MU 10-K & 10-Q changes, risk factors and insider trading

In addition to the factors discussed elsewhere in this Annual Report on Form 10-K, this section discusses important factors which could cause actual results or events to differ materially from those contained in any forward-looking statements made by us. The order of presentation is not necessarily indicative of the level of risk that each factor poses to us. Any of these factors could have a material adverse effect on our business, results of operations, financial condition, or stock price. Our operations could also be affected by other factors that are presently unknown to us or not considered significant.

•availability and quality of materials, supplies, electrical power, gas, water, and capital equipment, or dependency on third-party service providers;

•a downturn or ongoing adverse conditions in regional or worldwide economies;

•dependency on a select number of keycertain customers, including international customerscustomers, and end markets;

•environmental, social,sustainability and governance expectations or standards;

•acquisitions and/or alliancesstrategic transactions; and

We have experienced significant volatility in our average selling prices and may continue to experience such volatility in the future. In the past five years, annual percentage changes in DRAM average selling prices have ranged from plus low-teenlow percentage range40% to a minus high-40%high 40% range. In the past five years, annual percentage changes in NAND average selling prices have ranged from plus low-30%low 30% to a minus low-50%low 50% range. In some prior periods, average selling prices for our products have been below our manufacturing costs and we may experience such circumstances in the future. AverageIn periods of significant declines in average selling prices for our productsproducts, that decline faster than our costswe have recently had anexperienced adverse effecteffects on our business and results of operations,operations. andSignificant declines in average selling prices in future periods could have a material adverse effect on our business, results of operations, or financial condition.

•manufacturing yield and defect density;

•higher costs of goods and services due toto, among other things, inflationary pressurespressures, regulatory actions, including tariffs or trade restrictions, increased input costs, or market conditions; and

Many factors may result in a reduction of our output or a delay in ramping production, which have in the past and could in the future lead to underutilization of our production assets. These factors may include, among others, a weak demand environment, industry oversupply, inventory surpluses, difficulties in ramping emerging technologies, supply chain disruptions, and delays from equipment suppliers. See “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Industry Conditions” for information regarding recent underutilization charges. A significant portion of our manufacturing costs are fixed and do not vary proportionally with changes in production output. As a result, lower utilization, lower wafer output, and corresponding increases in our per gigabit manufacturing costs could result in higher inventory carrying costs, and have had, and may continue to have, an adverse effect on our gross margins, business, results of operations, or financial condition.

We have a broad portfolio of products to address our customers’ needs, which span multiple market segments and are subject to rapid technological changes. Our manufacturing costs on a per gigabit basis vary across our portfolio as they are largely influenced by the technology node in which the solution was developed. We strive to balance our demand and supply for each technology node, but the dynamics of our markets and our customers can create periods of imbalance, which can lead us to carry elevated inventory levels.levels and underutilized capacity. Consequently, we may incur charges in connection with obsolete or excess inventories, or we may not fully recover our costs, which would reduce our gross margins. For example, in 2023, we recorded aggregate charges of $1.83 billion to write down the carrying value of our inventories to their estimated net realizable value. In addition, due to the customized nature of certain products we manufacture, we may be unable to sell certain finished goods inventories to alternative customers or manufacture in-process inventory to different specifications, which may result in excess and obsolescence charges in future periods.

We may not be able to predict or quickly respond to trends in the dynamics of our markets and our customers or changes in customer demand, which could negatively impact our gross margin. Although AI is a relatively new demand driver for our products, it is evolving rapidly, and the expected timing and amount of investments related to AI can change significantly. As a result, it may be difficult to accurately forecast such demand and we may incur costs in anticipation of demand that ultimately does not materialize. If such demand does materialize, but is lower than expected, we may not be able to reduce our costs in response, which would adversely impact our gross margins. Our inability to prevent deterioration of or improve gross margins could have a material adverse effect on our business, results of operations, or financial condition.

In addition to our U.S. operations, a substantial portion of our operations are conducted in Taiwan, Singapore, Japan, Malaysia, China, and India, and many of our customers, suppliers, and vendors also operate internationally. In 2024,2025, nearlyapproximately halfone-third of our revenue was from sales to customers who have headquarters located outside the United States, while overapproximately 80% of our revenue in 20242025 was from products shipped to customer locations outside the United States.

•export and import duties, changes to import and export regulations, customs regulations and processes, and restrictions on the transfer of funds, including currency controls inand China,global tariffs, which could negatively affect the amount and timing of payments from certain of our customers and, as a result, our cash flows;

•compliance with U.S. and international laws involving international operations, including the Foreign Corrupt Practices Act of 1977, as amended, sanctions and anti-corruption laws, export and import laws, intellectual property, cybersecurity and data privacy laws, and similar rules and regulations;

•disruptions to manufacturing or R&D activities as a result of actions imposed by foreign governments;

In addition, the U.S. government has in the past and continues to restrict American firms, including us, from selling products and software to certain of our customers and may in the future impose similar restrictions on one or more of our significant customers. We may not be able to fully prevent the unauthorized resale, diversion, or misuse of our products by third parties. These restrictions may not prohibit our competitors from selling similar products to our customers, which may result in oura loss of sales and market share. Even as such restrictions are lifted, financial or other penalties or continuing export restrictions imposed with respect to our customers could have a continuing negative impact on our future revenue and results of operations, and we may not be able to recover any customers or market share we lose, or make such recoveries at acceptable average selling prices, while complying with such restrictions.

