Micron Technology 10-Q 2024-11-28

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended November 28, 2024

OR

For the transition period from to

Commission file number 1-10658

Micron Technology, Inc.

(Exact name of registrant as specified in its charter)

The number of outstanding shares of the registrant’s common stock as of December 12, 2024 was 1,114,171,932.

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Definitions of Commonly Used Terms

As used herein, “we,” “our,” “us,” and similar terms include Micron Technology, Inc. and its consolidated subsidiaries, unless the context indicates otherwise. All period references are to our fiscal periods unless otherwise indicated. Abbreviations, terms, or acronyms are commonly used or found in multiple locations throughout this report and include the following:

We are an industry leader in innovative memory and storage solutions transforming how the world uses information to enrich life for all. With a relentless focus on our customers, technology leadership, manufacturing, and operational excellence, Micron delivers a rich portfolio of high-performance DRAM, NAND, and NOR memory and storage products through our Micron® and Crucial® brands. Every day, the innovations that our people create fuel the data economy, enabling advances in artificial intelligence (AI) and compute-intensive applications that unleash opportunities — from the data center to the intelligent edge and across the client and mobile user experience.

Micron, Crucial, any associated logos, and all other Micron trademarks are the property of Micron. Other product names or trademarks that are not owned by Micron are for identification purposes only and may be the trademarks of their respective owners.

Available Information

Investors and others should note that we announce material financial information about our business and products through a variety of means, including our investor relations website (investors.micron.com), filings with the U.S. Securities and Exchange Commission (“SEC”), press releases, public conference calls, blog posts (micron.com/about/blog), and webcasts. We use these channels to achieve broad, non-exclusionary distribution of information to the public and for complying with our disclosure obligations under Regulation FD. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on such channels. Web links throughout this document are inactive textual references provided for convenience only, and the content on the referenced websites is not incorporated herein by reference and does not constitute a part of this Quarterly Report on Form 10-Q.

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Forward-Looking Statements

This Form 10-Q contains trend information and other forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements may be identified by words such as "anticipate," "expect," "intend," "pledge," "committed," "plan," "opportunities," "future," "believe," "target," "on track," "estimate," "continue," "likely," "may," "will," "would," "should," "could," and variations of such words and similar expressions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Specific forward-looking statements include, but are not limited to, statements such as those made regarding expected production ramp of certain products; plans to invest in research and development, including the plans to implement EUV lithography; anticipated technological developments; potential change in our effective tax rate; the timing for construction and ramping of production for our facilities, including new memory manufacturing fabs in the United States; receipt, timing, and utilization of government incentives; the payment of future cash dividends; market conditions and profitability in our industry; future demand for our products; DRAM bit shipments in future periods; actions to align our NAND supply with industry demand trends; the impact of the Cyberspace Administration of China decision; capital spending in 2025; the potential impact of business, economic, political, legal and regulatory developments upon our global operations; and the sufficiency of our cash and investments. Our actual results could differ materially from our historical results and those discussed in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those identified in “Part II. Other Information – Item 1A. Risk Factors.”

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PART I. FINANCIAL INFORMATION

Micron Technology, Inc.

Consolidated Statements of Operations

(In millions, except per share amounts)

(Unaudited)

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In millions)

(Unaudited)

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

Consolidated Balance Sheets

(In millions, except par value amounts)

(Unaudited)

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

Consolidated Statements of Changes in Equity

(In millions, except per share amounts)

(Unaudited)

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This discussion should be read in conjunction with the consolidated financial statements and accompanying notes for the year ended August 29, 2024*. All period references are to our fiscal periods unless otherwise indicated. Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31. Fiscal 2025 and 2024 each contain 52 weeks. All tabular dollar amounts are in millions, except per share amounts.*

Overview

We are an industry leader in innovative memory and storage solutions transforming how the world uses information to enrich life for all. With a relentless focus on our customers, technology leadership, manufacturing, and operational excellence, Micron delivers a rich portfolio of high-performance DRAM, NAND, and NOR memory and storage products through our Micron® and Crucial® brands. Every day, the innovations that our people create fuel the data economy, enabling advances in artificial intelligence (AI) and compute-intensive applications that unleash opportunities — from the data center to the intelligent edge and across the client and mobile user experience.

