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

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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

In the second quarter of 2025, DRAM revenue declined slightly from the prior quarter primarily due to customer actions in consumer-oriented markets to reduce inventories, which was partially offset by continued strength in data center markets, particularly for HBM products. Demand for leading-edge DRAM remains strong, driven by HBM and other data center DRAM. We have 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. In 2024 and the first quarter of 2025, we experienced substantial improvements in revenue, pricing, and margins from 2023 reflecting demand growth, driven in part by deployment of AI, which combined with industry-wide supply discipline, resulted in a substantially improved industry supply and demand balance.

In the second quarter of 2025, NAND revenue declined due to lower storage growth by data center customers after several quarters of strong investments and pricing pressure in consumer-oriented markets as customers worked to reduce inventories to align with demand in their end markets. We continue to prudently manage our NAND supply, including the levels of our capital investment, the pace of ramp of our new technology node, and fab utilization consistent with our demand growth. Throughout 2024, we experienced substantial improvements in pricing and margins for NAND from 2023.

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Results of Operations

Consolidated Results

Second QuarterFirst QuarterSecond QuarterSix months ended
20252025202420252024
Revenue$8,053100%$8,709100%$5,824100%$16,762100%$10,550100%
Cost of goods sold5,09063%5,36162%4,74581%10,45162%9,50690%
Gross margin2,96337%3,34838%1,07919%6,31138%1,04410%
Research and development89811%88810%83214%1,78611%1,67716%
Selling, general, and administrative2854%2883%2805%5733%5435%
Other operating (income) expense, net7—%(2)—%(224)(4)%5—%(239)(2)%
Operating income (loss)1,77322%2,17425%1913%3,94724%(937)(9)%
Interest income (expense), net(4)—%(11)—%(14)—%(15)—%(14)—%
Other non-operating income (expense), net(11)—%(11)—%(7)—%(22)—%(34)—%
Income tax (provision) benefit(177)(2)%(283)(3)%62211%(460)(3)%5495%
Equity in net income (loss) of equity method investees2—%1—%1—%3—%(5)—%
Net income (loss)$1,58320%$1,87021%$79314%$3,45321%$(441)(4)%

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

Total revenue for the second quarter of 2025 decreased 8% as compared to the first quarter of 2025 primarily due to decreases in sales of both DRAM and NAND products.

  • Sales of DRAM products decreased 4% primarily due to a high-single-digit percent range decrease in bit shipments, partially offset by a mid-single-digit percent range increase in average selling prices driven by an increased mix of HBM and other data center products.

  • Sales of NAND products decreased 17% primarily due to a high-teens percent range decrease in average selling prices due to industry conditions and a mix shift to consumer-oriented products, partially offset by modestly higher bit shipments.

Total revenue for the second quarter of 2025 increased 38% as compared to the second quarter of 2024 primarily due to increases in sales of both DRAM and NAND products.

  • Sales of DRAM products increased 47% primarily due to a mid-50% range increase in average selling prices, partially offset by decreases in bit shipments in the mid-single-digit percent range.

  • Sales of NAND products increased 18% primarily due to a mid-teens percent range increase in bit shipments and a low-single-digit percent range increase in average selling prices.

Total revenue for the first six months of 2025 increased 59% as compared to the first six months of 2024 due to increases in both DRAM and NAND sales.

  • Sales of DRAM products increased 65% primarily due to a mid-60% range increase in average selling prices.

  • Sales of NAND products increased 46% primarily due to a low-30% range increase in average selling prices and an approximate 10% increase in bit shipments.

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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 decreased to 37% for the second quarter of 2025 from 38% for the first quarter of 2025, primarily due to a decrease in margins for NAND products, partially offset by an improvement in margins for DRAM products. NAND margins declined primarily due to decreases in average selling prices and a mix shift to consumer-oriented products. DRAM margins improved primarily due to an increased mix of HBM and other data center products. Our consolidated gross margin percentage improved to 37% for the second quarter of 2025 from 19% for the second quarter of 2024 and improved to 38% for the first six months of 2025 from 10% for the first six months of 2024. Improvements in our consolidated gross margins for the second quarter and first six months of 2025 as compared to corresponding periods of 2024, were primarily due to increases in average selling prices for both DRAM and NAND, manufacturing cost reductions for NAND, and an increased mix in sales to high-margin cloud products, particularly HBM. Our consolidated gross margin for the second quarter and first six months of 2024 reflected $382 million and $987 million, respectively, of benefit due to lower costs from the sale of inventories written down to their net realizable value in 2023.