We face intense competition in the semiconductor memory and storage markets from a number of companies, including Kioxia Holdings Corporation; Samsung Electronics Co., Ltd.; SK hynix Inc.; Kioxia Holdings Corporation; Sandisk Corporation; ChangXin Memory Technologies, Inc. (“CXMT”); and WesternYangtze DigitalMemory Corporation.Technologies Co., Ltd. (“YMTC”). Our competitors may use aggressive pricing to obtain market share. Some of our competitors are large corporations or conglomerates that may operate in jurisdictions with lower labor and compliance costs and may have a larger market share and greater resources to invest in technology, capitalize on growth opportunities, and withstand downturns in the semiconductor markets in which we compete. Consolidation of industry competitors could put us at a competitive disadvantage as our competitors may benefit from increased manufacturing scale and a stronger product portfolio. Alternatively, new entrants into the memory and storage market could have a significant adverse impact on our competitive position. We operate in different jurisdictions than our competitors and may be impacted by unfavorable changes in currency exchange rates.rates, import/export restrictions, and other trade regulations, including tariffs.

In addition, some governments may provide, or have providedprovided, and may continue to provide, significant assistance, financial or otherwise, to some of our competitors or to new entrants and may intervene in support of national industries and/or competitors. InAs particular,a result, we face the threat of increasing competition asand aDRAM resultand ofNAND oversupply due to significant investment in the semiconductor industryindustry, including by the Chinese government and various state-owned or affiliated entities, in companies such as Yangtze Memory Technologies Co., Ltd. (“YMTC”)CXMT and ChangXin Memory Technologies, Inc. (“CXMT”).YMTC. In addition, the CAC’s decision that critical information infrastructure operators in China may not purchase Micron products had an adverse impact on our ability to compete effectively in China and elsewhere.

We andintend to advance our competitorsprocess generally seektechnology to increase supplybit tooutput addressper growing market demands,wafer, improve yields, and reduceincrease diewafer size,supply. whichIn couldaddition, result in significant increases in worldwide supply and downward pressure on prices. Increases in worldwide supply of semiconductor memory and storage also result from fabrication capacity expansions, either by way of new facilities, increased capacity utilization, or reallocation of other semiconductor production to semiconductor memory and storage production. Ourour competitors may increase capital expenditures resulting in future increases in worldwide supply. We, and some of our competitors, have plans to ramp,construct new fabrication facilities and/or are constructing or ramping,ramp production at newexisting fabrication facilities. Increases in worldwide supply of semiconductor memory and storage, if not accompanied by commensurate increases in demand, could lead to declines in average selling prices for our products and could materially adversely affect our business, results of operations, or financial condition. Additionally, rapid technological change in markets we serve could contribute to shortened product life cycles and a decline in average selling prices of our products. If competitors are more successful at developing or implementing new product or process technology, their products could have cost or performance advantages.

Our key semiconductor memory and storage technologies face technological barriers to continue to meet long-term customer needs. These barriers include achieving acceptable yields and quality for HBM products with their multiple memory chip layers, potential limitations on stacking additional 3D memory layers, increasing bits per cell (i.e., cell levels), meeting higher density requirements, developing advanced packaging solutions, improving power consumption and reliability, and delivering advanced features and higher performance. We may face technological barriers to continue to shrink our products at our current or historical rate, which has generally reduced per gigabit cost. We have invested and expect to continue to invest in R&D for new and existing products and process technologies, such as EUV lithography, to continue to deliver advanced product requirements. Such new technologies can add complexity and risk to our schedule and may affect our costs and production output. We may be unable to recover our investment in R&D or otherwise realize the economic benefits of reducing die size or increasing memory and storage densities. Our competitors are working to develop new memory and storage technologies that may offer performance and/or cost advantages to existing technologies and render existing technologies obsolete. Accordingly, our future success may depend on our ability to develop and produce viable and competitive new memory and storage technologies.

We are developing new products, including system-level memory and storage products and solutions, which complement our traditional products or leverage their underlying design or process technology. We have invested and expect to continue to invest in new semiconductor product and system-level solution development. We are increasingly differentiating our products and solutions to meet the specific demands of our customers, which increases our reliance on our customers’ ability to accurately forecast the needs and preferences of their customers. Recent technologies, such as generative AI models have emerged, and while they have driven increased demand for HBM and other advanced products in the data center and other markets, the long-term trajectory is unknown and associated demand may fluctuate. As a result, our product demand forecasts may be impacted significantly by the strategic actions of our customers. In addition, our ability to successfully introduce new products often requires us to make product specification decisions multiple years in advance of when new products enter the market.

Our product demand may also be impacted significantly by the strategic actions of our customers. It is important that we deliver products in a timely manner withthat increasinglymeet advancedcustomer performance characteristicsrequirements at the time our customers are designing and evaluating samples for their products. If we do not meet their product design schedules, our customers may exclude us from further consideration as a supplier for those products. The process to develop new products requires us to demonstrate advanced functionality, performance, and reliability, often well in advance of a planned ramp of production, in order to secure design wins with our customers. Many factors may negatively impact our ability to meet anticipated timelines and/or expected or required quality standards with respect to the development of certain of our products. In addition, some of our components have long lead-times, requiring us to place orders up to a year in advance of anticipated demand. Such long lead-times increase the risk of excess inventory or loss of sales in the event our forecasts vary substantially from actual demand.

