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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion should be read in conjunction with the consolidated financial statements and accompanying notes for the year ended August 29, 2024. 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 2024, 2023, and 2022 each contained 52 weeks. All tabular dollar amounts are in millions, except per share amounts.

Overview

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

Industry Conditions

Throughout 2024, we experienced substantial improvements in pricing and margins. 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 2023 conditions. We executed well on pricing and improved our financial performance significantly from the start of the year. We are exiting the year with excellent momentum and an industry-leading product portfolio.

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.

In manufacturing, we have been fully utilized throughout most of 2024 on our high-volume manufacturing nodes where we are maximizing output against our current capacity, which we have proactively, structurally lowered. Beginning in the latter part of 2022, we reduced capital expenditures and wafer starts for both DRAM and NAND in response to challenging market conditions and increased levels of our inventories. In addition, to improve capital efficiency, we redeployed equipment from older technology nodes to support conversions to leading-edge nodes. Since the number of wafer processing steps is higher for leading-edge nodes, this approach has resulted in a meaningful structural reduction in DRAM and NAND wafer capacity. We believe this approach to node migration and consequent wafer capacity reduction was adopted across the industry. We recognized period costs from fabrication facility underutilization of $382 million in 2023 and $165 million in the first quarter of 2024 due to wafer start reductions. Subsequently, fabrication facility underutilization was reduced and principally related to legacy manufacturing capacity. Accordingly, 2024 period costs beyond the first quarter were not significant.

In connection with improved 2024 market conditions, we reinstated our bonuses and phased out certain other temporary cost-saving measures that were implemented in 2023. We took significant steps in 2023 to reduce our costs and operating expenses, both on a temporary and ongoing structural basis. These measures included the 2023 Restructure Plan, as well as implementing productivity programs, suspension of our 2023 bonus, reductions in select product programs, lower discretionary spending, and cuts to 2023 executive salaries. Under the 2023 Restructure Plan, we reduced our headcount by approximately 15% by the end of calendar 2023, through a combination of voluntary attrition and personnel reductions. We incurred restructure charges of $171 million in 2023 primarily related to employee severance costs. The 2023 Restructure Plan, which was substantially completed in 2023, yielded estimated cost savings of approximately $130 million per quarter (approximately 60% in cost of goods sold, 30% in R&D, and 10% in SG&A) subsequent to 2023.

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Results of Operations

Consolidated Results

Restructure and asset impairments 1 — % 171 1 % 48 — %

Other operating (income) expense, net (251) (1) % 124 1 % (34) — %

Interest income (expense), net (33) — % 80 1 % (93) — %

Other non-operating income (expense), net (31) — % 7 — % (38) — %

Income tax (provision) benefit (451) (2) % (177) (1) % (888) (3) %

Equity in net income (loss) of equity method investees (11) — % 2 — % 4 — %

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

Total revenue for 2024 increased 62% as compared to 2023 primarily due to increases in sales of both DRAM and NAND products.

•Sales of DRAM products increased 60% primarily due to a mid-40% range increase in bit shipments and a low-teen percentage range increase in average selling prices.

•Sales of NAND products increased 72% primarily due to a low-30% range increase in bit shipments and a low-30% percentage range increase in average selling prices.

Total revenue for 2023 decreased 49% as compared to 2022 primarily due to decreases in sales of both DRAM and NAND products.

•Sales of DRAM products decreased 51% primarily due to a high-40% range decline in average selling prices and decreases in bit shipments in the high-single-digit percent range.

•Sales of NAND products decreased 46% primarily due to a low-50% range decline in average selling prices partially offset by increases in bit shipments in the high-single-digit percent range.

Consolidated Gross Margin:Our consolidated gross margin has been impacted by the factors described in the section titled “Industry Conditions” above and inventory write-downs in 2023 as detailed in the table below. Our consolidated gross margin percentage improved to 22% for 2024 from negative 9% for 2023, as a result of improvements in margins for both DRAM and NAND products, primarily due to increases in average selling prices, and manufacturing cost reductions, the effects of charges to write down inventories to their NRV in 2023 and lower costs in 2024 from the sale of inventories written down in 2023 (as detailed in “Inventory NRV write-downs” below).

Our consolidated gross margin percentage decreased to negative 9% for 2023 from 45% for 2022 primarily due to declines in average selling prices for both DRAM and NAND, charges to write down inventories, and $382 million of facility underutilization costs in 2023.

