot of insight about the rest of the market. So, pretty excited to hear um what they're saying.

What's kind of like the demand story? Is anything being accelerated by um their their players?

The thing I would say I'm more curious about is I think the past two three quarters we've seen sequential growth in memory for like north of 60% uh sequentially each I think two the past two or three quarters. I want to see if that trend continues.

I wonder how the market reacts when you no longer start to see kind of those price increase. Even if revenue still is amazing, even if earnings per share is still amazing. I wonder if the market reacts a little bit different when they start to see a slowdown on the sequential pricing, which I don't think is a a big deal.

I mean, you don't can't expect to see 60 50% every every single quarter, but I would be curious to see how the market reacts towards that.

what else am I curious about? I I mean I I don't know if they talked about it in recent conference, but one of the semi analysis report that came out about a month ago um kind of pushed on HBM um no longer get needing the type of levels that we were needing expected to need about two years ago.

Like many people were expecting like hey we might need x amount but it's like we need a fifth of that just because model imp model parameters haven't increased to the type of levels that we've expected to increase.

Like I think at these levels we were expected to have 10 trillion um parameter count models where we're now we're like in the two in the two uh I think in the two trillion um numbers um >> two three.

Yeah. >> Yeah. So so that that creates a bit of a difference on what the market is moving. I don't know if they covered that in a recent conference, but if not, I I would love to hear some thoughts on that from um from management and analysts kind of pushing on that.

Hey, does this impact anything of of that you might have in the in the future um or or anything like that?

And then following kind of what Steve and you were saying, um the the the long-term commitments or or the commitments that they're making. Um just a little bit more update. I think last time it was like less than 30% of DRAM was already allocated, less than 30% of NAN was already allocated around those levels.

Does that change? Has that changed? Are we getting closer to 40 50%. Does the market want it to be higher? Does the market want it to like I I'm curious to also see like what the market wants in in regards to those.

Do would the market love if 70% of their revenue is already in lock for the next 5 years or would they want them to have plenty of opportunity to I wouldn't say gamble but be at the mercy of like the pricing.

So just a lot of learning of what the market wants for this player.

I don't really think it's gonna affect Micron, but it'd be interesting to see if uh the big memory names from South Korea are playing any role in potentially building new fabs in the United States.

Um, do we do we think do we think so? I put a pump and dump poll in the chat. The majority of people said pump. Do we think it will pump and then dump intraday, meaning it'll get that seven, eight% move and then just slowly get walked down, or do you guys think it's an immediate 8% rug and then maybe a slight recovery on the earnings call?

Or do you think it's just like the last time it was 17% up and then it took 24 hours for it to go down? Like how do you guys think the stock plays out after the spread?

Personally, I think like it's I I I have no clue because I don't know like it's going to be very hard to understand the numbers now. Even I'm thinking back to Micron, you know, maybe two quarters ago, SanDisk last quarter, it fell on unbelievable earnings in the after hours and then like over the course of the next weeks it was up like, you know, 30%.

So, um I wouldn't be surprised if we saw ungodly numbers and the stock still be down for some reason, but just having to wait till tomorrow or for the rest of the week to start seeing that appreciation.

I know Tanner actually owns Micron. I think Steve has a little bit of Micron. Jose does not. But it's just tough to play earnings on this dude. You have no idea given yields are now at 5.3% how the market's going to react to any macro uncertainty with Micron.

>> Yeah, I'm actually not in Micron. >> Okay. >> Super bullish on it. Think it's going to go higher. Not in it. I added roughly 30% recently at the sort of 950 level. So yeah, it's not it's not, you know, one of the biggest positions in my portfolio, but I've definitely I've taken some chips off the table from Micron and I've put them back on.

So I'm I'm back to the original, you know, um, investment in this name, just with a higher cost base.

Another one of the things that a lot of bulls say or or I mean which is a great argument um I mean like forward P ratio of this is is crazy cheap. Just curious of bulls what do you expect?

Like do you guys expect to one day wake up and be like oh back we're at 4 P ratio of 20 and see this massive jump in in in stock or you guys are are like expecting like

It's a good question. And you're basically saying at what when does the rerating happen on the forward PE? Cuz I if if the 4P is seven right now, if it goes to 14, the stock's going to double.

So that's still below market multiple of 20. But can it go to 14 overnight? I don't think that's possible because that would be adding like a trillion dollars in market cap overnight.

I think people are thinking, hey, let's get to 1250 again, then 15, then maybe next year 18 to 2,000 over time if things work out. But there's so many variables in between.

Um my broader question as someone who hasn't really been a big memory bull all year and has quite frankly missed uh the Micron story. Tanner did a great job of of really looking at it deeply at 400 500 bucks is like why is the multiple discounted so much?

And part of the thing that has kept me scared all year is like there's something about this sector that the market hates and I don't know how much better the numbers have to be for the sec for the market to not hate it given last quarter was one of the best quarters we've ever seen.

So, and I think today these LTAs are going to have to calm down a lot of doubts to to eventually get that forward multiple expansion.

Well, I think that's the bigger more important question and what it what has to happen for the market to actually believe that earnings will keep expanding because unless the market gets visibility and believes the visibility out to 29 and 2030, I don't think we go past a single forward multiple.

Another question for for the Micron players and Tanner here right now the market caps is sitting at a $1.2 trillion. Um I think for Micron um and and and Mitch just mentioned right if the stock doubles it's still sitting at a 14 forward PE ratio.

Now if the stock doubles and you're still sitting at 14 forward PE ratio you're sitting at about $2.4 4 trillion company. But then you have like other players like TSMC which some would say are like a complete necessity for the AI semiconductor player and they're sitting at $2 trillion.

Do you think for Micron to kind of get to those type of values like there has to be a rerating in some of those other players as well or is a 2.4 trillion for Micron perfectly fine compared to a $2 trillion TSMC?

Uh it what what matters is, you know, can this company print money? And the truth is is that TSMC's margins are like onethird or at least a half of what M microns is right now. their average selling price is unbelievably high and that's leading to pricing power that will let them like you're talking about a company TSMC has not done this they're uh a quarter ago or sorry not not a quarter ago I'm talking about last quarter's year-over-year I think we did 1.8 billion in net income this most recent quarter we did 28 billion so 1.8 8 up to 28 billion and then this quarter is expected to be like $36 billion. That's not TSMC can't compete with that.

Um so and and I also don't think that this company needs to go from a seven times PE to a 14 times PE for it to double. I'm expecting that earnings expectations are going to be higher than um you know Wall Street's saying.

So it's not necessarily a rerating that needs to happen. It just needs to be earnings per share that needs to happen. You just need to prove out that growth.

And because there is no TSMC of memory, there's no Broadcom for memory. There's really three big players that can play in this space. Maybe CXMT might be a fourth or whatever, but still there's not a lot of players.

The need is only increasing. Um, you know, you talked about that 10 trillion parameter model. That's the expectation for, you know, OpenAI's Bell model. like the the need for memory is only increasing and my belief is that the reason why there was a d- rating or or a reduction in HBM for Vera Rubin Ultra which was the one that you were talking about from semi analysis like they reduced it by like 80%.

I think that has a lot to do with pricing. They can't afford to do a terabyte or a terabyte of HBM, right? And so as more supply comes online, if we start to see average selling prices go down, I think there will be an an increase of how much HBM that AMD and Nvidia actually purchase.

So I I think the overall amount of net income that Micron is going to produce is so much higher than what people are currently anticipating. It's why UBS is saying they're going to buy back like 40% of their shares over the next, you know, two years.

Okay, folks. This is a big one. It's a big one for retail. It is a big one for institutions. Micron is 51% of the S&P 500 earnings growth this year. Micron is 4.83% of the S&P 500's 13.5% year-to-ate performance.

So, 35% of the year-to-date uh gain that the S&P 500 has had is because of this company that's about to report. So, um, it's going to be really important to see what these numbers look like and obviously see how the stock

It's going to be really important to see what these numbers look like and obviously see how the stock kind of reacts to it, whether it's a knee-jerk reaction or whether it's flat and how the market chooses to judge what these numbers will look like.

These numbers better be good. I built that up just for it to not work. Robin Hood 11250 down about 3% on the day. Micron's up. Yes. No, it's down.

$54 billion in revenue. Expectations were 51 billion. EPS $3342 beating expectations of 31. So it was roughly about a 7% 6% beat on both sides. Nothing like the 20% that we were expecting.

Adjusted gross margins 87%. Unbelievable. um operating cash flow 44 billion. Next quarter 61.5 billion plus or minus 1.5 billion. So we could see a $63 billion quarter. Next quarter uh expectations was 57.

So huge beat there. Adjusted gross margins 86.25% and EPS Steve $38.15 plus $1 potentially.