•we will be able to successfully marketachieve revenue targets for these technologies;

•margins and cash flows generated from sales of these products will allow us to recover costs of development efforts;

Our construction projects are highly dependent on available sources of materials, and specialized equipment, as well as labor, skilled sub-contractors and other service providers. Increasing demand, supply constraints, inflation, tariffs, trade restrictions, and other market conditions could result in shortages and higher costs. Additionally, difficulties in obtaining labor, skilled sub-contractors and other service providers or other resources could result in delays in completion of our construction projects and cost increases, including costs to operate these facilities.

In the United States and in certain other regions, fab building has been uncommon in recent years. Concurrent semiconductor expansion projects across the industry introduce significant competition for the limited pool of construction talent with requisite expertise and experience in these regions. As such, expanding production capacity in the United States and certain other regions may introduce more challenges than we would experience in geographies with more established ecosystems.

•inability to realize expected grants, investment tax credits, and other government incentives, including through the U.S. CHIPS and Science Act of 2022 (“CHIPS Act”) and other national, international, state, and local grants;

•potential changes in laws or provisions of grants, investment tax credits, and other government incentivesincentives, including the CHIPS Act;

•delays and potential restrictions related to environmental and other government regulations or permits;

From time to time, we have experienced the impacts from certain of the above items and, because these risks are a characteristic of our business, we expect to experience them in the future. Depending on the nature and extent of the impact from these risks, we may be unable to produce sufficient capacity in the expected time frametimeframe which could result in delays in the completion of our construction projects and increased costs, including costs to operate these facilities.

We have a broad portfolio of products to address our customers’ needs, which span multiple market segments and are subject to rapid technological changes. We invest our capital in areas that we believe best align with our business strategy and optimize future returns. Investments in capital expenditures may not generate expected returns or cash flows. Significant judgment is required to determine which capital investments will result in optimal returns, and we could invest in projects that are ultimately less profitable than those projects we do not select. DelaysOur strategic decision-making process involves careful evaluation and prioritization of investments to ensure alignment with our long-term goals. Additionally, we may choose to exit business segments that do not provide us with optimal returns. As we streamline our product portfolio, we may face execution risks that could impact our ability to support demand and maintain share in certain markets. Further, as we continue to optimize the efficiency of our fabrication facilities to support demand from leading edge notes, any delays in completion and ramping of new production facilities, or failure to optimize our investment choices, could significantly impact our ability to realize expected returns on our capital expenditures.

Our incentives from various governments are conditioned upon achieving or maintaining certain outcomes and thesatisfying compliance requirements and are subject to reduction, termination, or clawback, orand could impose certain limitations on our business.

We have received, and may in the future continue to receive, benefits and incentives from national, state, and local governments in various regions of the world designed to encourage us to establish, maintain, or increase investment, workforce, research and development, or production in those regions. However, there is no guarantee that such government incentives and benefits will continue to be available in the future on the same terms, terms that are acceptable to us or at all and existing incentives could be modified or terminated by government authorities. In addition, we have discretion in the timing of use of certain of these incentives. If we choose to exercise such discretion due to the cyclicality of our business or other factors, we may not be able to fully utilize these incentives. Our future business plans aremay be impacted by obtaining these government incentives, which may take various forms, including grants, subsidies, loans, and tax arrangements, and typically require us to achieve or maintain certain levels of investment, capital spending, employment, technology deployment or development milestones, construction or production milestones, or research and development activities to qualify for such incentives or could restrict us from undertaking certain activities. We may fail to achieve these milestones, in a timely manner or at all, due to a variety of factors, some of which may be outside of our control, including a cyclical downturn in our business or global downturn. Failure to achieve such milestones could result in up to all of certain incentives being clawed back, in some cases along with interest and/or loss of project assets. In some cases, these incentives have additional terms and conditions regarding our business operations or governance that are required to be satisfied as a condition to receive incentives or disbursements. Compliance with these terms and conditions may add complexity to our operations and increase our costs.costs and failure to comply could result in termination of incentive programs or clawbacks of incentive amounts received, in some cases along with interest and/or loss of project assets.

We may be unable to obtain sufficient future incentives to continue to fund a portion of our capital expenditures and operating costs, without which our cost structure may be adversely impacted and planned capital expenditures and research and development expenditures may be affected. For example, in December 2024, we haveentered signedinto adirect non-bindingfunding preliminaryagreements, memorandumproviding funds for the construction of termsfab facilities in Idaho and New York, with the U.S.United States Department of Commerce to(the receive a grant“Department”) under the U.S.Department’s CHIPS Incentives Program established pursuant to the CHIPS Act. In June 2025, such agreements were subsequently amended to expand our investments, and Sciencewe Actentered ofinto 2022a (“CHIPSdirect Act”).funding Theseagreement preliminaryto termsprovide funds to expand and modernize our fab in Virginia. The awards under the direct funding agreements are subject to various conditions and we may not resultreceive inthe usfunding receivingexpected funding.on the same terms or at all. We also cannot guarantee that we will successfully achieve or maintain outcomes or satisfy the compliance requirements to qualify for these incentives or that the granting agencies will provide or continue to provide such funding. See Part II, Item 8. Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 20. Government Incentives.

These incentive arrangementsarrangements, including the funding agreements, typically provide the granting agencies with rights to audit our compliance with their terms and obligations. Such audits could result in modifications to, or termination of, the applicable incentive program. TheIn addition, the incentives we receivereceive, couldincluding bethe funding agreements, are in some cases subject to reduction, termination, or clawback,clawback under certain circumstances, and any decrease or clawback of government incentives could have a material adverse effect on our business, results of operations, or financial condition.

