Micron Technology Financial Model

Cloud Memory Business Unit (CMBU)

• Segment name: Cloud Memory Business Unit (CMBU)
• Revenue driver formula: Hyperscale Server Demand x Memory Content per Server x Blended Average Selling Price (ASP)
• Historical growth rate: Highly volatile, recently growing over 250% year-over-year in FY2025 due to AI demand.
• Key growth levers and headwinds: Surging demand for High Bandwidth Memory (HBM) tied to AI graphics processing units, offset by cyclical inventory corrections at major cloud service providers.
• Pricing dynamics: Spot and contract pricing, highly sensitive to industry supply and demand balances.
• Revenue recognition notes: Recognised upon transfer of control, typically at shipment.
• Seasonality: Generally stronger in the second half of the calendar year aligning with cloud infrastructure build cycles.

Core Data Center Business Unit (CDBU)

• Segment name: Core Data Center Business Unit (CDBU)
• Revenue driver formula: Enterprise Server Shipments x Memory/Storage Content per Server x ASP
• Historical growth rate: 40% to 140% year-over-year in recent recovery quarters.
• Key growth levers and headwinds: Enterprise IT spending budgets and server upgrade cycles.
• Pricing dynamics: Contractual pricing with enterprise original equipment manufacturers.
• Revenue recognition notes: Standard point-in-time recognition.
• Seasonality: Tied to enterprise IT budget flushes in calendar Q4.

Mobile and Client Business Unit (MCBU)

• Segment name: Mobile and Client Business Unit (MCBU)
• Revenue driver formula: (Smartphone Units + PC Units) x Average Memory per Device x ASP
• Historical growth rate: Cyclical, ranging from negative 40% during downturns to positive 80% during upcycles.
• Key growth levers and headwinds: Smartphone replacement cycles, AI-enabled PC upgrades, and consumer macroeconomic health.
• Pricing dynamics: Fiercely competitive, driven by mobile original equipment manufacturer negotiations.
• Revenue recognition notes: Standard point-in-time recognition.
• Seasonality: Peaks in fiscal Q1 (autumn) ahead of holiday device launches.

Automotive and Embedded Business Unit (AEBU)

• Segment name: Automotive and Embedded Business Unit (AEBU)
• Revenue driver formula: Vehicle Production Volumes x Advanced Driver Assistance Systems Penetration x Memory per Vehicle x ASP
• Historical growth rate: 10% to 20% compound annual growth rate, making it the most stable segment.
• Key growth levers and headwinds: Electric vehicle adoption and autonomous driving features require exponentially more memory.
• Pricing dynamics: Long-term agreements provide more stability than consumer segments.
• Revenue recognition notes: Standard point-in-time recognition.
• Seasonality: Less seasonal than consumer segments, tied to global auto production schedules.

• Total assets: Approximately $65 billion to $70 billion.
• Key asset categories: Property, Plant and Equipment (PP&E) dominates the balance sheet, alongside significant cash and inventory balances.
• Goodwill & intangibles as % of total assets: Less than 5%, as growth is primarily organic rather than through acquisitions.
• Working capital profile:
• Days Sales Outstanding (DSO): 40 to 50 days.
• Days Inventory Outstanding (DIO): 100 to 150 days. Inventory management is critical due to obsolescence risk.
• Days Payable Outstanding (DPO): 60 to 80 days.
• Net working capital as % of revenue: Typically 15% to 25%.
• Is working capital positive or negative? Positive. The company requires significant inventory to buffer node transitions.
• PP&E: Consists of fabrication facilities and extremely expensive extreme ultraviolet (EUV) lithography equipment. Useful lives are typically 5 to 7 years for equipment.
• Right-of-use assets / operating leases: Immaterial relative to owned PP&E.