There is zero reason for this to go down. Zero reason. Why is it going down then? I think the beats were not the the beats were not as slam dunk as before. Yeah, they beat the whisper numbers, but not by the level they beat it in June.

The stock should be up. I agree with you. Like the stock should be minimum at least a couple percentage. Like it's fighting. This really should be green. It it maybe this shouldn't be 1300 today, right?

But this should be up a little bit. I mean, this is a phenomenal quarter. Guidance is great. And they're likely going to come out on the call and say that we have visibility in this this this.

We signed up 10 more strategic agreements at market prices today, which is much higher than the 16 previous we did last quarter. I mean, this is crazy.

So, they beat the guy by uh uh three 7.2 billion. I mean, not not by a small amount. Like, this is a big quarter. And this is the bigger thing is this is setting the tone for the future.

Like at some point the market is going to have to allow this to trade in more than a singledigit forward PE. Like that's the big thing here.

Yeah, this is pretty incredible. Tanner, what were the gross margins? 87 87%. So that that's even better. That's that's up on you.

That that's a beat, but guidance for next quarter is uh 86.25. That could also be a reason that Wall Street, if you're getting super nitpicky, like let's not forget this is the problem with Wall Street is they can get adjusted to a new norm very quickly.

And just the idea that we're even in the 80s is already ungodly. But the difference between 87 going down to 86.25 you could point a, you know, a finger at.

I don't know if you guys are facing the same thing. It looks like Micron's website is down right now for me.

Micron's up 1% here. Uh, so you're not getting too much from Micron, but it is trying. Here's the official update on earnings. ... 23 billion analysts were looking for 51.0. Uh we are seeing shares up about uh.5% here in overtime.

We just look at guidance which also came in better than expected and that gross margin number Mike that Inels have been deliberating over ahead of this release uh for the fourth quarter came in at 87%.

Remember the street was looking for 86.3. So it's a slight beat there. And looking ahead to the gross margins it predicts for the first quarter. That's at 86.3. It's slightly lower than the 86.6% the street was uh anticipating.

But overall a strong report and the guide looks good.

Now I think some some uh deliberation over gross margins will continue as we await that earnings call to begin at 4:30 p.m. Eastern. Remember going into the support the story was you know how good can this be?

And I remember the the analyst note from Joe Moore at Morgan Stanley uh Mike really resonated. He said it's not how good can it be, it's how long can it stay this good given this the incredible growth it's seen in sales uh given this momentous time we're in the memory cycle market more once the earnings call begins.

you know these micro numbers are amazing. We got to keep diving into it but man Google kind of stole a little bit of the spotlight here. Micron now going back to going red. It it is uh if we get a flat reaction to be honest, I don't think that's the worst thing for the market.

It's better than like 10% down, but it's definitely not the the move people thought immediately would happen on these just unbelievable numbers.

Oh, dude. This is this is perfectly fine. Like for for me they there was a CEO comment as well that said that fiscal 2027 is uh expected to be much higher or much let let me get the exact quote.

Uh Micron delivered record fiscal 2026 results and we expect an even stronger fiscal 2027. So expecting good results longterm way better than Wall Street expectations. These are still huge beats.

Like beating by six or or six to 7% on both the top and bottom line is not normal. Um guidance looks amazing. Wall Street's going to have to come out with a bunch of upgrades for Q1 and for fiscal 2027.

The call can swing things, however. Long-term agreements, the pricing on those agreements can change the the story, but right now it's looking okay.

Jose, why is the micron going up? I don't know. I can't see this damn freaking slide. Trying to look at the slideshow. No, but on the core numbers, Jose, like I know you're not in it, but you would imagine this is good enough to get it moving up a little, right?

Yeah. I mean, it numbers are crazy and like guidance are insane. I just I wonder if like in this AI space and I don't know if it was Tanner who mentioned it or whoever we were just watching CNBC.

It's like how long can it last? And I think it can last a long time, but I think that's what the market is wondering, right?

So I wonder if management is going because I remember last quarter they told us that 2027 um was pretty much all spoken for. 2028 was already kind of getting into discussion. If they kind of go a little bit more into that they go 2027 completely sold out. 2028 we're almost there and we're already starting discussions into 2029.

I think that can the market will be like okay now I feel happy. Let's kind of jump on this stock uh a little bit more. But um I I I think it's just that it's just the market I think the market is just thinking oh this next quarter is going to be the bad one and the quarter after or or no this next quarter is going to be the bad one.

Um and they just keep having that fear just like I think in the SAS space right in the SAS space it's like every quarter even though they provide great numbers it's like that's a great quarter but next quarter is when AI kills.

because to I don't know if this is where the market thinks but the memory pricing decrease does in my opinion does not implicate that the AI story goes down right so it's like I I I don't I think that's one of the reasons being it's like we continue to see the demand for AI and chips and servers and all this, but it's like the question is like we're going to need more memory.

It's more like and again I'm not the one before all these micron bulls get mad at me is is I the market is seeing how long can that pricing last, right? I know you're going to need more memory for the foreseeable future, right?

Memory is is crucial, but how long can that pricing last? And does there h is there something that changes when maybe we start to fight against seeing gross margins being put down.

So I wonder if that again right for for all the other players in the semiconductor space they would love memory prices to go down. Um so I I think that's where there might be a bit of a disconnect um between there.

Micron's website's finally up. I'll get I'll get the micron deck while you go through this.

this is how smart Micron is they already saying super intelligence it just changed yesterday they've already updated their deck Micron strategic customer agreements accelerate the transformation of our business.

These multi-year takeer pay agreements sharpen our long-term supply planning and enhance the durability and predictability of our strong financial performance. Further, they provide our customer supply assurance.

This in turn helps our customers invest more confidently in the business. To date, we have signed 26 SCAS which we currently estimate to be over 35% of our revenue through 2030.

Threearters of this estimated revenue has a defined pricing framework. a majority of with a majority of which have pricing bands with floor and ceiling prices because the question is what are those margins?

Um but obviously that that means uh you shouldn't have some unbelievably massive price decline. The remaining quarter of this sea revenue expectation has pricing negotiated periodically based on market prices.

Customers want sea assured supply beyond 2030 and we have now signed seas that extended to 2031 as well as one-year extensions to 2031 for two agreements.

Any new discussions on seas where prices involved are negotiating with higher pricing based on prevailing market conditions? For the 26 signed seas and extensions, financial commitments from customers have increased to 32 billion, the vast majority of which are cash deposits.

These financial commitments reflect our customers confidence in their long-term demand for memory and storage.

curious, what do you guys think when they are able to buy back shares? Like, what do you think that number looks like? They don't have it yet. Legally, they can't yet because they took money from the US government for the chips act, I think.

I my belief is on on December 9th or December 10th you're going to see an announcement, Well, we also didn't get a stock split either. So, I think two of those announcements maybe one wasn't practical to happen today, the the buyback.

Um both of those were supposed to be catalysts potentially and we didn't get that. So the at this point the fundamentals alone have to get this stock to make a move on earnings

you know I mean the fundamentals obviously amazing but I agree with you Jose we're not there was a hundred billion number last time up until 2030 and that number I do not see in the deck.

Yeah it's super vague. I bet the majority of the questions on the earnings call are going to be talking about that. they talk about average selling price. So average selling price increased high teens range this quarter on DRM.

Um so I wonder if that's going to be a portion of question for analysts because I think last quarter was 60 and the one before that was 50.

And then I think nan I don't know if nan accelerated compared to 30% is still really obvious both are great in terms of hey we're just increasing pricing still. Um but it does show there's a control there.

So, I wonder if that's what analysts are going to be um kind of pushing us. Like, is this just a one-time thing? Are we now going to start to see average selling price be at these levels instead?

the amount of supply that's coming online is not coming on as fast as new needs are increasing. like the the memory needs are increasing.

now some of his AI workloads are going to go to Google, are going to go to Facebook. These weren't these companies weren't even in uh topics of conversation a year ago. Well, maybe. Well, Google kind of was, but

So, we're huge amount of CPU use. I mean, they're going to need a lot more memory. But but now the specifics of like uh what the sustainability and durability of these earnings look like because you know, SanDisk had the same problem and they said all the right things, but it took it like a couple weeks for the market to move on from it. I don't think it should take that long here.

But if Sanjay can just clearly stayed on the call, I mean, it looks like they're extending it. It was 2028. Now it's 2030 as of June. Now it's 2032 they're talking about. Like that's what gets this thing to to feel like it's not super cyclical.

It was up 2%. Now, it's like in fact up only 1%. I mean, it's either going to break out when when SunJ talks or they're going to say something the street doesn't like cuz last time it was within seconds this thing was up 10%.

And they didn't need that much more information.

prepared remarks. Sunj said, "Fiscal 2026 was an outstanding year. Revenue was three and a half times last year's record. I am thankful for the above and beyond efforts of our employees.