Our manufacturing processes are also dependent on our relationships with third-party manufacturers of controllers, analog integrated circuits, and other components used in some of our products and with outsourced semiconductor foundries, assembly and test providers, contract manufacturers, logistics carriers, and other service providers, including providers of maintenance for our advanced semiconductor manufacturing equipment and providers of electricity and other utilities. Although we have certain long-term contracts with some of our suppliers, many of these contracts do not provide for long-term capacity or pricing commitments. To the extent we do not have firm commitments from our third-party suppliers over a specific time period or for any specific capacity, quantity, and/or pricing, our suppliers may allocate capacity to their other customers and capacity and/or materials may not be available when needed or at reasonable prices. Inflationary pressures may continue to increase costs for materials, supplies, and services. Regardless of contract structure, large swings in demand may exceed our contracted supply and/or our suppliers’ capacity to meet those demand changeschanges, resulting in a shortage of parts, materials, or capacity needed to manufacture our products. In periods of shortage, we may be required to incur increased costs in order to meet our contractual commitments and demand from our customers or experience a decrease in revenue. In addition, if any of our suppliers were to cease operations or become insolvent, this could impact their ability to provide us with necessary supplies, and we may not be able to obtain the needed supply in a timely waymanner or at all from other providers.

This discussion should be read in conjunction with the consolidated financial statements and accompanying notes for the year ended August 29,28, 2024.2025. All period references are to our fiscal periods unless otherwise indicated. Our fiscal year is the 5252- or 53-week period ending on the Thursday closest to August 31. Fiscal 2025, 2024, 2023, and 20222023 each contained 52 weeks. All tabular dollar amounts are in millions, except per share amounts.

For an overview of our business, see “Part I –I, Item 1. Business –Business, Overview.”

Throughout 2024, we experienced substantial improvements in pricing and margins.margins due to improving market conditions as compared to 2023. Increasing demand growth, driven in part by deployment of AI and mostly normal customer inventories, combined with industry-wide supply discipline, resulted in an industry supply and demand balance that substantially improved from 2023downturn conditions.conditions Wein executed well on pricingmemory and storage markets during 2023. In connection with improved market conditions in 2024, we reinstated our financial performance significantly from the start of the year. We are exiting the year with excellent momentumbonuses and anphased industry-leadingout productcertain portfolio.other temporary cost-saving measures that were implemented in 2023.

In contrast, 2023 was a year of weak memory and storage industry demand in many end markets, stemming from global macroeconomic challenges and customer actions to reduce inventory levels. These conditions, which began in the fourth quarter of 2022 and persisted into early 2024, led to significant reductions in average selling prices for both DRAM and NAND and reductions in bit shipments for DRAM. We experienced declines in revenue across all our business segments and nearly all our end markets throughout 2023. Also in 2023, China’s Cyberspace Administration (the “CAC”) conducted a cybersecurity review of our products sold in China and decided that our products presented a cybersecurity risk. The CAC determined that critical information infrastructure operators in China may not purchase Micron products. The CAC decision has impacted our business, particularly in the domestic data center and networking markets in China, and we have been working to mitigate that impact. Our goal is to retain our worldwide DRAM and NAND market share.

Total Revenue: Total revenue for 2024 and 2023 was impacted by the factors described in the section titled “Industry Conditions” above. These conditions drove asubstantial recovery of average selling prices throughout 2024 after significant declinesimprovements in average selling prices throughout 2023.2025 and 2024.

Consolidated Gross Margin: Our consolidated gross margin has been impacted by the factors described in the section titled “Industry Conditions” above and the effects of 2023 inventory write-downs inon our 2024 and 2023 gross margin, as detailed in the table below. Our consolidated gross margin percentage improved to 40% for 2025 from 22% for 2024 from negative 9% for 2023, as a result of improvements in margins for both DRAM and NAND products,products. DRAM margins improved primarily due to increases in average selling prices, an increased mix of higher-margin products, including HBM, and manufacturing cost reductions,reductions thedriven effectsby improvements in product and process technology. NAND margins improved primarily due to manufacturing cost reductions. Our consolidated gross margin for 2024 reflected $987 million of chargesbenefit due to write down inventories to their NRV in 2023 and lower costs in 2024 from the sale of inventories written down to their net realizable value in 2023 (as detailed in “Inventory NRV write-downsWrite-Downs” below).

Our consolidated gross margin percentage decreasedimproved to 22% for 2024 from negative 9% for 2023 fromas 45%a forresult 2022of primarily due to declinesimprovements in average selling pricesmargins for both DRAM and NAND,NAND products, primarily due to increases in average selling prices, manufacturing cost reductions, the effects of charges to write down inventories,inventories to their NRV in 2023, and $382 million of facility underutilizationlower costs in 2023.2024 from the sale of inventories written down in 2023 (as detailed in “Inventory NRV Write-Downs” below).

•CNBUCMBU revenue increased 67%103% driven by increases in DRAM bit shipments and DRAM average selling prices.

•EBUCDBU revenue increased 27%135% primarily due to increases in NAND and DRAM bit shipments,shipments partially offset by declines inand average selling prices.

•SBUMCBU revenue increased 80%58% primarily due to increases in DRAM and NAND bit shipments and average selling prices for both mobile and bitclient shipments.markets.

•CNBUAEBU revenue decreasedincreased 58%12% primarily due to increases in DRAM bit shipments, partially offset by declines in average selling prices for DRAM and decreases in bit shipments.prices.

•CNBUCMBU operating income (loss) improved primarily due to higher bit shipments, increases in average selling prices, and manufacturing cost reductions, partially offset by higher R&D expenses.reductions.

