Micron: AI Capex spending spree continues, is the memory supercycle finally about to start?

Micron (MU.O) released its financial report for the fourth quarter of fiscal year 2025 (ending August 2025) after the U.S. stock market closed on September 24, 2025, Beijing time. The key points are as follows:

1. Overall Performance: Micron's revenue for this quarter was $11.3 billion, a quarter-on-quarter increase of 22%, in line with market expectations ($11.2 billion).

The revenue growth this quarter was mainly driven by the growth in the DRAM business. $Micron Tech(MU.US) The gross margin for this quarter reached 44.7%, better than the sell-side expectations (42.4%) and also met the revised buy-side expectations (44%), mainly benefiting from the price increase of storage products, with significant increases in both DRAM and NAND average prices this quarter.

2. DRAM Business: Achieved $8.98 billion this quarter, a quarter-on-quarter increase of 27.1%, mainly driven by both volume and price increases. The company's DRAM average price increased by about 11% quarter-on-quarter, and shipments also grew by about 14% quarter-on-quarter.

Specifically: ① HBM achieved nearly $2 billion in revenue this quarter, a quarter-on-quarter increase of about $500 million (previous quarter also increased by $500 million), mainly benefiting from the increased mass production of NVIDIA's GB series ; ② Traditional DRAM achieved nearly $7 billion in revenue this quarter, a quarter-on-quarter increase of 26%, with the demand from data centers gradually spilling over into the traditional storage field ;

3. NAND Business: Achieved $2.25 billion this quarter, a quarter-on-quarter increase of 4.5%. Although NAND product shipments still declined by 4% quarter-on-quarter this quarter, NAND average prices increased by 9% quarter-on-quarter. Previously, due to the sluggish NAND market, the industry reduced related NAND capacity. As AI Capex spills over into the NAND field, the supply-demand mismatch has driven NAND prices to rise again.

4. Operating Expenses: With the impact of revenue expansion, the company's R&D expense ratio and sales and management expense ratio both remained stable with a slight decrease. The company's core operating profit for this quarter was $3.69 billion, with the core operating profit margin rising to 32.6%. The key to the company's operating profit improvement is revenue and gross margin. With the increase in both DRAM and NAND average prices, the company's gross margin will exceed 50%.

5. Micron's Performance Guidance: For the first quarter of fiscal year 2026, expected revenue is around $12.2-12.8 billion, market expectations ($11.9 billion), and the company expects the gross margin for the first quarter of fiscal year 2026 to be 49.5%-51.5%, market expectations (45%). The company's guidance for the next quarter is significantly better than market expectations, mainly driven by HBM growth and price increases in traditional storage products.

Dolphin Research's Overall View: AI Capex Drives Storage Cycle Upward

Micron's revenue and gross margin for this quarter both met market expectations, mainly driven by the growth in the DRAM business.

The company also provided good guidance for the next quarter. Micron expects next quarter's revenue to be $12.5 billion (±$300 million), a quarter-on-quarter increase of $1.2 billion; the gross margin is expected to reach 50.5% (±1%). Especially, the gross margin is expected to exceed 50%, which also surpasses buy-side expectations (48%), indicating an unexpected increase in storage prices.

The company's business can be divided into three product categories: ① HBM business maintains a quarter-on-quarter increase of $500 million, driven by NVIDIA's GB series shipments; ② Traditional DRAM business reached $7 billion this quarter, setting a single-quarter historical high driven by both volume and price increases; ③ NAND business average prices also began to rebound this quarter.

Combining the performance of the company's three product categories, it can be seen that: The impact of AI capital expenditure is sequentially from HBM -> Traditional DRAM -> NAND, and currently, NAND products have also started to increase in price. Although demand in traditional markets such as mobile phones remains relatively weak, the significant increase in AI capital expenditure will continue to drive the overall upward trend in the storage industry.

Regarding the revenue situation of Micron's downstream markets, the company has adjusted its disclosure standards starting this quarter. The original CNBU, SBU, MBU, and EBU have been reclassified into CMBU, CDBU, MCBU, and AEBU, highlighting the company's emphasis on data center and cloud business.

Recently, driven by the significant increase in AI Capex, the storage sector has also gained more attention. For Micron, the current main points of focus are:

a) HBM: Undoubtedly the first to benefit from AI Capex. The company's HBM3e products have long been integrated into NVIDIA's supply chain, with HBM revenue this quarter at about $2 billion, a quarter-on-quarter increase of $500 million, mainly benefiting from the increased mass production of NVIDIA's GB series.

However, it should not be overlooked that: ① Currently, 2/3 of the HBM market demand comes from NVIDIA, and Micron remains a secondary supplier, with relatively weak bargaining power; ② Recently, there have been reports that Samsung's HBM3e has been certified by NVIDIA, which may have a potential impact on Micron's market share.