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Inventory NRV write-downs:Our consolidated gross margin was impacted by charges in 2023 to write down inventories to their estimated NRV as a result of declines in average selling prices for both DRAM and NAND. As charges to write down inventories are recorded in advance of when inventories are sold, costs of goods sold in subsequent periods were lower than they otherwise would be. The impact of inventory NRV write-downs for each period reflects (1) inventory write-downs in that period, offset by (2) lower costs in that period on the sale of inventory written down in prior periods. The impacts of inventory NRV write-downs are summarized below:

Provision to write down inventory to NRV $ — $ (1,831) $ —

Lower costs from sale of inventory written down in prior periods 987 844 —

Revenue by Business Unit

Percentages of total revenue may not total 100% due to rounding.

Changes in revenue for each business unit for 2024 as compared to 2023 were as follows:

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

•MBU revenue increased 75% primarily due to increases in average selling prices and bit shipments for both mobile DRAM and NAND.

•EBU revenue increased 27% primarily due to increases in bit shipments, partially offset by declines in average selling prices.

•SBU revenue increased 80% primarily due to increases in average selling prices and bit shipments.

Changes in revenue for each business unit for 2023 as compared to 2022 were as follows:

•CNBU revenue decreased 58% primarily due to declines in average selling prices for DRAM and decreases in bit shipments.

•MBU revenue decreased 50% primarily due to declines in average selling prices for both DRAM and NAND and decreases in NAND bit shipments.

•EBU revenue decreased 31% primarily due to declines in average selling prices for both DRAM and NAND and decreases in bit shipments.

•SBU revenue decreased 44% primarily due to declines in average selling prices for NAND partially offset by increases in bit shipments.

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Operating Income (Loss) by Business Unit

Percentages reflect operating income (loss) as a percentage of revenue for each business unit.

Changes in operating income or loss for each business unit for 2024 as compared to 2023 were as follows:

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

•MBU operating income (loss) improved primarily due to increases in average selling prices, higher bit shipments, and cost reductions.

•EBU operating income decreased primarily due to declines in average selling prices, partially offset by higher bit shipments and cost reductions.

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

Changes in operating income or loss for each business unit for 2023 as compared to 2022 were as follows:

•CNBU operating income (loss) deteriorated primarily due to declines in average selling prices and lower bit shipments.

•MBU operating income (loss) deteriorated primarily due to declines in average selling prices and lower NAND bit shipments.

•EBU operating income decreased primarily due to declines in average selling prices and lower bit shipments.

•SBU operating income (loss) deteriorated primarily due to declines in average selling prices.

Operating Expenses and Other

Research and Development: R&D expenses vary primarily with the number of development and pre-qualification wafers processed, the cost of advanced equipment dedicated to new product and process development, and personnel costs. 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 performance and reliability. R&D expenses can vary significantly depending on the timing of product qualification.

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 prequalification 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.

Selling, General, and Administrative: SG&A expenses for 2024 increased 23% as compared to 2023 primarily due to an increase in employee compensation. SG&A expenses for 2023 were 14% lower as compared to 2022 primarily due to decreases in employee compensation, legal fees, advertising, and professional services.

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Interest Income (Expense), Net: 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.

Income Taxes: Our income tax (provision) benefit consisted of the following:

Income tax (provision) benefit (451) (177) (888)

Effective tax rate 36.4 % (3.1) % 9.3 %

The change in our effective tax rate for 2024 as compared to 2023 was 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. As a result of the low level of profitability and 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.

Further changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project, including Pillar Two Model Rules (“Pillar Two”), undertaken by the Organisation for Economic Co-operation and Development (“OECD”). Nearly all European Union member states have enacted the Pillar Two legislation, which will be effective for us in 2025. While we do not expect these enacted laws to materially impact our effective tax rate for 2025, additional countries where we operate, including Singapore, have announced plans to adopt Pillar Two legislation. Enactment of this legislation would become effective for us in 2026 and significantly increase our tax expense.

Various tax reforms are being considered in multiple jurisdictions that, if enacted, contain provisions that could materially impact our tax expense. We continue to monitor the potential impact of these various tax reform proposals to our overall global effective tax rate and financial statements.

