How HBM Memory Is Driving Micron’s Surge
Micron Technology (NASDAQ: MU) delivered a strong set of Q3 FY’25 results (August fiscal year). Revenue rose 37% year-over-year to $9.3 billion, beating expectations, while adjusted earnings came in at $1.91, well ahead of the $1.60 consensus. Guidance was also solid: Micron expects Q4 revenue of approximately $10.7 billion, implying a roughly 38% jump versus last year. So, what’s fueling this surge for Micron? It’s all about that AI infrastructure demand, which is driving sales of high-bandwidth memory products, also known as HBM.
HBM And The AI Revolution
Revenue from HBM jumped nearly 50% sequentially, and Micron indicated that HBM is now a $6 billion annualized revenue run-rate business. HBM demand is being fueled by the rapid adoption of generative AI models, which require high-performance memory to operate at scale. While DRAM provides memory capacity, HBM delivers the bandwidth and low latency needed for large language models. Memory content is also rising. Nvidia’s latest Blackwell systems, for instance, feature 33% more memory content per node. As models evolve from text-only to multimodal applications, including video and speech, memory intensity is only expected to grow further.
But supply won’t keep up easily. HBM is more complex to manufacture than traditional DRAM, and HBM supply remains limited. Producing HBM is wafer-intensive – it takes about three times as many wafers as standard DRAM to produce the same number of bits, due to its lower bit density and complex 3D stacking. That creates a bottleneck. While Micron has been scaling its HBM memory production capacity, it is sold out of HBM output in calendar 2025 and notes that it is seeing strong demand for HBM supply in 2026.
Along with capacity growth, the company is also focusing on tech upgrades. It began shipping its next-generation HBM4 memory in early June 2025, sending 36 GB, 12-high HBM4 samples to key customers, which are reported to include Nvidia. Besides HBM, Micron is also the only volume producer of low-power DRAM for data centers. This is also expected to give the company an edge as AI workloads make efficiency more crucial. Overall, Micron’s data center revenue more than doubled from a year ago, setting a new quarterly record.
Margin Improvement
Gross margin for Q3 came in at 39.0%, up 110 basis points sequentially and 250 bps above the midpoint of guidance. Margins are expected to grow further, with Micron projecting Q4 gross margin to expand to 42%. The mix shift toward higher-margin products – especially HBM – was a key driver of margin growth. Moreover, the capacity intensive nature of HBM memory is constraining supply of standard DRAM, too, and this could be helping pricing to an extent. HBM now accounts for an estimated 15% of Micron’s total revenue, with gross margins being meaningfully higher than standard DRAM.
Tight supply and inventory conditions in the HBM space are also helping pricing. Micron is also seeing some benefits of process leadership in certain technologies. Its latest 1-gamma DRAM node, built using EUV (extreme ultraviolet lithography), improves power efficiency by 20% and bit density by 30%, helping it stay ahead on yield and scalability. While the NAND market has seen a lull, led by subdued demand from the smartphone and PC space, Micron has been mitigating these issues in part by increasing sales to consumer-oriented markets. The company also gained share across NAND and SSD markets and became the second-largest supplier of data center SSDs for the first time.
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