We manufacture our products at wholly-owned facilities and also utilize subcontractors for certain manufacturing processes. Our global network of manufacturing centers of excellence not only allows us to benefit from scale while streamlining processes and operations, but it also brings together some of the world’s brightest talent to work on the most advanced memory technology. Centers of excellence bring expertise together in one location, providing an efficient support structure for end-to-end manufacturing, with quicker cycle times, in partnership with teams such as research and development (“R&D”), product development, human resources, procurement, and supply chain. For our locations in Singapore and Taiwan, this is also a combination of bringing fabrication and back-end manufacturing together. We make significant investments to develop proprietary product and process technology, which generally increases bit density per wafer and reduces per-bit manufacturing costs of each generation of product. We continue to introduce new generations of products that offer improved performance characteristics, including higher data transfer rates, advanced packaging solutions, lower power consumption, improved read/write reliability, and increased memory density.

We face intense competition in the semiconductor memory and storage markets. To remain competitive we must continuously develop and implement new products and technologies and decrease manufacturing costs in spite of inflationary pressures. Our success is largely dependent on obtaining returns on our R&D investments, efficient utilization of our manufacturing infrastructure, development and integration of advanced product and process technologies, market acceptance of our diversified portfolio of semiconductor-based memory and storage solutions, and efficient capital spending.

Product Technologies

Our product portfolio of memory and storage solutions, advanced solutions, and storage platforms is based on our high-performance semiconductor memory and storage technologies, including DRAM, NAND, and NOR. We sell our products through our business units into various markets in numerous forms, including: components, modules, SSDs, managed NAND, multi-chip packages, and wafers. Many of our system-level solutions combine NAND, a controller, firmware, and in some cases DRAM.

DRAM: DRAM products are dynamic random access memory semiconductor devices with low latency that provide high-speed data retrieval with a variety of performance characteristics. DRAM products lose content when power is turned off (“volatile”) and are most commonly used in the data center, client PC, graphics, industrial, and automotive markets.

NAND**:** NAND products are non-volatile, re-writeable semiconductor storage devices that provide high-capacity, low-cost storage with a variety of performance characteristics. NAND is used in SSDs for the data center, client PC, consumer, and automotive markets and in removable storage markets. Managed NAND is used in smartphones and other mobile devices, and in consumer, automotive, and embedded markets. Low-density NAND is ideal for applications like automotive, surveillance, machine-to-machine, automation, printer, and home networking.

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NOR**:** NOR products are non-volatile, re-writable semiconductor memory devices that provide fast read speeds. NOR is most commonly used for reliable code storage (e.g., boot, application, operating system, and execute-in-place code in an embedded system) and for frequently changing small data storage and is ideal for automotive, industrial, and consumer applications.

Industry Conditions

Throughout 2024 and the first quarter of 2025, we experienced substantial improvements in pricing and margins for DRAM. Increasing demand growth, driven in part by deployment of AI and mostly normal customer inventories, combined with industry-wide supply discipline, resulted in a substantially improved industry supply and demand balance. Leading edge DRAM demand remains tight, driven by HBM supply ramp in the industry. In the PC, smartphone, and consumer markets, our bit shipments are expected to be weaker until inventories in these markets reach healthier levels expected in the spring. In line with prior plans, we shifted our supply to meet the strong demand in data center DRAM resulting in a portfolio mix weighted more towards high growth and less seasonal segments.

We also experienced substantial improvements in pricing and margins for NAND throughout 2024. In the first quarter of 2025, after several quarters of very robust revenue, NAND shipments and prices decreased as customers worked to reduce inventories to align with demand in their end markets. As NAND technology node transitions provide increases in bit output, the pace of technology transitions will need to slow to align supply to industry demand. We are taking prompt and decisive action to align our NAND supply with industry demand trends, including reducing NAND wafer starts and NAND capital expenditures.