• Capex as % of revenue: 30% to 45%.
• Maintenance capex vs. growth capex: Approximately 40% maintenance (technology node upgrades) and 60% growth (new fab shells).
• Major capex programmes underway or planned: New mega-fabs in Idaho and New York, supported by CHIPS Act funding, and transition to 1-gamma EUV nodes. Total FY2025 capex was $13.8 billion.
• Capitalised software / development costs: Immaterial.
• M&A pattern: Organic grower. The company rarely makes large acquisitions.
• Typical acquisition multiple paid: Not applicable.

• Total debt: Approximately $13 billion.
• Net debt: Negative (net cash position), with cash and investments around $12 billion.
• Debt/EBITDA ratio: Highly variable due to EBITDA cyclicality, but structurally conservative (typically under 1.5x mid-cycle).
• Credit rating: Investment grade (BBB- / Baa3).
• Key debt instruments: Senior unsecured notes with staggered maturities, and a $3.5 billion revolving credit facility.
• Maturity profile: Well-laddered over the next 10 to 15 years.
• Interest rate profile: Predominantly fixed-rate senior notes.
• Covenants: Standard investment-grade covenants, no restrictive financial maintenance covenants on the bonds.
• Share repurchase programme: Active during upcycles. The company repurchased over $7 billion under its ongoing authorisation historically, though paused during severe downturns.
• Dividend policy: Quarterly dividend of $0.115 per share, representing a low payout ratio but signalling management confidence.

• Operating cash flow conversion: Highly cyclical. OCF often exceeds net income due to massive depreciation add-backs.
• Free cash flow margin: Ranges from negative 20% during heavy investment downturns to positive 20% during peak cycle pricing.
• Major non-cash items: Depreciation and amortisation (the largest bridge item), stock-based compensation, and deferred taxes.
• Working capital cash flow impact: Significant use of cash during upcycles as inventory and receivables grow.
• Capex intensity: Extremely high. Capex is the largest use of cash and dictates free cash flow generation.
• Cash tax rate vs. GAAP effective tax rate: Cash taxes are often lower than GAAP taxes due to accelerated depreciation for tax purposes and investment tax credits from the CHIPS Act.

1. Assumptions: Hardcoded drivers for macroeconomic inputs, segment growth rates, ASP trends, bit shipment growth, and margin targets.
2. Scenarios: Cycle toggle (Peak, Mid-Cycle, Trough) to stress-test revenue and margins based on historical memory pricing volatility.
3. Revenue Build: Segment-level forecasting for CMBU, CDBU, MCBU, and AEBU. Includes a cross-check schedule calculating total DRAM and NAND bit shipments and blended ASPs.
4. Income Statement: Consolidated profit and loss statement mirroring the 10-K, including stock-based compensation breakouts and CHIPS Act grant amortisation.
5. Balance Sheet: Standard assets, liabilities, and equity. Highlights massive PP&E and inventory line items.
6. Cash Flow Statement: Indirect method starting from net income, highlighting the massive depreciation add-back and capital expenditure outflows.
7. Working Capital: Schedules for accounts receivable, inventory, and accounts payable based on days outstanding metrics.
8. PP&E and Capex: Detailed waterfall of fab investments, equipment depreciation (5 to 7 years), and CHIPS Act investment tax credit offsets.
9. Debt Schedule: Tranche-by-tranche tracking of senior notes, interest expense calculations, and revolving credit facility balances.
10. Valuation: Discounted cash flow analysis and cycle-adjusted enterprise value to EBITDA multiples.

1. Total Revenue = CMBU Revenue + CDBU Revenue + MCBU Revenue + AEBU Revenue
2. CMBU Revenue = Prior Year CMBU Revenue x (1 + CMBU Bit Growth Rate + CMBU ASP Growth Rate)
3. Total DRAM Revenue = Total DRAM Bit Shipments x Blended DRAM ASP
4. Total NAND Revenue = Total NAND Bit Shipments x Blended NAND ASP
5. Gross Profit = Total Revenue - (Fixed Fab Depreciation + Variable Manufacturing Costs + Inventory Write-downs)
6. Depreciation Expense = Beginning PP&E x Blended Depreciation Rate (historically 15% to 20% of gross PP&E)
7. Days Inventory Outstanding = (Average Inventory / Annualised COGS) x 365
8. Free Cash Flow = Cash from Operations - Capital Expenditures
9. Interest Expense = Sum of (Average Balance of Debt Tranche x Tranche Interest Rate)
10. Effective Tax Rate = Base Statutory Rate - CHIPS Act Investment Tax Credit Benefit Rate