•SBUCDBU operating income (loss) improved primarily due to higher NAND and DRAM bit shipments, increases in average selling prices, higherand bit shipments, andmanufacturing cost reductions, partially offset by higher R&D expenses.

•CNBUMCBU operating income (loss) deterioratedimproved primarily due to declinesincreases in average selling pricesprices, higher bit shipments, and lowermanufacturing bitcost shipments.reductions.

•EBUAEBU operating income decreased primarily due to declines in average selling pricesprices, partially offset by manufacturing cost reductions and lowerhigher bit shipments.

Research and Development: R&D expenses vary primarily with the number of development and pre-qualification wafers processed,processed and end-product solutions developed, personnel costs, and the cost of advanced equipment dedicated to new product and process development, and personnel costs.development. Because of the lead times necessary to manufacture our products, we typically begin to process wafers before completion of performance and reliability testing. Development of a product is deemed complete when it is qualified through internal reviews and tests for performanceperformance, functionality, and reliability. R&D expenses can vary significantly depending on the timing of product qualification.qualification and product specifications.

R&D expenses for 2025 increased 11% as compared to 2024 primarily due to increases in employee compensation, depreciation expense, and higher volumes of development and pre-qualification wafers. R&D expenses for 2024 increased 10% as compared to 2023 primarily due to an increase in employee compensation and higher volumes of development and prequalificationpre-qualification wafers, partially offset by an increase in government incentives. R&D expenses for 2023 were relatively unchanged as compared to 2022 as decreases in employee compensation were offset by higher depreciation expense.

Interest Income (Expense), Net: Interest income (expense) improved in 2025 as compared to 2024 primarily due to decreases in interest expense as a result of increased capitalized interest driven by higher levels of building construction, partially offset by decreases in interest income due to lower interest rates on our cash and investments. Interest income (expense) deteriorated for 2024 as compared to 2023 primarily due to increases in interest expense as a result of higher interest rates on our debt, partially offset by increases in interest income due to higher interest rates on our cash and investments. Interest income (expense) improved for 2023 as compared to 2022 primarily as a result of increases in interest income due to higher interest rates on our cash and investments, partially offset by increases in interest expense due to higher debt balances and interest rates on our debt.

The change in our effective tax rate for 2025 as compared to 2024, and for 2024 as compared to 20232023, waswere primarily due to changes in profitability. The change in our effective tax rate for 2023 as compared to 2022 was primarily due to a pre-tax loss in 2023. Despite a consolidated pre-tax loss on a worldwide basis in 2023, we had taxes payable in certain geographies due to minimum taxable income reportable in those geographies.

We operate in a number of jurisdictions outside the United States, including Singapore, where we have tax incentive arrangements. These incentives expire, in whole or in part, at various dates through 2034 and are conditional, in part, upon meeting certain business operations and employment thresholds. The effect of tax incentive arrangements reduced our tax provision by $1.05 billion (benefiting our diluted earnings per share by $0.93) for 2025. As a result of the low level of profitability and the jurisdictional mix of income, the benefit from tax incentive arrangements was not material for 2024 or 2023. The effect of tax incentive arrangements reduced our tax provision by $1.12 billion (benefiting our diluted earnings per share by $1.00) for 2022.

Other: Further information can be found in the following notes contained in “Item 8. Financial Statements and Supplementary Data –Data, Notes to Consolidated Financial Statements”:

•Note 18. Equity Compensation Plans

•Note 22. Restructure and Asset Impairments

•Note 23. Other Operating (Income) Expense, Net

•Note 25. Income Taxes

•acquisitions and/or strategic transactions and investments; and

We have experienced significant volatility in our average selling prices and may continue to experience such volatility in the future. InOver the past five fiscal years, annual percentagepercentages changes in DRAM average selling prices have ranged from plusan increase in the low 40% range to a minusdecrease in the high 40% range. DRAM average selling prices increased approximately 140% for the first nine months of 2026 compared to the first nine months of 2025. In the past five fiscal years, annual percentage changes in NAND average selling prices have ranged from plusan increase in the low 30% range to a minusdecrease in the low 50% range. NAND average selling prices increased approximately 130% for the first nine months of 2026 compared to the first nine months of 2025. In some prior periods, average selling prices for our products have been below our manufacturing costs, and we may experience such circumstances in the future. Significant declines in average selling prices in future periods could have a material adverse effect on our business, results of operations, or financial condition.

In addition to the impact of our average selling prices, our gross margins are dependent, in part, upon continuing decreases in per gigabit manufacturing costscosts, which is primarily achieved through improvements in our manufacturing processes and product designs. Factors that may limit our ability to reduce our per gigabit manufacturing costs at sufficient levels to prevent deterioration of or improve gross margins include, but are not limited to:

We operate in a dynamic and rapidly evolving industry where the timeframes for product transitions, facility expansions, production ramps, and supply chain shifts are increasingly compressed. To remain competitive, we must continuously develop and implement new products and technologies and decrease manufacturing costs in spite of inflationary pressures and regulatory uncertainty. As we streamline our production and shift capacity to leading-edge nodes, we face execution risks that could impact our ability to meet customer demand and maintain market coverage.