Recent Developments

In December 2024, we entered into direct funding agreements with the U.S. Department of Commerce for up to $6.1 billion in direct funding pursuant to the CHIPS Act for a planned fab in Idaho and two planned fabs in New York, as well as a non-binding preliminary memorandum of terms for up to $275 million in direct funding for our fab in Virginia. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – CHIPS Act Funding Agreements.”

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Results of Operations

Consolidated Results

Total Revenue: Total revenue for first quarter of 2025 and 2024 was impacted by the factors described in the section titled “Industry Conditions” above.

Total revenue for the first quarter of 2025 increased 12% as compared to the fourth quarter of 2024 primarily due to increases in sales of DRAM products, partially offset by decreases in sales of NAND products.

• Sales of DRAM products increased 20% primarily due to a low-double-digit percent range increase in bit shipments driven by demand in data center markets and a high-single-digit percent range increase in average selling prices.

• Sales of NAND products decreased 5% primarily due to a low-single-digit percent range decrease in bit shipments and a low-single-digit percent range decrease in average selling prices.

Total revenue for the first quarter of 2025 increased 84% as compared to the first quarter of 2024 primarily due to increases in sales of both DRAM and NAND products.

• Sales of DRAM products increased 87% primarily due to a high-70% range increase in average selling prices and increases in bit shipments in the mid-single-digit percent range.

• Sales of NAND products increased 82% primarily due to a high-60% range increase in average selling prices and an approximate 10% increase in bit shipments.

Consolidated Gross Margin**:** Our consolidated gross margin has been impacted by the factors described in the section titled “Industry Conditions” above. Our consolidated gross margin percentage improved to 38% for the first quarter of 2025 from 35% for the fourth quarter of 2024, primarily due to improvements in margins for both DRAM and NAND products, as well as an increase in the share of revenue from DRAM. DRAM margins improved due to increases in average selling prices and a mix shift to high value HBM and DDR5 products. NAND margins improved primarily due to manufacturing cost reductions. Our consolidated gross margin percentage improved to 38% for the first quarter of 2025 from negative 1% for the first quarter of 2024 primarily due to increases in average selling prices and manufacturing cost reductions for both DRAM and NAND. Our consolidated gross margin for the first quarter of 2024 reflected $605 million of benefit due to lower costs from the sale of inventories written down to their net realizable value in 2023.

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Revenue by Business Unit

Percentages of total revenue may not total 100% due to rounding.

Changes in revenue for each business unit for first quarter of 2025 as compared to the fourth quarter of 2024 were as follows:

• CNBU revenue increased 46% primarily due to increases in bit shipments and average selling prices driven by cloud server DRAM demand, including HBM.

• SBU revenue increased 3% primarily due to increases in bit shipments driven by demand in the data center SSD end market.

• MBU revenue decreased 19% primarily due to decreases in bit shipments as output was shifted to higher demand data center markets, and declines in average selling prices for both mobile DRAM and NAND.

• EBU revenue decreased 10% primarily due to decreases in bit shipments for both DRAM and NAND, as auto, industrial, and consumer customers managed inventories lower, and decreases in average selling prices for NAND.

Changes in revenue for each business unit for first quarter of 2025 as compared to the first quarter of 2024 were as follows:

• CNBU revenue increased 153% primarily due to increases in average selling prices and increases in bit shipments driven by improved demand, particularly in cloud server markets, including HBM.

• SBU revenue increased 165% primarily due to increases in average selling prices and bit shipments for NAND.

• MBU revenue increased 18% primarily due to increases in average selling prices for both DRAM and NAND, partially offset by decreases in bit shipments.

• EBU revenue increased 1% primarily due to increases in bit shipments, partially offset by declines in average selling prices.

Operating Income (Loss) by Business Unit

Percentages reflect operating income (loss) as a percentage of revenue for each business unit.

