MICRON TECHNOLOGY INC — Call Transcript 2026

Ladies and gentlemen, thank you for joining us, and welcome to Micron's post earnings analyst call. After the speaker presentation, we will host a question-and-answer session. I will now hand the conference over to Satya Kumar, Corporate Vice President of Investor Relations and Treasury. Satya, please go ahead. Thank you. Welcome to Micron Technology's fiscal third quarter 2026 post earnings analyst call. On the call with me today are Sumit Sadana, Micron's Chief Business Officer; Manish Bhatia, EVP of Global Operations; and Mark Murphy, our CFO. As a reminder, the matters we're discussing today include forward-looking statements regarding market demand and supply, market trends and drivers, and our expected results and guidance, and other matters. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer you to documents we have filed with [SEC], including our most recent Form 10-K and upcoming Form 10-Q, for a discussion of risks that may affect our results. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future levels of activity, performance, and achievements. We are under no duty to update any of the forward-looking statements or to conform these statements to actual results. We can now open up the call for Q&A. We will now begin the question-and-answer session. If you would like to ask a question, press star one to raise your hand. To withdraw your question, press star one again. Your first question comes from the line of Ben Reitzes of Melius Research. Your line is open. Please go ahead. Thanks a lot. It's great to be speaking with you. Mark, looking at the numbers here for the next quarter, free cash flow is going to be somewhere around $30+ billion. I just want to make sure really the buy side and investors understand what you're saying here with regard to cash return. You're saying 100% will go back to shareholders. I assume the vast majority of that is in buyback. If you go from $30 billion in free cash flow and grow it, you could buy back 10% of the company next calendar year. Just basically, if we say that something close to this quarter is what you do next year. Are you prepared to do that and buy back at that level? I just want to have you react to the math and the commentary. At a $1.2 trillion market cap, that's where it is, 10% of the company. I just want to make sure that you can react to that. Thanks. Sure, Ben, thanks for the question. We're really pleased with the financial trajectory of the business. The combination of memory being so important to so many markets, AI data center, the edge, enabling this or helping enable this technology revolution we have underway. When we've got between our technology products and manufacturing performance, we are delivering record cash flow numbers. The last two quarters, we've generated as much as the company's history. We expect, as you point out, that cash flow growth will increase in the fourth quarter. We've paid down quite a bit of debt over the past year, and cash will build, and we will maintain levels of cash that we feel comfortable that we can invest through all seasons in the business. As you heard today, we feel good about the durability of the performance of the business, given the secular growth demand drivers, the need for more and higher performance memory, the structural supply challenges that we've talked about the last couple of years, node migration yielding less, HBM soaking up more wafers, and the need for greenfield for incremental wafer capacity. We have these Strategic Customer Agreements, which we announced today, a meaningful number of these, and we expect more. We will hold what we believe is appropriate excess cash. We've always said that we intend to grow the dividend over time. You saw us do a 30% increase recently, but the principal capital return we have will be share repurchase. I said today in the prepared remarks that we intend to increase our capital return from December 9th, which is the second anniversary of our CHIPS agreement signature. The rate and pace from there will determine based on a number of factors. Absolutely committed to capital return. Thanks. Do you think I could sneak in one more? We're really pleased to see 40% and eventually 1/2 of your business on SCAs. I cover Apple, and they've never made a comment, basically, that they're willing to pay full price for a component and pass it through to customers ever publicly. To me, it was an advertisement that they are open for business, for full price DRAM, let's put it that way. Are you tempted to do a lot more in DRAM? Given these conditions, do we think that there's an appetite for maybe a higher mix than expected of DRAM, which obviously would then keep maybe some of the SCAs lower, but for very good reason? Thanks. When you say higher mix of DRAM, you mean versus what? Versus HBM, versus NAND, whatever you're making decisions around. Commodity DRAM to consumer would certainly not be on SCAs as much as a hyperscaler would, I would think. Just a couple of thoughts around that. As you know, our mix in our business of DRAM versus NAND, DRAM inclusive of HBM, tends to be oscillating between the 80% DRAM:20% NAND, to maybe 75% DRAM:20% NAND, kind of is in that type range. We are pretty comfortable with that mix of DRAM versus NAND. We intend to obviously, focus on and service customers in both of those product categories. As it relates to HBM, we have made a strategic decision that we have also communicated over time that our goal is to have our HBM share consistent over time with our DRAM share. Our intention is that we support our customers on HBM and also support our customers on the non-HBM portion of the DRAM business across all market segments. We definitely believe in the strength of diversity. If you look at the AEBU business and the MCBU business, both of which are non-data center businesses in our business unit structure, that's almost at 40% of our company revenue. We like that diversity, and we continue to focus on ensuring that we are servicing customers and their demand, and supporting their growth, across all of the market segments, including non-HBM DRAM, HBM, as well as NAND. Got it. Thanks a lot. Great quarter. Thank you. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Please limit yourself to one question and one follow-up. Your next question comes from the line of Harlan Sur with JPMorgan. Your line is open. Please go ahead. Good afternoon. Thanks for hosting this call back. I think it was September of last year when the Micron team said that they were booked out through calendar 2026 on HBM3, HBM3E. Obviously, at that time, the team was still in qual and eval on HBM4. If you fast-forward to now, and with a stronger, especially XPU ASIC demand profile, is the team already booked up volume and pricing for HBM3E and HBM4 for calendar 2027? Obviously, understand you still need to go through qual on HBM4E. Are you booked up on current gen HBM3E and HBM4 for calendar 2027? Hi, Harlan. The demand that we have for our HBM products - HBM3E, HBM4 and of course, even ahead of the HBM4E quals - the asks from our customers for volume, not just in 2027— but as you know, due to these SCA agreements, one huge advantage of these SCA agreements is we have been discussing these demand requests from customers for multiyear time horizon. If we look at this multiyear time horizon, even going beyond 2027, into 2028, et cetera, we are able to get very high confidence demand from our customers that is far in excess of our ability to support using our supply. The demand continues to be well above our supply. Even when we do these SCAs for multiple years, these SCAs contain volumes that are less than customers would actually like to sign up for. In fact, in a lot of these negotiations, we spend a lot of time helping customers understand that this is all we can do in this timeframe. Absolutely, our demand for HBM, not just in 2027, but even 2028, is well above our ability to supply across all the different HBM flavors. Right. The same thing is also true, by the way, for non-HBM DRAM, as well. It's in the same category. Harlan, it's Mark. Hi. Maybe just something to add while we're on HBM. Today, we indicated that we expected market tightness to continue beyond 2027. Part of that reason is we did see the HBM TAM increase. We saw that. We had said previously that it would cross $100 billion in 2028. We see that now, the HBM TAM easily crossing $100 billion in 2027. That's great color. Thank you for that. The other thing I wanted to ask is, it's actually been over a year since the team has given us an update on your midterm to long-term view on industry DRAM and NAND bit demand growth. Obviously, much has changed over the past 12 months. Inferencing workloads have crossed over training workloads, inferencing workloads themselves continue to evolve and become more complex. On the server CPU side, the CPU customers are now forecasting 30%-40% per year CAGRs given agentics like higher CPU intensity. I'm sure the mid to long-term bit demand CAGR is also sort of guiding the discussions on these multiyear SCAs. Could you guys just give us an update on your midterm views on DRAM and NAND bit demand CAGRs over the next call it few years? That's a good question. We have provided some updates to you on how we see 2026 bit demand forecasts change versus what we had provided earlier, with DRAM forecasts up a little bit, NAND relatively similar. The reason we are not really providing a lot of forward-looking views on the CAGRs is because for the foreseeable future, the shipment growth for bits is not really determined by demand anymore. It's actually more determined by the supply. The demand is so much above the industry's ability to supply, that the supply growth, in fact, is going to determine how the shipping growth occurs, far less so the demand growth because of this relative position with the supply. Because of that, we are trying to point out what kind of growth trajectory we believe. We give you some kind of data points here and there around how we think this year's supply growth or demand growth is going to be next year. We are not providing sort of an outlook too much further down because how the supply conditions change, we are continuing to constantly evaluate, but our expectation is that the supply growth will continue to remain short of what is needed to meet the demand. We don't really see when the supply is going to be able to meet demand. That is not something we are able to project at this time. Got it. Thank you. Your next question comes from the line of Tom O'Malley with Barclays. Your line is open. Please go ahead. I just wanted to go back to the long-term agreements that you were signing. Is there any way to kind of walk us through what happens if a customer was to cancel the agreement? What financial hooks do you have in it? Do you get to keep all the cash from the agreement? Just any color that you can add there would be helpful. Sure. I'll start by saying that these Strategic Customer Agreements or SCAs cannot be canceled. There is no provision in this agreement to enable a customer or allow a customer to walk away from this agreement. These are designed to be take-or-pay agreements. Outside of automotive, generally, these are five-year agreements. There are annual volume commitments for each of those years, and the take-or-pay means that whether they want to purchase the bits or not, they are obligated to pay for the price times the volume. The price itself for a lot of these large agreements has a price band. There is a price ceiling and a price floor. The price gets negotiated every quarter based on market conditions. The price cannot exceed the ceiling no matter what, cannot go below the floor no matter what. Consequently, the value of these agreements can be readily determined. There are also premiums in the agreement for products that may be more sophisticated, higher performance, higher capacities, newer products like, for example, when we do LPDDR6 versus LPDDR5 or DDR6 versus DDR5 or a new version of HBM, then there are provisions for those products to be priced differently at a premium to the existing products. We have all of those provisions. The one provision that doesn't exist is any customer's ability to walk away from these agreements. Beyond the take-or-pay related obligations that exist in these agreements and its financial obligations that are price times volume, there is also this upfront cash deposit that these agreements entail where customers have provided, in the form of upfront cash deposit and related financial commitments, like a letter of credit, for example, for a minority of the total, that even for the agreements we have already signed, these 16 agreements aggregates to $22+ billion in terms of total cash and related financial commitments, of which the cash alone is almost $18 billion. You can imagine that when we get to our target numbers of agreements, which will go from the roughly 20% DRAM bits, roughly 1/3 of NAND bits, all the way to roughly accounting for 1/2 of the company's revenue, which is what we are likely to end up at, or somewhat more. You can imagine that the cash associated with all of those will significantly increase from the current $22 billion number. That cash is our customers' commitment to this new business model. That's how the structure of these agreements are. Thank you. That's helpful. Just for my follow-up question. I wanted to clarify on the cash deposits. It was my understanding that towards the end of the agreement, you end up returning those back to the customers. The general question is, any strategic rationale for receiving those upfront and being able to use that at will, like any plans with that cash, and just any way to think through why it ends up getting returned back to customers instead of just being recognized as part of the revenue that you end up selling them in the agreement? Thank you. Our customers are going to, as per the terms of the agreement, be purchasing the volumes over the years. The cash is sort of a contingency, and a show of good faith and confidence in this new business model from our customers. Meaning in the unlikely event that a customer is unable to purchase or does not purchase the volume at the price as determined by the terms of the agreement, then we do have the right to be able to decrement the cash balance that ultimately will get returned to them as one available remedy, but not the only available remedy. None of this ultimately relieves the customers of the liability of having to purchase the volumes over the term of the agreement at the agreed-upon prices. The cash is just one of the elements of the overall transaction. The cash doesn't get returned all in one shot at the end of the term. It gets returned over a period of time with the return of the cash weighted towards the second half of the term of the agreement. Thank you. Your next question comes from the line of Melissa Weathers of Deutsche Bank. Your line is open. Please go ahead. Hi there. Thank you for taking my questions. I wanted to ask on the non-HBM side of DRAM within the data center. You guys have talked a lot about SOCAMM and using low-power DRAM for data center applications, and especially as we see