On the other hand, NVIDIA's next-generation Rubin GPU will be equipped with HBM4, and Micron, Samsung, and SK Hynix are all committed to the development of HBM4. If they can obtain certification from major customers first, they are expected to gain a larger share in the HBM market. Therefore, the progress of Micron's HBM4 will directly affect the company's future HBM business expectations.

b) Traditional DRAM: Recently, NVIDIA released the Rubin CPX inference card, which will be equipped with large-capacity GDDR7, bringing significant increments to the traditional memory field. Although DDR does not have the large bandwidth of HBM, it can achieve a significant cost reduction, providing cloud service providers with a more cost-effective choice during the inference phase.

Previously, the traditional DRAM field had been performing flat, mainly due to the sluggishness in markets such as mobile phones. However, the increase in DDR demand from data centers and AI markets will undoubtedly inject new imagination into the traditional DRAM market, directly driving the expected rise in DDR prices.

c) NAND: Long absent from the "AI market," it finally receives attention. In both the training and inference stages of AI, NAND storage is needed, with enterprise-level solid-state drives (eSSD) mainly used to store pre-trained models, checkpoints, key-value caches (KV Cache) offload data, and specific data required for post-training fine-tuning.

As cloud service giants increase capital expenditure, they also increase demand for NAND. AI training requires high-capacity eSSD to store training data; AI inference also needs to store pre-trained models and KV caches (currently upgraded from 64TB to 96TB/server).

The two major driving forces of the NAND market are: ① QLC eSSD compared to traditional TLC, can better meet AI's random I/O needs (higher storage density, larger capacity, cost-effectiveness advantage), making it a relatively better storage solution in current AI applications; ② NL SSD is expected to be launched in 2026, using QLC NAND + PCIe Gen4 interface, aiming to replace near-line HDD, alleviating the supply constraints of HDD.

Samsung remains the largest supplier in the eSSD market, with Micron still in third place, but Micron's market share is showing an upward trend.

Combining (a+b+c), the current AI supercycle drives Micron's core businesses (HBM, traditional DRAM, and NAND), especially the recent boost to the traditional storage field.

From the company's revenue sources, it is mainly derived from the procurement of large cloud service providers. Combining the capital expenditures of the four major cloud providers (Google, Microsoft, Amazon, and Meta), the total capital expenditure of the four is expected to reach $140 billion in 2025, a year-on-year increase of nearly 60%, and they have successively raised their capital expenditure plans after the financial report.

At the same time, large orders from AI fields such as Oracle and Open AI have been disclosed one after another, indicating that the current AI Capex has entered a "crazy expansion period." As long as cloud service providers continue to increase capital investment, this will correspondingly increase the demand for storage products, driving the upward trend of Micron's operations.

Although DRAM and NAND production lines can be partially converted technically, they still require optimization and improvement of equipment and processes. During the relatively sluggish period of the NAND market, Samsung and SK Hynix have converted some NAND production lines. Now that the demand for HBM, traditional DRAM, and NAND is fully favorable, it will drive the overall capacity utilization rate of the storage industry, and the capital expenditure situation of each storage manufacturer can be followed up.

Combining the company's current market value ($186.2 billion), it roughly corresponds to a PE ratio of about 9 times the company's net profit for fiscal year 2026 (assuming revenue +48%, gross margin 53%, tax rate 11.8%). Referring to the historical valuation range (8-14 times PE) during the company's upward cycle, the company's current market value is at the lower end of the range.

Recently, the "group mode" initiated by NVIDIA, Open AI, Intel, etc., has further boosted the heat of the AI market. As an American storage company, Micron may also be "grouped" in the future to jointly shape the "independent and controllable" of the U.S. domestic semiconductor industry, which has the potential to boost Micron's valuation.

Overall, as long as the capital expenditure of cloud service providers maintains a high growth trend, storage chips will directly benefit from the improvement of this round of AI Capex, thereby driving Micron's performance and the upward cycle of the storage industry. The internal risk to be wary of in the industry is the supply situation of Samsung's HBM3e and its impact on HBM market share.

For more changes in the company's business, please pay attention to the subsequent telephone communication (Dolphin Research will organize), focusing on the company's capital expenditure expectations, HBM4 progress, and the outlook for the next fiscal year's operations, which can all demonstrate the confidence of the company's management during this round of AI expansion period.

The following is Dolphin Research's specific analysis of Micron's financial report:

I. Overall Performance: Two Core Guidance, Both Better Than Expected

1.1 Revenue

Micron's total revenue for the fourth quarter of fiscal year 2025 was $11.3 billion, a quarter-on-quarter increase of 21.7%, in line with market expectations ($11.2 billion). The quarter-on-quarter increase in revenue this quarter was mainly driven by the growth in the DRAM business.

From each downstream perspective, data centers and networks contributed the main increment this quarter, the mobile department was driven by downstream seasonal stocking, and other departments changed little.

From the company's guidance for the next quarter, the company expects next quarter's revenue to be $12.2-12.8 billion, a quarter-on-quarter increase of about 10%, better than market expectations ($11.9 billion). Dolphin Research believes that the company's revenue growth for the next quarter mainly comes from the HBM growth driven by data center demand and the recovery of traditional storage products.

1.2 Gross Margin

Micron achieved a gross profit of $5.05 billion in the fourth quarter of fiscal year 2025, with a gross margin of 44.7% this quarter, a quarter-on-quarter increase of 7 percentage points. The increase in gross margin was mainly driven by the growth in HBM shipments and the price increase of traditional storage products.