As strong as fiscal 2026 was, we expect fiscal 2027 to be even better. Industry demand has strengthened since our last earnest call. And we expect memory and storage supply demand conditions to be much tighter in 27 and 28 than they were in 26."

Other thing that I think is crazy, cash flow. I I I don't know if Tanner said it already. 44 billion. 81% of revenue. I just I I do think when that when they are able to buy back shares, they're just going to open up that that cuz what else are I mean free cash?

What's their free cash flow? 30. Huh? What do they spend? No. 33. So they spent about 10 billion um in capital.

They got to buy they got to buy their own fast. There's no there's no TSM of memory. I think they're going to either they're going to buy back like crazy or make you guys all crazy dividend investors.

Micron could very easily do the same thing and just become a capital allocation beast because at the end of the day if they are going to generate that much more EPS what do you do with all that cash flow?

I'm going to have to disagree on the um dividend side just because it's so cyclical, but buybacks, I think they're going to ramp like crazy. Yeah, I I don't think they're giving a dividend, but I think they're going to buy back a ton of stock.

But if they do, I mean, I think shareholders would be a little happy. They're getting a little extra piece.

do you do you guys see them becoming a player that starts acquiring or investing in other business as well? I have been so confused why they haven't been doing that. Like I I I just don't get it.

But their core business is selling memory. So is that part of their restrictions as well?

UBS currently puts it. And by the way, this is on old Wall Street numbers. Micron also has uh numbers on this as well, but they talked about um essentially repurchasing up to 40% of its shares by the end of 2028.

UBS expects Micron to generate over 40 billion in free cash flow through 2028.

once its buyback restrictions expire on December 9th. And Micron also said that their excess cash will be put towards uh buybacks as well. If something's keeping the stock down, it's maybe a 10-year Treasury that's spiking.

It's maybe the options market pricing it in a certain way. It's not the fundamental story here. And I doubt the call is going to have something that's so dramatic that would change uh what the fundamentals look like.

So, I mean, this might be a slower story or maybe we get the pop on the call. But it makes sense that it's not down.

They they went from $30 billion in cash to $73 billion in cash the next quarter. They added $43 billion in cash, dude. Like, what's their debt at now? I want to see what their total debt is.

I bet it's zero. They're going to be buying back a ton of if they're not going to be acquiring companies.

The story of this is going to be buybacks, supply, demand, imbalance, 80% free cash flow conversion.

who the hell can they buy? This is not Nvidia that can go buy a company for 10 billion then 15 billion and 5 billion here. They can't go make licensing deals.

There's nobody for Micron to buy. Short-term investments. I'm just looking at their uh you know their sheet here. Short-term investments went from 1 billion to 5 billion. Um long-term marketable investments went from 4 billion to 30 billion. They're doing something.

Oh, and think about this. Whatever cash they just added probably going short duration T bills at 4 to 5%. Yep. I mean, I know that's not crazy to people, but that type of cash with four to 5% helps a little bit every quarter.

Yeah, in 2026 they did $108 billion in gross margin. That is crazy, bro. Up from 15 billion.

Operating income went from 10 billion to 101 billion. But think about it. This is validating Nvidia's numbers and Broadcom's numbers and it's saying we're not stopping. Especially if they see it uh tight in the next two fiscal years.

Welcome to Micron fourth quarter 2026 fin.

Thank you, Satya. Micron delivered an exceptional fiscal Q4 with significant records in revenue, gross margin, and EPS, each exceeding the high end of our guidance.

Fiscal 2026 was an outstanding year. Revenue was three and a half times last year's record with data center revenue up four-fold. Micron's DM revenue for the fiscal year 2026 surpassed $100 billion.

In recognition of these efforts and Micron's strong execution, we increased fiscal 2026 incentive compensation for every global team member, reinforcing our performance-driven culture and aligning team member success with long-term shareholder value creation.

As strong as fiscal 2026 was, we expect fiscal 2027 to be even better. Industry demand has strengthened since our last earnings call, and we expect memory and storage supply demand conditions to be much tighter in fiscal 2027 and 2028 than they were in 2026.

AI is becoming super intelligence and memory enhances this intelligence and the competitiveness of our customers per platforms. AI applications across end markets whether using open-source or closed source models are run on a variety of competing customer platforms.

These platforms all share one important characteristic. Their value proposition is enhanced by the performance and capacity of memory and storage. Running an AI application on a platform with greater memory capability enables more scalable growth in use usage, improves the end-user experience and increases the value users get from AI application.

The strategic importance of memory to our customers also provides greater differentiation opportunities for Micron than at any time in our history. As we address AIdriven demand for an increasingly complex set of products across the memory hierarchy, we have opportunities to deliver differentiated performance and quality, time tomarket advantages, and geographically diversified supply including DAM made in the US.

We also have opportunities for richer product mix relative to our competitors with our focus on higher value solutions. Micron's technology leadership, strong product portfolio, strategic customer agreements, and manufacturing excellence position us to capitalize on these opportunities.

Micron is the industry's technology leader. Our one gamma DM node and G9 NAND nodes are our largest production nodes today and are on track to become the highest volume nodes in Micron's history.

Development of our next generation DM and NAND technology nodes is also progressing well and they are on track to begin volume production in the second half of calendar 2027.

We are leveraging these technology nodes and our advanced packaging capabilities to deliver leadership products across the memory hierarchy such as industry-leading HPM, high-capacity SOCAM, high-capacity and high performance DDR modules and data center SSD products.

We are focused on our global manufacturing expansions to help address customer demand growth through the end of this decade and beyond. Micron is investing to provide long-term US-based supply assurance for DDR, LPD RAM, and HPM products through our fabs in Virginia, Idaho, and New York to support our customers across a variety of markets, including data center, PC, mobile, automotive, aerospace, and defense, medical, humanoid, robotics, and other industrial and consumer markets.

During the last quarter, we celebrated a concrete pore milestone for our first New York FAB with initial wafer output expected in calendar 2030. Our ID1 FAB is on track to commence wafer output in midcar 2027 and ID2 is on track to commence wafer output in late calendar 2028.

In fiscal Q4, we held a groundbreaking ceremony for our DRM fab expansion in Japan with initial output expected in late calendar 2028 to support technology node transitions. In Taiwan, we are on track for meaningful product shipments from our Tongloo facility in midcaler 2027.

In Singapore, clean room preparation is ahead of plan at our HPM advanced packaging facility with initial output expected in early calendar 2027. Also, construction is on track for our new NAND facility in Singapore to begin output in the second half of calendar 2028.

Production from new DAM and NAND fabrication facilities takes time to ramp and gradually becomes more meaningful starting a few quarters after initial outputs. Micron's strategic customer agreements accelerate the transformation of our business.

These multi-year take or pay agreements sharpen our long-term supply planning and enhance the durability and predictability of our strong financial performance. Further, they provide our customer our customers supply assurance and deepen technology roadmap collaboration.

This in turn helps our customers invest more confidently in their business and enables their end consumers to benefit from their products and services.

To date, we have signed 26 SCAS which we currently estimate to be over 35% of our revenue through 2030. Threearters of this estimated revenue has a defined pricing framework, a majority of which have pricing bands with floor and ceiling prices.

The remaining quarter of this SCA revenue expectation has pricing negotiated periodically based on market prices.

Customers want sea assured supply beyond 2030 and we have now signed seas that extend into 2031 as well as one-year extensions to 2031 for two agreements. Any new discussions on SCAS where pricing is involved are negotiated with higher pricing based on prevailing market conditions and outlook for the 26 signed seas and extensions.

Financial commitments from customers have increased to $ 32 billion, the vast majority of which are cash deposits. These financial commitments reflect our customers confidence in their long-term demand for memory and storage.

Turning to our end markets, please see our earnings press release for highlights across our highcapacity DDR and LP server DRAM, data center, SSD, PC, smartphone, and physical AI product portfolios.

We expect server unit growth in the high teams percentage range in both calendar 2026 and 2027. This strong server unit growth is supported by a modestly lower rate of content growth than prior expectations.

Imag tight memory supply. Growing model parameter size, longer context lengths, and higher concurrency continue to increase the memory and storage content required to execute AI workloads efficiently.

Micron is leveraging our technology leadership and manufacturing excellence to deliver innovative products across the memory hierarchy to data center customers.

In HBM, our revenue for fiscal 20 fiscal Q4 2026 grew faster than total company revenue in the quarter as we ramp HBM shipments across a growing number of customers. We have completed agreements for the vast majority of our calendar 2027 HBM bid supply with significant price increases year-over-year, narrowing the gross margin gap with conventional DAM.

We continue to execute well on our ramp of HPM4.

We have a strong road map for future HPM products and are proud to be working with Nvidia on the industry's first custom HPM4E implementation. NVHVM to be adopted on next generation of GPUs and NVLAN fusion platforms.

