Ladies and gentlemen, thank you for joining us, and welcome to Micron Technology, Inc.'s fiscal second quarter 2026 financial conference call. After today's prepared remarks, we will host a question and answer session. I will now hand the conference over to Satya Kumar, Investor Relations. Satya, please go ahead.

Thank you, and welcome to Micron Technology, Inc.'s fiscal second quarter 2026 financial conference call. On the call with me today are Sanjay Mehrotra, our Chairman, President and CEO, and Mark Murphy, our CFO. Today's call is being webcast from our Investor Relations site at investors.micron.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website along with the prepared remarks for this call. Today's discussion contains forward-looking statements that are subject to risks and uncertainties. These forward-looking statements include statements regarding our future financial and operating performance, as well as trends and expectations in our business, customers, market, industry, products, and regulatory and other matters. These statements are based on our current assumptions, and we assume no obligation to update these statements. Please refer to our most recent financial report on Forms 10-K, Forms 10-Q, and our other filings with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially from expectations. Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures can be found on our website. I will now turn the call over to Sanjay. Thank you, Satya.

With stellar records in revenue, gross margin, EPS, and free cash flow. Micron Technology, Inc. delivered an exceptional fiscal Q2. Quarterly revenue nearly tripled versus one year ago, and revenue for DRAM, NAND, HBM, and each business unit reached new highs. Our fiscal Q3 single-quarter revenue guidance exceeds the full-year revenue for every year in our company's history through fiscal 2024. For fiscal Q3, we anticipate exceptional growth across revenue, gross margin, EPS, and free cash flow. Reflecting confidence in the sustained strength of our business, I am pleased to announce that our Board has approved a 30% increase in our quarterly dividend. The step-up in our results and outlook are the outcome of an increase in memory demand driven by AI, structural supply constraints, and Micron Technology, Inc.'s strong execution across the board. Our memory and storage solutions are at the heart of this AI revolution. Memory makes AI smarter and more capable, enabling longer context windows, deeper reasoning chains, and multi-agent orchestration. As AI evolves, we expect compute architectures to become more memory intensive. This is why we strongly believe that Micron Technology, Inc. is one of the biggest beneficiaries and enablers of AI. AI has not just increased demand for memory; it has fundamentally recast memory as a defining strategic asset in the AI era. We continue to work with customers on strategic customer agreements, or SCAs, that are different from prior LTAs and have specific commitments over a multiyear time horizon for improved visibility and stability in our business model. These SCAs also provide customers greater certainty to plan their businesses while reinforcing long-term engagement across our broad product portfolio. We are excited to have signed our first five-year SCA. We are making excellent progress ramping our industry-leading 1γ DRAM and G9 NAND technology nodes. We…

Thank you, Sanjay. Good afternoon, everyone. Micron Technology, Inc. delivered strong financial results for the fiscal second quarter, with revenue, gross margin, and EPS all exceeding the high end of our guidance. In fiscal Q2, we generated record free cash flow, reduced our debt, and closed the quarter with the highest net cash position in our history. Total fiscal Q2 revenue was $23,900,000,000, up 75% sequentially and up 196% year over year, representing our fourth consecutive quarterly revenue record. The $10,200,000,000 sequential increase is the largest in our history. Fiscal Q2 DRAM revenue was a record $18,800,000,000, up 207% year over year, and represented 79% of total revenue. Sequentially, DRAM revenue increased 74%. Bit shipments were up mid-single digits. Prices increased in the mid-sixties percentage range, driven by tight industry conditions, and included favorable mix. Fiscal Q2 NAND revenue was a record $5,000,000,000, up 169% year over year, and represented 21% of Micron Technology, Inc.'s total revenue. Sequentially, NAND revenue increased 82%. NAND bit shipments increased in the low-single-digit percentage range. Prices increased in the high-seventies percentage range, driven by tight NAND industry conditions, and included favorable mix. The consolidated gross margin for fiscal Q2 was 75%, up 18 percentage points sequentially. This improvement was driven primarily by higher pricing and also included favorable mix and cost performance. Fiscal Q2 gross margin nearly doubled from a year ago and was a company record. Now turning to quarterly financial performance by business unit. Cloud Memory Business Unit revenue was a record $7,700,000,000 and represented 32% of total company revenue. CMBU revenue was up 47% sequentially, driven by an increase in prices and favorable mix. CMBU gross margins were 74%, higher by nine percentage points sequentially, driven by higher pricing and cost execution. Core Data Center Business Unit revenue was a record…

Thank you, Mark. Decades of investment, innovation, and execution have established Micron Technology, Inc. as a technology leader in memory and storage and as one of the semiconductor industry's biggest beneficiaries and enablers of AI. As the only U.S.-based manufacturer of advanced memory products, Micron Technology, Inc. is uniquely positioned to capitalize on the unprecedented opportunities ahead. I want to thank our team members worldwide whose execution made this outstanding quarter possible. As strong as these results are, I am even more excited about what is ahead for Micron Technology, Inc. We will now open for questions.

Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star-1 to raise your hand and star-6 to unmute. Your first question comes from the line of Krish Sankar from TD Cowen. Please go ahead.

The 81% gross margin guide is very impressive. Just kind of curious how to think about the sustainability of gross margins, especially as you bring more HBM4 into the mix. If you can give some thought on how to think about gross margins in the August quarter and beyond, that will be very helpful. Then I have a follow-up for Sanjay.

So, Krish, this is Mark. We provide a strong guide up, up 600 basis points sequentially into the third quarter. We are not going to provide the fourth quarter gross margin guidance. However, we have indicated that we expect the market conditions to remain tight beyond 2026. So clearly beyond the fourth quarter, what you are seeing reflected in our gross margin is the benefits of AI driving a multiyear investment cycle, most of which is ahead of us. AI requires more memory and more high-performance memory, and that is reflected in the margins. Also, we have talked about supply factors, and those are going to continue beyond 2026. The 81% contemplates a growth in HBM4, but we expect, as I mentioned, market conditions to be strong. Now keep in mind that at these gross margin levels, incremental increases in price are going to have less of an effect on gross margin. But beyond that, we are not providing a fourth quarter gross margin.

Got it. And then a quick question for Sanjay on the SCA. Congrats on your first five-year SCA. How different is it from an LTA? Is this a multiyear volume and price commitment, or does the price get negotiated every year? And also how to think about cancellation terms in the SCA in case the cycle slows down during the time frame.

Thanks, Sanjay. So thank you for recognizing us for the first SCA that we have completed here. And, as you noted, SCA is a multiyear agreement, and we noted that in our remarks as well. LTAs have tended to be typically one-year agreements. And, of course, in this environment of extremely tight supply outlook in the foreseeable time frame as well, our customers are very motivated, for their own planning purposes and for their better predictability, to have these structural strategic agreements with us. These agreements are really meant to bring stability and greater visibility into our business model as well. We have completed one SCA, so we are not going to be getting into the specifics here of these agreements. I am sure you can appreciate that these SCAs are confidential in nature. But these SCAs are meant to achieve the objectives for the customers in terms of their ability to plan and be able to count on supply commitments that are in the agreements, but also for us to be able to count on specific commitments that are there from the customers. These are meant to go across periods when the industry is very tight versus other parts of the industry environment as well. That is why they are long-term agreements, and they have robust terms in them. So the terms have robust provisions in them for us as well as for our customers.

Got it. Thank you very much.

Your next question comes from the line of Joseph Moore from Morgan Stanley. Your line is open. Please go ahead.

Allocation questions by end market. Obviously, AI is the area that has the most urgency. But do you worry about demand destruction for things like PCs and smartphones? Are you trying to balance big customer, small customer? Just how are you thinking about that allocation process?

I mean, clearly, supply is extremely tight across all end markets. Demand trends are strong across the end markets, while price-sensitive markets such as the consumer example that you gave may have some demand that is getting impacted due to the higher prices. But overall demand in those markets as well stays pretty strong. Our goal and strategy always is to be a diversified supplier to our various end markets. I think that is very important for us. Of course, data center is becoming a bigger and bigger part of the industry TAM. So a bigger portion of the supply goes there. That is the main driver of growth for the industry as well as for Micron Technology, Inc. But other parts of the markets are important to us, such as PCs, smartphones, automotive, industrial, and we want to maintain that well-diversified mix for our end markets. I would just like to point out that overall, whether in data center or in the consumer parts of the markets, such as smartphones or PCs, the AI trend is continuing to drive greater and greater requirements for memory content. Customers are working in this tight supply environment to manage the mix of their products. But overall, we are very much working with customers across our end markets.

Great. Thank you. And I think in the past, you have said that some customers are getting 70% of what they are asking for. Is that still kind of the ballpark of what you are dealing with? Are there customers higher or lower than that than they were three months ago?

