Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

			First Quarter						Fourth Quarter						First Quarter
			2025						2024						2024
Revenue			$	8,709		100		%	$	7,750		100		%	$	4,726		100		%
Cost of goods sold			5,361			62		%	5,013			65		%	4,761			101		%
Gross margin			3,348			38		%	2,737			35		%	(35)			(1)		%
Research and development			888			10		%	903			12		%	845			18		%
Selling, general, and administrative			288			3		%	295			4		%	263			6		%
Other operating (income) expense, net			(2)			—		%	17			—		%	(15)			—		%
Operating income (loss)			2,174			25		%	1,522			20		%	(1,128)			(24)		%
Interest income (expense), net			(11)			—		%	(5)			—		%	—			—		%
Other non-operating income (expense), net			(11)			—		%	(7)			—		%	(27)			(1)		%
Income tax (provision) benefit			(283)			(3)		%	(623)			(8)		%	(73)			(2)		%
Equity in net income (loss) of equity method investees			1			—		%	—			—		%	(6)			—		%
Net income (loss)			$	1,870		21		%	$	887		11		%	$	(1,234)		(26)		%

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

			First Quarter						Fourth Quarter						First Quarter
			2025						2024						2024
CNBU			$	4,395		50		%	$	3,018		39		%	$	1,737		37		%
SBU			1,731			20		%	1,681			22		%	653			14		%
MBU			1,527			18		%	1,875			24		%	1,293			27		%
EBU			1,052			12		%	1,172			15		%	1,037			22		%
All Other			4			—		%	4			—		%	6			—		%
			$	8,709					$	7,750					$	4,726

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

			First Quarter						Fourth Quarter						First Quarter
			2025						2024						2024
CNBU			$	1,711		39		%	$	907		30		%	$	(397)		(23)		%
SBU			347			20		%	269			16		%	(490)			(75)		%
MBU			327			21		%	509			27		%	(687)			(53)		%
EBU			11			1		%	66			6		%	10			1		%
All Other			(2)			(50)		%	(6)			(150)		%	4			67		%
			$	2,394					$	1,745					$	(1,560)

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:

			First Quarter			Fourth Quarter			First Quarter
			2025			2024			2024
Income (loss) before taxes			$	2,152		$	1,510		$	(1,155)
Income tax (provision) benefit			(283)			(623)			(73)
Effective tax rate			13.2		%	41.3		%	(6.3)		%

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

Three months ended			November 28, 2024			November 30, 2023
Net cash provided by operating activities			$	3,244		$	1,401
Net cash provided by (used for) investing activities			(3,148)			(1,558)
Net cash provided by (used for) financing activities			(422)			(352)
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash			(29)			(1)
Net increase (decrease) in cash, cash equivalents, and restricted cash			$	(355)		$	(510)

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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