In NAND AI context memory storage used for KV cache offload and HDD displacement opportunities are expanding the addressable market for SSDs. Data center SSD revenue in fiscal Q4 was nearly $10 billion, more than 10 times the year ago quarter and was over 2/3 of total company NAN revenue.

We are on track to deliver the fifth consecutive year of record market share in data center SSD in calendar 2026. This performance is driven by the strength of our NAND technology leadership, endtoend data center storage portfolio and close collaboration with customers which has resulted in design vents across the largest data center deployments.

PC and mobile industry revenue remain on track to grow this calendar year driven by strength at the premium end of the market. Despite potential double-digit overall unit declines in both markets, OEMs continue to introduce new AI capabilities in flagship PCs and smartphones, driving robust demand for higher performance devices with increased DAM and NAND content.

Micron is focused on these premium segments and is well positioned to support customers as they expand edge AI capabilities with our industry-leading memory and storage portfolio.

Nearly half of MCBU revenue in fiscal Q4 was generated by one gamma products as customers accelerate qualifications and adopt our latest technology which delivers lower power consumption and higher performance.

Autonomous vehicles are the first major deployment of physical AI, which we believe will expand over time to humanoid robots and other intelligent autonomous systems. These increasingly complex systems require substantially higher performance and more power efficient memory and storage to operate in real time.

Memory content in level four and higher autonomous vehicles typically exceeds 200 GBTE while storage content reaches multiple terabytes each more than an order of magnitude greater than in today's level two plus and level three semi-aututonomous vehicles.

Humanoid robots are expected to have comparable memory and storage requirements to autonomous vehicles. With the anticipated increase in both units and memory content, physical AI can become a significant driver of memory and storage demand by the end of this decade.

Several physical AI customers are sampling our next generation products and we are increasing investments in our technology roadmap to ensure we are prepared to capitalize on this opportunity.

Now turning to market outlook, we expect memory and storage supply demand conditions to be much tighter in calendar 2027 and 2028 than they were in 2026. In NAND for calendar 2026, we expect industry bit shipments to grow in the low 20s percentage range, slightly above our our prior expectations.

We expect micron supply to grow less than industry supply growth in calendar 2026. For calendar 2027 and 2028, we expect industry nan bit shipments to grow approximately in the mid20s percentage range and the industry to remain supply constrained in both years.

In DM for calendar 2026, we expect industry bid shipments to grow in the mid20s percentage range. We expect Micron DM supply to grow approximately in line with industry supply growth for calendar 2027 and 2028.

We expect industry DM bit shipments to grow approximately in the low 20s percentage range and the industry to remain supply constraint in both years. We expect industry HPM bit shipments to grow faster than conventional DAM through calendar 2028.

The structural gap between DM supply and demand growth rates is resulting in ongoing supply tightness and clean room additions are required to augment node transition supply growth and help narrow the gap.

Even with additional industry DM clean room space plans with robust demand trends, including new upside requests from customers, we do not have line of sight to when supply and demand will return to balance.

Given the need for DM clean room space and supported by greater visibility from SCAS into our demand through the end of the decade and beyond, we plan to increase our capex in fiscal 20 2027 versus prior plans.

A majority of the increase is for construction capex, most of which is to help accelerate clean room space availability in late calendar 2028 and beyond. We are also working to optimize production from available clean room space which is resulting in some pull forward of equipment spending.

Mark will provide more details on capex as we make these clean room space investments. We will remain disciplined in our approach and anticipate ramping equipment capacity appropriately with our demand in the market environment.

To further accelerate execution and innovation across the company, last month we announced leadership appointments. Manish Bhartia has been appointed to president and chief operating officer and Scott Dbor has been appointed to president and chief technology and products officer.

Manish leads Micron's business units and global operations with accountability for our operating P&L. In his role as COO, Manish has end-to-end responsibility for demand through supply, enabling faster, more integrated decision making and stronger alignment across the organization to meet our customers evolving needs.

Scott leads Micron's innovation technology and products organization. In his role as chief technology and products officer, Scott is responsible for advancing Micron's industry-leading memory and storage roadmaps, accelerating innovation to meet customers rapidly evolving requirements, and overseeing Micron research labs, a global flagship research hub dedicated to breakthrough memory and compute technologies.

Micron delivered exceptional results to close out the fiscal year with fiscal Q4 revenue, gross margin and EPS all exceeding the high end of our guidance. For the full year, we achieved record revenue of 133.2 billion, up 256% year-over-year.

Fiscal 2026 gross margins expanded to 81.1%. A 40 percentage point improvement from fiscal 2025. And EPS increased 811% year-over-year to $752.

To date, we have signed 26 SCAS in total, and our remaining performance obligations or RPO is approximately $150 billion. All SCAS have take pay contracted volumes and RPO reflects the contract value for only SCAs that have a determined pricing framework which can e be either a fixed price or subject to a pricing floor and ceiling.

RPO is based on committed volumes and minimum pricing is and is inherently conservative. As mentioned in our last earnings call, even at floor prices, we expect margins meaningfully above any prior cycle peak margins.

We expect revenue to well exceed the associated RPO over the terms of the agreements.

Consolidated fiscal Q4 revenue was 54.2 billion, up 31% sequentially and up 379% year-over-year. Fiscal Q4 revenue was our sixth consecutive quarterly revenue record. Fiscal Q4 DM revenue was a record 39.8 billion, up 343% year-over-year, and represented 73% of total revenue.

Sequentially, DRAM revenue increased 27%. Bit shipments were up mids singledigit percentage range. Prices increased high teens percentage range driven by tight DRM industry conditions.

Fiscal Q4 NAND revenue was a record 14.1 billion, up 526% year-over-year and represented 26% of total revenue.

Sequentially, NAN revenue increased 42%. Bid shipments increased approximately 10%. Prices increased approximately 30% driven by tight NAND industry conditions. Consolidated gross margin for fiscal Q4 was 87%.

Up 210 basis points sequentially. This improvement was driven primarily by higher pricing and strong execution partially offset by mix.

Cloud memory business unit revenue was a record 16.3 billion and represented 30% of total company revenue. CMBBU revenue was up 18% sequentially driven by higher pricing and bit shipments.

CMBBU gross margins were 83%. Flat sequentially driven by higher pricing offset by higher HBM mix.

Core data center business unit revenue was a record $18 billion and represented 33% of total company revenue. TDBU revenue was up 56% sequentially driven by higher pricing in bit shipments.

TDBU gross margins were 90% up 290 basis points sequentially driven by higher pricing and favorable mix.

Mobile and client business unit revenue was a record 13.1 billion and represented 24% of total company revenue. MCBU revenue was up 14% sequentially driven by higher pricing partially offset by lower bit shipments.

MCBU gross margins were 90%. Up 260 basis points sequentially driven primarily by higher pricing and favorable mix.

Automotive and embedded business unit revenue was a record $6.8 billion and represented 13% of total company revenue. AEBU revenue was up 47% sequentially driven by higher pricing and higher bit shipments.

Aebu gross margins were 84% up 470 basis points sequentially driven by higher pricing.

Operating expenses in fiscal Q4 were $2.6 billion, up $1.1 billion quarter over quarter. The sequential change was primarily due to the increase in incentive compensation for every global team member.

Along with our decisions to contribute $300 million to community investments,

we generated operating income of $44.6 6 billion in fiscal Q4, resulting in an operating margin of 82.3%, up 110 basis points sequentially and 47 percentage points year-over-year.

Fiscal Q4 taxes were 6.8 billion on an effective tax rate of 15%.

Non-GAAP diluted earnings per share in fiscal Q4 was $3342, up 33% sequentially.

Turning to cash flow and capital expenditures in fiscal Q4, operating cash flows were $44 billion. Capital expenditures were $10.8 billion, resulting in free cash flow of $33.2 billion.

As noted in previous disclosures, customer cash deposits associated with SCAS are reported within financing activities and therefore do not affect our free cash flow. Customer cash deposits received during fiscal Q4 were 12.3 billion.

Ending inventory for fiscal Q4 was $10.4 4 billion with days of inventory at 129 an increase of 9 days sequentially. The increase in DIIO includes the effect of no end of life related build ahead and manufacturing related incentive compensation in fiscal Q4 that was absorbed into inventories.

Our inventory levels and supply remain extremely tight and we expect DIIO to decline in the coming quarters. We reached record levels of cash and investments of $73.5 billion at quarter end.

Customer cash deposits on our balance sheet at the end of fiscal Q4 were 12.7 billion. SCA cash deposits are unrestricted and will be returned to customers over time toward the latter half of each agreement's term assuming minimum purchase requirements are met.

During fiscal Q4, we reduced debt by approximately $500 million, including a note redemption that reduced senior notes by approximately $300 million.

