HBM is about to expand, can Micron seize the opportunity?

Micron (MU.O) released its financial report for the third quarter of fiscal year 2025 (ending May 2025) after the U.S. stock market closed on June 26, 2025, Beijing time. The key points are as follows:

1. Overall Performance: $Micron Tech(MU.US) reported revenue of $9.3 billion this quarter, a quarter-on-quarter increase of 15.5%, exceeding market expectations ($8.85 billion), mainly driven by increased NAND shipments and HBM growth. Although the average prices of DRAM and NAND continued to decline this quarter, both saw shipment growth rates exceeding 20% quarter-on-quarter.

2. DRAM Business: Achieved $7.07 billion this quarter, a quarter-on-quarter increase of 15.5%. The high average price of HBM and shipment growth contributed to the increase in DRAM average prices. However, the company's DRAM average price still declined by about 4% quarter-on-quarter, with business growth mainly driven by a 20% increase in shipment volume.

Regarding the market's focus on the HBM business, Dolphin Research expects the company to achieve approximately $1.5 billion in HBM revenue this quarter, a quarter-on-quarter increase of about $500 million (compared to $300 million in the previous quarter). With the mass production of GB300, the company's HBM quarter-on-quarter growth is expected to continue expanding in the second half of the year.

3. NAND Business: Achieved $2.16 billion this quarter, a quarter-on-quarter increase of 16.2%. Although the average price of NAND products still declined by 7% quarter-on-quarter, NAND shipment volume grew by 25% quarter-on-quarter, significantly exceeding expectations, mainly due to demand from data centers and clients.

4. Operating Expenses: The company's R&D expense ratio and sales and management expense ratio remained relatively stable this quarter. The company's core operating profit was $2.17 billion this quarter, a quarter-on-quarter increase of 22%. The key to the improvement in operating profit was revenue and gross margin. Thanks to the DRAM product mix and cost improvements, the company's gross margin rebounded to 37.7% this quarter.

5. Micron's Performance Guidance: The fourth quarter of fiscal year 2025 is expected to have revenue of approximately $10.4-11 billion, exceeding market expectations ($9.89 billion), with the company expecting a gross margin of 40%-42% for the fourth quarter of fiscal year 2025, compared to market expectations (38.3%). The growth exceeding expectations next quarter is mainly driven by HBM growth and price increases in some traditional products.

Dolphin Research's Overall View: The company's financial report data and guidance are favorable, driving the stock price to rise by 8% in after-hours trading. However, the management did not provide additional incremental information on the HBM aspect, which is the market's main focus, causing the after-hours gains to retreat.

In the current performance of Micron, the important indicators are revenue and gross margin. The change in gross margin is mainly affected by changes in DRAM and NAND prices, while revenue growth is more importantly driven by the company's HBM volume. Since Micron's HBM capacity is almost fully booked, the focus is on capacity ramp-up and release performance.

Micron's current HBM progress is smooth, with HBM3E 12-high already entering NVIDIA's GB300, and it is expected to enter a state of cross-supply between 8Hi and 12Hi next quarter. At that time, HBM3E 12Hi (paired with GB 300) is expected to be the main shipment, while HBM3E 8Hi (paired with GB 200) will play a supporting role.

Core Drivers for Micron's Stock Price:

1) Can HBM exceed expectations? Narrowing the gap with SK Hynix, gaining more market share, and whether Samsung's HBM products can enter NVIDIA's supply chain.

Based on company and market expectations, Dolphin Research believes that Micron's HBM revenue is expected to reach $7-8 billion in 2025 (calendar year). The HBM business achieved $1 billion last quarter and $1.5 billion this quarter, a quarter-on-quarter increase of $500 million. This suggests that the company's revenue in the second half of 2025 will reach $4-5 billion, which aligns with the market's timing for large-scale shipments of the GB series. Further stock price performance will depend on whether HBM can exceed $8 billion for the year and achieve "greater heights" in 2026. Additionally, due to the "cyclical stock" nature combined with the "industry follower" identity, Micron's storage business performance in the AI industry chain will still be significantly inferior to NVIDIA and TSMC.

2) The penetration of edge-side AI hardware and the recovery cycle of traditional products. Recently, the average price of DDR products has increased, mainly due to market concerns about the suspension of DDR4 supply by Micron, Samsung, and others. However, the company's expectations for the computer and mobile phone markets only show low single-digit growth, indicating that downstream demand is still relatively flat, and there is no expectation of significant penetration of edge-side AI. If subsequent edge-side AI penetration exceeds expectations, it may lead to a real recovery of DDR and related products.