The Assumptions sheet dictates the pricing and volume inputs on the Revenue Build. The Revenue Build feeds the top line of the Income Statement. The PP&E and Capex sheet is the critical chain for this company. Capital expenditures flow to the Balance Sheet as PP&E, which generates massive depreciation that flows into COGS on the Income Statement and is added back on the Cash Flow Statement. The Cash Flow Statement determines the ending cash balance, which feeds the Debt Schedule to calculate interest income and potential revolver drawdowns. A circularity exists between interest expense, net income, cash balances, and debt paydown.

Revenue, assets, and cash inflows are represented as positive numbers. Expenses, liabilities, capital expenditures, and cash outflows are represented as negative numbers. Margins and ratios are represented as positive percentages. The builder must ensure that COGS is subtracted from Revenue to yield Gross Profit.

1. The company reorganised its segments in FY2025 into CMBU, CDBU, MCBU, and AEBU. Historical data prior to FY2023 will not map cleanly to these new segments.
2. Memory pricing is fiercely cyclical. Straight-line revenue growth assumptions will produce fundamentally flawed valuations. The model must incorporate ASP cyclicality.
3. Depreciation is a massive component of COGS, not operating expenses. The builder must ensure depreciation is captured above the gross profit line.
4. Inventory write-downs occur frequently during downcycles. The model needs a toggle to stress-test inventory valuation when ASPs fall below cost.
5. CHIPS Act grants and investment tax credits distort the effective tax rate and capital expenditure cash flows. These must be modelled as separate line items.
6. Stock-based compensation is material and allocated across COGS, R&D, and SG&A. Excluding it from adjusted metrics flatters margins significantly.
7. High Bandwidth Memory (HBM) has a vastly different margin profile than standard DRAM. The model must account for mix shift driving gross margin expansion.
8. Fiscal year timing. Micron uses a 52 or 53-week fiscal year ending in late August or early September. The model must align with this non-standard calendar.

1. Gross margin should fluctuate between 20% and 55% based on the cycle phase. Flag if it stabilises outside this band.
2. Capital expenditures as a percentage of revenue should remain between 30% and 45%.
3. Depreciation should represent at least 15% to 25% of total revenue due to the asset-heavy nature of the business.
4. Total DRAM revenue should account for approximately 70% to 75% of total consolidated revenue.
5. Total NAND revenue should account for approximately 20% to 25% of total consolidated revenue.
6. Balance sheet must balance. Total Assets must equal Total Liabilities plus Equity in every period.
7. Net debt should remain near zero or negative, reflecting the company's conservative balance sheet management.
8. Dividend payout ratio should remain below 10% of peak-cycle net income, reflecting the nominal $0.115 quarterly dividend policy.

• Filings source: SEC EDGAR database and Micron Investor Relations website (investors.micron.com).
• Key peers for benchmarking: Samsung Electronics (KRX: 005930), SK Hynix (KRX: 000660), Western Digital (WDC).
• Industry data sources: TrendForce (for spot and contract memory pricing), Gartner (for server and PC shipment forecasts), and World Semiconductor Trade Statistics.
• Consensus estimates source: Bloomberg or FactSet for forward-looking EPS and revenue estimates.

• Micron Technology, Inc. Form 10-K for the Fiscal Year Ended August 28, 2025 (SEC EDGAR).
• Micron Technology, Inc. Q1 Fiscal 2026 Earnings Press Release and Presentation (investors.micron.com).
• Micron Technology, Inc. Q4 Fiscal 2025 Earnings Call Transcripts.
• TrendForce Memory Pricing Reports (trendforce.com).