The weighted average maturity on our outstanding debt is approximately nine years. We closed the quarter with $5.2 billion of debt and a net cash balance of $68.3 billion. During the quarter, we received two credit rating agency upgrades and are now rated at tripleB plus or equivalent with all three major credit rating agencies.

Our balance sheet has never been stronger and we expect it to strengthen further even as we increase investment in technology and needed capacity. As noted previously, we intend to increase our capital return from December 9th, 2026, the second anniversary of the signature of our definitive chips agreements.

Over time, we expect to return 100% of our excess cash to shareholders.

Now, turning to guidance, we expect fiscal Q1 revenue to be a record 61.5 billion plus or minus $1.5 billion. Gross margin to be approximately 86.25% 25% and operating expenses to be approximately $2.06 billion.

Based on a share count of approximately 1.15 billion shares, we expect EPS to be $38.15 per share plus or minus a dollar. We expect fiscal 2027 to be another record year with sequential revenue growth each quarter.

Consistent with projected strong execution and record company financial performance. We expect fiscal 2027 to have higher incentive compensation levels. We anticipate fiscal Q1 to be the floor for gross margins in fiscal 2027.

As Sanjay mentioned, we made a decision to increase fiscal 2026 incentive compensation in fiscal Q4. Most of the increase in fiscal 2026 incentive compensation pertaining to manufacturing was absorbed into inventories in fiscal Q4.

As a result, the effects from the sale of these higher cost inventories principally impact fiscal Q1 gross margin.

Fiscal Q2 benefits from less of this fiscal Q4 related compensation expense, but this benefit is offset by the impact of higher fiscal 2027 incentive compensation. We expect higher gross margins beyond fiscal Q1 for the remainder of fiscal 2027 with a more moderate rate of price increases.

We project operating expenses to increase by approximately $2.5 billion in fiscal 2027, primarily from higher R&D to support an unprecedented set of opportunities in memory and storage and from higher incentive compensation plans.

We expect a fiscal Q1 and fiscal 2027 tax rate of around 15.5%.

Micron continues to invest in a disciplined manner across our global footprint to address customer demand. As a reminder, our capex is net of anticipated government incentives.

In fiscal Q1, we project capex of around 11.5 billion and anticipate first half fiscal 2027 capex to be approximately $2 billion. We project capex to be higher in the second half of fiscal 2027.

We expect a meaningfully higher growth rate in construction capex as compared to equipment capex in fiscal 2027.

Before I close, I would also like to add my thanks to all Micron Global team members for their focus on technology and product innovation and disciplined execution that makes these strong results and outlook possible.

Super intelligence is creating the most compelling opportunity for Micron in its history. Fiscal 2026 was an outstanding year and we expect fiscal 2027 to be even better. As we celebrate the 48th anniversary of Micron's founding, I would like to acknowledge the nearly five decades of innovation, disciplined execution, and perseverance that have prepared Micron for this moment.

the market conditions, microns, technology and product position and operational execution. Um you know, all combined to deliver very strong free cash flow. We had 33 billion as reported here in fiscal Q4.

Um we expected strong free cash flow growth to continue on on the market conditions and and disciplined execution.

um even while we invest in in more R&D and capex as you heard today. Um so with these demand drivers and and supply factors and and long-term and committed agreements that you heard about today plus Micron's technology position and execution, we think this free cash flow strength is more durable.

So near-term uh based on our Q1 guide and including the capex number that that you heard, you will see free cash flow significantly higher than the 33 billion we reported in fiscal Q4.

Um you know on target cash uh we expect to be around a target cash level by the end of fiscal Q1. Now over time and with the you know rate and pace determined by various factors you know we plan to return excess primarily done through share repurchase.

Um we intend to increase capital return as we've talked about before and in the script today uh from December 9th. And then uh finally, I'll just add that, you know, our current authorization uh that you can see from our previous filings uh for share repurchase stands at $2.2 billion and you can assume that we will seek additional authorization in the near term on more authorization.

capex, you're not guiding the full year, but it sounds like maybe it's going to be 55, maybe a little higher, uh, this year. Um, which seems like it's maybe in the high teens as a percent of revenue for fiscal 27.

I know that the, you know, revenue is a lot higher, so it's going to take time for the capex to kind of, you know, catch up, but how do how do we think about capital intensity over the longer term for the business?

I I know you used to talk about mid30s. That seems a little high, you know, probably given what's going on now, but is is is like 20 to 25 the new norm?

Yeah, Tim, I would just comment that, you know, you you um you captured correctly that you know, we gave you a first half capex number. We indicated second half would be higher.

Um, importantly that mix of capital spend is shifting to more construction and we gave you some commentary on that uh versus equipment and you know we would expect that trend to continue here um next few years.

Now um you know as it relates to capital intensity I think as you point out that capital intensity is low on historic levels and that is reflective of you know, the strategic asset that that memory and storage has become and uh you know, the bit the industry is structurally reset and um and we will continue to work to you know add capacity a very disciplined manner um ensuring that we're getting adequate return on that capacity investment um going forward.

I guess first question on gross margins w within the guide for November. Can you quantify the impact from the higher uh ASP inventory and are there other sort of mix shifts that we should be thinking about that are that are impacting the sequential?

Yeah, CJ, I will uh this is Mark. I will I will take this opportunity to just provide a bit more perspective on on fiscal Q4 and and fiscal Q1 to help help walk you through you know the puts and takes on margin.

Um, you know, in in fiscal Q4, we we we made the decision to increase incentive compensation and you can see that most clearly in actually the OPEX number and um, you know, and that you can see it, you know, clearly in the third quarter to fourth quarter OPEX.

Um, now in manufacturing expense, most of these costs, you know, they're absorbed into um, you know, into inventories um, in Q4. So there was only a small effect in Q4. Um you know the higher cost inventories as a result of the um increase in incentive comp you know booked in the fourth quarter the the impact of that you'll see um you you see in the fiscal Q1 guide and uh we also have some some startup costs which I've talked about previously and some other costs but but incentive comp is is the big driver to

And in total these these factors in the first quarter are roughly a billion dollars um of higher cost in Q1. So that gives you the you know gives you a sense of the margin impact.

Um now I think it's important to note that that we also have um significantly increased fiscal 27 incentive compensation and and you'll you see the effect of that in first quarter uh again in the opex number um in the fiscal Q1 opex guide um on manufacturing most of the higher FY27 incentive comp um will start to impact margins in in fiscal Q2. to now um you know beyond the normal cost increases from higher volume and depreciation you know you have this you know roughly billion dollars of of ongoing costs from incentive comp um higher startup and and some other other costs in fiscal 27.

So, you know, while it's a while it's a um you know, a headwind in the first quarter um and and there are some sustained costs through the year, I just it's important to keep in mind how structurally different the business is as far as profitability and return. um we're operating at a much stronger level and um and have talked about how 27 28 we expect to be stronger market conditions in 26 and long-term agreements give us you know take and take pay agreements give us visibility uh beyond that and I think it's important also note that that these costs you know these uh some of these costs can be considered variable or temporal

So for for 27 um we also discussed how we expect Q1 to be the floor um and um gross margin and we expect higher gross margin for the balance of the year um as we have continued price increases and um and strong operating performance.

So, I can take that question. Uh CJ. Um so as you know for 2026 our prices for HPM were negotiated with our customers last year and we mentioned that now um for 2027 a large part of the volume is uh already sold out for uh 2027 for HBM and the prices are much higher than 2026 prices and um you know of course that is helping us narrow the margin gap with the nonHPM memory there.

Um so overall our HBM is on a very good trajectory. We indicated that uh you know overall for the industry we expect HBM uh to be outgrowing the DRAM uh in terms of the uh demand growth.

So HBM is on a a strong trajectory. our portfolio is very well uh positioned. Um you know our HBM uh 3E, HBM 4 products late next year with HBM 4E products. Uh so we continue to see strong momentum uh with our uh HBM products and well positioned to address opportunities ahead.

So I hope I answered your question regarding uh the growth here. strong growth, strong products and with the price increases starting in calendar year 2027 uh narrowing the margin gap with um nonHBM part of the D market.

for the first one Marco I wanted to go back to uh cash returns. Um you know at this space a micron could generate over a 100red billion uh I think from Q2 to Q4. So even if let's say Q1 you're building cash to get your target balance sheet your cash generation from Q2 onward should get you to at least 100 you know plus billion.

So if that is the case why shouldn't we expect that level of cash return in in fiscal 27? So I know you're not providing a specific number but what am I missing in that highlevel uh analysis um right beyond just you know going through the outline of sales and margins and capex um uh estimates that you're providing.

Yeah. All all I can add is that and hopefully made it clear in the prior response that we have the ability and the intent to increase our capital return. Uh and we you can expect us to uh seek to increase our authorization and commence stronger capital return from December 9th in accordance with um the agreements we have with on chips.

when when we look Sanjay at the just the valuation of of memory stocks right very depressed which suggests that people feel that next year might be a peak for pricing you know might be a peak for earnings um in in this cycle uh either because the industry is bringing on incremental capacity or there is a narrative that maybe some of your customers even in the data center might despec uh products because either because of shortages of memory or just because right it's such a bigger part of of bill material.