the mix of server CPUs increase with agentic AI. I was hoping you could give an update on how you guys are seeing the growth in demand for SOCAMM attach and what kind of trends are you seeing in adoption there. Sure, Melissa. Agentic AI, as you noted, drives a lot of growth in CPU demand and CPU-based servers. That is certainly a trend that we are seeing. These CPU-based servers are coming from multiple different suppliers. You're seeing a lot of companies announce products targeted towards the data center for CPUs. You have x86-based CPUs. You have CPUs from NVIDIA. Qualcomm announced a CPU. There's lots of different possibilities for types of CPUs that could be used in the data center over time to drive the use of agentic AI. We have CPUs that use DDR5, as well as plans from our customers to increase the use of LPDRAM in the data center. When LPDRAM gets used, it will be in the SOCAMM form factor. As you know, Micron has been a pioneer. We were first in the industry to not just drive the usage of LPDRAM, we were, for the longest time, sole sourced on LPDRAM in the data center. We were also the pioneers in bringing out new products, first to market with the SOCAMM form factor. We continue to expect that this is going to be an area of differentiation for us with our customers and be a recognized leader in this space. We have market leadership in all of these products. We have really strong engagement with customers who intend to use LPDRAM as a way of reducing the power consumption, increasing the performance, and even reducing the footprint of some memory. Certainly these SOCAMMs help do all of that. There are RAS-related complications - reliability, availability, and serviceability-related complications - that have to be worked through for LPDRAM, because LPDRAM was not really designed for data centers. That's where we are bringing in differentiation and helping our customers deal with that. We expect LPDRAM to grow over time as a percent of consumption of DRAM in the data center, we expect to be leaders in that front. Thank you. Maybe one for, I don't know if it's Manish or Mark, but as we think about Idaho One, Tongluo, Idaho Two, as we think about these greenfield fabs starting to have wafer outs in next year and the year after that, can you remind us how should we think about the impact of startup costs or just the incremental impact on cost per bit that we should be flowing through as those greenfield fabs come online? I'll let Mark handle the technical question on the startup cost accounting. We did say, Melissa, on this call that, given the industry-wide trend towards higher performance solutions such as HBM and even within the HBM category, higher trade ratio is expected in the future with HBM—which obviously requires more silicon per bit versus traditional DRAM—as well as with greenfield build-out, which doesn't get the same leverage on existing capacity as our traditional technology transition models for the industry have. Both of these trends to higher performance—as well as greenfield investments that take time to ramp scale and are not as efficient—both of these are going to be trends that we expect will actually increase DRAM bit costs here in the near term. That was one thing that we did have in the prepared remarks. That goes for Idaho One, for Tongluo, for Idaho Two. Those are all elements of that greenfield build-out, and that's something that we expect will be an industry-wide phenomenon. Mark, you can comment. I think you've given some commentary before in terms of timing of the startup costs for facilities and how they'll impact the P&L. Melissa, as Manish mentioned, there are a number of factors that will bias the costs up in DRAM over time here. The trade ratios, as he mentioned, for HBM and actually LP, the greenfield facilities. To your question on startup, we've talked about this before. We begin to see startup costs more meaningfully begin here in the fourth quarter and then into the first half of next year. You'll see 2027 at elevated levels, think about $100 million, $200 million per quarter effect versus what we had seen at previous run rates. What that will be over time will just be a function, the various ramp profiles of fabs. As you point out, Tongluo and Idaho One are the first to go here. We provided more color on this, I think it was maybe at the end of maybe 2024, beginning of 2025, because it was a more material effect to the business at that time. I think I had said at the time, maybe 0.5 point-1+ point of margin effect. Today, with the size of the business, this effect is much reduced from before. Obviously, the faster we can get capacity on, which we're obviously trying to do for our customers to get much needed supply. The benefit of that incremental bits is going to outweigh this incremental associated cost at startup. Thank you, guys. Your next question comes from the line of Vijay Rakesh with Mizuho. Your line is open. Please go ahead. Thanks for doing this call back. Sumit, Manish, and Mark, on the 16 SCAs that you announced, the four large customers, does it include any HBM? Do they include some of the major CSPs within that, or can you give us some more color? Sure. The SCAs that we have signed already do include some hyperscalers, where the purchasing for those hyperscalers requires HBM, that is part of the overall agreement. Got it. Then, just a quick follow-up on the $20 billion deposit. Is the intention that you hold it for the five-year contract period or as the customers buy the product, it's prorated and runs through it? If you could just clarify that. Thanks. I mean, it's not a prorated type of a thing. It is a customer cash deposit, it's not a prepaid revenue or things like that. It gets returned to customers on a predefined schedule that has been agreed to, that X amount will be returned in Y quarter over time. It is back-end loaded, in terms of the second half of the agreement term is when the bulk of the return of the customer deposit occurs. Of course, the cash would be returned, assuming it hasn't been decremented for reasons determined by the terms of the [agreement]. Got it. Thank you. Thank you. Your next question comes from the line of Jim Schneider with Goldman Sachs. Your line is open. Please go ahead. Thanks for taking my question. Just stepping back for a moment, as you've had discussions with your customers about their forecast demand needs, let's say through the end of fiscal 2028 or the end of calendar 2028, where do you think you will end up in terms of the percentage of the forecasted demand that they have in terms of your ability to supply? I mean, is it something that's going to be 70%, 90%? I guess, how do you expect that to close over time? Clearly, there is a gap between your ability to build facilities and where the demand is, but maybe give us a sense at a point in time what percentage that represents. I mean, there isn't a homogeneous percentage number that we can provide because our strategy is different for each segment of the market. Of course, we try to be very diversified, and we are very committed to supporting each of the segments of the market. As you can imagine, if the automotive industry can only do 50% or 70% of the units, then that would be a catastrophic problem for that portion of the market. We can't have a one-size-fits-all kind of an approach. There are a number of complex factors that go into the assessment of what kind of fulfillment rate would be appropriate for what kind of customer in what kind of segment, in what kind of geography. There are lots of different factors that play into that. With that said, I would say that the general sentiment amongst customers is that we are very short of their demand. For some customers, we are extremely short. Some of our supply numbers are a fraction of what they want. Then in other parts of the market, albeit smaller parts of the market that are super important sectors of the economy, like automotive and some critical parts like defense, aerospace, some important industrial markets, including medical equipment and so on. Obviously, we try to do our best to minimize the impact. I'm not saying that those customers get everything they want, but at least we try to minimize the impact that they are going through in this very challenging environment of tightness. Broadly speaking, the overall aggregate supply is substantially below the aggregate demand for both DRAM and NAND. Of course, DRAM is extremely constrained. HBM is very constrained. All the segments are seeing those challenges. Jim, it's Mark. If I could just add in this to build on Sumit's comments about supply efforts. As you heard, and you heard Manish talk about Idaho site and Tongluo, we're doing everything we can to bring up supply. You heard us today, between adding construction and tool installs in the fourth quarter here, we're increasing our fiscal 2026 CapEx number to around $27 billion. We're also going to increase substantially CapEx next year, and more than 1/2 of that increase will be construction. Now, we did provide some comments last quarter about the increase FY 2027. Based on our comments, you may have come up with numbers that are in the low to mid-40%, and we will be spending above that level as we look at it today. We'll do about $10 billion this quarter, and we will step up from there into 2027. Thanks. That was exactly where my next question was, which is, given that run rate sort of implies mid-40%, you said you're going to do above that, but I guess what are the chances you're going to do materially above 50%? Is something like 55% or 60% even in the cards? No. We're not going to give a CapEx number. If the number were that order of magnitude, I think we'd owe it to you to update you more specifically. We're going to run about $10 billion this quarter. We'll step up from there. We are going to be, I believe, higher than the mid-40%. We're going to remain extremely disciplined as we always are. The ops team's been amazing on figuring out how to sweat these assets that we have as much as possible and then accelerating all these greenfield capacity adds that we have. Manish here. We've mentioned a couple of times that the majority of the fiscal 2027 CapEx, Jim, is for construction, which kind of also gives you some indication of those construction dollars are not going to be producing bits in that time horizon, which is why we also talked about for us in the industry, the kind of greenfield capacity really starts to contribute to bits in calendar 2028. Even with that supply improvement, we don't see, as Sumit was saying earlier, an intercept for supply with demand. Very helpful call. Thank you all. Your final question comes from the line of Aaron Rakers of Wells Fargo. Your line is open. Please go ahead. Thanks for doing this call and taking the questions. I have one and one follow-up as well. On the SCAs, I know it was asked about HBM, but I'm curious about the NAND flash market. Obviously, that market seems to be further constrained. As you're engaging with your customers on these SCAs, is there a strategic advantage you're finding of having both NAND and DRAM in your portfolio competitively in these engagements? Is NAND pervasive across these SCAs or any context around that, particularly as it relates to enterprise SSDs? Sure. Our enterprise SSD momentum is exceptionally strong, and we provided you some data points on that with a $5 billion quarter in FQ3 for enterprise SSDs inside of the $25 billion overall data centers revenue for the quarter. Absolutely, we do feel really good about the fact that we have incredibly strong portfolio of products, both on the NAND and DRAM side. They, of course, stand on their own feet individually in terms of their capabilities. We have hit record share after record share of data center SSDs over time due to the strength of that portfolio. You know the strength of our DRAM portfolio, both in terms of HBM and non-HBM products. In terms of the levels of constraint, both DRAM and NAND are very constrained. Of course, when we talk to customers across this long horizon of time through the end of 2030 calendar year, which is the term of a lot of these large SCAs. They are definitely interested in getting their hands on NAND, but DRAM is certainly far more constrained, and more difficult to supply in the quantities and volumes that our customers need. Like I said, NAND is very constrained too, but the sense of concern and urgency in the minds of our customers around DRAM is very, very high. Very helpful. My final question on the competitive landscape, always trying to think about what vector could change some of the dynamics and the backdrop that we're talking very constructively about. I'm curious how you've evolved your thoughts around China and the competition from either be it CXMT or YMTC. Have you seen any changes on that front or anything you want to share, how you view the competitive landscape from that regard? Thank you. Sure. Certainly those two companies have grown over the years in terms of their capabilities and share. Most of their output, the overwhelming majority of their output tends to be sold within China. We haven't really seen much by way of their product or competition from them outside of China. With that said, we are very focused from a competitive perspective in driving really the highest performing, most complex products in the portfolio. When you look at NAND, we are focused on data center SSDs in a very single-minded way. You have seen us also do really well on QLC across client SSDs, but also in data center SSDs. We are the QLC leader in the world. We are leaders in Gen6, first company to come out with Gen6 drives and we advanced them in volume. When you look at that or you look at the highest capacity, 245 TB drives, we are a leader there. You have seen the strength of our DRAM portfolio as well, everything from HBM to high capacity DIMMs, to LPDRAM leadership in the data center, to mobile and client LP leadership in those markets as well. We could go on and on on that, but our focus is to look for these complex, difficult to get right type of products, get into deep customer engagements across multiple years, on the roadmap, gain their confidence in terms of being able to have a track record of meeting and beating time to market with the best specs in the industry, have a track record of innovation. You've seen how many nodes in a row of DRAM and NAND we have been first to market on, how many products are first to market across the board. Of course, I would be remiss to not mention that we have one of the best intellectual property portfolios in the world, almost 65,000 patents. We are very aggressive and have a great track record in defending our IP, over a number of years, a number of decades, in fact. Overall, we feel very good about where we are and the structural foundational changes in our business model that the combination of demand, the combination of structural supply challenges in the industry, and the place that AI is creating for memory and its newfound relevance and importance and strategic nature, and now combined with these SCAs are completely transformative for our business. Thank you. Thank you. This concludes today's call. Thank you for attending. You may now disconnect.