What we have said in the last earnings call is that some of our key customers, we are able to fulfill only 50% to two-thirds of their demand in the medium term. And yes, that still remains the case.

Great. Thank you. Great quarter. Thank you.

Your next question comes from the line of Timothy Michael Arcuri. Your line is open. Please go ahead.

Thanks a lot. Sanjay, I also wanted to ask about the SCAs. I think we are all trying to think to the other side of the cycle and hope that these SCAs provide some mechanism that will kind of limit your gross margin on the downside to a certain number. So I know you do not want to give too many details, but is it fair to say that there is a mechanism in these SCAs that would limit your gross margin on the downside when things do finally roll back over?

We are certainly not getting into the specifics of these SCAs for the obvious reasons of confidentiality of these agreements. We have successfully completed one SCA. We are in discussions with multiple other customers. If and when we complete these agreements and as appropriate, we will, of course, share further details with you. What I want to highlight is that these SCAs are multiyear and they have specific commitments in them. These are robust agreements, and these are meant to give us the visibility and stability toward our business model. Beyond that, I cannot get into any specifics at this point.

Okay. Thanks. And then, Mark, I just had a question about cash. You are going to generate, I do not know, $35,000,000,000 to $40,000,000,000 in free cash flow this fiscal year. You are going to probably have more than $50,000,000,000 in cash by the end of the calendar year. So what do you do with this? Are you planning to set aside a bunch of it to buy back a bunch of stock on the other side? And I guess, with respect to that, you do have restrictions on the repo from the money you took from the CHIPS Act. Is there any way to get that reworked? Thanks.

Yeah, Tim. We are thrilled with the performance of the business and the improvement in the balance sheet. In the second quarter, it was record net cash and record free cash flow, beating the previous quarter's record by 77%. Our third quarter guide, when you take those numbers and consider the CapEx we gave, we could see cash flow roughly double sequentially. We are going to continue to build on the balance sheet strength and improve our net cash position. We are continuing to delever and pay down debt. Noteworthy that we received two credit upgrades in the quarter, so we are now a solid triple-B. We are getting stronger, while, as you can see, we have talked about increasing our CapEx investment and increasing our R&D investment. Now to your specific question on balance sheet priority or capital allocation, balance sheet is always going to be a priority along with organic investment in our business to advance technology and to put in capacity for value-add bits, which we certainly see now. We are generating return on capital at this point over 30%, headed towards 50%. We are going to remain disciplined there, though. And then you saw today we are pleased to announce a dividend increase of 30%. It reflects the confidence we have in our business outlook, stability of the business, and cash returns in the future. And then, as you said, we believe we will have significant capacity for returning cash to shareholders through repurchase, a combination of offsetting dilution from stock comp and then opportunistically repurchasing.

Thanks, Mark.

Your next question comes from the line of Christopher James Muse from Cantor Fitzgerald. Your line is open. Please go ahead.

Yeah, good afternoon. Thanks for taking the question. One follow-up, again the SCA question. So you have had an evolution here—LTAs, binding, now SCAs. I am curious if you could discuss the breadth of the different customers that you are speaking with. Is it only hyperscale, or are there others that are interested? And I know you do not want to go into specific details on the contract. But just to follow up on the last question, is there any CapEx-forward requirements tied to these agreements? Are there pricing tied to an ROIC on those investments? Any help there would be helpful. Thank you.

We shared with you that the SCA that we have just signed is with a large customer. These agreements are very much focused on allowing us to invest with confidence in our future supply plans and also having specific terms that enable us to have overall better visibility into future demand and, as I said earlier, enable stability around the business model as well. Beyond that, we are not commenting on the SCAs other than to say that, as I mentioned earlier, these SCA discussions are proceeding with multiple customers. And yes, these are across multiple markets as well.

Very helpful. And then I guess as a quick follow-up for HBM. I think you guided last quarter 40% growth CAGR, which would suggest roughly $50,000,000,000 in revenues for the market this year. Has that number changed? And are you seeing any sort of preference for perhaps moving bits to DDR5 over HBM by any industry players given, today, the higher margins that we see there? Thanks so much.