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

•Equity Compensation Plans

•Restructure and Asset Impairments

•Other Operating (Income) Expense, Net

•Income Taxes

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Liquidity and Capital Resources

Our primary sources of liquidity are cash generated from operations and financing obtained from capital markets and financial institutions. Cash generated from operations is highly dependent on selling prices for our products, which can vary significantly from period to period. Cash and marketable investments totaled $9.15 billion as of August 29, 2024, and $10.44 billion as of August 31, 2023. Our cash and investments consist primarily of bank deposits, money market funds, and liquid investment-grade, fixed-income securities, which are diversified among industries and individual issuers. To mitigate credit risk, we invest through high-credit-quality financial institutions and by policy generally limit the concentration of credit exposure by restricting the amount of investments with any single obligor. As of August 29, 2024, $3.34 billion of our cash and marketable investments was held by our foreign subsidiaries.

We continuously evaluate alternatives for efficiently funding our capital expenditures and ongoing operations. We expect to engage in a variety of financing transactions, from time to time, for such purposes as well as to refinance our existing indebtedness, including the issuance of securities. As of August 29, 2024, $2.50 billion was available to draw under our Revolving Credit Facility. Funding of certain significant capital projects is also dependent on the receipt of government incentives, which are subject to conditions and may not be obtained.

To develop new product and process technology, support future growth, achieve operating efficiencies, and maintain product quality, we must continue to invest in manufacturing technologies, facilities and equipment, and R&D. We estimate capital expenditures in 2025 for property, plant, and equipment, net of proceeds from government incentives, to be around mid-30% range of revenue for the year. Actual amounts for 2025 will vary depending on market conditions and may vary from quarter to quarter due to the timing of expenditures and proceeds from government incentives. As of August 29, 2024, we had purchase obligations of approximately $1.17 billion for the acquisition of property, plant, and equipment, of which approximately $1.10 billion is expected to be paid within one year. For a description of other contractual obligations, such as leases, debt, and commitments, see “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Leases,” “ – Debt,” and “ – Commitments.”

To support projected memory demand in the second half of the decade, we will need to add new DRAM wafer capacity. Following the enactment of the U.S. CHIPS and Science Act of 2022 (“CHIPS Act”), we announced plans to invest in two leading-edge memory manufacturing fab facilities in the United States, based on CHIPS Act support through grants and investment tax credits. As part of this plan, in September 2022, we broke ground on a leading-edge memory manufacturing fab in Boise, Idaho. Construction of the fab began in October 2023, with meaningful DRAM output projected in 2027. In addition, in October 2022, we announced plans to build a second leading-edge DRAM manufacturing facility, consisting of up to four fabs to be built over the next 20-plus years, in Clay, New York. We expect construction site preparation to begin in calendar 2025, with production anticipated to ramp in the latter half of the decade. We expect these new fabs to be key to meeting our requirements for additional wafer capacity starting in the second half of the decade and beyond, in line with industry demand trends and to maintain an objective of stable bit share.

We have signed a non-binding preliminary memorandum of terms with the U.S. Department of Commerce for up to $6.1 billion in direct funding under the CHIPS Act for our planned fab in Boise, Idaho and the first two planned fabs in Clay, New York. We are also eligible for federal loans up to $7.5 billion. In addition, we receive a 25% investment tax credit on qualified investments in U.S. semiconductor manufacturing under the CHIPS Act. We have also signed a non-binding term sheet with the state of New York that provides up to $5.5 billion in funding for the planned four-fab facility over the next 20-plus years through a combination of tax credits for qualified capital investments and incentives for eligible new job wages.

Additionally, we began enablement of cleanroom space within our existing manufacturing fab in Hiroshima, Japan, that will support production of DRAM using EUV lithography. We also continue to advance our global back-end assembly and test network in order to support our product portfolio and extend our ability to deliver on global customer demand in the future. We have started construction to expand our existing assembly and test facility in Xi’an, China, to provide space to add more product capability, to allow us over time to serve more of the demand from our customers in China. Construction is also progressing for the assembly and test facility in Gujarat, India to address demand in the latter half of this decade. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Government Incentives.”

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Our Board of Directors has authorized the discretionary repurchase of up to $10 billion of our outstanding common stock through open-market purchases, block trades, privately-negotiated transactions, derivative transactions, and/or pursuant to Rule 10b5-1 trading plans. The repurchase authorization has no expiration date, does not obligate us to acquire any common stock, and is subject to market conditions and our ongoing determination of the best use of available cash. Through August 29, 2024, we had repurchased an aggregate of $7.19 billion of the authorized amount. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity.”