Speaker 8: Ladies and gentlemen, thank you for joining us, and welcome to Micron's post earnings analyst call. After the speaker presentation, we will host a question-and-answer session. I will now hand the conference over to Satya Kumar, Corporate Vice President of Investor Relations and Treasury. Satya, please go ahead. Ladies and gentlemen, thank you for joining us, and welcome to Micron's post earnings analyst call. ladies and gentlemen thank you for joining us and welcome to micron's post earnings analyst call After the speaker presentation, we will host a question- and- answer session. after the speaker presentation we will host a question- and- answer session I will now hand the conference over to Satya Kumar, Corporate Vice President of Investor Relations and Treasury. i will now hand the conference over to satya kumar corporate vice president of investor relations and treasury Satya, please go ahead. satya please go ahead

Speaker 9: Thank you. Welcome to Micron Technology's fiscal third quarter 2026 post earnings analyst call. On the call with me today are Sumit Sadana, Micron's Chief Business Officer; Manish Bhatia, EVP of Global Operations; and Mark Murphy, our CFO. As a reminder, the matters we're discussing today include forward-looking statements regarding market demand and supply, market trends and drivers, and our expected results and guidance, and other matters. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer you to documents we have filed with [SEC], including our most recent Form 10-K and upcoming Form 10-Q, for a discussion of risks that may affect our results. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future levels of activity, performance, and achievements. Thank you. thank you Welcome to Micron Technology's fiscal third quarter 2026 post earnings analyst call. welcome to micron technology's fiscal third quarter 2026 post earnings analyst call On the call with me today are Sumit Sadana, Micron's Chief Business Officer; Manish Bhatia, EVP of Global Operations; and Mark Murphy, our CFO. on the call with me today are sumit sadana micron's chief business officer manish bhatia evp of global operations and mark murphy our cfo As a reminder, the matters we're discussing today include forward-looking statements regarding market demand and supply, market trends and drivers, and our expected results and guidance, and other matters. as a reminder the matters we're discussing today include forward-looking statements regarding market demand and supply market trends and drivers and our expected results and guidance and other matters These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today We refer you to documents we have filed with [SEC], including our most recent Form 10-K and upcoming Form 10-Q, for a discussion of risks that may affect our results. we refer you to documents we have filed with [sec] including our most recent form 10-k and upcoming form 10-q for a discussion of risks that may affect our results Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future levels of activity, performance, and achievements. although we believe that the expectations reflected in the forward-looking statements are reasonable we cannot guarantee future levels of activity performance and achievements We are under no duty to update any of the forward-looking statements or to conform these statements to actual results. We can now open up the call for Q&A. We are under no duty to update any of the forward-looking statements or to conform these statements to actual results. we are under no duty to update any of the forward-looking statements or to conform these statements to actual results We can now open up the call for Q&A. we can now open up the call for q&a

Speaker 8: We will now begin the question-and-answer session. If you would like to ask a question, press star one to raise your hand. To withdraw your question, press star one again. Your first question comes from the line of Ben Reitzes of Melius Research. Your line is open. Please go ahead. We will now begin the question -and- answer session. we will now begin the question -and- answer session If you would like to ask a question, press star one to raise your hand. if you would like to ask a question press star one to raise your hand To withdraw your question, press star one again. to withdraw your question press star one again Your first question comes from the line of Ben Reitzes of Melius Research. your first question comes from the line of ben reitzes of melius research Your line is open. your line is open Please go ahead. please go ahead

Speaker 2: Thanks a lot. It's great to be speaking with you. Mark, looking at the numbers here for the next quarter, free cash flow is going to be somewhere around $30+ billion. I just want to make sure really the buy side and investors understand what you're saying here with regard to cash return. You're saying 100% will go back to shareholders. I assume the vast majority of that is in buyback. If you go from $30 billion in free cash flow and grow it, you could buy back 10% of the company next calendar year. Just basically, if we say that something close to this quarter is what you do next year. Are you prepared to do that and buy back at that level? I just want to have you react to the math and the commentary. Thanks a lot. thanks a lot It's great to be speaking with you. it's great to be speaking with you Mark, looking at the numbers here for the next quarter, free cash flow is going to be somewhere around $30+ billion . mark looking at the numbers here for the next quarter free cash flow is going to be somewhere around $30+ billion I just want to make sure really the buy side and investors understand what you're saying here with regard to cash return. i just want to make sure really the buy side and investors understand what you're saying here with regard to cash return You're saying 100% will go back to shareholders. you're saying 100% will go back to shareholders I assume the vast majority of that is in buyback. i assume the vast majority of that is in buyback If you go from $30 billion in free cash flow and grow it, you could buy back 10% of the company next calendar year. if you go from $30 billion in free cash flow and grow it you could buy back 10% of the company next calendar year Just basically, if we say that something close to this quarter is what you do next year. just basically if we say that something close to this quarter is what you do next year Are you prepared to do that and buy back at that level? are you prepared to do that and buy back at that level I just want to have you react to the math and the commentary. i just want to have you react to the math and the commentary At a $1.2 trillion market cap, that's where it is, 10% of the company. I just want to make sure that you can react to that. Thanks. At a $1.2 trillion market cap, that's where it is, 10% of the company. at a $1.2 trillion market cap that's where it is 10% of the company I just want to make sure that you can react to that. i just want to make sure that you can react to that Thanks. thanks

Speaker 6: Sure, Ben, thanks for the question. We're really pleased with the financial trajectory of the business. The combination of memory being so important to so many markets, AI data center, the edge, enabling this or helping enable this technology revolution we have underway. When we've got between our technology products and manufacturing performance, we are delivering record cash flow numbers. The last two quarters, we've generated as much as the company's history. We expect, as you point out, that cash flow growth will increase in the fourth quarter. We've paid down quite a bit of debt over the past year, and cash will build, and we will maintain levels of cash that we feel comfortable that we can invest through all seasons in the business. Sure, Ben, thanks for the question. sure ben thanks for the question We're really pleased with the financial trajectory of the business. we're really pleased with the financial trajectory of the business The combination of memory being so important to so many markets, AI data center, the edge, enabling this or helping enable this technology revolution we have underway. the combination of memory being so important to so many markets ai data center the edge enabling this or helping enable this technology revolution we have underway When we've got between our technology products and manufacturing performance, we are delivering record cash flow numbers. when we've got between our technology products and manufacturing performance we are delivering record cash flow numbers The last two quarters, we've generated as much as the company's history. the last two quarters we've generated as much as the company's history We expect, as you point out, that cash flow growth will increase in the fourth quarter. we expect as you point out that cash flow growth will increase in the fourth quarter We've paid down quite a bit of debt over the past year, and cash will build, and we will maintain levels of cash that we feel comfortable that we can invest through all seasons in the business. we've paid down quite a bit of debt over the past year and cash will build and we will maintain levels of cash that we feel comfortable that we can invest through all seasons in the business As you heard today, we feel good about the durability of the performance of the business, given the secular growth demand drivers, the need for more and higher performance memory, the structural supply challenges that we've talked about the last couple of years, node migration yielding less, HBM soaking up more wafers, and the need for greenfield for incremental wafer capacity. We have these Strategic Customer Agreements, which we announced today, a meaningful number of these, and we expect more. We will hold what we believe is appropriate excess cash. We've always said that we intend to grow the dividend over time. You saw us do a 30% increase recently, but the principal capital return we have will be share repurchase. As you heard today, we feel good about the durability of the performance of the business, given the secular growth demand drivers, the need for more and higher performance memory, the structural supply challenges that we've talked about the last couple of years, node migration yielding less, HBM soaking up more wafers, and the need for greenfield for incremental wafer capacity. as you heard today we feel good about the durability of the performance of the business given the secular growth demand drivers the need for more and higher performance memory the structural supply challenges that we've talked about the last couple of years node migration yielding less hbm soaking up more wafers and the need for greenfield for incremental wafer capacity We have these Strategic Customer Agreements, which we announced today, a meaningful number of these, and we expect more. we have these strategic customer agreements which we announced today a meaningful number of these and we expect more We will hold what we believe is appropriate excess cash. W e've always said that we intend to grow the dividend over time. we will hold what we believe is appropriate excess cash. w e've always said that we intend to grow the dividend over time You saw us do a 30% increase recently, but the principal capital return we have will be share repurchase. you saw us do a 30% increase recently but the principal capital return we have will be share repurchase I said today in the prepared remarks that we intend to increase our capital return from December 9th, which is the second anniversary of our CHIPS agreement signature. The rate and pace from there will determine based on a number of factors. Absolutely committed to capital return. I said today in the prepared remarks that we intend to increase our capital return from December 9th, which is the second anniversary of our CHIPS agreement signature. i said today in the prepared remarks that we intend to increase our capital return from december 9th which is the second anniversary of our chips agreement signature The rate and pace from there will determine based on a number of factors. the rate and pace from there will determine based on a number of factors Absolutely committed to capital return. absolutely committed to capital return

Speaker 2: Thanks. Do you think I could sneak in one more? We're really pleased to see 40% and eventually 1/2 of your business on SCAs. I cover Apple, and they've never made a comment, basically, that they're willing to pay full price for a component and pass it through to customers ever publicly. To me, it was an advertisement that they are open for business, for full price DRAM, let's put it that way. Are you tempted to do a lot more in DRAM? Given these conditions, do we think that there's an appetite for maybe a higher mix than expected of DRAM, which obviously would then keep maybe some of the SCAs lower, but for very good reason? Thanks. Thanks. thanks Do you think I could sneak in one more? do you think i could sneak in one more We're really pleased to see 40% and eventually 1/2 of your business on SCAs. we're really pleased to see 40% and eventually 1/2 of your business on scas I cover Apple, and they've never made a comment, basically, that they're willing to pay full price for a component and pass it through to customers ever publicly. i cover apple and they've never made a comment basically that they're willing to pay full price for a component and pass it through to customers ever publicly To me, it was an advertisement that they are open for business, for full price DRAM, let's put it that way. to me it was an advertisement that they are open for business for full price dram let's put it that way Are you tempted to do a lot more in DRAM? are you tempted to do a lot more in dram Given these conditions, do we think that there's an appetite for maybe a higher mix than expected of DRAM, which obviously would then keep maybe some of the SCAs lower, but for very good reason? given these conditions do we think that there's an appetite for maybe a higher mix than expected of dram which obviously would then keep maybe some of the scas lower but for very good reason Thanks. thanks

Speaker 10: When you say higher mix of DRAM, you mean versus what? When you say higher mix of DRAM, you mean versus what? when you say higher mix of dram you mean versus what

Speaker 2: Versus HBM, versus NAND, whatever you're making decisions around. Commodity DRAM to consumer would certainly not be on SCAs as much as a hyperscaler would, I would think. Versus HBM, versus NAND, whatever you're making decisions around. versus hbm versus nand whatever you're making decisions around Commodity DRAM to consumer would certainly not be on SCAs as much as a hyperscaler would, I would think. commodity dram to consumer would certainly not be on scas as much as a hyperscaler would i would think