Yes, it is correct that the margins for non-HBM today are higher than HBM margins. Demand for HBM, of course, continues to be strong. We have not updated the numbers that we had provided last in terms of the outlook for the HBM TAM. The demand for DDR5, LP, and HBM all continue to be strong in the data centers. We, of course, continue to manage the mix of the business as the data center AI demand continues to grow. As I said earlier, outside of data center, we are very much focused on making sure that we are maintaining relevant share in our other key market segments as well. Overall, in this environment of strong AI demand trends across data center to the edge, we are very much focused on continuing to manage our portfolio, and we see strong growth opportunity for the full portfolio of Micron Technology, Inc. in the data center. I will just point out there that this portfolio is about HBM, it is about LP, it is about SoC-M, it is about DDR5, as well as our data center SSDs. We have made tremendous strides in terms of our market share in data center SSDs over the course of the last few years.

Your next question comes from the line of Harlan L. Sur from JPMorgan. Your line is open. Please go ahead.

Good afternoon, and congratulations on the solid results and strong quarterly execution. Maybe, Sanjay, to carry on from where you left off on your commentary on SSD. In November of last year, I estimated that your enterprise SSD business was almost half of your total flash business. I think it was up 60% sequentially. Obviously, a very favorable mix shift from a margin perspective for the Micron Technology, Inc. team. And as you mentioned, you remain a strong top-three global supplier of the ESSD. Off of that strong number, it looks like your ESSD business doubled sequentially in February, still 50% of the NAND mix. Looking forward, with the G9 node continuing to ramp—your next-generation ESSDs, performance-optimized, capacity-optimized, mainstream, all on G9—does this give the team a runway to continue to drive sequential growth in ESSD through the remainder of this calendar year and into next year? And then I just wanted to get your thoughts on this new proposed memory tier of high-bandwidth flash. Is this an area where the Micron Technology, Inc. team might start to focus on R&D resources?

Regarding your question on data center SSDs, this is an area of strong growth ahead. NAND supply is very tight, demand for NAND stays strong, and data center SSDs are a big driver of NAND growth as well. Micron Technology, Inc. is well positioned with our portfolio of SSDs going across the requirements in terms of capacity as well as performance across various customers using TLC as well as QLC with respect to our data center mix. We are very well positioned with this, and as part of our strategy of continuing to shift our portfolio—our revenue mix—toward higher profit pools of the industry and high-value parts of the market, we will continue to address opportunities for growing our SSD business. We feel really good about the trajectory that we have been on with data center SSD and the trajectory that is planned ahead for us as well. Regarding your question on HBF, high-bandwidth flash, high-bandwidth flash has some positive attributes, such as capacity, but it has the limitations that NAND has, such as write speed as well as power and retention. Therefore, there will be potentially some workloads where this may be a possible solution, but it is really early, and what is needed is engagement with the customers in terms of really understanding the business value proposition of HBF. We, of course, continue to study this.

I appreciate that. And then how much of these multiyear SCA agreements is due to the inherent requirements for earlier and longer-term engagement with your GPU/XPU chip customers, just due to the customization of their next-generation HBM architectures—especially around the base die? Given the 12- to 18-month design cycle times for these custom base dies, the sharing of IP between you and your chip customers, and optimizing the base die to your process flow, it does imply that they have to engage with you much earlier in the design phase for their GPUs and XPUs. Is this another factor driving these multiyear SCAs?

Again, we are not getting into the specifics, not getting into the specific type of customers here as well. But what I will definitely tell you is that yes, these SCAs really bring us closer to the customer in terms of partnership. That partnership extends into bringing us closer in terms of R&D collaboration and roadmap planning, both ours as well as for customers. That is definitely one of the benefits of these SCAs as well.

Yep. Thank you.

Your next question comes from the line of Thomas James O'Malley from Barclays. Your line is open. Please go ahead.

Hey, guys. Thanks for taking the questions and really nice results. So at GTC and at OCP this week, I think there is a lot of conversation around the LPU architecture and the increased use of SRAM. Could you talk about your view on the memory market longer term as you see more workloads rely on other types of memory outside of the HBM that you are already using? And then, as a broader question, with so much of the demand coming in these longer-term agreements, being associated with data center and just a few number of customers that can actually acquire and build these products, how are you benchmarking when you are adding capacity? Do you have an internal forecast for accelerators? Are you talking customer by customer and building bottoms-up forecasts, just so that you know in year three, year four, year five, that you are offering enough supply to the industry and not getting into a situation in which we are in an oversupply? Thank you very much.