So I know you don't talk about specific pricing uh but as you were to think about conceptually in in 2028 for the industry. What what is the the potential for industry pricing to continue to stay favorable to even potentially increase versus 27 given uh these u uh you know headwinds uh from either incremental capacity coming online or some customers wanting to despec uh their products to cope with with market conditions.

So as we noted uh calendar year um you know in calendar year 27 as well as 2028 uh we see demand exceeding supply and in fact we see greater tightness in the industry in 27 and in uh 28 versus uh 26.

So overall supply demand environment is only getting tighter and um of course you know uh even as we work hard to bring up um uh capacity as I shared in my prepared remarks um even uh with any new clean room space coming up in 2028.

We see continuing tight supply conditions because uh first of all clean rooms uh take a long while to build uh even after they are built even after first wafer output production ramps up only gradually in the clean rooms that's just the nature of what it takes to bring up production and you know with HBM going from 3E to a greater mix of four and 4E and with the trade ratio that exists that again creates headbands with respect to supply growth.

Nodes transitions of the future give less productivity gain per wafer as well. So there are lot of factors these key factors that are u you know headwinds to the supply growth and even in 2028 even as uh some of the new clean rooms start ramping up the supply is tight and that is in the backdrop of strong demand.

Um while some level of uh content growth may be moderately lower in some of the servers uh compared to prior expectations, overall unit demand for servers continues to increase. 26 as well as 27 uh we expect uh you know high teens in terms of uh server unit shipments and that sets the stage well for data center growth o of shipments uh for DRM in 2028 um as well.

So it's a strong uh demand environment and customers work with um you know they fully understand this extremely tight supply outlook that we have. We have shared with you that we do not see line of sight when supply catches up with demand because the demand trends of larger models, growing context, more current currency, greater agents across enterprise and consumer only continue to drive greater need for uh memory, greater need for memory content as well as for higher performance memory.

So when customers uh reduce their content growth versus prior expectation as I referred to in certain uh platforms that really is to enable them to ship more units as reflected in the strong server growth in 26 as well as 27 which sets the stage up well for 2028 time frame. uh so I see uh healthy demand supply environment here uh you know going forward for the factors related to demand as well as uh for supply and that obviously bodess well uh for the industry pricing environment as well and I'll just add here that our SDAs give us tremendous visibility uh with our customers and we mentioned here that our customers are actually coming to us um you know asking for uh more uh supply.

Sea customers are asking for more supply. Nonsea customers, I mean we are getting POS. I'll tell you that 2027 uh 70 more than 75% of our um output is already committed uh for 2027 and uh majority of discussions with our customers today are already around 2028.

So overall the industry demand supply environment and the outlook is in a very healthy place here and we do not have in this strong demand environment we do not have uh line of sight to when supply and demand will uh get in balance and um customers want assurance now even beyond 2030 time frame.

I mean we mentioned that we uh concluded some extensions to our SCAS as well as uh the U to 2031 time frame as well as new SCAS for 20 extending out to 2031 time frame.

Sanjay is you know there's been talk of wave one large customer despecking HBM. I'm kind of curious what your view on that is and also implications given the fact that HBM has higher trade ratio if those wafers get reallocated to DDR with it increase DDR supply quite a bit and then add a followup.

So as you mentioned we actually see the overall HVM supply I mean HBM demand outpacing the industry demand in 27 as well as in uh 28 and we continue to see you know tight memory conditions uh in both uh 27 and uh 28 time frame. uh and you know uh the latent nature of a need for more memory in the applications continues to be uh strong because you know AI platforms in order to deliver their maximum uh capabilities and potential just need more and faster uh memory uh you know to again address the growing context concurrency and of course the larger uh model sizes as well.

Uh so overall the demand trends are in a very strong place and then customers make optimizations. They make these optimizations um mainly to be able to ship more units to drive their own more growth as well as to address the end market opportunity of growing uh scaling up AI and um you know these optimizations you know when they occur you know they do not take away from the latent nature of need for more memory uh in the systems and um these optimizations also have you know diminishing um you know um diminishing you know return for any further optimizations.

And if you contrast optimizations with actually the secular demand and the value proposition of memory in the platforms you will see that the overall demand trend continues to be very healthy for memory and storage and again we see 27 and 28 um tighter than 26.

Mark, just a quick followup. I know look clearly like FI27 capex higher than 50 billion and looks like your free cash is going to be over 100 billion and uh higher growth rate in construction capex.

This is equipment. I'm just wondering um is that because you are constrained in getting semi- equipment next year or is it not an issue? I'm just trying to wonder if there is a natural cap on capex next year because you're constrained in securing the uh equipment.

Kersh, it's it's uh related to just the uh you know strong supply demand um imbalance that we have and the lead time it takes to get green field capacity in place. So that you know we've talked through uh many fabs that we're building out uh and coming uh you know uh ID1 ID2 um Japan uh Singapore Tonglow and so uh and we've got now the visibility through these uh you know strategic customer agreements to build out this green field capacity capacity and then um you know we will equip those fabs as as appropriate uh given uh our most current views on demand.

Last earnings with 16 seas secured, your view was the potential for 50% plus kind of sea coverage on forward revenues given the pipeline of sea signed and under negotiation. Fast forward to this quarter, 26 SCA now secured under coverage and you and your customers have an updated industry view that is even further supply constrained in calendar 27 and calendar 28.

So what do you think your forward revenue coverage will be if all of your current SCA negotiations are completed? I think Sanjay you said 70% of revenues covered in fiscal 27 by customer commits including SCAS but could the team actually see 60 70% SCA coverage on forward revenues over the next few years when all of your negotiations are completed.

uh so regarding my comment on 27 that more than 75% of our output is already committed as I had said that is of course between the SCA customers as well as nonseca customers keep in mind that we have large certain large customers where we uh of course uh are doing business with them on annual basis as well so you know that volume coverage comment I just wanted to clarify it is across our uh customer base SCAS as well have non seas and given the strong demand trends u you know we are getting purchase orders for 2027 from nonsea customers as well early on here um and regarding your uh question on you know where could SCAS ultimately reach to so that you know basically is still around 50% of our uh revenue you know through the 2030 uh time frame that we had previously com commented on uh that comment still remain remains about the same that you know we could reach around 50% of our uh revenue to be covered uh by SCA of course you know that could be less too depending upon the revenue of all the rest of the business right so uh but you know overall that objective uh remains uh by and large uh the same and of course we are always managing the mix of the business it is important for us to be able to maintain uh flexibility uh in terms of um you know managing our supply across our uh customer base across the end market segments across new customers too that may be uh evolving over the course of the next few years uh particularly given uh the dynamic nature of our industry the tremendous amount of innovation that's just happening across the board you know we want to be in a position um uh to basically remain in that position so uh basically I think you know we are really making very good progress in this regard and uh the benefit of SCA is to give us visibility into the demand out

Oh, I appreciate that. And then on the NAN side of your business, you know, relative to your competitors in that, the Micron teams, I think total bit supply share puts you sort of in that number four, number five sort of global market share regime, right?

Yet the team continues to drive this very very strong like number two market leadership position in data center and enterprise. Strong performance differentiation is required here, right?

It's not just you've got this great base G9 technology, but it's also the controller technology firmware customization. You're also a part of the Nvidia Scattera initiative for direct GPU access to storage.

And it seems like more and more of the inferencing related KV cache functionality is being offloaded to storage, right? And so with the expansion of memory turing to include more and more flashbased architectures like has that changed the team's view on your R&D and capex investments in your nan franchise?

Um so you know certainly as you noted the memory hierarchy from HBM to DRAM to SSD uh I mean it continues to be leveraged as context Windows grow and a as uh AI advances and we are very pleased with our product portfolio position and as we noted I mean our portfolio is uh in the best position ever in the industry particularly to capture these huge growing market opportunities with uh AI and of of course very proud of our team's uh strong um execution on the side of uh SSD which is critical you know for uh data center SSDs which are absolutely critical uh in the me memory hierarchy that is needed to drive the growth of uh AI and you're seeing the results of that you know five consecutive years now of share growth in the data center market you know our uh revenue uh reaching $10 billion in uh fiscal Q4 for data center SSD data center SSD becoming 2/3 of our total uh NAND uh revenue.

So we are of course um you know continuing to invest in R&D you know related to the products as well as making the investments on the manufacturing side our um investments related to NAND as part of our overall capex you know certainly are um increasing uh as well and you know we are as you know we have talked about um the next fab for NAND that we are also building in Singapore which is currently on track for late uh calendar 2028 uh time frame and our capex is supporting our uh you know G9 uh NAND tech transition of course driving toward equipment productivity optimization uh NAND R&D uh you know and you know other aspects of our Singapore operations as well.