Speaker 10: Just a couple of thoughts around that. As you know, our mix in our business of DRAM versus NAND, DRAM inclusive of HBM, tends to be oscillating between the 80% DRAM:20% NAND, to maybe 75% DRAM:20% NAND, kind of is in that type range. We are pretty comfortable with that mix of DRAM versus NAND. We intend to obviously, focus on and service customers in both of those product categories. As it relates to HBM, we have made a strategic decision that we have also communicated over time that our goal is to have our HBM share consistent over time with our DRAM share. Our intention is that we support our customers on HBM and also support our customers on the non-HBM portion of the DRAM business across all market segments. We definitely believe in the strength of diversity. Just a couple of thoughts around that. just a couple of thoughts around that As you know, our mix in our business of DRAM versus NAND, DRAM inclusive of HBM, tends to be oscillating between the 80% DRAM: 20% NAND, to maybe 75% DRAM: 20% NAND, kind of is in that type range. as you know our mix in our business of dram versus nand dram inclusive of hbm tends to be oscillating between the 80% dram 20% nand to maybe 75% dram 20% nand kind of is in that type range We are pretty comfortable with that mix of DRAM versus NAND. we are pretty comfortable with that mix of dram versus nand We intend to obviously, focus on and service customers in both of those product categories. we intend to obviously focus on and service customers in both of those product categories As it relates to HBM, we have made a strategic decision that we have also communicated over time that our goal is to have our HBM share consistent over time with our DRAM share. as it relates to hbm we have made a strategic decision that we have also communicated over time that our goal is to have our hbm share consistent over time with our dram share Our intention is that we support our customers on HBM and also support our customers on the non-HBM portion of the DRAM business across all market segments. our intention is that we support our customers on hbm and also support our customers on the non-hbm portion of the dram business across all market segments We definitely believe in the strength of diversity. we definitely believe in the strength of diversity If you look at the AEBU business and the MCBU business, both of which are non-data center businesses in our business unit structure, that's almost at 40% of our company revenue. We like that diversity, and we continue to focus on ensuring that we are servicing customers and their demand, and supporting their growth, across all of the market segments, including non-HBM DRAM, HBM, as well as NAND. If you look at the AEBU business and the MCBU business, both of which are non-data center businesses in our business unit structure, that's almost at 40% of our company revenue. if you look at the aebu business and the mcbu business both of which are non-data center businesses in our business unit structure that's almost at 40% of our company revenue We like that diversity, and we continue to focus on ensuring that we are servicing customers and their demand, and supporting their growth, across all of the market segments, including non-HBM DRAM, HBM, as well as NAND. we like that diversity and we continue to focus on ensuring that we are servicing customers and their demand and supporting their growth across all of the market segments including non-hbm dram hbm as well as nand

Speaker 2: Got it. Thanks a lot. Great quarter. Got it. got it Thanks a lot. thanks a lot Great quarter. great quarter

Speaker 10: Thank you. Thank you. thank you

Speaker 8: If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Please limit yourself to one question and one follow-up. Your next question comes from the line of Harlan Sur with JPMorgan. Your line is open. Please go ahead. If you would like to ask a question, please press star one to raise your hand. if you would like to ask a question please press star one to raise your hand To withdraw your question, press star one again. to withdraw your question press star one again Please limit yourself to one question and one follow-up. please limit yourself to one question and one follow-up Your next question comes from the line of Harlan Sur with JP Morgan. your next question comes from the line of harlan sur with jp morgan Your line is open. your line is open Please go ahead. please go ahead

Speaker 3: Good afternoon. Thanks for hosting this call back. I think it was September of last year when the Micron team said that they were booked out through calendar 2026 on HBM3, HBM3E. Obviously, at that time, the team was still in qual and eval on HBM4. If you fast-forward to now, and with a stronger, especially XPU ASIC demand profile, is the team already booked up volume and pricing for HBM3E and HBM4 for calendar 2027? Obviously, understand you still need to go through qual on HBM4E. Are you booked up on current gen HBM3E and HBM4 for calendar 2027? Good afternoon. good afternoon Thanks for hosting this call back. thanks for hosting this call back I think it was September of last year when the Micron team said that they were booked out through calendar 2026 on HBM3, HBM3E. i think it was september of last year when the micron team said that they were booked out through calendar 2026 on hbm3 hbm3e Obviously, at that time, the team was still in qual and eval on HBM4. obviously at that time the team was still in qual and eval on hbm4 If you fast-forward to now, and with a stronger, especially XPU ASIC demand profile, is the team already booked up volume and pricing for HBM3E and HBM4 for calendar 2027? if you fast-forward to now and with a stronger especially xpu asic demand profile is the team already booked up volume and pricing for hbm3e and hbm4 for calendar 2027 Obviously, understand you still need to go through qual on HBM4E. obviously understand you still need to go through qual on hbm4e Are you booked up on current gen HBM3E and HBM4 for calendar 2027? are you booked up on current gen hbm3e and hbm4 for calendar 2027

Speaker 10: Hi, Harlan. The demand that we have for our HBM products - HBM3E, HBM4 and of course, even ahead of the HBM4E quals - the asks from our customers for volume, not just in 2027— but as you know, due to these SCA agreements, one huge advantage of these SCA agreements is we have been discussing these demand requests from customers for multiyear time horizon. If we look at this multiyear time horizon, even going beyond 2027, into 2028, et cetera, we are able to get very high confidence demand from our customers that is far in excess of our ability to support using our supply. The demand continues to be well above our supply. Even when we do these SCAs for multiple years, these SCAs contain volumes that are less than customers would actually like to sign up for. Hi, Harlan. hi harlan The demand that we have for our HBM products - HBM3E, HBM4 and of course, even ahead of the HBM4E quals - the asks from our customers for volume, not just in 2027— but as you know, due to these SCA agreements, one huge advantage of these SCA agreements is we have been discussing these demand requests from customers for multiyear time horizon. the demand that we have for our hbm products - hbm3e hbm4 and of course even ahead of the hbm4e quals - the asks from our customers for volume not just in 2027— but as you know due to these sca agreements one huge advantage of these sca agreements is we have been discussing these demand requests from customers for multiyear time horizon If we look at this multiyear time horizon, even going beyond 2027, into 2028, et cetera, we are able to get very high confidence demand from our customers that is far in excess of our ability to support using our supply. if we look at this multiyear time horizon even going beyond 2027 into 2028 et cetera we are able to get very high confidence demand from our customers that is far in excess of our ability to support using our supply The demand continues to be well above our supply. the demand continues to be well above our supply Even when we do these SCAs for multiple years, these SCAs contain volumes that are less than customers would actually like to sign up for. even when we do these scas for multiple years these scas contain volumes that are less than customers would actually like to sign up for In fact, in a lot of these negotiations, we spend a lot of time helping customers understand that this is all we can do in this timeframe. Absolutely, our demand for HBM, not just in 2027, but even 2028, is well above our ability to supply across all the different HBM flavors. In fact, in a lot of these negotiations, we spend a lot of time helping customers understand that this is all we can do in this timeframe. in fact in a lot of these negotiations we spend a lot of time helping customers understand that this is all we can do in this timeframe Absolutely, our demand for HBM, not just in 2027, but even 2028, is well above our ability to supply across all the different HBM flavors. absolutely our demand for hbm not just in 2027 but even 2028 is well above our ability to supply across all the different hbm flavors

Speaker 3: Right. Right. right

Speaker 10: The same thing is also true, by the way, for non-HBM DRAM, as well. It's in the same category. The same thing is also true, by the way, for non-HBM DRAM, as well. the same thing is also true by the way for non-hbm dram as well It's in the same category. it's in the same category

Speaker 6: Harlan, it's Mark. Harlan, it's Mark. harlan it's mark

Speaker 3: Hi. Hi. hi

Speaker 6: Maybe just something to add while we're on HBM. Today, we indicated that we expected market tightness to continue beyond 2027. Part of that reason is we did see the HBM TAM increase. We saw that. We had said previously that it would cross $100 billion in 2028. We see that now, the HBM TAM easily crossing $100 billion in 2027. Maybe just something to add while we're on HBM. maybe just something to add while we're on hbm Today, we indicated that we expected market tightness to continue beyond 2027. today we indicated that we expected market tightness to continue beyond 2027 Part of that reason is we did see the HBM TAM increase. part of that reason is we did see the hbm tam increase We saw that. we saw that We had said previously that it would cross $100 billion in 2028. we had said previously that it would cross $100 billion in 2028 We see that now, the HBM TAM easily crossing $100 billion in 2027. we see that now the hbm tam easily crossing $100 billion in 2027

Speaker 3: That's great color. Thank you for that. The other thing I wanted to ask is, it's actually been over a year since the team has given us an update on your midterm to long-term view on industry DRAM and NAND bit demand growth. Obviously, much has changed over the past 12 months. Inferencing workloads have crossed over training workloads, inferencing workloads themselves continue to evolve and become more complex. On the server CPU side, the CPU customers are now forecasting 30%-40% per year CAGRs given agentics like higher CPU intensity. I'm sure the mid to long-term bit demand CAGR is also sort of guiding the discussions on these multiyear SCAs. Could you guys just give us an update on your midterm views on DRAM and NAND bit demand CAGRs over the next call it few years? That's great color. that's great color T hank you for that. t hank you for that The other thing I wanted to ask is, it's actually been over a year since the team has given us an update on your midterm to long-term view on industry DRAM and NAND bit demand growth. the other thing i wanted to ask is it's actually been over a year since the team has given us an update on your midterm to long-term view on industry dram and nand bit demand growth Obviously, much has changed over the past 12 months. obviously much has changed over the past 12 months Inferencing workloads have crossed over training workloads, inferencing workloads themselves continue to evolve and become more complex. inferencing workloads have crossed over training workloads inferencing workloads themselves continue to evolve and become more complex On the server CPU side, the CPU customers are now forecasting 30%-40% per year CAGRs given agentics like higher CPU intensity. on the server cpu side the cpu customers are now forecasting 30%-40% per year cagrs given agentics like higher cpu intensity I'm sure the mid to long-term bit demand CAGR is also sort of guiding the discussions on these multiyear SCAs. i'm sure the mid to long-term bit demand cagr is also sort of guiding the discussions on these multiyear scas Could you guys just give us an update on your midterm views on DRAM and NAND bit demand CAGRs over the next call it few years? could you guys just give us an update on your midterm views on dram and nand bit demand cagrs over the next call it few years

Speaker 10: That's a good question. We have provided some updates to you on how we see 2026 bit demand forecasts change versus what we had provided earlier, with DRAM forecasts up a little bit, NAND relatively similar. The reason we are not really providing a lot of forward-looking views on the CAGRs is because for the foreseeable future, the shipment growth for bits is not really determined by demand anymore. It's actually more determined by the supply. The demand is so much above the industry's ability to supply, that the supply growth, in fact, is going to determine how the shipping growth occurs, far less so the demand growth because of this relative position with the supply. Because of that, we are trying to point out what kind of growth trajectory we believe. That's a good question. that's a good question We have provided some updates to you on how we see 2026 bit demand forecasts change versus what we had provided earlier, with DRAM forecasts up a little bit, NAND relatively similar. we have provided some updates to you on how we see 2026 bit demand forecasts change versus what we had provided earlier with dram forecasts up a little bit nand relatively similar The reason we are not really providing a lot of forward-looking views on the CAGRs is because for the foreseeable future, the shipment growth for bits is not really determined by demand anymore. the reason we are not really providing a lot of forward-looking views on the cagrs is because for the foreseeable future the shipment growth for bits is not really determined by demand anymore It's actually more determined by the supply. it's actually more determined by the supply The demand is so much above the industry's ability to supply, that the supply growth, in fact, is going to determine how the shipping growth occurs, far less so the demand growth because of this relative position with the supply. the demand is so much above the industry's ability to supply that the supply growth in fact is going to determine how the shipping growth occurs far less so the demand growth because of this relative position with the supply Because of that, we are trying to point out what kind of growth trajectory we believe. because of that we are trying to point out what kind of growth trajectory we believe We give you some kind of data points here and there around how we think this year's supply growth or demand growth is going to be next year. We give you some kind of data points here and there around how we think this year's supply growth or demand growth is going to be next year. we give you some kind of data points here and there around how we think this year's supply growth or demand growth is going to be next year We are not providing sort of an outlook too much further down because how the supply conditions change, we are continuing to constantly evaluate, but our expectation is that the supply growth will continue to remain short of what is needed to meet the demand. We don't really see when the supply is going to be able to meet demand. That is not something we are able to project at this time. We are not providing sort of an outlook too much further down because how the supply conditions change, we are continuing to constantly evaluate, but our expectation is that the supply growth will continue to remain short of what is needed to meet the demand. we are not providing sort of an outlook too much further down because how the supply conditions change we are continuing to constantly evaluate but our expectation is that the supply growth will continue to remain short of what is needed to meet the demand We don't really see when the supply is going to be able to meet demand. we don't really see when the supply is going to be able to meet demand That is not something we are able to project at this time. that is not something we are able to project at this time