First of all, on your question on the SRAM and LPU-based architectures, I would just like to point out that these kinds of architectures make the AI infrastructure more efficient. Any architecture that makes AI infrastructure more efficient is good for AI; they help the pie grow faster. Keep in mind that this LPU architecture works in conjunction with Vera Rubin, which utilizes a tremendous amount of HBM as well as DRAM. The NVIDIA Grok LPX, this LPU-based architecture, actually, per rack, uses 12TB of DRAM as well. All of this is addressing the workloads in a more efficient manner. This helps with the token economics, the token speed, and the scale-up of AI across inference, and helps with the power. Every bit that helps overall is good for further scaling up and acceleration of AI demand as well. We look at this as complementing what already exists with respect to HBM and DRAM and continuing to grow the TAM and accelerate the deployment of AI. Just keep in mind that today, the enterprises' AI deployment as a percentage is still very, very low, and across all verticals, across all industries, across the economies, there is a lot of opportunity ahead. We are excited about all of these opportunities for our full portfolio of HBM, LP, DRAM, SoC-M, and SSD in addressing these future market requirements. Ultimately, all of this just points to how strategic of an asset memory is for AI. Without more memory, without faster memory, AI just cannot scale up. AI just cannot deliver the capabilities, whether it is in training or in inference. Just look at from last year to this year: the DRAM requirement in the advanced AI accelerators has now doubled. These are some of the factors that are contributing to the supply shortage. These trends of AI deployment apply on the edge devices, smartphones, and PCs as well. We are excited about the opportunities ahead, and we absolutely continue to see strong opportunities for our full portfolio ahead.

Your next question comes from the line of Vivek Arya from Bank of America Securities. Please go ahead.

Thanks for taking my questions. Sanjay, on HBM share, do you think you can be in the 20–25% range right off the bat? Or do you think you will build towards it over time? Just conceptually, how do you see the puts and takes in terms of whether you can actually expand your HBM share in this upcoming Vera Rubin generation?

We have shared before that in CQ3 of last year, we reached our HBM target which we had targeted for calendar 2025, to bring our HBM share in line with DRAM share. We had also said that going forward, we are going to manage our HBM as part of the mix of our total portfolio and are not going to break out the share quarter by quarter. What I can tell you is that we feel very good about our HBM product positioning and feel very good about overall HBM product. The market is there for both HBM4 as well as HBM3E in calendar 2026, and we will be supplying both of these products and feel good about our overall position here and our ability to fully manage the mix of the business.

And for my follow-up, Mark, I wanted to revisit this 81% gross margin guidance. I appreciate you are not giving a specific forward view, but in prior historical peaks where Micron Technology, Inc.'s margins, I think, peaked in the low sixties, what is the difference between the prior situations versus now? What do those historical precedents indicate to you about how the trajectory of gross margins can be over the next several quarters? How do customers start to react when they see these levels of gross margins in what is a very important input into their AI silicon? Thank you.

Before Mark answers that question, I want to point out that I accidentally said that we targeted to reach our HBM share in Q3 2026. Of course, I said it wrong by mistake. I meant that we had targeted to get to our HBM share in 2025, and we achieved our HBM share in line with our DRAM share in 2025. Beyond that, in Q3 2025, we had said we are not going to be providing any further mix of HBM share. I just wanted to correct that I accidentally said 2026 instead of 2025.

Vivek, I would say that keep in mind that the industry is supply constrained, and conditions will remain very tight beyond 2026. That certainly supports the near-term and medium-term pricing. We have discussed how we are working with customers to allocate best we can to their businesses and work with them on adding capacity, on supply assurance, on working with them with new products, and so forth. Your question about reverting to some historical mean is the thing that should be revisited. We have a situation where AI is a transformational secular driver. As Sanjay mentioned, AI requires more and higher-performance memory, and this memory helps with driving the token cost down. It helps lower the energy cost per token. It increases the number of tokens. It increases intelligence overall of AI, which drives harder problem sets and agent use, which drives more tokens and needs more memory. The margins are reflecting recognition that memory is a lot more valuable and an efficient way to monetize AI. That is from data center to the edge. On top of that, we have been clear for a year or more that there are supply constraints that exist on a number of fronts that will take time. There are low inventory levels. There is declining bits-per-wafer on node advances. HBM trade ratio is increasing. Any new capacity really needs to be greenfield, which is a physical constraint that takes a lot of time. These are both durable factors: both the value of memory and the structural challenge of bringing on supply. We are working both those issues. We are investing in capacity, and we are also increasing R&D to continue to advance the technology and improve the value of memory. We believe that these will help with margins over time. I think customers are recognizing that and entering into these agreements.

This concludes today's call. Thank you for attending. You may now disconnect.