Changes in operating income or loss for each business unit for the first quarter of 2025 as compared to the fourth quarter of 2024 were as follows:

• CNBU operating income increased primarily due to higher bit shipments and increases in average selling prices.

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• SBU operating income increased primarily due to higher bit shipments and manufacturing cost reductions.

• MBU operating income decreased primarily due to lower bit shipments and declines in average selling prices.

• EBU operating income decreased primarily due to lower bit shipments, declines in NAND average selling prices, and higher costs.

Changes in operating income or loss for each business unit for the first quarter of 2025 as compared to the first quarter of 2024 were as follows:

• CNBU operating income (loss) improved primarily due to increases in average selling prices and higher bit shipments.

• SBU operating income (loss) improved primarily due to increases in average selling prices, higher bit shipments, and manufacturing cost reductions.

• MBU operating income (loss) improved primarily due to increases in average selling prices and manufacturing cost reductions, partially offset by lower bit shipments.

• EBU operating income was relatively unchanged as higher bit shipments and manufacturing cost reductions were offset by declines in average selling prices.

Operating Expenses and Other

Research and Development: R&D expenses vary primarily with the number of development and pre-qualification wafers processed, the cost of advanced equipment dedicated to new product and process development, and personnel costs. Because of the lead times necessary to manufacture our products, we typically begin to process wafers before completion of performance and reliability testing. Development of a product is deemed complete when it is qualified through internal reviews and tests for performance and reliability. R&D expenses can vary significantly depending on the timing of product qualification.

R&D expenses for the first quarter of 2025 were relatively unchanged as compared to the fourth quarter of 2024. R&D expenses for the first quarter of 2025 increased 5% as compared to the first quarter of 2024 primarily due to an increase in employee compensation, partially offset by lower volumes of development and prequalification wafers.

Selling, General, and Administrative: SG&A expenses for the first quarter of 2025 were relatively unchanged as compared to the fourth quarter of 2024. SG&A expenses for the first quarter of 2025 increased 10% as compared to the first quarter of 2024 primarily due to an increase in employee compensation.

Income Taxes: Our income tax (provision) benefit consisted of the following:

In the first quarter of 2024, our tax expense was based on actual results for jurisdictions where small changes in our projected pre-tax income would have caused significant changes in the estimated annual effective tax rate. Beginning in the second quarter of 2024, we were able to estimate a more reliable annual effective tax rate and reverted to a global annual effective tax rate method for all jurisdictions.

The change in our effective tax rate for the first quarter of 2025 as compared to the fourth quarter of 2024 was primarily due to changes in profitability. The change in our effective tax rate for the first quarter of 2025 as compared to the first quarter of 2024 was primarily due to changes in profitability and the calculation of our tax expense using actual results in the first quarter of 2024.

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We operate in a number of jurisdictions outside the United States, including Singapore, where we have tax incentive arrangements. These incentives expire, in whole or in part, at various dates through 2034 and are conditional, in part, upon meeting certain business operations and employment thresholds. The effect of tax incentive arrangements reduced our tax provision by $212 million (benefiting our diluted earnings per share by $0.19) for the first quarter of 2025. As a result of the low levels of profitability and jurisdictional mix of income, the benefit from tax incentive arrangements was not material for the periods presented for 2024.

Further changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project, including Pillar Two Model Rules (“Pillar Two”), undertaken by the Organisation for Economic Co-operation and Development (“OECD”). Nearly all European Union member states have enacted the Pillar Two legislation, which will be effective for us in 2025. We do not expect these enacted laws to materially impact our effective tax rate for 2025. On November 27, 2024, Singapore enacted legislation to implement Pillar Two, which will apply to us starting in 2026. While we are still evaluating the impacts, we expect our effective tax rate for 2026 to be in the high-teens percentage range. We also continue to monitor for additional guidance and legislative changes to Pillar Two in the jurisdictions where we operate.