Speaker 3: Got it. Thank you. Got it. got it T hank you. t hank you

Speaker 8: Your next question comes from the line of Tom O'Malley with Barclays. Your line is open. Please go ahead. Your next question comes from the line of Tom O'Malley with Barclays. your next question comes from the line of tom o'malley with barclays Your line is open. your line is open Please go ahead. please go ahead

Speaker 11: I just wanted to go back to the long-term agreements that you were signing. Is there any way to kind of walk us through what happens if a customer was to cancel the agreement? What financial hooks do you have in it? Do you get to keep all the cash from the agreement? Just any color that you can add there would be helpful. I just wanted to go back to the long-term agreements that you were signing. I s there any way to kind of walk us through what happens if a customer was to cancel the agreement? i just wanted to go back to the long-term agreements that you were signing. i s there any way to kind of walk us through what happens if a customer was to cancel the agreement What financial hooks do you have in it? what financial hooks do you have in it Do you get to keep all the cash from the agreement? do you get to keep all the cash from the agreement Just any color that you can add there would be helpful. just any color that you can add there would be helpful

Speaker 10: Sure. I'll start by saying that these Strategic Customer Agreements or SCAs cannot be canceled. There is no provision in this agreement to enable a customer or allow a customer to walk away from this agreement. These are designed to be take-or-pay agreements. Outside of automotive, generally, these are five-year agreements. There are annual volume commitments for each of those years, and the take-or-pay means that whether they want to purchase the bits or not, they are obligated to pay for the price times the volume. The price itself for a lot of these large agreements has a price band. There is a price ceiling and a price floor. The price gets negotiated every quarter based on market conditions. The price cannot exceed the ceiling no matter what, cannot go below the floor no matter what. Sure. sure I'll start by saying that these Strategic Customer Agreements or SCAs cannot be canceled. i'll start by saying that these strategic customer agreements or scas cannot be canceled There is no provision in this agreement to enable a customer or allow a customer to walk away from this agreement. there is no provision in this agreement to enable a customer or allow a customer to walk away from this agreement These are designed to be take-or- pay agreements. these are designed to be take-or- pay agreements Outside of automotive, generally, these are five-year agreements. outside of automotive generally these are five-year agreements There are annual volume commitments for each of those years, and the take-or- pay means that whether they want to purchase the bits or not, they are obligated to pay for the price times the volume. there are annual volume commitments for each of those years and the take-or- pay means that whether they want to purchase the bits or not they are obligated to pay for the price times the volume The price itself for a lot of these large agreements has a price band. the price itself for a lot of these large agreements has a price band There is a price ceiling and a price floor. there is a price ceiling and a price floor The price gets negotiated every quarter based on market conditions. the price gets negotiated every quarter based on market conditions The price cannot exceed the ceiling no matter what, cannot go below the floor no matter what. the price cannot exceed the ceiling no matter what cannot go below the floor no matter what Consequently, the value of these agreements can be readily determined. There are also premiums in the agreement for products that may be more sophisticated, higher performance, higher capacities, newer products like, for example, when we do LPDDR6 versus LPDDR5 or DDR6 versus DDR5 or a new version of HBM, then there are provisions for those products to be priced differently at a premium to the existing products. We have all of those provisions. The one provision that doesn't exist is any customer's ability to walk away from these agreements. Consequently, the value of these agreements can be readily determined. consequently the value of these agreements can be readily determined There are also premiums in the agreement for products that may be more sophisticated, higher performance, higher capacities, newer products like, for example, when we do LPDDR6 versus LPDDR5 or DDR6 versus DDR5 or a new version of HBM, then there are provisions for those products to be priced differently at a premium to the existing products. there are also premiums in the agreement for products that may be more sophisticated higher performance higher capacities newer products like for example when we do lpddr6 versus lpddr5 or ddr6 versus ddr5 or a new version of hbm then there are provisions for those products to be priced differently at a premium to the existing products We have all of those provisions. T he one provision that doesn't exist is any customer's ability to walk away from these agreements. we have all of those provisions. t he one provision that doesn't exist is any customer's ability to walk away from these agreements Beyond the take-or-pay related obligations that exist in these agreements and its financial obligations that are price times volume, there is also this upfront cash deposit that these agreements entail where customers have provided, in the form of upfront cash deposit and related financial commitments, like a letter of credit, for example, for a minority of the total, that even for the agreements we have already signed, these 16 agreements aggregates to $22+ billion in terms of total cash and related financial commitments, of which the cash alone is almost $18 billion. You can imagine that when we get to our target numbers of agreements, which will go from the roughly 20% DRAM bits, roughly 1/3 of NAND bits, all the way to roughly accounting for 1/2 of the company's revenue, which is what we are likely to end up at, or somewhat more. Beyond the take-or-pay related obligations that exist in these agreements and its financial obligations that are price times volume, there is also this upfront cash deposit that these agreements entail where customers have provided, in the form of upfront cash deposit and related financial commitments, like a letter of credit, for example, for a minority of the total, that even for the agreements we have already signed, these 16 agreements aggregates to $22+ billion in terms of total cash and related financial commitments, of which the cash alone is almost $18 billion. beyond the take-or-pay related obligations that exist in these agreements and its financial obligations that are price times volume there is also this upfront cash deposit that these agreements entail where customers have provided in the form of upfront cash deposit and related financial commitments like a letter of credit for example for a minority of the total that even for the agreements we have already signed these 16 agreements aggregates to $22+ billion in terms of total cash and related financial commitments of which the cash alone is almost $18 billion You can imagine that when we get to our target numbers of agreements, which will go from the roughly 20% DRAM bits, roughly 1/3 of NAND bits, all the way to roughly accounting for 1/2 of the company's revenue, which is what we are likely to end up at, or somewhat more. you can imagine that when we get to our target numbers of agreements which will go from the roughly 20% dram bits roughly 1/3 of nand bits all the way to roughly accounting for 1/2 of the company's revenue which is what we are likely to end up at or somewhat more You can imagine that the cash associated with all of those will significantly increase from the current $22 billion number. That cash is our customers' commitment to this new business model. That's how the structure of these agreements are. You can imagine that the cash associated with all of those will significantly increase from the current $22 billion number. you can imagine that the cash associated with all of those will significantly increase from the current $22 billion number That cash is our customers' commitment to this new business model. that cash is our customers' commitment to this new business model That's how the structure of these agreements are. that's how the structure of these agreements are

Speaker 11: Thank you. That's helpful. Just for my follow-up question. I wanted to clarify on the cash deposits. It was my understanding that towards the end of the agreement, you end up returning those back to the customers. The general question is, any strategic rationale for receiving those upfront and being able to use that at will, like any plans with that cash, and just any way to think through why it ends up getting returned back to customers instead of just being recognized as part of the revenue that you end up selling them in the agreement? Thank you. Thank you. thank you That's helpful. that's helpful Just for my follow-up question. I wanted to clarify on the cash deposits. just for my follow-up question i wanted to clarify on the cash deposits It was my understanding that towards the end of the agreement, you end up returning those back to the customers. it was my understanding that towards the end of the agreement you end up returning those back to the customers The general question is, any strategic rationale for receiving those upfront and being able to use that at will, like any plans with that cash, and just any way to think through why it ends up getting returned back to customers instead of just being recognized as part of the revenue that you end up selling them in the agreement? the general question is any strategic rationale for receiving those upfront and being able to use that at will like any plans with that cash and just any way to think through why it ends up getting returned back to customers instead of just being recognized as part of the revenue that you end up selling them in the agreement Thank you. thank you

Speaker 10: Our customers are going to, as per the terms of the agreement, be purchasing the volumes over the years. The cash is sort of a contingency, and a show of good faith and confidence in this new business model from our customers. Meaning in the unlikely event that a customer is unable to purchase or does not purchase the volume at the price as determined by the terms of the agreement, then we do have the right to be able to decrement the cash balance that ultimately will get returned to them as one available remedy, but not the only available remedy. None of this ultimately relieves the customers of the liability of having to purchase the volumes over the term of the agreement at the agreed-upon prices. The cash is just one of the elements of the overall transaction. Our customers are going to, as per the terms of the agreement, be purchasing the volumes over the years. our customers are going to as per the terms of the agreement be purchasing the volumes over the years The cash is sort of a contingency, and a show of good faith and confidence in this new business model from our customers. the cash is sort of a contingency and a show of good faith and confidence in this new business model from our customers Meaning in the unlikely event that a customer is unable to purchase or does not purchase the volume at the price as determined by the terms of the agreement, then we do have the right to be able to decrement the cash balance that ultimately will get returned to them as one available remedy, but not the only available remedy. meaning in the unlikely event that a customer is unable to purchase or does not purchase the volume at the price as determined by the terms of the agreement then we do have the right to be able to decrement the cash balance that ultimately will get returned to them as one available remedy but not the only available remedy None of this ultimately relieves the customers of the liability of having to purchase the volumes over the term of the agreement at the agreed-upon prices. none of this ultimately relieves the customers of the liability of having to purchase the volumes over the term of the agreement at the agreed-upon prices The cash is just one of the elements of the overall transaction. the cash is just one of the elements of the overall transaction The cash doesn't get returned all in one shot at the end of the term. It gets returned over a period of time with the return of the cash weighted towards the second half of the term of the agreement. The cash doesn't get returned all in one shot at the end of the term. the cash doesn't get returned all in one shot at the end of the term It gets returned over a period of time with the return of the cash weighted towards the second half of the term of the agreement. it gets returned over a period of time with the return of the cash weighted towards the second half of the term of the agreement

Speaker 11: Thank you. Thank you. thank you

Speaker 8: Your next question comes from the line of Melissa Weathers of Deutsche Bank. Your line is open. Please go ahead. Your next question comes from the line of Melissa Weathers of Deutsche Bank. your next question comes from the line of melissa weathers of deutsche bank Your line is open. your line is open Please go ahead. please go ahead

