Micron Boosts HBM4 Share and $18B DRAM CapEx Through 2026 Amid AI Demand Surge

Key Business Updates and Strategic Shifts

During the earnings call, Micron Technology's CEO Sanjay Mehrotra was referenced but did not provide direct remarks. Instead, Sumit Sadana, Executive Vice President and Chief Business Officer, delivered key business updates. Sadana highlighted that the large hyperscalers are expected to require significantly more storage capability for their AI server deployments due to shortages in the HDD segment of the market. This is anticipated to drive an increase in the deployment of NAND SSDs and servers across data centers in calendar year 2026.

Sadana also emphasized Micron’s strong position in the data center SSD market, noting that the company has consistently achieved record shares over several years. Regarding HBM (high bandwidth memory), Sadana stated that Micron expects to be in the vicinity of its DRAM supply share in calendar Q3 2025. For the full calendar year 2026, the company anticipates a higher share in HBM compared to 2025.

A strategic shift involved exiting the managed NAND business. Sadana explained that this move allows for greater supply availability to focus on the data center market. The CFO, Mark Murphy, provided financial guidance, stating that Micron will transition from $13 billion to $18 billion net in 2025 and maintain approximately $18 billion net in 2026. Most of this investment will be directed toward DRAM, construction, and equipment.

Murphy also discussed supply and inventory management, mentioning that the company has structurally reduced wafer outs and NAND production. They continue to slow node transitions and pace new node ramps carefully.

Outlook and Market Conditions

Sadana indicated that the NAND industry is expected to improve, with the DRAM business already experiencing tight conditions that are expected to become even tighter going forward. Murphy noted that the second-quarter gross margin is expected to be higher than the first quarter, reflecting favorable market conditions.

Sadana projected that the tightening in the market will lead to improved pricing and margins on the non-HBM portion of Micron’s portfolio. Murphy added that the company’s reported margin is now above levels seen in mid-fiscal 2022, with DRAM margins higher than that period. Additionally, the operating margin is the highest since November 2018.

Murphy also mentioned that Micron has completed a second year of positive free cash flow in NAND. Bhatia highlighted successful technology ramp, noting that the company achieved both mature yield and first revenue shipments into hyperscalers and other applications with the 1-gamma node.

Analyst Questions and Management Responses

Analysts raised various questions during the Q&A session. Thomas O'Malley from Barclays asked about NAND bit growth and industry pricing. Sadana responded that the bits for fiscal Q4 should not be overinterpreted, as they are influenced by minor factors within different segments of the business.

O'Malley also inquired about CapEx guidance, which Murphy confirmed would increase from $13 billion to $18 billion net in 2025 and remain around $18 billion in 2026.

Joseph Moore from Morgan Stanley asked about HBM market share, to which Sadana replied that Micron expects to be near its DRAM supply share in calendar Q3 2025 and anticipate a higher share in HBM for the full year 2026.

James Schneider from Goldman Sachs questioned the sustainability of HBM4 share, and Sadana explained that the product has the highest performance among competing options, expressing confidence in selling out the supply for 2026.

Christopher Danely from Citi asked about DDR4 and DDR5 mix and gross margin drivers. Sadana clarified that DDR4 alone, excluding LP4, represents a low single-digit percentage of the business. Murphy noted that prices continue to improve, with very tight DRAM markets and improving NAND conditions.

Sentiment and Competitive Positioning

Analysts displayed a keen interest in granular details regarding memory mix, margin sustainability, CapEx, and competitive positioning. Their questions often focused on margin drivers, share gains, and the technology roadmap. Management remained confident, emphasizing strong competitive positioning, robust demand, and a well-defined portfolio strategy.

Phrases such as “we are very confident in the capabilities of our product” and “we have confidence that we will sell out that supply for calendar 2026” were frequently used. Responses were measured and occasionally cautious, especially when declining to provide specifics on cost-down guidance or facility CapEx breakdowns.

Compared to the previous quarter, the management tone remains confident but is more explicit about strategic shifts and higher CapEx. Analysts showed heightened interest in competitive dynamics and technology transitions.

Quarter-over-Quarter Comparison

Guidance language shifted to emphasize higher CapEx ($18 billion net) and a DRAM-focused investment strategy for 2025 and 2026. The strategic focus has clearly pivoted further toward AI-driven data center demand, HBM share, and the managed NAND exit.

Analysts in the current quarter concentrated more on HBM4 competitive positioning, CapEx scaling, and gross margin expansion, compared to the previous quarter’s broader mix and pricing questions. Management’s confidence is sustained, with more assertive statements about expected HBM4 share and the DRAM supply outlook. Analyst sentiment has shifted from general optimism to more pressing queries about execution and sustainability.

The mix of revenue from data center and high-value segments continues to rise, described as a structural shift with "AI has radically changed the landscape."

Risks and Concerns

Management highlighted ongoing supply constraints in DRAM and NAND, noting that meaningful incremental supply is difficult to bring on. Sadana acknowledged uncertainties related to tariffs and customer transitions, stating that changes in the landscape due to tariffs may occur and that the company will respond accordingly when announced.

The decision to exit managed NAND was based on ROI concerns and portfolio optimization. Sadana noted that the pricing expectations and level of competitiveness in the mobile NAND market did not support robust ROI over time.

Analysts raised questions regarding long-term agreements, customer transitions, and the impact of new memory architectures (e.g., GDDR7 vs. HBM).

Final Takeaway

Micron’s management emphasized its strengthened competitive position in AI-driven markets, projecting higher HBM market share and signaling a DRAM-focused $18 billion CapEx plan through 2026. The company highlighted robust demand and pricing for both DRAM and NAND, driven by data center and hyperscaler needs, while addressing ongoing supply constraints and a strategic exit from managed NAND. Management remains confident in margin expansion and continued technology leadership, positioning Micron to capitalize on accelerating AI data center growth in the coming year.