Micron Technology (NASDAQ: MU) announced impressive Q3 FY’25 results (August fiscal year). Revenue increased by 37% year-over-year, reaching $9.3 billion, surpassing expectations, while adjusted earnings were reported at $1.91, significantly higher than the $1.60 consensus. The guidance was equally strong: Micron anticipates Q4 revenue of around $10.7 billion, suggesting an approximate 38% increase compared to last year. So, what is driving this growth for Micron? It’s all about the demand for AI infrastructure, which is boosting sales of high-bandwidth memory products, also referred to as HBM.
HBM And The AI Revolution
Revenue from HBM surged nearly 50% sequentially, with Micron stating that HBM is currently at a $6 billion annualized revenue run-rate. The demand for HBM is driven by the swift adoption of generative AI models, which necessitate high-performance memory for operation at scale. While DRAM offers memory capacity, HBM provides the bandwidth and low latency essential for large language models. The memory content is also increasing. For example, Nvidia’s latest Blackwell systems feature 33% more memory content per node. As models transition from text-only to multimodal applications, encompassing video and speech, the intensity of memory usage is expected to rise further.
However, supply won’t be easily maintained. HBM production is more complicated than that of traditional DRAM, and HBM supply remains constrained. Manufacturing HBM is wafer-intensive — producing the same number of bits requires approximately three times the number of wafers as standard DRAM, due to its lower bit density and intricate 3D stacking. This creates a bottleneck. Although Micron has been expanding its HBM memory production capacity, it is already sold out of HBM output for calendar 2025 and has noted that there is strong demand for HBM supply in 2026.
In conjunction with increasing capacity, the company is prioritizing technological upgrades. It began shipping its next-generation HBM4 memory in early June 2025, delivering 36 GB, 12-high HBM4 samples to important customers, reportedly including Nvidia. In addition to HBM, Micron stands out as the sole volume producer of low-power DRAM for data centers. This is expected to provide the company an advantage as AI workloads require greater efficiency. Overall, Micron’s data center revenue more than doubled from the prior year, establishing a new quarterly record.
Margin Improvement
The gross margin for Q3 was recorded at 39.0%, an increase of 110 basis points sequentially and 250 bps higher than the guidance midpoint. Margins are projected to increase further, with Micron forecasting Q4 gross margin to reach 42%. The shift towards higher-margin products — particularly HBM — was a significant contributor to margin growth. Additionally, the capacity-intensive nature of HBM memory is restricting the supply of standard DRAM, which may be supporting pricing to some extent. HBM now represents around 15% of Micron’s total revenue, with gross margins considerably higher than those of standard DRAM.
The tight supply and inventory conditions in the HBM sector are also aiding pricing. Micron is benefiting from process leadership in specific technologies. The latest 1-gamma DRAM node, produced using EUV (extreme ultraviolet lithography), enhances power efficiency by 20% and bit density by 30%, enabling the company to maintain an edge in yield and scalability. While the NAND market has experienced a slowdown, primarily due to weak demand from the smartphone and PC markets, Micron has been alleviating these challenges by increasing sales to consumer-oriented markets. The company has also gained market share in both NAND and SSD sectors, becoming the second-largest supplier of data center SSDs for the first time.
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