Speaker 7: Hi there. Thank you for taking my questions. I wanted to ask on the non-HBM side of DRAM within the data center. You guys have talked a lot about SOCAMM and using low-power DRAM for data center applications, and especially as we see the mix of server CPUs increase with agentic AI. I was hoping you could give an update on how you guys are seeing the growth in demand for SOCAMM attach and what kind of trends are you seeing in adoption there. Hi there. hi there Thank you for taking my questions. thank you for taking my questions I wanted to ask on the non-HBM side of DRAM within the data center. i wanted to ask on the non-hbm side of dram within the data center You guys have talked a lot about SOCAMM and using low-power DRAM for data center applications, and especially as we see the mix of server CPUs increase with agentic AI. you guys have talked a lot about socamm and using low-power dram for data center applications and especially as we see the mix of server cpus increase with agentic ai I was hoping you could give an update on how you guys are seeing the growth in demand for SOCAMM attach and what kind of trends are you seeing in adoption there. i was hoping you could give an update on how you guys are seeing the growth in demand for socamm attach and what kind of trends are you seeing in adoption there

Speaker 10: Sure, Melissa. Agentic AI, as you noted, drives a lot of growth in CPU demand and CPU-based servers. That is certainly a trend that we are seeing. These CPU-based servers are coming from multiple different suppliers. You're seeing a lot of companies announce products targeted towards the data center for CPUs. You have x86-based CPUs. You have CPUs from NVIDIA. Qualcomm announced a CPU. There's lots of different possibilities for types of CPUs that could be used in the data center over time to drive the use of agentic AI. We have CPUs that use DDR5, as well as plans from our customers to increase the use of LPDRAM in the data center. When LPDRAM gets used, it will be in the SOCAMM form factor. As you know, Micron has been a pioneer. Sure, Melissa. sure melissa Agentic AI, as you noted, drives a lot of growth in CPU demand and CPU-based servers. agentic ai as you noted drives a lot of growth in cpu demand and cpu-based servers That is certainly a trend that we are seeing. that is certainly a trend that we are seeing These CPU-based servers are coming from multiple different suppliers. these cpu-based servers are coming from multiple different suppliers You're seeing a lot of companies announce products targeted towards the data center for CPUs. you're seeing a lot of companies announce products targeted towards the data center for cpus You have x86-based CPUs. you have x86-based cpus You have CPUs from NVIDIA. you have cpus from nvidia Qualcomm announced a CPU. qualcomm announced a cpu There's lots of different possibilities for types of CPUs that could be used in the data center over time to drive the use of agentic AI. there's lots of different possibilities for types of cpus that could be used in the data center over time to drive the use of agentic ai We have CPUs that use DDR5, as well as plans from our customers to increase the use of LPDRAM in the data center. we have cpus that use ddr5 as well as plans from our customers to increase the use of lpdram in the data center When LPDRAM gets used, it will be in the SOCAMM form factor. when lpdram gets used it will be in the socamm form factor As you know, Micron has been a pioneer. as you know micron has been a pioneer We were first in the industry to not just drive the usage of LPDRAM, we were, for the longest time, sole sourced on LPDRAM in the data center. We were also the pioneers in bringing out new products, first to market with the SOCAMM form factor. We continue to expect that this is going to be an area of differentiation for us with our customers and be a recognized leader in this space. We have market leadership in all of these products. We have really strong engagement with customers who intend to use LPDRAM as a way of reducing the power consumption, increasing the performance, and even reducing the footprint of some memory. Certainly these SOCAMMs help do all of that. We were first in the industry to not just drive the usage of LPDRAM, we were, for the longest time, sole sourced on LPDRAM in the data center. we were first in the industry to not just drive the usage of lpdram we were for the longest time sole sourced on lpdram in the data center We were also the pioneers in bringing out new products, first to market with the SOCAMM form factor. we were also the pioneers in bringing out new products first to market with the socamm form factor We continue to expect that this is going to be an area of differentiation for us with our customers and be a recognized leader in this space. we continue to expect that this is going to be an area of differentiation for us with our customers and be a recognized leader in this space We have market leadership in all of these products. we have market leadership in all of these products We have really strong engagement with customers who intend to use LPDRAM as a way of reducing the power consumption, increasing the performance, and even reducing the footprint of some memory. we have really strong engagement with customers who intend to use lpdram as a way of reducing the power consumption increasing the performance and even reducing the footprint of some memory Certainly these SOCAMM s help do all of that. certainly these socamm s help do all of that There are RAS-related complications - reliability, availability, and serviceability-related complications - that have to be worked through for LPDRAM, because LPDRAM was not really designed for data centers. That's where we are bringing in differentiation and helping our customers deal with that. We expect LPDRAM to grow over time as a percent of consumption of DRAM in the data center, we expect to be leaders in that front. There are RAS-related complications - reliability, availability, and serviceability-related complications - that have to be worked through for LPDRAM, because LPDRAM was not really designed for data centers. T hat's where we are bringing in differentiation and helping our customers deal with that. there are ras-related complications - reliability availability and serviceability-related complications - that have to be worked through for lpdram because lpdram was not really designed for data centers. t hat's where we are bringing in differentiation and helping our customers deal with that We expect LPDRAM to grow over time as a percent of consumption of DRAM in the data center, we expect to be leaders in that front. we expect lpdram to grow over time as a percent of consumption of dram in the data center we expect to be leaders in that front

Speaker 7: Thank you. Maybe one for, I don't know if it's Manish or Mark, but as we think about Idaho One, Tongluo, Idaho Two, as we think about these greenfield fabs starting to have wafer outs in next year and the year after that, can you remind us how should we think about the impact of startup costs or just the incremental impact on cost per bit that we should be flowing through as those greenfield fabs come online? Thank you. thank you Maybe one for, I don't know if it's Manish or Mark, but as we think about Idaho One, Tongluo, Idaho Two, as we think about these greenfield fabs starting to have wafer outs in next year and the year after that, can you remind us how should we think about the impact of startup costs or just the incremental impact on cost per bit that we should be flowing through as those greenfield fabs come online? maybe one for i don't know if it's manish or mark but as we think about idaho one tongluo idaho two as we think about these greenfield fabs starting to have wafer outs in next year and the year after that can you remind us how should we think about the impact of startup costs or just the incremental impact on cost per bit that we should be flowing through as those greenfield fabs come online

Speaker 5: I'll let Mark handle the technical question on the startup cost accounting. We did say, Melissa, on this call that, given the industry-wide trend towards higher performance solutions such as HBM and even within the HBM category, higher trade ratio is expected in the future with HBM—which obviously requires more silicon per bit versus traditional DRAM—as well as with greenfield build-out, which doesn't get the same leverage on existing capacity as our traditional technology transition models for the industry have. Both of these trends to higher performance—as well as greenfield investments that take time to ramp scale and are not as efficient—both of these are going to be trends that we expect will actually increase DRAM bit costs here in the near term. That was one thing that we did have in the prepared remarks. I'll let Mark handle the technical question on the startup cost accounting. i'll let mark handle the technical question on the startup cost accounting We did say, Melissa, on this call that, given the industry-wide trend towards higher performance solutions such as HBM and even within the HBM category, higher trade ratio is expected in the future with HBM— which obviously requires more silicon per bit versus traditional DRAM— as well as with greenfield build-out, which doesn't get the same leverage on existing capacity as our traditional technology transition models for the industry have. we did say melissa on this call that given the industry-wide trend towards higher performance solutions such as hbm and even within the hbm category higher trade ratio is expected in the future with hbm— which obviously requires more silicon per bit versus traditional dram— as well as with greenfield build-out which doesn't get the same leverage on existing capacity as our traditional technology transition models for the industry have Both of these trends to higher performance— as well as greenfield investments that take time to ramp scale and are not as efficient— both of these are going to be trends that we expect will actually increase DRAM bit costs here in the near term. both of these trends to higher performance— as well as greenfield investments that take time to ramp scale and are not as efficient— both of these are going to be trends that we expect will actually increase dram bit costs here in the near term That was one thing that we did have in the prepared remarks. that was one thing that we did have in the prepared remarks That goes for Idaho One, for Tongluo, for Idaho Two. Those are all elements of that greenfield build-out, and that's something that we expect will be an industry-wide phenomenon. Mark, you can comment. I think you've given some commentary before in terms of timing of the startup costs for facilities and how they'll impact the P&L. That goes for Idaho One, for Tongluo, for Idaho Two. that goes for idaho one for tongluo for idaho two Those are all elements of that greenfield build-out, and that's something that we expect will be an industry-wide phenomenon. those are all elements of that greenfield build-out and that's something that we expect will be an industry-wide phenomenon Mark, you can comment. mark you can comment I think you've given some commentary before in terms of timing of the startup costs for facilities and how they'll impact the P&L. i think you've given some commentary before in terms of timing of the startup costs for facilities and how they'll impact the p&l

Speaker 6: Melissa, as Manish mentioned, there are a number of factors that will bias the costs up in DRAM over time here. The trade ratios, as he mentioned, for HBM and actually LP, the greenfield facilities. To your question on startup, we've talked about this before. We begin to see startup costs more meaningfully begin here in the fourth quarter and then into the first half of next year. You'll see 2027 at elevated levels, think about $100 million, $200 million per quarter effect versus what we had seen at previous run rates. What that will be over time will just be a function, the various ramp profiles of fabs. As you point out, Tongluo and Idaho One are the first to go here. Melissa, as Manish mentioned, there are a number of factors that will bias the costs up in DRAM over time here. melissa as manish mentioned there are a number of factors that will bias the costs up in dram over time here T he trade ratios, as he mentioned, for HBM and actually LP, the greenfield facilities. t he trade ratios as he mentioned for hbm and actually lp the greenfield facilities To your question on startup, we've talked about this before. to your question on startup we've talked about this before We begin to see startup costs more meaningfully begin here in the fourth quarter and then into the first half of next year. we begin to see startup costs more meaningfully begin here in the fourth quarter and then into the first half of next year You'll see 2027 at elevated levels, think about $100 million, $200 million per quarter effect versus what we had seen at previous run rates. you'll see 2027 at elevated levels think about $100 million, $200 million per quarter effect versus what we had seen at previous run rates What that will be over time will just be a function, the various ramp profiles of fabs. what that will be over time will just be a function the various ramp profiles of fabs As you point out, Tongluo and Idaho One are the first to go here. as you point out tongluo and idaho one are the first to go here We provided more color on this, I think it was maybe at the end of maybe 2024, beginning of 2025, because it was a more material effect to the business at that time. I think I had said at the time, maybe 0.5 point-1+ point of margin effect. Today, with the size of the business, this effect is much reduced from before. Obviously, the faster we can get capacity on, which we're obviously trying to do for our customers to get much needed supply. The benefit of that incremental bits is going to outweigh this incremental associated cost at startup. We provided more color on this, I think it was maybe at the end of maybe 2024, beginning of 2025, because it was a more material effect to the business at that time. we provided more color on this i think it was maybe at the end of maybe 2024 beginning of 2025 because it was a more material effect to the business at that time I think I had said at the time, maybe 0.5 point- 1+ point of margin effect. i think i had said at the time maybe 0.5 point- 1+ point of margin effect Today, with the size of the business, this effect is much reduced from before. today with the size of the business this effect is much reduced from before Obviously, the faster we can get capacity on, which we're obviously trying to do for our customers to get much needed supply. obviously the faster we can get capacity on which we're obviously trying to do for our customers to get much needed supply The benefit of that incremental bits is going to outweigh this incremental associated cost at startup. the benefit of that incremental bits is going to outweigh this incremental associated cost at startup

Speaker 7: Thank you, guys. Thank you, guys. thank you guys

Speaker 8: Your next question comes from the line of Vijay Rakesh with Mizuho. Your line is open. Please go ahead. Your next question comes from the line of Vijay Rakesh with Mizuho. your next question comes from the line of vijay rakesh with mizuho Your line is open. your line is open Please go ahead. please go ahead