It's ironic because this is the most important company in the stock market you could argue outside of like Nvidia, but uh you know their call was relatively boring. But then again, they don't need to make the call that exciting.

They just have to crush their numbers and they did.

So I guess we'll start there. Any thoughts on what they said there? Yeah, there was a really interesting thing. I'll have to go back and listen to the transcript as well where they were talking about bit growth going into the first half of next year if I believe they actually said that they're going to fall behind their competition and uh lose market share but then in the back half of 2027 and all of 2028 they are going to dominate market share.

Um, so that was very interesting that they said bit growth is going to be slow and and we're going to we're not going to scale as fast as our competitors and we're really going to ramp up because that's just when their their fabs come online. So that was quite interesting.

They also brought up this very interesting um point about all the EPS growth that they talked about. I've listened to a lot of the Micron calls. They've never said, "Oh, our EPS is based on this many outstanding shares," which I thought was quite interesting.

Now, they're talking about the amount of outstanding shares because by the time that they announce, they'll probably have less outstanding shares after December 9th, which I actually would have to see because uh their quarter might actually end on November.

Um but then it would be, you know, next quarter growth that would really be impacted.

100% of all uh excess cash is going to go into buybacks. We knew that. But uh some analysts tried to get out. Okay, well what does excess cash mean? You know, are you guys going to sit on $40 billion worth of cash or are you going to sit on 10 billion? How much can we actually price into buybacks?

Yeah, I was looking a little bit at that bit growth uh story t you were just mentioning and it was mainly on the nan side on the DRAM side um they are expected to grow in line with the market.

So okay um it was just in the nan side that just for I forget um for this calendar year they expect to grow in the low 20s um and that's a little bit lower than where their the market was.

Uh the thing that really grabbed my attention um obviously all the great things that you guys mentioned but uh that guidance gross margins is going to hit a floor next quarter and then kind of like sequential growth from there.

Um and mainly it's just the uh the the way that pricing works is they did lock up some long-term contracts like about a year ago or so and pricing was was cheaper back then. Um and it seems like after next quarter um they expect sequential growth in in in everything.

Um so uh and then kind of the um the commentary right that the market is expected to be tighter than what they originally expected just a few quarters ago as well um for 2027 and 2028.

So I think a lot of great clarity of of of where the market is heading.

I was actually surprised though with how big the capix number was. Um yeah. $55 billion. So that hold on. So that that's what took the stock down. So what was it last time? Like why was the street upset about that?

10. I don't know if you have maybe the numbers for last year or or even for this year, but I know for I mean they mentioned for the first half of this year was going to be around 25 billion and they mentioned they didn't give a number for the second half of of of this cuz right they're starting the new fiscal um so for the second half go ahead

was 27.37 billion. Oh man doubled capex but that's but that's so bullish though like the street should not be taking that as bearish. That means that they have such insight to how long this goes for.

They're not spending 55 billion this year if they don't have years and years and years of runway. No board would approve that.

But uh agreed the problem with memory has never been the amount like they there's never been a selling problem in memory. It's been about pricing. And are they putting out 55 billion to get 80 plus% margins or are they doing this for 10% margins?

Because if they don't do anything, it's not like they're the only supplier. They can't control the the supply that's outstanding because there's SKH Highix, there's Samsung.

Yeah, but Tanner memory is gone so much PZ Dram. They're the leader in HBM4. There's nobody that can touch them right now. And eventually you have HBM5. So they're like even if margins even if they drop to a 50% or 60% margin from 80% they're likely still to be the number one player in high bandwidth memory.

Yeah. I just I while I agree that the capex number is not as bad. I'm looking at um last 12 months here. So you know if you were to take last quarter and then the last uh four quarters before it's like 30 billion right now.

So that's only expected to continue. Um, but it doesn't necessarily mean like TSM that they're going to have those super high margins. I think whenever TSM shows uh capex, it's a little bit more exciting to me than Micron having a lot of capex.

I just think the market doesn't love capex. Micron is a capex beneficiary. They're not supposed to be a massive capex spender. Now, obviously, they're going to have to spend on capex in order to keep growing, but uh that is a little aggressive.

Having said that, if they keep their margins relatively stable, 55 billion is going to be a drop in the bucket on their free cash flow next year. So, it shouldn't be a reason the stock's down 2%.

yeah, they just came out and said they're doing 61.5 billion in revenue in tier one. Like, think about how much that is compared to where we were.

I think the thing that was surprising, I don't know if you guys felt the same way. I was watching chat and people were texting as if it was lights out. And I think the amount of people who are writing calls, who are levered up in the retail space on this name is higher than usual cuz we're down 1% and people were screaming like it was down 15.

Well, people expected it to be up at least 10, right? Yeah. It's crazy. That's a huge move on. No, I agree. I I mean, I think a lot of people in the chat were a bit annoyed that the call was this.

I mean, I missed the last call cuz I was on a flight. So, it doesn't feel like this call was that different, but the importance of this company following up that June quarter really was important because a lot of people bought Micron around that time for the first time and they've been DCAing and you know, it's up 300% for the year.

Like, it just might need to keep consoling. I know I people hate to hear that, but

I mean, just think about this. $38.15 of EPS for Q1 plus or minus a buck. Let's just say they do 38. You extrapolate that with no growth on a run rate. I mean, what is that? 146 of EPS a share.

But the problem is we for the past like five months, we've all been making the same analysis that it's five times forward, seven times forward, almost their entire free cash flow and EPS. Like the market doesn't care.

Doesn't care. So, so it's like there's to Tanner's point like this concern of oh they're 55 million in capex is going to lead to potentially less margin and it doesn't matter if the margins are 70% versus 85 like those are insane numbers but the decline whenever that's going to happen which based on what Sanjay said I don't think margins are going to decline in fiscal year 2027 and any specific it's going to be down like upper it's going to be up or down 2%.

It's not going to go from like 86 to 73 or something.

But even if margin a little bit, but if output on revenue expands and supersedes it, it's not going to matter. I mean, once again, I just can't believe that their board of directors or their executive team would propose and approve spending 55 billion on building out more fabs if there wasn't 5 to 10 years of insight into what that's going to produce.

It's just it's a it's a business mathematical equation that you don't spend that type of capex if you're not going to make X amount on top of it.

Yeah. I mean, look at the products that have been coming out. I I think I saw that uh the product cycles, something like this for OpenAI and Enthropic put together, maybe Amit, maybe you saw this post, the model release dates is now down to like something like a new model per 11 days just between those two companies where before it used to be like 10 weeks.

And these models are making significant leaps in performance. I mean, it's clear to see where memory is going. It's just a matter of if we see some, you know, major technological breakthrough like 3D RAM that just changes the amount of fab space that you need and condenses the amount of um money that essentially you need to spend in order to produce similar or or way more adequate amount of DRAM.

Like I think that that's still scaring people is that there are breakthroughs in memory that have happened before that have crashed the market.

Do do you Jose do you do you think it's very likely that that is the reason why the stock has been depressed that Nvidia is going to come out one day? Because see, here's the the political part of Nvidia innovating is that they have these relationships with Samsung and SKH Highix and SanDisk.

And I mean, I don't know if that looks the best for Nvidia to be like, "Yeah, you're one of our biggest customers and uh or one of our biggest vendors and we just don't need you as much anymore."

You know, like how would how would how would South Korea as a country and and and their political administration react to that given how much of a close tie they have with Nvidia?

What's the alternative? They pay 87%. But it would be an awkward position for Jensen to be like, "Yeah, we just don't need as much anymore." And then just watch Micron fall 50%.

And like what does that mean for all the picks and shovels that he's talking because if Micron gets hit, the rest of them are getting hit and Jensen at this point is now responsible for like the semicmplex, right?

So I'm not changing my position on Micron. Am I the only shareholder or you have Micron? No, I mean, overall, this looks like the exact same story. I've not run the math on it.

I can't wait to see what this company opens up tomorrow, looking at their forward PE, how analysts are going to rewrite because they they have to. Their expectations are higher than Wall Street expectations for next quarter.

So, the forward PE, especially if we're down tomorrow, is going to get drastically cheaper. Um, excited to see what that looks like.

And, um, I don't know if I'm in the mood to add just yet, but if we also have a, you know, stark fall in the in the stock price again, like we get back into the 900s, I might end up adding for the short term.

>> you seem bummed out about Micron. >> No, I'm not I'm not I'm not bummed out. I would like it to be up 10%, but it's just like, you know, it it's not moving. The numbers look good.

Um, the call sucked some of my energy away, but no, I'm I I I didn't see really anything too wrong here. I don't know about the capex if I like the the capex or not. Maybe it extends the cycle.