On September 25, 2024, our Board of Directors declared a quarterly dividend of $0.115 per share, payable in cash on October 23, 2024, to shareholders of record as of the close of business on October 7, 2024. The declaration and payment of any future cash dividends are at the discretion and subject to the approval of our Board of Directors. Our Board of Directors' decisions regarding the amount and payment of dividends will depend on many factors, including, but not limited to, our financial condition, results of operations, capital requirements, business conditions, debt service obligations, contractual restrictions, industry practice, legal requirements, regulatory constraints, and other factors that our Board of Directors may deem relevant.

We expect that our cash and investments, cash flows from operations, expected funding from government incentives, and available financing will be sufficient to meet our requirements at least through the next 12 months and thereafter for the foreseeable future.

Cash Flows

Net cash provided by operating activities $ 8,507 $ 1,559 $ 15,181

Net cash provided by (used for) investing activities (8,309) (6,191) (11,585)

Net cash provided by (used for) financing activities (1,842) 4,983 (2,980)

Operating Activities: Cash provided by operating activities reflects net income (loss) adjusted for certain non-cash items, including depreciation expense, amortization of intangible assets, inventory write-downs, asset impairments, and stock-based compensation, and the effects of changes in operating assets and liabilities.

The increase in cash provided by operating activities for 2024 as compared to 2023 was primarily due to net income in 2024 adjusted for non-cash items, the effect of an increase in accounts payable and accrued expenses and an increase in other current liabilities largely due to customer prepayments to secure product supply, partially offset by an increase in receivables.

The decrease in cash provided by operating activities for 2023 as compared to 2022 was primarily due to a net loss in 2023 adjusted for non-cash items and the effect of an increase in inventories and a decline in accounts payable and accrued expenses, partially offset by a decrease in receivables.

Investing Activities: For 2024, net cash used for investing activities consisted primarily of $8.39 billion of expenditures for property, plant, and equipment; and $205 million of net outflows from purchases, maturities, and sales of available-for-sale securities; partially offset by contributions of $315 million received from government incentives to offset capital expenditures.

For 2023, net cash used for investing activities consisted primarily of $7.68 billion of expenditures for property, plant, and equipment; partially offset by contributions of $710 million received from government incentives to offset capital expenditures; and $868 million of net inflows from maturities, sales, and purchases of available-for-sale securities.

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For 2022, net cash used for investing activities consisted primarily of $12.07 billion of expenditures for property, plant, and equipment; partially offset by contributions of $115 million received from government incentives to offset capital expenditures; $888 million of net inflows from the sale of the Lehi, Utah fab; and $155 million of net outflows from purchases, maturities, and sales of available-for-sale securities.

Financing Activities: For 2024, net cash used for financing activities consisted primarily of $1.90 billion of repayments of debt, which included the prepayment of the 2024 Term Loan A and the 2025 Term Loan A borrowings; $513 million for payments of dividends to shareholders; $300 million for the acquisition of 3.2 million shares of our common stock under our share repurchase authorization; and $149 million of payments on equipment purchase contracts, partially offset by approximately $1.00 billion of proceeds from the issuance of the 2031 Notes.

For 2023, net cash provided by financing activities consisted primarily of $3.20 billion of proceeds from our 2025, 2026, and 2027 Term Loan A borrowings; $1.27 billion from the issuance of the 2029 B Notes; $896 million from the issuance of the 2033 B Notes; $749 million from the issuance of the 2033 A Notes; and $599 million from the issuance of the 2028 Notes. Cash used for financing activities included $761 million for repayments of debt; $504 million for payments of dividends to shareholders; $425 million for the acquisition of 8.6 million shares of our common stock under our share repurchase authorization; and $138 million of payments on equipment purchase contracts.

For 2022, net cash used for financing activities included $2.43 billion for the acquisition of 35.4 million shares of our common stock under our share repurchase authorization; $2.03 billion of repayments of debt primarily to redeem the 2023 Notes and 2024 Notes; $461 million of cash payments of dividends to shareholders; and $141 million of payments on equipment purchase contracts. Cash used for financing activities was partially offset by aggregate proceeds of $2.00 billion from the issuance of the unsecured 2032 Green Bonds, 2041 Notes, and 2051 Notes.

See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt.”

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that we believe to be reasonable under the circumstances. Estimates and judgments may vary under different assumptions or conditions and involve a significant level of uncertainty. We evaluate our estimates and judgments on an ongoing basis. Our management believes the accounting policies below are critical in the portrayal of our financial condition and results of operations and require management’s most difficult, subjective, or complex judgments.