Various tax reforms are being considered in multiple jurisdictions that, if enacted, contain provisions that could materially impact our tax expense. We continue to monitor the potential impact of these various tax reform proposals to our overall global effective tax rate and financial statements.

Other: Further information related to our operating expenses and other can be found in “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Equity Compensation Plans”:

Liquidity and Capital Resources

Our primary sources of liquidity are cash generated from operations and financing obtained from capital markets and financial institutions. Cash generated from operations is highly dependent on selling prices for our products, which can vary significantly from period to period. Cash and marketable investments totaled $8.74 billion as of November 28, 2024, and $9.15 billion as of August 29, 2024. Our cash and investments consist primarily of bank deposits, money market funds, and liquid investment-grade, fixed-income securities, which are diversified among industries and individual issuers. To mitigate credit risk, we invest through high-credit-quality financial institutions and by policy generally limit the concentration of credit exposure by restricting the amount of investments with any single obligor. As of November 28, 2024, $2.70 billion of our cash and marketable investments was held by our foreign subsidiaries.

We continuously evaluate alternatives for efficiently funding our capital expenditures and ongoing operations. We expect to engage in a variety of financing transactions, from time to time, for such purposes as well as to refinance our existing indebtedness, including the issuance of securities. As of November 28, 2024, $2.50 billion was available to draw under our Revolving Credit Facility. Funding of certain significant capital projects is also dependent on the receipt of government incentives, which are subject to conditions and may not be obtained.

To develop new product and process technology, support future growth, achieve operating efficiencies, and maintain product quality, we must continue to invest in manufacturing technologies, facilities and equipment, and R&D. We estimate capital expenditures in 2025 for property, plant, and equipment, net of proceeds from government incentives, to be approximately $14 billion plus or minus $500 million. Actual amounts for 2025 will vary depending on market conditions and may vary from quarter to quarter due to the timing of expenditures and proceeds from government incentives. As of November 28, 2024, we had purchase obligations of approximately $1.49 billion for the acquisition of property, plant, and equipment, of which approximately $1.46 billion is expected to be paid within one year. For a description of other contractual obligations, such as leases and debt, see “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Leases,” and “ – Debt.”

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To support projected memory demand in the second half of the decade, we will need to add new DRAM wafer capacity. Following the enactment of the CHIPS Act, we announced plans to invest in two leading-edge memory manufacturing fab facilities in the United States, based on CHIPS Act support through grants and investment tax credits. As part of this plan, in September 2022, we broke ground on a leading-edge memory manufacturing fab in Boise, Idaho. Construction of the fab began in October 2023, with meaningful DRAM output projected in 2027. In addition, in October 2022, we announced plans to build a second leading-edge DRAM manufacturing facility, consisting of up to four fabs to be built over the next 20-plus years, in Clay, New York. We expect construction site preparation to begin in calendar 2025, with production anticipated to ramp in the latter half of the decade. We expect these new fabs to be key to meeting our requirements for additional wafer capacity starting in the second half of the decade and beyond, in line with industry demand trends and our objective of maintaining stable bit share.

On December 9, 2024, we entered into direct funding agreements with the U.S. Department of Commerce for up to $6.1 billion in direct funding pursuant to the CHIPS Act for a planned fab in Boise, Idaho and two planned fabs in Clay, New York. On December 9, 2024, we also signed a non-binding preliminary memorandum of terms for up to $275 million in direct funding for our fab in Manassas, Virginia. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – CHIPS Act Funding Agreements.” We elected not to pursue the federal loans previously disclosed as included in the non-binding preliminary memorandum of terms for the Boise, Idaho and Clay, New York fabs.

In addition, we receive a 25% investment tax credit on qualified investments in U.S. semiconductor manufacturing under the CHIPS Act. We have also signed a non-binding term sheet with the State of New York that provides up to $5.5 billion in funding for the planned four-fab facility over the next 20-plus years through a combination of tax credits for qualified capital investments and incentives for eligible new job wages.