Our industry goes through cycles with demand changes that are not fully aligned to the available supply in the market. We may not be able to predict or quickly respond to trends in the dynamics of our markets and our customers or changes in customer demand, which could negatively impact our gross margin. Although AI is a relatively new demand driver for our products, it is evolving rapidly, and the expected timing and amount of demand related to AI can change significantly. As a result, it may be difficult to accurately forecast such demand, and we have incurred and mayexpect to continue to incur costs in anticipation of demand that ultimately may not materialize or may not be sustained. Additionally, periods of sustained higher prices for memory and storage products may reduce demand or result in our customers modifying product designs to reduce memory and storage content or seeking alternative technologies and solutions. If demand for our products materializes but is lower than expected, we may not be able to reduce our costs in response, which would adversely impact our gross margins. If demand exceeds our forecast, we may be unable to increase supply sufficiently to meet such demand, which could result in a loss of revenue or damage to customer relationships. Our inability to align supply with demand could have a material adverse effect on our business, results of operations, or financial condition.

We havecontinue commencedto expansion ofexpand our production capacity in the United States and in other regions where we operate.operate, in large part, to meet expected demand for our products. These expansion projects are multi-year projects that require significant lead time and commitment of capital well in advance of achieving any returns. Semiconductor fabs are complex, capital-intensive projects and require specialized knowledge, expertise, experience, and skill sets to construct and operate.

Our construction projects are highly dependent on available sources of materials and specialized equipment, as well as labor, skilled sub-contractors, and other service providers. Increasing demand, supply constraints, inflation, tariffs, trade restrictions, and other market conditions could result in shortages and higher costs. Additionally, difficulties in obtaining labor, skilled sub-contractors and other service providers, or other resources could result in delays in completion of our construction projects and cost increases, including costs to operate these facilities.facilities, and could impair our ability to meet customer demand and result in loss of market share to competitors.

We and our subcontractors and suppliers manufacture products using highly complex processes that require technologically advanced equipment and continuous modification to improve yields and performance. Difficulties in the manufacturing process or the effects from a shift in product mix can reduce yields or disrupt production and may increase our per gigabit manufacturing costs. We and our subcontractors and suppliers maintain operations and continuously implement new product and process technology at manufacturing facilities, which are widely dispersed in multiple locations in several countries, including the United States, Singapore, Taiwan, Japan, Malaysia, China, and India. As a result of the necessary interdependence within our network of manufacturing facilities, an operational disruption at one of our or a subcontractor’s or supplier’s facilities may have a disproportionate impact on our ability to produce many of our products.

Infinancial 2025,consequences. over half of our total revenue came from our top ten customers. Among our end markets, approximately one-half of our total revenue was concentrated in the data center end market. A disruption in our relationship with any of our top customers or a significant decrease in demand for our data center products, or in the overall data center end market, could adversely affect our business. We could experience fluctuations in our customer base or the mix of revenue by customer or end market, as markets and strategies evolve. Demand for our products may fluctuate due to factors beyond our control. Our inability to qualify our products to meet customer or end market requirements could adversely impact our revenue. A meaningful change in inventory strategy by our top customers or in certain end markets could impact our industry bit demand growth outlook. In addition, any consolidation of our customers or consolidation of significant end markets could limit the opportunity for sale of our products. Additionally, any commitments made under longer-term supplyThese arrangements could also constrain our available supply and limit our flexibility to respond to changes in market conditions, includingand shiftsif customers fail to meet their purchase commitments, we may need to enforce our contractual rights, which could result in demand, pricing,litigation or productdisputes mix.that adversely effect our business, customer relationships, or both, and any such disputes could have a material adverse effect on our business, results of operations, or financial condition. Further, if we are unable to satisfy customer demand and customers are required to purchase products from our competitors, they may shift immediate and future purchases to such competitors, which could harm our customer relationships and adversely impact our access to certain end markets. The loss of, or restrictions on our ability to sell to, one or more of our major customers or in certain end markets, or any significant reduction in orders or a shift in product mix, could have a material adverse effect on our business, results of operations, or financial condition. See Part I. Financial Information, Item 1. Financial Statements, Notes to Consolidated Financial Statements, Note 17. Segment and Other Information.

We maintain a system of controls over the physical security of our facilities. We also manage and store various proprietary information and sensitive or confidential data relating to our operations. In addition, we process, store, and transmit data relating to our customers, suppliers, and employees, including sensitive personal information. Unauthorized persons, employees, former employees, nation states, or other parties may gain access to our facilities or technology infrastructure and systems through fraudulent means and may steal trade secrets or other proprietary information, compromise confidential information, create system disruptions, or have other impacts. This risk is exacerbated as competitors for talent, particularly engineering talent, attempt to hire our employees. Through cyberattacks on technology infrastructure and systems, unauthorized parties may obtain access to computer systems, networks, and data, including cloud-based platforms. Our technology infrastructure and systems and that of our suppliers, vendors, service providers, cloud solution providers, and partners have in the past experienced, and may in the future experience, such attacks, which could impact our operations. Cyberattacks can include ransomware, denial-of-service attacks, zero-day attacks, supply chain attacks, “phishing” and other forms of social engineering, exploitation of open source software vulnerabilities, and other malicious software programs or other attacks, including those using techniques that change frequently or may be disguised or difficult to detect, or designed to remain dormant until a triggering event, impersonation of authorized users, and efforts to discover and exploit any design flaws, “bugs,” security vulnerabilities, as well as intentional or unintentional acts by employees or other insiders with access privileges. The emergence and maturation of AI capabilities may also lead to new and/or more sophisticated methods of attack. Globally, cyberattacks are increasing in number and the attackers are increasingly organized and well-financed, or supported by state actors, and are developing increasingly sophisticated systems to not only attack, but also to evade detection. In addition, geopolitical tensions or conflicts may create a heightened risk of cyberattacks. Breaches of our physical security, including break-ins, sabotage or vandalism, attacks on our technology infrastructure and systems, security breaches or incidents, or attacks on our customers, suppliers, or business partners who maintain or otherwise process confidential or sensitive information regarding us and our customers and suppliers, could result in damage to, or loss, disruption, or unavailability of data or systems, or inappropriate disclosure, destruction, loss, or other processing of confidential or sensitive information. In addition, our systems and those of our third-party vendors may experience service interruptions, data loss or compromise, and outages for other reasons, including human error, pandemics, fires, other natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks and other geopolitical unrest, computer viruses, ransomware, and other malicious software, changes in social, political, or regulatory conditions or in laws and policies, or other changes or events.