Speaker 12: Thanks for doing this call back. Sumit, Manish, and Mark, on the 16 SCAs that you announced, the four large customers, does it include any HBM? Do they include some of the major CSPs within that, or can you give us some more color? Thanks for doing this call back. thanks for doing this call back Sumit, Manish, and Mark, on the 16 SCAs that you announced, the four large customers, does it include any HBM? sumit manish and mark on the 16 scas that you announced the four large customers does it include any hbm Do they include some of the major CSPs within that, or can you give us some more color? do they include some of the major csps within that or can you give us some more color

Speaker 10: Sure. The SCAs that we have signed already do include some hyperscalers, where the purchasing for those hyperscalers requires HBM, that is part of the overall agreement. Sure. sure The SCAs that we have signed already do include some hyperscalers, where the purchasing for those hyperscalers requires HBM, that is part of the overall agreement. the scas that we have signed already do include some hyperscalers where the purchasing for those hyperscalers requires hbm that is part of the overall agreement

Speaker 12: Got it. Then, just a quick follow-up on the $20 billion deposit. Is the intention that you hold it for the five-year contract period or as the customers buy the product, it's prorated and runs through it? If you could just clarify that. Thanks. Got it. got it Then, just a quick follow-up on the $20 billion deposit. then just a quick follow-up on the $20 billion deposit Is the intention that you hold it for the five-year contract period or as the customers buy the product, it's prorated and runs through it? is the intention that you hold it for the five-year contract period or as the customers buy the product it's prorated and runs through it If you could just clarify that. if you could just clarify that Thanks. thanks

Speaker 10: I mean, it's not a prorated type of a thing. It is a customer cash deposit, it's not a prepaid revenue or things like that. It gets returned to customers on a predefined schedule that has been agreed to, that X amount will be returned in Y quarter over time. It is back-end loaded, in terms of the second half of the agreement term is when the bulk of the return of the customer deposit occurs. Of course, the cash would be returned, assuming it hasn't been decremented for reasons determined by the terms of the [agreement]. I mean, it's not a prorated type of a thing. i mean it's not a prorated type of a thing It is a customer cash deposit, it's not a prepaid revenue or things like that. it is a customer cash deposit it's not a prepaid revenue or things like that It gets returned to customers on a predefined schedule that has been agreed to, that X amount will be returned in Y quarter over time. it gets returned to customers on a predefined schedule that has been agreed to that x amount will be returned in y quarter over time It is back-end loaded, in terms of the second half of the agreement term is when the bulk of the return of the customer deposit occurs. it is back-end loaded in terms of the second half of the agreement term is when the bulk of the return of the customer deposit occurs Of course, the cash would be returned, assuming it hasn't been decremented for reasons determined by the terms of the [agreement]. of course the cash would be returned assuming it hasn't been decremented for reasons determined by the terms of the [agreement]

Speaker 12: Got it. Thank you. Got it. got it Thank you. thank you

Speaker 10: Thank you. Thank you. thank you

Speaker 8: Your next question comes from the line of Jim Schneider with Goldman Sachs. Your line is open. Please go ahead. Your next question comes from the line of Jim Schneider with Goldman Sachs. your next question comes from the line of jim schneider with goldman sachs Your line is open. your line is open Please go ahead. please go ahead

Speaker 4: Thanks for taking my question. Just stepping back for a moment, as you've had discussions with your customers about their forecast demand needs, let's say through the end of fiscal 2028 or the end of calendar 2028, where do you think you will end up in terms of the percentage of the forecasted demand that they have in terms of your ability to supply? I mean, is it something that's going to be 70%, 90%? I guess, how do you expect that to close over time? Clearly, there is a gap between your ability to build facilities and where the demand is, but maybe give us a sense at a point in time what percentage that represents. Thanks for taking my question. thanks for taking my question Just stepping back for a moment, as you've had discussions with your customers about their forecast demand needs, let's say through the end of fiscal 2028 or the end of calendar 2028, where do you think you will end up in terms of the percentage of the forecasted demand that they have in terms of your ability to supply? just stepping back for a moment as you've had discussions with your customers about their forecast demand needs let's say through the end of fiscal 2028 or the end of calendar 2028 where do you think you will end up in terms of the percentage of the forecasted demand that they have in terms of your ability to supply I mean, is it something that's going to be 70%, 90%? i mean is it something that's going to be 70% 90% I guess, how do you expect that to close over time? i guess how do you expect that to close over time Clearly, there is a gap between your ability to build facilities and where the demand is, but maybe give us a sense at a point in time what percentage that represents. clearly there is a gap between your ability to build facilities and where the demand is but maybe give us a sense at a point in time what percentage that represents

Speaker 10: I mean, there isn't a homogeneous percentage number that we can provide because our strategy is different for each segment of the market. Of course, we try to be very diversified, and we are very committed to supporting each of the segments of the market. As you can imagine, if the automotive industry can only do 50% or 70% of the units, then that would be a catastrophic problem for that portion of the market. We can't have a one-size-fits-all kind of an approach. There are a number of complex factors that go into the assessment of what kind of fulfillment rate would be appropriate for what kind of customer in what kind of segment, in what kind of geography. There are lots of different factors that play into that. I mean, there isn't a homogeneous percentage number that we can provide because our strategy is different for each segment of the market. i mean there isn't a homogeneous percentage number that we can provide because our strategy is different for each segment of the market Of course, we try to be very diversified, and we are very committed to supporting each of the segments of the market. of course we try to be very diversified and we are very committed to supporting each of the segments of the market As you can imagine, if the automotive industry can only do 50% or 70% of the units, then that would be a catastrophic problem for that portion of the market. as you can imagine if the automotive industry can only do 50% or 70% of the units then that would be a catastrophic problem for that portion of the market We can't have a one-size-fits-all kind of an approach. we can't have a one-size-fits-all kind of an approach There are a number of complex factors that go into the assessment of what kind of fulfillment rate would be appropriate for what kind of customer in what kind of segment, in what kind of geography. there are a number of complex factors that go into the assessment of what kind of fulfillment rate would be appropriate for what kind of customer in what kind of segment in what kind of geography There are lots of different factors that play into that. there are lots of different factors that play into that With that said, I would say that the general sentiment amongst customers is that we are very short of their demand. For some customers, we are extremely short. Some of our supply numbers are a fraction of what they want. Then in other parts of the market, albeit smaller parts of the market that are super important sectors of the economy, like automotive and some critical parts like defense, aerospace, some important industrial markets, including medical equipment and so on. Obviously, we try to do our best to minimize the impact. I'm not saying that those customers get everything they want, but at least we try to minimize the impact that they are going through in this very challenging environment of tightness. Broadly speaking, the overall aggregate supply is substantially below the aggregate demand for both DRAM and NAND. Of course, DRAM is extremely constrained. With that said, I would say that the general sentiment amongst customers is that we are very short of their demand. with that said i would say that the general sentiment amongst customers is that we are very short of their demand For some customers, we are extremely short. for some customers we are extremely short Some of our supply numbers are a fraction of what they want. some of our supply numbers are a fraction of what they want Then in other parts of the market, albeit smaller parts of the market that are super important sectors of the economy, like automotive and some critical parts like defense, aerospace, some important industrial markets, including medical equipment and so on. then in other parts of the market albeit smaller parts of the market that are super important sectors of the economy like automotive and some critical parts like defense aerospace some important industrial markets including medical equipment and so on Obviously, we try to do our best to minimize the impact. obviously we try to do our best to minimize the impact I'm not saying that those customers get everything they want, but at least we try to minimize the impact that they are going through in this very challenging environment of tightness. i'm not saying that those customers get everything they want but at least we try to minimize the impact that they are going through in this very challenging environment of tightness Broadly speaking, the overall aggregate supply is substantially below the aggregate demand for both DRAM and NAND. broadly speaking the overall aggregate supply is substantially below the aggregate demand for both dram and nand Of course, DRAM is extremely constrained. of course dram is extremely constrained HBM is very constrained. All the segments are seeing those challenges. HBM is very constrained. hbm is very constrained All the segments are seeing those challenges. all the segments are seeing those challenges

Speaker 6: Jim, it's Mark. If I could just add in this to build on Sumit's comments about supply efforts. As you heard, and you heard Manish talk about Idaho site and Tongluo, we're doing everything we can to bring up supply. You heard us today, between adding construction and tool installs in the fourth quarter here, we're increasing our fiscal 2026 CapEx number to around $27 billion. We're also going to increase substantially CapEx next year, and more than 1/2 of that increase will be construction. Now, we did provide some comments last quarter about the increase FY 2027. Based on our comments, you may have come up with numbers that are in the low to mid-40%, and we will be spending above that level as we look at it today. We'll do about $10 billion this quarter, and we will step up from there into 2027. Jim, it's Mark. jim it's mark If I could just add in this to build on Sumit's comments about supply efforts. if i could just add in this to build on sumit's comments about supply efforts As you heard, and you heard Manish talk about Idaho site and Tongluo, we're doing everything we can to bring up supply. as you heard and you heard manish talk about idaho site and tongluo we're doing everything we can to bring up supply You heard us today, between adding construction and tool installs in the fourth quarter here, we're increasing our fiscal 2026 CapEx number to around $27 billion. you heard us today between adding construction and tool installs in the fourth quarter here we're increasing our fiscal 2026 capex number to around $27 billion We're also going to increase substantially CapEx next year, and more than 1/2 of that increase will be construction. we're also going to increase substantially capex next year and more than 1/2 of that increase will be construction Now, we did provide some comments last quarter about the increase FY 2027. now we did provide some comments last quarter about the increase fy 2027 Based on our comments, you may have come up with numbers that are in the low to mid-40%, and we will be spending above that level as we look at it today. based on our comments you may have come up with numbers that are in the low to mid-40% and we will be spending above that level as we look at it today We'll do about $10 billion this quarter, and we will step up from there into 2027. we'll do about $10 billion this quarter and we will step up from there into 2027

Speaker 4: Thanks. That was exactly where my next question was, which is, given that run rate sort of implies mid-40%, you said you're going to do above that, but I guess what are the chances you're going to do materially above 50%? Is something like 55% or 60% even in the cards? Thanks. thanks That was exactly where my next question was, which is, given that run rate sort of implies mid-40%, you said you're going to do above that, but I guess what are the chances you're going to do materially above 50%? that was exactly where my next question was which is given that run rate sort of implies mid-40% you said you're going to do above that but i guess what are the chances you're going to do materially above 50% Is something like 55% or 60% even in the cards? is something like 55% or 60% even in the cards

Speaker 6: No. We're not going to give a CapEx number. If the number were that order of magnitude, I think we'd owe it to you to update you more specifically. We're going to run about $10 billion this quarter. We'll step up from there. We are going to be, I believe, higher than the mid-40%. We're going to remain extremely disciplined as we always are. The ops team's been amazing on figuring out how to sweat these assets that we have as much as possible and then accelerating all these greenfield capacity adds that we have. No. no We're not going to give a CapEx number. we're not going to give a capex number If the number were that order of magnitude, I think we'd owe it to you to update you more specifically. if the number were that order of magnitude i think we'd owe it to you to update you more specifically We're going to run about $10 billion this quarter. we're going to run about $10 billion this quarter We'll step up from there. we'll step up from there We are going to be, I believe, higher than the mid-40%. we are going to be i believe higher than the mid-40% We're going to remain extremely disciplined as we always are. we're going to remain extremely disciplined as we always are The ops team's been amazing on figuring out how to sweat these assets that we have as much as possible and then accelerating all these greenfield capacity adds that we have. the ops team's been amazing on figuring out how to sweat these assets that we have as much as possible and then accelerating all these greenfield capacity adds that we have