Oh, 100%. But I just don't even know if I believe that. That's almost too bullish. That's that's way more bullish than I'm willing to believe right now. That's like I still think that we're in a super cycle and that this is a cyclical business.

Oh, it is a cyclical business. I don't think anybody's going to say it isn't. The question is does how is this going to make a normal DRAM cycle which is what three to five years Jose?

That may even be conservative. I mean probably more two to four leaning more toward the two end for a typical DRAM cycle. But this could make a high bandwidth memory cycle be five or 10 years and that's what you want with this capex because nobody has the answer on when the buildout is going to slow down.

Nobody has the answer when the buildout is going to go into maintenance mode and more importantly what that maintenance mode looks like. And if the maintenance mode looks like we are going to spend whatever the previous year was and it's just replacing older stuff and stuff that burnt out and Micron is able to get whatever that last year was of revenue, that'll be amazing because it'll be continuous cash flow, continuous buybacks, capital back to shareholders and make EPS expand like we want them to spend on capex my opinion because it shows that us that they have done the due diligence on how long this lasts and they are projecting it's going to last longer than what people think. That's the most important thing right now.

>> Oh, so someone someone says that's why the market won't push it higher. It is pricing the eventual decline even if it's 5 to 8 years away. >> Yeah. Well, and then if that's true, they're just going to be able to buy back shares at cheaper prices than it should trade at.

And the EPS is going to expand and eventually it'll trade higher. It just won't trade at a gang busters rate that everybody wants it to. But the real question is, can we get the multiple to rerate on a forward basis to at least 12 times >> because right now it trades cheaper than a tobacco company. Do we really think that that's realistic?

No. You know what, Steve? I I completely agree with you. I just did a quick little They generated like what $40 billion in cash this quarter. If the market doesn't care, even if it lasts eight years, >> if they generate $40 billion a quarter for the next eight years, that's $1.3 trillion, >> right?

160 a year. I mean, they buy back the whole company. >> They would buy back that that's the price of the company today is how much they could generate in cash. >> And by the way, that's with zero growth.

That's just maintaining >> what it is. And and next quarter's expectations are even higher than than this quarter. So, it's not going to maintain. So it can't stay still. I mean, well, I mean, >> that's my exact point that if it doesn't go up, they can just buy back more shares because they have more cash and eventually the EPS is going to look so ridiculous that even at a five to eight time multiple, the share is going to have to expand the share price.

Yeah, debt did fall as well. We we lowered uh debt to like five billion free cash flow margin 61%. Who does this?

Another question for you guys. We're seeing kind of these like strategic customer agreements. Um, and they mentioned some of them are pushed out till 2031, 2032. But do you think within these agreements there's an a necessity for Micron to keep developing like innovating a technology?

Like what what is that a possibility? Like they say we're in HBM6, but they don't deliver in HBM6. They they're for some reason stuck. Does that ruin their their strategic customer agreement?

And could that be a fear that the market is having? It's like it's also even though you're saying you're locking in these customers, it also you have to continue to innovate within the space.

If not, those customer agreements kind of go out somewhere else.

>> Yeah. They're not the only player, right? There's CXMT, there's Samsung, there's SKH Highex, and there there's no coalition to um sort of block innovation, especially with CXMT.

They don't want, you know, any of the American companies to win. Um

>> okay so at 1.2 2 trillion Ter valuation do you think is reasonable for Micron right now or market cap I should say >> I don't know uh right now I would have to do some numbers I think it would be marginally higher than where it is today but I'm not calling for a $3 trillion market cap today

>> No. Exactly. So, could you see Micron being a three to5 trillion dollar company in a decade? Because if you're buying it at one right now, you're at least hoping for the risk you're taking it gets like 1.82 and then if it gets to two, someone's got to buy it at two, you know, for like otherwise it's not going to get to two.

It's like are you really buying a a commodity memory supplier that has historically gone up and down 80%. At $2 trillion expecting it to go to five trillion like is that type like you can expect Amazon, Meta, Google, Microsoft, Nvidia, Tesla to hold multi- trillion dollar valuations?

Not just get them, not just compound earnings, but actually sustain them for like decades because of the quality of those companies. And I know memory is not really a commodity right now because obviously we're in this like massive supply buildout.

But eventually when that buildout starts to to decline um you know it can does it make sense for Micron to be a multi- trillion dollar. Now the push back against that is well they're going to be buying back so much stock >> that even if you don't think it should be worth three four trillion fundamentally like at some point you have to give a multiple to it but that just requires more and more people to be excited for that growth story long term.

And I'm I'm excited to buy Nvidia at 5 trillion if I think it can get to 10 trillion. Do I have that same excitement for Micron?

Um just going back to the question about what you know value should Micron be at long term over the next couple of years. I think that maybe there should be a healthy level of skepticism and that's why the forward P is at seven times.

I think that's, you know, beyond healthy. Um, that's, you know, almost safe. And if you just want to keep that multiple and just go based on growth, then I think that the company should grow based on its ability to compound EPS.

So, if they can continue to grow at a 40% clip, the stock should be up, you know, 40%. you you need no additional um like like multiple expansion. Now, should there be some multiple expansion?

I think that's going to come with how long should this actually last? Of course, I think that the PE is too low. Um but I'm trying to put on my my hat of what are other investors who are not buying this seeing and you know, I can't see through Jose's eyes.

So, um like yeah, I don't know. You tell me, Jose, why you don't like memory?

>> No, I mean time and I'm still not listening correctly because I don't get it. >> I don't think I'm bearish memory, right? I don't It's just I feel my portfolio is very high beta that I don't want to add a high beta that in my opinion has more uncertainty.

Look, I think I've mentioned it in the past that the AI story can continue without memory. Innovations in various aspects can happen. We're seeing innovations of other players kind of trying to reduce certain dependency in memory.

It's not working right now, but eventually when you're being pushed back and someone's you're getting 87 margins. I forget who has who says it. It's like your your your margin is my opportunity or whatever the saying is.

>> Yeah. So um it's just there's so much uncertain I can't see the memory space like I see certain other semiconductor industries and that cloudiness would give me too much emotion in that market.

Um and I don't like trading or investing on emotions. Um where in the other industries like for me with GPUs and and CPUs I can see it with various other innovations happening in the AI industry.

I don't think I can say the same with memory. Um I I

Look, I think I've mentioned it in the past that the AI story can continue without memory. Innovations in various aspects can happen. We're seeing innovations of other players kind of trying to reduce certain dependency in memory.

It's not working right now, but eventually when you're being pushed back and someone's you're getting 87 margins. I forget who has who says it. It's like your your margin is my opportunity or whatever the saying is.

I don't know if Micron is the goat in where they're at. right for a company like Micron it'll be like oh yes this if this person builds 100 billion capix two three years from now that's going to impact Micron dramatically with memory

Uh, but I truly believe this cycle is going to continue. I think one thing that's memory space is exciting about is it's a cycle that keeps going and extending with new innovations, right?

I mean, what happens when the robotics era takes over, right? It's going to push memory, autonomous driving, which they were talking. Um, so as long as AI innovations, you have a good

I would never say you're wrong for being a memory investor. I just wouldn't say memory investment is not the style for me.

Like I And then another thing is like I wonder what happens when does the growth in memory innovation stop being enough for you to pay that premium? And now in HBM 5 um you have now the ability of more players kind of one the thing HBM itself is not the strength it's the innovation of the next level of HBM right we already have a lot of people already developing HBM 3 but we don't care about HBM 3 anymore right we care about HBM 4 we came about HBM 4E then we're going to care about HBM 5 but what happens when you don't care about the next level it gives the people that are in the back row that are trying to catch up have the opportunity to catch up a little bit faster.

there's various aspects the one is doing it and when I talk about it in the memory market is just like any performance boost right like if you if you've ever bought like a GPU for your for your um gaming rig or for your computer it's like if I go from this GPU to this GPU I get 20 30% improvements there's going to come a time where it's like it's 20 to I I don't know the improvements between HBM 4 and HBM 5 and all that.

There's thermal improvements, there's energy improvements, there's data movement improvement. But eventually there is going to come a time where it's like the market is going to start thinking, do I really need to improve to the next gen or can we just stay back in this lower one that's typically has higher yields, that typically has higher manufacturing footprint, um, and that usually has higher competitors.

I don't think that's going to happen anytime soon. I'm just trying to say like I wonder if this is what the market is fearing.

I'm bullish. Micron, same here. Well, I hope this thing uh goes higher because SMH is like it feels like the semis have been stuck for two months and Micron will be the catalyst to get us there.

But we also got to get through midterms, guys. We got a 10 year at 5.3. Like there is that stuff in and of itself might be part of the reason people are not rushing to buy Micron here.

There are weird things going on in the micro in the macro that could be affecting most of memory at the moment.