Additionally, AI algorithms or training methodologies may be flawed, and datasets may contain irrelevant, insufficient or biased information, which can cause errors in outputs. The use of AI in the development of our products could also cause loss of intellectual property, as well as subject us to risks related to intellectual property infringement or misappropriation, data privacy, and cybersecurity. AI is also the subject of an evolving set of legal requirements and regulations, and we may be subject to new and conflicting laws and regulations. In addition, public and governmental perceptions regarding the use and impact of AI may evolve over time. Any of these matters may give rise to legal liability, damage our reputation, and materially harm our business.

Acquisitions and/or strategic transactionstransactions, including strategic investments, involve numerous risks.

Our cash flows from operations depend primarily on the volume of semiconductor memory and storage products sold,sold and average selling prices, and manufacturing costs.prices. To develop new product and process technology, support future growth, achieve operating efficiencies, and maintain product quality, we must make significant capital investments in manufacturing technology, capital equipment, facilities, R&D, and product and process technology.

We have incurred in the past, and expect to incur in the future, debt to finance our capital investments, business acquisitions, and to realign our capital structure. As of FebruaryMay 26,28, 2026, we had debt with a carrying value of $10.14$5.72 billion and may incur additional debt, including under our $3.50$2.00 billion Revolving Credit Facility. Our debt obligations could adversely impact us as follows:

Our common stock has experienced substantial price volatility in the past and may continue to do so in the future. Additionally, we, the technology industry, and the stock market as a whole have on occasion experienced extreme stock price and volume fluctuations that have affected stock prices in ways that may have been unrelated to the specific operating performance of individual companies. The trading price of our common stock may fluctuate widely due to various factors, including, but not limited to, actual or anticipated fluctuations in our financial condition and operating results, changes in financial forecasts or estimates by us, other participants in our markets, including our customers and competitors, changes in financial or other market estimates and ratings by securities and other analysts, changes in our capital structure, including issuance of additional debt or equity to the public, interest rate changes, regulatory changes, news regarding our products or products of our competitors, market perception regarding certain technologies, and broad market and industry fluctuations. These fluctuations may not be related to our specific financial or operating performance or our expectations regarding our financial or operating performance. In addition, stock price fluctuations could impact the value of our equity compensation, which could affect our ability to recruit and retain employees.

Although our Board of Directors has authorized share repurchases of up to $10 billion of our outstanding common stock, of which approximately $2.16 billion remains, the authorization does not obligate us to repurchase any common stock. The amount, frequency, and execution of our share repurchases pursuant to our share repurchase authorization may fluctuate based on our operating results, cash flows, restrictions applicable under our CHIPS Act direct funding agreements, and priorities for the use of cash for other purposes. Since repurchases under the authorization began in 2019, our expenditures for share repurchases in any one year have ranged from no repurchases to a high of $2.66 billion of repurchases. Cash uses that could impact our repurchases include, but are not limited to, operational spending, capital spending, acquisitions, and repayment of debt. Other factors, including changes in tax laws, could also impact our share repurchases.

This discussion should be read in conjunction with the consolidated financial statements and accompanying notes for the year ended August 28, 2025. All period references are to our fiscal periods unless otherwise indicated. Our fiscal year is the 52- or 53-week period ending on the Thursday closest to August 31. Fiscal 2026 contains 53 weeks and fiscal 2025 contains 52 weeks. The third quarter of 2026 contains 13 weeks and the fourth quarter of 2026 contains 14 weeks. All tabular dollar amounts are in millions, except per share amounts.

DRAM: DRAM products are dynamic random access memory semiconductor devices with low latency that provide high-speed data retrieval with a variety of performance characteristics. DRAM products lose content when power is turned off (“volatile”) and are most commonly used in the data center, client PC, graphics, industrial, mobile, and automotive markets. DRAM products include High-Bandwidth Memory (“HBM”), which is a 3D stacked DRAM architecture that utilizes through-silicon via (“TSV”) connections for more efficient communication giving it the ability to achieve a higher bandwidth while consuming less power compared to other memory types.

NAND: NAND products are non-volatile, re-writeable semiconductor storage devices that provide high-capacity, low-cost storage with a variety of performance characteristics. NAND is used in SSDs for the data center, client PC, consumer, and automotive markets, and in removable storage markets. Managed NAND is used in smartphones and other mobile devices, and in the consumer, automotive, and embedded markets. Low-density NAND is ideal for applications like automotive, surveillance, machine-to-machine, automation, printer, and home networking.

AI-driven memory and storage growth is outpacing industry supply. In the secondthird quarter of 2026, we continued to benefit from substantial improvements in pricing and margins, reflecting strong demand growth, driven in large part by the continued advancement of AI. The AI-driven growth in the data center has accelerated demand for memory and storage at a rate greater than our ability and the industry’s ability to increase supply. This has led to decisions on supply allocation that may impact certain customers and end markets as the overall market demand for memory and storage exceeds overall industry supply. Robust overall industry DRAM and NAND demand,demand and constrained supply,supply has led to increased pricing and improved the profitability inacross our portfolio.