Additionally, we began enablement of cleanroom space within our existing manufacturing fab in Hiroshima, Japan, that will support production of advanced DRAM using EUV lithography. We also continue to advance our global back-end assembly and test network in order to support our product portfolio and extend our ability to deliver on global customer demand in the future. We have started construction to expand our existing assembly and test facility in Xi’an, China, to provide space to add more product capability, to allow us over time to serve more of the demand from our customers in China. Construction is also progressing for the assembly and test facility in Gujarat, India to address demand in the latter half of this decade.

Our Board of Directors has authorized the discretionary repurchase of up to $10 billion of our outstanding common stock through open-market purchases, block trades, privately-negotiated transactions, derivative transactions, and/or pursuant to Rule 10b5-1 trading plans. The repurchase authorization has no expiration date, does not obligate us to acquire any common stock, and is subject to market conditions, restrictions applicable under our CHIPS Act direct funding agreements, and our ongoing determination of the best use of available cash. Through November 28, 2024, we had repurchased an aggregate of $7.19 billion of the authorized amount. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Equity” and “Item 1. Financial Statements – Notes to Consolidated Financial Statements – CHIPS Act Funding Agreements.”

On December 18, 2024, our Board of Directors declared a quarterly dividend of $0.115 per share, payable in cash on January 15, 2025, to shareholders of record as of the close of business on December 30, 2024. The declaration and payment of any future cash dividends are at the discretion and subject to the approval of our Board of Directors. Our Board of Directors' decisions regarding the amount and payment of dividends will depend on many factors, including, but not limited to, our financial condition, results of operations, capital requirements, business conditions, debt service obligations, contractual restrictions, industry practice, legal requirements, regulatory constraints, and other factors that our Board of Directors may deem relevant.

We expect that our cash and investments, cash flows from operations, expected funding from government incentives, and available financing will be sufficient to meet our requirements at least through the next 12 months and thereafter for the foreseeable future.

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Cash Flows

Operating Activities: Cash provided by operating activities reflects net income (loss) adjusted for certain non-cash items, including depreciation expense, amortization of intangible assets, and stock-based compensation, and the effects of changes in operating assets and liabilities.

The increase in cash provided by operating activities for the first three months of 2025 as compared to the first three months of 2024 was primarily due to net income in the current year adjusted for non-cash items, partially offset by the effect of an increase in receivables, a decrease in accounts payable and accrued expenses, and a decrease in other current liabilities.

Investing Activities: For the first three months of 2025, net cash used for investing activities consisted primarily of $3.21 billion of expenditures for property, plant, and equipment; partially offset by $65 million received from government incentives to offset capital expenditures and $51 million of net inflows from maturities, sales, and purchases of available-for-sale securities.

For the first three months of 2024, net cash used for investing activities consisted primarily of $1.80 billion of expenditures for property, plant, and equipment; partially offset by $85 million received from government incentives to offset capital expenditures and $175 million of net inflows from maturities, sales, and purchases of available-for-sale securities.

Financing Activities: For the first three months of 2025, net cash used for financing activities consisted primarily of $131 million for payments of dividends to shareholders and $84 million of repayments of debt.

For the first three months of 2024, net cash used for financing activities consisted primarily of $129 million for payments of dividends to shareholders, $56 million of payments on equipment purchase contracts, and $53 million for repayments of debt.

Critical Accounting Estimates

For a discussion of our critical accounting estimates, see “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” of our Annual Report on Form 10-K for the year ended August 29, 2024. There have been no significant changes to our critical accounting estimates since our Annual Report on Form 10-K for the year ended August 29, 2024.

Recently Issued Accounting Standards

See “Part I. Financial Information – Item 1. Financial Statements – Notes to Consolidated Financial Statements – Recently Issued Accounting Standards.”

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For further discussion about market risk and sensitivity analysis related to changes in interest rates and currency exchange rates, see “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended August 29, 2024. There have been no material changes to our market risk during the three months ended November 28, 2024.

An evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, the principal executive officer and principal financial officer concluded that those disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer, to allow timely decisions regarding disclosure.