Revenue by Business Unit

Second QuarterFirst QuarterSecond QuarterSix months ended
20252025202420252024
CNBU$4,56457%$4,39550%$2,18538%$8,95953%$3,92237%
SBU1,39217%1,73120%90516%3,12319%1,55815%
MBU1,06813%1,52718%1,59827%2,59515%2,89127%
EBU1,02513%1,05212%1,11119%2,07712%2,14820%
All Other4—%4—%25—%8—%31—%
$8,053$8,709$5,824$16,762$10,550

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

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

  • CNBU revenue increased 4% primarily due to higher sales of HBM products, which increased more than 50%.

  • SBU revenue decreased 20% primarily due to lower storage investments by data center customers after several quarters of very strong growth, and overall NAND industry pricing declines.

  • MBU revenue decreased 30% primarily due to decreases in bit shipments, as mobile customers managed inventories lower, and declines in average selling prices for both mobile DRAM and NAND.

  • EBU revenue decreased 3% primarily due to decreases in automotive sales as customers managed inventories lower.

Changes in revenue for each business unit for the second quarter and the first six months of 2025 as compared to the corresponding periods of 2024 were as follows:

  • CNBU revenue increased 109% and 128%, respectively, primarily due to increases in average selling prices and bit shipments driven by improved demand, particularly in cloud server markets, including HBM.

  • SBU revenue increased 54% and 100%, respectively, primarily due to increases in bit shipments and average selling prices for NAND.

  • MBU revenue decreased 33% and 10%, respectively, primarily due to decreases in bit shipments partially offset by increases in DRAM average selling prices.

  • EBU revenue decreased 8% and 3%, respectively, primarily due to decreases in DRAM bit shipments and declines in average selling prices for NAND, partially offset by increases in NAND bit shipments.

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Operating Income (Loss) by Business Unit

Second QuarterFirst QuarterSecond QuarterSix months ended
20252024202420252024
CNBU$1,91942%$1,71139%$281%$3,63041%$(369)(9)%
SBU242%34720%(217)(24)%37112%(707)(45)%
MBU606%32721%(9)(1)%38715%(696)(24)%
EBU3—%111%(1)—%141%9—%
All Other125%(2)(50)%2184%(1)(13)%2581%
$2,007$2,394$(178)$4,401$(1,738)

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 second quarter of 2025 as compared to the first quarter of 2025 were as follows:

  • CNBU operating income increased primarily due to increases in high-value HBM products.

  • SBU operating income decreased primarily due to declines in average selling prices.

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

  • EBU operating income decreased primarily due to declines in average selling prices and lower DRAM bit shipments, partially offset by higher NAND bit shipments and manufacturing cost reductions.

Changes in operating income or loss for each business unit for the second quarter and the first six months of 2025 as compared to the corresponding periods of 2024 were as follows:

  • CNBU operating income (loss) improved primarily due to increases in average selling prices and high-value HBM products.

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

  • MBU operating income (loss) improved primarily due to increases in DRAM average selling prices and manufacturing cost reductions.

  • EBU operating income (loss) was relatively unchanged.

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 second quarter of 2025 were relatively unchanged as compared to the first quarter of 2025. R&D expenses for the second quarter and first six months of 2025 increased 8% and 6%, respectively, as compared to the corresponding periods of 2024 primarily due to an increase in employee compensation and subcontractor expense, partially offset by lower volumes of development and prequalification wafers.

Selling, General, and Administrative: SG&A expenses for the second quarter of 2025 were relatively unchanged as compared to the first quarter of 2025. SG&A expenses for the second quarter and first six months of 2025 increased 2% and 6%, respectively, as compared to the corresponding periods of 2024 primarily due to an increase in employee compensation.