Total Revenue: Total revenue for the secondthird quarter and first sixnine months of 2026 was impacted by the factors described in the section titled “Industry Conditions—Memory and Storage Demand” above.

Total revenue for the secondthird quarter of 2026 increased 196%74% as compared to the second quarter of 2025,2026, primarily due to increases in sales of both DRAM and NAND products.

•Sales of DRAM products increased 136%,67%, primarily due to a mid-70%low-60% range increase in average selling prices and a mid-30%low-single-digit percentage range increase in bit shipments.

•Sales of NAND products increased 89%,99%, primarily due to a mid-40%mid-80% range increase in average selling prices and ana approximatemid-single-digit 30%percentage range increase in bit shipments.

Consolidated Gross Margin: Our consolidated gross margin has been impacted by the factors described in the section titled “Industry Conditions.Conditions—Memory and Storage Demand.” Our consolidated gross margin percentage increased to 74%85% for the secondthird quarter of 2026 from 56%74% for the firstsecond quarter of 2026 as a result of improvements in margins for both DRAM and NAND products. Margins improved primarily due to increases in average selling prices,prices and also benefited from continued strong execution and favorable mix, and manufacturing cost reductions driven by improvements in product and process technology.mix.

Our consolidated gross margin percentage improved to 74%85% for the secondthird quarter of 2026 from 37%38% for the secondthird quarter of 2025 and improved to 68%77% for the first sixnine months of 2026 from 38% for the first sixnine months of 2025. Improvements in our consolidated gross margins for the secondthird quarter and first sixnine months of 2026 as compared to corresponding periods of 2025 were primarily due to improvements in margins for both DRAM and NAND products. Margins improved, primarily due to increases in average selling prices,prices and, to a lesser extent, favorable mix,mix and manufacturing cost reductions.

Changes in revenue for each business unit for the secondthird quarter of 2026 as compared to the firstsecond quarter of 2026 were as follows:

•CDBUCMBU revenue increased 139%,78%, primarily due to increases in average selling prices and bit shipments.

•MCBUCDBU revenue increased 81%,103%, primarily due to increases in average selling prices,prices partiallyand offsetfavorable by lower bit shipments.mix.

•AEBUMCBU revenue increased 57%,49%, primarily due to increases in average selling prices, partially offset by lower bit shipments.

Revenue•AEBU for each business unitrevenue increased for the second quarter and first six months of 2026 as compared to the corresponding periods of 2025,71%, primarily due to increases in average selling prices and higher bit shipments. Increases were as follows:

•CMBU revenue increased 163%307% and 133%,198%, respectively.respectively, primarily due to increases in average selling prices and bit shipments.

•MCBUCDBU revenue increased 245%653% and 147%,247%, respectively.respectively, primarily due to increases in average selling prices and bit shipments.

•AEBU revenue increased 162%311% and 102%,173%, respectively.respectively, primarily due to increases in average selling prices and bit shipments.

Changes in operating income for each business unit for the secondthird quarter of 2026 as compared to the firstsecond quarter of 2026 were as follows:

•CDBUCMBU operating income was higher, primarily due to increases in average selling prices,prices and higher bit shipments, and favorable mix.shipments.

•AEBU operating income was higher, primarily due to increases in average selling prices, partially offset by lowerhigher bit shipments.shipments, and favorable mix.

OurChanges in operating income increasedfor each business unit for the secondthird quarter and first sixnine months of 2026 as compared to the corresponding periods of 2025 forwere allas of our business units primarily due to increases in average selling prices, higher bit shipments, and manufacturing cost reductions.follows:

R&D expenses for the secondthird quarter of 2026 increased 7%5% as compared to the firstsecond quarter of 2026, primarily due to an increaseincreases in employee compensation. R&D expenses for the secondthird quarter and first sixnine months of 2026 both increased 39% and 36%, respectively, as compared to the corresponding periods of 2025, primarily due to higher volumes of development and pre-qualification wafers, as we ramp R&D investments in support of long-term opportunities in memory and storage, and increases in employee compensation.

Selling, General, and Administrative: SG&A expenses for the secondthird quarter of 2026 wereincreased relatively unchanged18% as compared to the firstsecond quarter of 2026.2026, primarily due to increases in employee compensation. SG&A expenses for the secondthird quarter and first sixnine months of 2026 increased 21%28% and 19%,22%, respectively, as compared to the corresponding periods of 2025, primarily due to increases in employee compensation.

Interest Income (Expense), Net: Interest income (expense) improved in the secondthird quarter of 2026 as compared to the firstsecond quarter of 2026 and for the secondthird quarter and first sixnine months of 2026 as compared to the corresponding periods of 2025, primarily due to a decrease in interest expense due to lower debt balances and an increase in interest income due to higher cash and investments balances.

The change in our effective tax rate for the secondthird quarter of 2026, as compared to the firstsecond quarter of 2026 was primarily due to changes in profitability, which reduced the relative impact of discrete tax benefits. The change in our effective tax rate for the secondthird quarter and first sixnine months of 2026, as compared to the corresponding periods of 2025, was primarily due to the 15% minimum tax Pillar Two Model Rules (“Pillar Two”). Singapore enacted legislation to implement Pillar Two, effective for us in 2026, which largely offsets the benefit from our Singapore tax incentive arrangements.