Speaker 5: Manish here. We've mentioned a couple of times that the majority of the fiscal 2027 CapEx, Jim, is for construction, which kind of also gives you some indication of those construction dollars are not going to be producing bits in that time horizon, which is why we also talked about for us in the industry, the kind of greenfield capacity really starts to contribute to bits in calendar 2028. Even with that supply improvement, we don't see, as Sumit was saying earlier, an intercept for supply with demand. Manish here. manish here We've mentioned a couple of times that the majority of the fiscal 2027 CapEx, Jim, is for construction, which kind of also gives you some indication of those construction dollars are not going to be producing bits in that time horizon, which is why we also talked about for us in the industry, the kind of greenfield capacity really starts to contribute to bits in calendar 2028. we've mentioned a couple of times that the majority of the fiscal 2027 capex jim is for construction which kind of also gives you some indication of those construction dollars are not going to be producing bits in that time horizon which is why we also talked about for us in the industry the kind of greenfield capacity really starts to contribute to bits in calendar 2028 Even with that supply improvement, we don't see, as Sumit was saying earlier, an intercept for supply with demand. even with that supply improvement we don't see as sumit was saying earlier an intercept for supply with demand

Speaker 4: Very helpful call. Thank you all. Very helpful call. very helpful call Thank you all. thank you all

Speaker 8: Your final question comes from the line of Aaron Rakers of Wells Fargo. Your line is open. Please go ahead. Your final question comes from the line of Aaron Rakers of Wells Fargo. your final question comes from the line of aaron rakers of wells fargo Your line is open. your line is open Please go ahead. please go ahead

Speaker 1: Thanks for doing this call and taking the questions. I have one and one follow-up as well. On the SCAs, I know it was asked about HBM, but I'm curious about the NAND flash market. Obviously, that market seems to be further constrained. As you're engaging with your customers on these SCAs, is there a strategic advantage you're finding of having both NAND and DRAM in your portfolio competitively in these engagements? Is NAND pervasive across these SCAs or any context around that, particularly as it relates to enterprise SSDs? Thanks for doing this call and taking the questions. thanks for doing this call and taking the questions I have one and one follow-up as well. i have one and one follow-up as well On the SCAs, I know it was asked about HBM, but I'm curious about the NAND flash market. on the scas i know it was asked about hbm but i'm curious about the nand flash market Obviously, that market seems to be further constrained. obviously that market seems to be further constrained As you're engaging with your customers on these SCAs, is there a strategic advantage you're finding of having both NAND and DRAM in your portfolio competitively in these engagements? as you're engaging with your customers on these scas is there a strategic advantage you're finding of having both nand and dram in your portfolio competitively in these engagements Is NAND pervasive across these SCAs or any context around that, particularly as it relates to enterprise SSDs? is nand pervasive across these scas or any context around that particularly as it relates to enterprise ssds

Speaker 10: Sure. Our enterprise SSD momentum is exceptionally strong, and we provided you some data points on that with a $5 billion quarter in FQ3 for enterprise SSDs inside of the $25 billion overall data centers revenue for the quarter. Absolutely, we do feel really good about the fact that we have incredibly strong portfolio of products, both on the NAND and DRAM side. They, of course, stand on their own feet individually in terms of their capabilities. We have hit record share after record share of data center SSDs over time due to the strength of that portfolio. You know the strength of our DRAM portfolio, both in terms of HBM and non-HBM products. In terms of the levels of constraint, both DRAM and NAND are very constrained. Sure. Our enterprise SSD momentum is exceptionally strong, and we provided you some data points on that with a $5 billion quarter in FQ3 for enterprise SSDs inside of the $25 billion overall data centers revenue for the quarter. sure our enterprise ssd momentum is exceptionally strong and we provided you some data points on that with a $5 billion quarter in fq3 for enterprise ssds inside of the $25 billion overall data centers revenue for the quarter Absolutely, we do feel really good about the fact that we have incredibly strong portfolio of products, both on the NAND and DRAM side. absolutely we do feel really good about the fact that we have incredibly strong portfolio of products both on the nand and dram side They, of course, stand on their own feet individually in terms of their capabilities. they of course stand on their own feet individually in terms of their capabilities We have hit record share after record share of data center SSDs over time due to the strength of that portfolio. we have hit record share after record share of data center ssds over time due to the strength of that portfolio You know the strength of our DRAM portfolio, both in terms of HBM and non-HBM products. you know the strength of our dram portfolio both in terms of hbm and non-hbm products In terms of the levels of constraint, both DRAM and NAND are very constrained. in terms of the levels of constraint both dram and nand are very constrained Of course, when we talk to customers across this long horizon of time through the end of 2030 calendar year, which is the term of a lot of these large SCAs. They are definitely interested in getting their hands on NAND, but DRAM is certainly far more constrained, and more difficult to supply in the quantities and volumes that our customers need. Like I said, NAND is very constrained too, but the sense of concern and urgency in the minds of our customers around DRAM is very, very high. Of course, when we talk to customers across this long horizon of time through the end of 2030 calendar year, which is the term of a lot of these large SCAs. of course when we talk to customers across this long horizon of time through the end of 2030 calendar year which is the term of a lot of these large scas They are definitely interested in getting their hands on NAND, but DRAM is certainly far more constrained, and more difficult to supply in the quantities and volumes that our customers need. they are definitely interested in getting their hands on nand but dram is certainly far more constrained and more difficult to supply in the quantities and volumes that our customers need Like I said, NAND is very constrained too, but the sense of concern and urgency in the minds of our customers around DRAM is very, very high. like i said nand is very constrained too but the sense of concern and urgency in the minds of our customers around dram is very very high

Speaker 1: Very helpful. My final question on the competitive landscape, always trying to think about what vector could change some of the dynamics and the backdrop that we're talking very constructively about. I'm curious how you've evolved your thoughts around China and the competition from either be it CXMT or YMTC. Have you seen any changes on that front or anything you want to share, how you view the competitive landscape from that regard? Thank you. Very helpful. very helpful My final question on the competitive landscape, always trying to think about what vector could change some of the dynamics and the backdrop that we're talking very constructively about. my final question on the competitive landscape always trying to think about what vector could change some of the dynamics and the backdrop that we're talking very constructively about I'm curious how you've evolved your thoughts around China and the competition from either be it CXMT or YMTC. i'm curious how you've evolved your thoughts around china and the competition from either be it cxmt or ymtc Have you seen any changes on that front or anything you want to share, how you view the competitive landscape from that regard? have you seen any changes on that front or anything you want to share how you view the competitive landscape from that regard Thank you. thank you

Speaker 10: Sure. Certainly those two companies have grown over the years in terms of their capabilities and share. Most of their output, the overwhelming majority of their output tends to be sold within China. We haven't really seen much by way of their product or competition from them outside of China. With that said, we are very focused from a competitive perspective in driving really the highest performing, most complex products in the portfolio. When you look at NAND, we are focused on data center SSDs in a very single-minded way. You have seen us also do really well on QLC across client SSDs, but also in data center SSDs. We are the QLC leader in the world. We are leaders in Gen6, first company to come out with Gen6 drives and we advanced them in volume. Sure. sure Certainly those two companies have grown over the years in terms of their capabilities and share. certainly those two companies have grown over the years in terms of their capabilities and share Most of their output, the overwhelming majority of their output tends to be sold within China. most of their output the overwhelming majority of their output tends to be sold within china We haven't really seen much by way of their product or competition from them outside of China. we haven't really seen much by way of their product or competition from them outside of china With that said, we are very focused from a competitive perspective in driving really the highest performing, most complex products in the portfolio. with that said we are very focused from a competitive perspective in driving really the highest performing most complex products in the portfolio When you look at NAND, we are focused on data center SSDs in a very single-minded way. when you look at nand we are focused on data center ssds in a very single-minded way You have seen us also do really well on QLC across client SSDs, but also in data center SSDs. you have seen us also do really well on qlc across client ssds but also in data center ssds We are the QLC leader in the world. we are the qlc leader in the world We are leaders in Gen 6, first company to come out with Gen 6 drives and we advanced them in volume. we are leaders in gen 6 first company to come out with gen 6 drives and we advanced them in volume When you look at that or you look at the highest capacity, 245 TB drives, we are a leader there. You have seen the strength of our DRAM portfolio as well, everything from HBM to high capacity DIMMs, to LPDRAM leadership in the data center, to mobile and client LP leadership in those markets as well. We could go on and on on that, but our focus is to look for these complex, difficult to get right type of products, get into deep customer engagements across multiple years, on the roadmap, gain their confidence in terms of being able to have a track record of meeting and beating time to market with the best specs in the industry, have a track record of innovation. When you look at that or you look at the highest capacity, 245 TB drives, we are a leader there. when you look at that or you look at the highest capacity 245 tb drives we are a leader there You have seen the strength of our DRAM portfolio as well, everything from HBM to high capacity DIMMs, to LPDRAM leadership in the data center, to mobile and client LP leadership in those markets as well. you have seen the strength of our dram portfolio as well everything from hbm to high capacity dimms to lpdram leadership in the data center to mobile and client lp leadership in those markets as well We could go on and on on that, but our focus is to look for these complex, difficult to get right type of products, get into deep customer engagements across multiple years, on the roadmap, gain their confidence in terms of being able to have a track record of meeting and beating time to market with the best specs in the industry, have a track record of innovation. we could go on and on on that but our focus is to look for these complex difficult to get right type of products get into deep customer engagements across multiple years on the roadmap gain their confidence in terms of being able to have a track record of meeting and beating time to market with the best specs in the industry have a track record of innovation You've seen how many nodes in a row of DRAM and NAND we have been first to market on, how many products are first to market across the board. Of course, I would be remiss to not mention that we have one of the best intellectual property portfolios in the world, almost 65,000 patents. We are very aggressive and have a great track record in defending our IP, over a number of years, a number of decades, in fact. Overall, we feel very good about where we are and the structural foundational changes in our business model that the combination of demand, the combination of structural supply challenges in the industry, and the place that AI is creating for memory and its newfound relevance and importance and strategic nature, and now combined with these SCAs are completely transformative for our business. You've seen how many nodes in a row of DRAM and NAND we have been first to market on, how many products are first to market across the board. you've seen how many nodes in a row of dram and nand we have been first to market on how many products are first to market across the board Of course, I would be remiss to not mention that we have one of the best intellectual property portfolios in the world, almost 65,000 patents. of course i would be remiss to not mention that we have one of the best intellectual property portfolios in the world almost 65,000 patents We are very aggressive and have a great track record in defending our IP, over a number of years, a number of decades, in fact. we are very aggressive and have a great track record in defending our ip over a number of years a number of decades in fact Overall, we feel very good about where we are and the structural foundational changes in our business model that the combination of demand, the combination of structural supply challenges in the industry, and the place that AI is creating for memory and its newfound relevance and importance and strategic nature, and now combined with these SCAs are completely transformative for our business. overall we feel very good about where we are and the structural foundational changes in our business model that the combination of demand the combination of structural supply challenges in the industry and the place that ai is creating for memory and its newfound relevance and importance and strategic nature and now combined with these scas are completely transformative for our business

Speaker 1: Thank you. Thank you. thank you

Speaker 10: Thank you. Thank you. thank you

Speaker 8: This concludes today's call. Thank you for attending. You may now disconnect. This concludes today's call. this concludes today's call Thank you for attending. thank you for attending You may now disconnect. you may now disconnect