During the first quarter of 2025, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a discussion of legal proceedings, see “Part I. Financial Information – Item 1. Financial Statements – Notes to Consolidated Financial Statements – Contingencies” and “Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q.

SEC regulations require disclosure of certain proceedings related to environmental matters unless we reasonably believe that the related monetary sanctions, if any, will be less than a specified threshold. We use a threshold of $1 million for this purpose.

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In addition to the factors discussed elsewhere in this Form 10-Q, this section discusses important factors which could cause actual results or events to differ materially from those contained in any forward-looking statements made by us. The order of presentation is not necessarily indicative of the level of risk that each factor poses to us. Any of these factors could have a material adverse effect on our business, results of operations, financial condition, or stock price. Our operations could also be affected by other factors that are presently unknown to us or not considered significant.

Risk Factor Summary

Risks Related to Our Business, Operations, and Industry

• volatility in average selling prices of our products;

• a range of factors that may adversely affect our gross margins;

• our international operations, including geopolitical risks;

• the highly competitive nature of our industry;

• our ability to develop and produce new and competitive memory and storage technologies and products;

• realizing expected returns from capacity expansions;

• achieving or maintaining certain outcomes and the compliance requirements associated with incentives from various governments;

• availability and quality of materials, supplies, electrical power, water, and capital equipment, or dependency on third-party service providers;

• a downturn in regional or worldwide economies;

• disruptions to our manufacturing process from operational issues, natural disasters, or other events;

• dependency on certain customers, including international customers, and end markets;

• products that fail to meet specifications, are defective, or are incompatible with end uses;

• breaches of our security systems or products, systems failures, interruptions, delays in service, catastrophic events, and resulting interruptions of our systems or those of our customers, suppliers, or business partners;

• uncertainties and outcomes associated with the use and evolution of AI;

• attracting, retaining, and motivating highly skilled employees;

• responsible sourcing requirements and related regulations;

• environmental, social, and governance expectations or standards;

• acquisitions and/or alliances; and

• restructure plans may not realize expected savings or other benefits.

Risks Related to Intellectual Property and Litigation

• protecting our intellectual property and retaining key employees who are knowledgeable of and develop our intellectual property;

• legal, regulatory and administrative investigations, inquiries, proceedings, and claims; and

• claims that our products or manufacturing processes infringe or otherwise violate the intellectual property rights of others or failure to obtain or renew license agreements covering such intellectual property.

Risks Related to Laws and Regulations

• impacts of government actions and compliance with tariffs, trade restrictions, and/or trade regulations;

• tax expense and tax laws in key jurisdictions; and

• compliance with laws, regulations, or industry standards, including environmental considerations.

Risks Related to Capitalization and Financial Markets

• our ability to generate sufficient cash flows or obtain access to external financing;

• our debt obligations;

• changes in foreign currency exchange rates;

• counterparty default risk;

• volatility in the trading price of our common stock; and

• fluctuations in the amount and frequency of our common stock repurchases and payment of cash dividends and resulting impacts.

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Risks Related to Our Business, Operations, and Industry

Volatility in average selling prices for our semiconductor memory and storage products may adversely affect our business.

We have experienced significant volatility in our average selling prices and may continue to experience such volatility in the future. In the past five years, annual percentage changes in DRAM average selling prices have ranged from plus low-teen percentage range to a minus high-40% range. In the past five years, annual percentage changes in NAND average selling prices have ranged from plus low-30% to a minus low-50% range. In some prior periods, average selling prices for our products have been below our manufacturing costs and we may experience such circumstances in the future. Average selling prices for our products that decline faster than our costs have recently had an adverse effect on our business and results of operations, and in future periods could have a material adverse effect on our business, results of operations, or financial condition.

Our gross margins may be adversely affected by a range of factors.