In the storage industry, Micron inherently has the characteristics of a "cyclical stock." The growth of HBM and AI demand brings new increments to the company and opens up upward space. Since the company's HBM products are mainly driven by NVIDIA's GB series shipments, during the transition from GB200 to GB300, Micron's HBM revenue in the first half of the year will be relatively flat, and the market will focus more on the company's HBM guidance performance in the second half of the year. After this financial report, the company did not raise its HBM expectations again, and Dolphin Research expects the company's HBM revenue in the second half of 2025 to reach $4-5 billion, a 50% increase compared to the first half.

Overall, the company is still in a prosperous cycle, and as long as HBM is successfully ramped up, the company's performance in the second half of the year will continue to improve. Compared to fiscal year 2025, the performance in fiscal year 2026, driven by GB300 and HBM3E 12-high, will see a significant improvement. Dolphin Research expects the company's current market value to correspond to a PE of about 11-12 times for fiscal year 2026 (assuming revenue +26%, gross margin +5pct, tax rate 11%).

Due to the "cyclical" impact, it is difficult for the gross margin to remain above 40% for a long time, and there will be significant fluctuations in profits. From a longer perspective, the company's profit is expected to achieve a compound growth of 16.5% from fiscal year 2025 to fiscal year 2029, with the company's market value corresponding to an average PE of about 13-14 times during these five years, placing the valuation at a relatively neutral level. Overall, the current stock price has already factored in the expectation of HBM growth (achieving around $7-8 billion in 2025 calendar year), and the valuation is at a relatively reasonable position.

Although the financial report and guidance are favorable, the company did not raise its HBM expectations again, and the temporary recovery in traditional fields (DDR4 price increase due to production suspension) does not open up further upward space. The certainty of performance growth in fiscal year 2026 is relatively strong, and if the company can exceed expectations in the HBM market or edge-side AI field, it will bring more anticipation to the market.

Continuously updating...

Dolphin Research's Micron article retrospectives:

Earnings Season

March 21, 2025, Conference Call "Micron (Minutes): HBM climbing continuously in 2025, higher revenue in 2026"

March 21, 2025, Earnings Commentary "Micron: The "East Wind" is not far, but waiting for the wind is risky"

December 19, 2024, Conference Call "Micron: HBM revenue expected to reach billions in 2025 (FY25Q1 Conference Call)"

December 19, 2024, Earnings Commentary "Micron: AI can't fill the "cyclical pit""

September 26, 2024, Earnings Commentary "Micron: Big ups and downs, the ballast still depends on the cycle"

September 26, 2024, Conference Call "Micron: Capital expenditure in 2025 focused on HBM (FY24Q4 Conference Call Minutes)"

June 27, 2024, Earnings Commentary "Micron: Price increases can't support high expectations"

June 27, 2024, Conference Call "Micron: Gross margin will continue to improve in the second half of the year (3QFY24 Conference Call)"

March 21, 2024, Earnings Commentary "Micron: Storage price surge, unveiling the HBM3E battle"

March 21, 2024, Conference Call "Micron: HBM3E mass production, supplying NVIDIA (2QFY2024 Conference Call Minutes)"

December 21, 2023, Earnings Commentary "Micron Technology: The storage winter is over, price increases welcome spring"

December 21, 2023, Conference Call "Gross margin will see continuous improvement (Micron 1QFY24 Conference Call Minutes)"

September 28, 2023, Earnings Commentary "Micron Technology: False recovery, true depression"

September 28, 2023, Conference Call "Inventory problem no longer, when will prices rise?"

June 29, 2023, Earnings Commentary "Micron Technology: AI wave surges, is the turning point here?"

June 29, 2023, Conference Call "End of inventory clearance, AI adds new fire (Micron 3QFY23 Conference Call)"

March 29, 2023, Conference Call "Experiencing the worst period, semiconductor may gradually see dawn (Micron FY23Q2 Conference Call)"

March 29, 2023, Earnings Commentary "Micron's "big bleeding" may not be a bad thing"

In-depth

June 18, 2024 "AI Storage: HBM grabs NVIDIA's lifeline"

April 13, 2023 "Micron: GPT cooling down, no hindrance to storage bottoming out recovery"

March 15, 2023 "Micron: Has the storage chip giant survived the winter?"

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