Although the company's current inventory is $8.36 billion, a quarter-on-quarter decrease of 4.3%. Driven by data center and related demand, the company's current inventory turnover days have dropped to 123 days, close to the previous cycle's upward phase.

The company expects the gross margin for the next quarter to be 49.5-51.5%, a quarter-on-quarter increase of about 7 percentage points. With the continued price increase of DRAM and NAND products, the gross margin will rise again.

1.3 Operating Expenses

Micron's operating expenses for the fourth quarter of fiscal year 2025 were $1.4 billion, a quarter-on-quarter increase of 4.6%. Due to the faster growth rate of revenue, the company's operating expense ratio for this quarter dropped to 12.4%.

This quarter's R&D expenses increased, but the quarter-on-quarter growth rate was lower than the revenue side, and both expense ratios fell this quarter.

The company's core operating profit for this quarter was $3.69 billion, with the quarter-on-quarter growth mainly coming from revenue growth and gross margin improvement. Overall, since the company's operating expenses remained relatively stable, the improvement in the profit side was mainly influenced by the two core indicators of revenue and gross margin.

II. Business Segments: AI Capex Extends from HBM to Traditional Fields

From the latest financial report, DRAM and NAND remain the company's most important revenue sources. With the gradual volume increase of HBM, the proportion of the company's DRAM revenue is showing an upward trend.

2.1 DRAM

DRAM is the company's largest revenue source, accounting for nearly 80%. This quarter, the company's DRAM business revenue grew to $8.98 billion, a quarter-on-quarter increase of 27.1%. This quarter, the DRAM average price increased by about 11% quarter-on-quarter, and shipments also grew by about 14% quarter-on-quarter.

Specifically, the company's HBM revenue this quarter was close to $2 billion, a quarter-on-quarter increase of about $500 million. Traditional DRAM revenue was about $7 billion, a quarter-on-quarter increase of 26%.

DRAM is the company's most core business, mainly consisting of HBM and traditional DRAM.

1) HBM:

Based on previous company communications, Dolphin Research expects the company's HBM revenue in 2025 (calendar year) to reach $7-8 billion. Since the company's HBM revenue in the first three quarters was about $4.8 billion, it can be inferred that HBM revenue in the fourth quarter of 2025 is expected to reach $2.2-3.2 billion, a quarter-on-quarter increase of about $700 million.

Currently, the company's HBM products are in a secondary supplier position to NVIDIA, with product progress only behind SK Hynix. With the shipment of the GB series, the company's current market share in the HBM market has reached the target of 20-25%.

In the HBM business, the potential risk of Samsung should not be ignored. Recently, Korean media rumors suggest that Samsung has been certified by NVIDIA, but the official has not specifically clarified. If Samsung also enters NVIDIA's supply chain, it may have a certain impact on the HBM market share.

In addition, since NVIDIA's subsequent Rubin GPU will be equipped with HBM4, the progress and certification status of each HBM4 product may also have the potential to reshape the HBM market pattern. Continue to pay attention to the specific progress of Micron's HBM4.

2) Traditional DRAM:

From the business breakdown, the company's traditional DRAM business revenue this quarter was close to $7 billion, a new quarterly high for the company's traditional DRAM business, mainly benefiting from the data center and AI business.

Although demand in terminal markets such as mobile phones and PCs remains relatively weak, data centers and AI have affected the original supply-demand situation, driving up the prices of traditional DRAM products.

With the launch of NVIDIA's CPX products, equipped with GDDR7, it can directly drive the expected improvement in the traditional DRAM market. During the inference phase, replacing some products from HBM with DDR products can directly bring a significant improvement in cost-effectiveness, which will continue the supply-demand imbalance in the DRAM market.

2.2 NAND

NAND is the company's second-largest revenue source, accounting for about 20%. This quarter, the company's NAND business revenue was $2.25 billion, a quarter-on-quarter increase of 4.5%. This quarter, NAND shipments declined, but the average price increased by about 9% quarter-on-quarter.

Compared to the DRAM business, NAND's growth rate is significantly weaker. However, as AI capital expenditure extends outward, NAND also begins to benefit, and the price segment has already started to warm up this quarter.

The recent increase in NAND prices is mainly because:

① TCL -> QCL: Driven by data center demand, QLC eSSD compared to traditional TLC can better meet AI's random I/O needs (higher storage density, larger capacity, cost-effectiveness advantage), making it a relatively better storage solution in current AI applications;

② NAND market supply-demand mismatch: Previously, the sluggish NAND market led some manufacturers to cut NAND production lines. As NAND demand recovers, the supply side gradually cannot meet market demand, and the supply-demand mismatch drives prices up;

③ NL SSD is expected to be launched in 2026, using QLC NAND + PCIe Gen4 interface, aiming to replace near-line HDD, alleviating the supply constraints of HDD.

Combining the above three points, the NAND market will also benefit from the improvement driven by AI Capex. As HBM and traditional DDR warm up, the storage market is expected to usher in an overall upward cycle.