In addition to the impact of our average selling prices, our gross margins are dependent, in part, upon continuing decreases in per gigabit manufacturing costs achieved through improvements in our manufacturing processes and product designs. Factors that may limit our ability to reduce our per gigabit manufacturing costs at sufficient levels to prevent deterioration of or improve gross margins include, but are not limited to:

• strategic product diversification decisions affecting product mix;

• increasing complexity of our product portfolio, which may impact operational costs;

• increasing complexity of manufacturing processes;

• difficulties in transitioning to smaller line-width process technologies or additional 3D memory layers or NAND cell levels;

• process complexity including number of mask layers and fabrication steps;

• manufacturing yield and defect density;

• technological barriers;

• changes in process technologies;

• new products that may require relatively larger die sizes or advanced packaging technologies;

• start-up or other costs associated with capacity expansions;

• higher costs of goods and services due to inflationary pressures or market conditions; and

• higher manufacturing costs per gigabit due to fabrication facility underutilization, lower wafer output, and insufficient volume to run new technology nodes to achieve cost optimization.

Many factors may result in a reduction of our output or a delay in ramping production, which have in the past and could in the future lead to underutilization of our production assets. These factors may include, among others, a weak demand environment, industry oversupply, inventory surpluses, difficulties in ramping emerging technologies, supply chain disruptions, and delays from equipment suppliers. A significant portion of our manufacturing costs are fixed and do not vary proportionally with changes in production output. As a result, lower utilization, lower wafer output, and corresponding increases in our per gigabit manufacturing costs could result in higher inventory carrying costs, and have had, and may continue to have, an adverse effect on our gross margins, business, results of operations, or financial condition.

We have a broad portfolio of products to address our customers’ needs, which span multiple market segments and are subject to rapid technological changes. Our manufacturing costs on a per gigabit basis vary across our portfolio as they are largely influenced by the technology node in which the solution was developed. We strive to balance our demand and supply for each technology node, but the dynamics of our markets and our customers can create periods of imbalance, which can lead us to carry elevated inventory levels. Consequently, we may incur charges in connection with obsolete or excess inventories, or we may not fully recover our costs, which would reduce our gross margins. For example, in 2023, we recorded aggregate charges of $1.83 billion to write down the carrying value of our inventories to their estimated net realizable value. In addition, due to the customized nature of certain products we manufacture, we may be unable to sell certain finished goods inventories to altern

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Securities Trading Plans of Directors and Executive Officers

The following director and officers, as defined in Rule 16a-1(f) of the Exchange Act, adopted a “Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K, as follows:

On October 17, 2024, April Arnzen, our Executive Vice President and Chief People Officer, adopted a Rule 10b5-1 trading arrangement providing for the sale of an aggregate of up to 60,000 shares of our common stock. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The first date that sales of any shares are permitted to be sold under the trading arrangement is March 25, 2025, and subsequent sales under the trading arrangement may occur on a regular basis for the duration of the trading arrangement until December 31, 2025, or earlier if all transactions under the trading arrangement are completed.

On October 31, 2024, Scott DeBoer our Executive Vice President, Chief Technology and Products Officer, adopted a Rule 10b5-1 trading arrangement providing for the sale of an aggregate of up to 63,047 shares of our common stock. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The first date that sales of any shares are permitted to be sold under the trading arrangement is January 30, 2025, and subsequent sales under the trading arrangement may occur on a regular basis for the duration of the trading arrangement. The trading arrangement will terminate no less than one year from the date the plan is entered into, or the completion of all trades set forth under the trading arrangement.

On November 6, 2024, Mary Pat McCarthy, a Director on our Board of Directors, adopted a Rule 10b5-1 trading arrangement providing for the sale of an aggregate of up to 9,616 shares of our common stock.The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The first date that sales of any shares are permitted to be sold under the trading arrangement is February 5, 2025, and subsequent sales under the trading arrangement may occur on a regular basis for the duration of the trading arrangement until November 14, 2025, or earlier if all transactions under the trading arrangement are completed.

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No other directors or officers, as defined in Rule 16a-1(f), adopted and/or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K, during the last fiscal quarter.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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