Other Operating (Income) Expense, Net: See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Other Operating (Income) Expense, Net.”

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

Second QuarterFirst QuarterSecond QuarterSix months ended
20252025202420252024
Income (loss) before taxes$1,758$2,152$170$3,910$(985)
Income tax (provision) benefit(177)(283)622(460)549
Effective tax rate10.1%13.2%(365.9)%11.8%55.7%

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. Applying this updated rate to our year-to-date earnings resulted in the tax benefit of $622 million recognized in the second quarter of 2024.

The change in our effective tax rate for the second quarter of 2025 as compared to the second quarter of 2024 was primarily due to changes in profitability and the aforementioned calculation of our tax expense in the second quarter of 2024. The change in our effective tax rate for the first six months of 2025 as compared to the first six months of 2024 was primarily due to changes in profitability. The change in our effective tax rate for the second quarter of 2025 as compared to the first quarter of 2025 was primarily due discrete items related to tax return filings.

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 $171 million (benefiting our diluted earnings per share by $0.15) for the second quarter of 2025, $212 million (benefiting our diluted earnings per share by $0.19) for the first quarter of 2025, and $383 million (benefiting our diluted earnings per share by $0.34) for the first six months of 2025, respectively. As a result of the low level of profitability and geographic 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 $9.59 billion as of February 27, 2025, 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 February 27, 2025, $2.12 billion of our cash and marketable investments was held by our foreign subsidiaries.

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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 February 27, 2025, $2.50 billion was available to draw under our existing credit facility. On March 12, 2025, we terminated our existing undrawn credit facility and entered into a new five-year unsecured Revolving Credit Facility and increased our borrowing capacity. Under the Revolving Credit Facility, we can draw up to $3.50 billion. 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. 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 February 27, 2025, we had purchase obligations of approximately $1.73 billion for the acquisition of property, plant, and equipment, substantially all of which 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.”

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 are expanding our production capacity in Taiwan for DRAM and HBM products to meet rising market demand. 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. Construction is progressing on the expansion of 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. In January 2025, we broke ground on an HBM advanced packaging facility in Singapore to meaningfully expand our total advanced packaging capacity beginning in calendar 2027.

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 February 27,

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2025, 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 March 20, 2025, our Board of Directors declared a quarterly dividend of $0.115 per share, payable in cash on April 15, 2025, to shareholders of record as of the close of business on March 31, 2025. 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.

Cash Flows

Six months endedFebruary 27, 2025February 29, 2024
Net cash provided by operating activities$7,186$2,620
Net cash provided by (used for) investing activities(6,300)(2,709)
Net cash provided by (used for) financing activities(326)(458)
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash(49)(8)
Net increase (decrease) in cash, cash equivalents, and restricted cash$511$(555)

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

Investing Activities: For the first six months of 2025, net cash used for investing activities consisted primarily of $7.26 billion of expenditures for property, plant, and equipment; partially offset by $1.03 billion received from government incentives to offset capital expenditures and $58 million of net inflows from maturities, sales, and purchases of available-for-sale securities.

For the first six months of 2024, net cash used for investing activities consisted primarily of $3.18 billion of expenditures for property, plant, and equipment; partially offset by $234 million received from government incentives to offset capital expenditures and $261 million of net inflows from maturities, sales, and purchases of available-for-sale securities.

Financing Activities: For the first six months of 2025, net cash used for financing activities consisted primarily of $2.63 billion of repayments of debt, which included the prepayment of the 2026 Notes, 2026 Term Loan A, and 2027 Term Loan A borrowings; and $261 million for payments of dividends to shareholders; partially offset by $1.68 billion of proceeds from the issuance of the 2029 Term Loan A and approximately $1.00 billion of proceeds from the issuance of the 2035 Notes. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Debt.”

For the first six months of 2024, net cash used for financing activities consisted primarily of $1.10 billion of repayments of debt, which included the prepayment of the 2024 Term Loan A and a portion of the 2025 Term Loan A borrowings; $256 million for payments of dividends to shareholders; and $82 million of payments on equipment purchase contracts; partially offset by approximately $1.00 billion of proceeds from the issuance of the 2031 Notes.

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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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