Contingencies: We are subject to the possibility of losses from various contingencies. Significant judgment is necessary to estimate the probability and amount of a loss, if any, from such contingencies. An accrual is made when it is probable that a liability has been incurred or an asset has been impaired, and the amount of loss can be reasonably estimated. In accounting for the resolution of contingencies, significant judgment may be necessary to estimate amounts pertaining to periods prior to the resolution that are charged to operations in the period of resolution and amounts related to future periods.

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Goodwill: We test goodwill for impairment in our fourth quarter each year, or more frequently if indicators of an impairment exist, to determine whether it is more likely than not that the fair value of the reporting unit with goodwill is less than its carrying value. For reporting units for which this assessment concludes that it is more likely than not that the fair value is more than its carrying value, goodwill is considered not impaired, and we are not required to perform the quantitative goodwill impairment test. Qualitative factors considered in this assessment include industry and market considerations, overall financial performance, and other relevant events and factors affecting the fair value of the reporting unit. For reporting units for which this assessment concludes that it is more likely than not that the fair value is below the carrying value, goodwill is tested for impairment by determining the fair value of each reporting unit and comparing it to the carrying value of the net assets assigned to the reporting unit. If the fair value of the reporting unit exceeds its carrying value, goodwill is considered not impaired. If the carrying value of the reporting unit exceeds its fair value, we recognize an impairment loss up to the difference between the carrying value and implied fair value. We recognized a charge of $101 million in 2023 to impair all of the goodwill assigned to our SBU reporting unit based on our quantitative assessment for impairment. We performed a qualitative assessment for the current year and have not identified any impairment indicators for our reporting units.

Determining when to test for impairment, the reporting units, the assets and liabilities of the reporting unit, and the fair value of the reporting unit requires significant judgment and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates, forecasted manufacturing costs, and other expenses and are developed as part of our long-range planning process. The same estimates are used in business planning, forecasting, and capital budgeting as part of our long-term manufacturing capacity analysis. These estimates and assumptions are used to calculate projected future cash flows for the reporting unit, which are discounted using a risk-adjusted rate to estimate a fair value. The discount rate requires determination of appropriate market comparables. We base fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. We assess the reasonableness of our methodology, forecasts, and assumptions by comparing the aggregate calculated fair value for our reporting units to our market capitalization.

Income taxes: We are required to estimate our provision for income taxes and amounts ultimately payable or recoverable in numerous tax jurisdictions around the world. These estimates involve significant judgment and interpretations of regulations and are inherently complex. Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of the applicable year. We are also required to evaluate the realizability of our deferred tax assets on an ongoing basis in accordance with U.S. GAAP, which requires the assessment of our performance and other relevant factors. Realization of deferred tax assets is dependent on our ability to generate future taxable income. Our income tax provision or benefit is dependent, in part, on our ability to forecast future taxable income in Japan, the United States, Malaysia, Taiwan, and other jurisdictions. Such forecasts are inherently difficult and involve significant judgments including, among others, projecting future average selling prices and sales volumes, manufacturing and overhead costs, levels of capital spending, and other factors that significantly impact our analyses of the amount of net deferred tax assets that are more likely than not to be realized.

Inventories: Inventories are stated at the lower of cost or net realizable value, with cost being determined on a first-in, first-out (“FIFO”) basis. Cost includes depreciation, labor, material, and overhead costs, including product and process technology costs. Determining net realizable value of finished goods and work in process inventories involves significant judgments, including projecting future average selling prices, future sales volumes, and future cost per part. To project average selling prices and sales volumes, we review recent sales volumes, existing customer orders, current contract prices, industry analyses of supply and demand, and general economic trends. To project cost per part, we review trends with historical results and consider known changes in our cost structure as applicable. Actual selling prices may vary significantly from projected prices due to the volatile nature of the semiconductor memory and storage markets. When these analyses reflect estimated net realizable values below our manufacturing costs, we record a charge to cost of goods sold in advance of when inventories are actually sold. As a result, the timing of when product costs are charged to costs of goods sold can vary significantly. Differences in future average selling prices used in calculating lower of cost or net realizable value adjustments can result in significant changes in the estimated net realizable value of finished goods and work in process inventories and accordingly the amount of write-down recorded. For example, a 5% decrease in future average selling prices would have changed the estimated net realizable value of our finished goods and work in process inventories by approximately $700 million as of August 29, 2024.

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U.S. GAAP provides for products to be grouped into categories in order to compare costs to net realizable values. The amount of any inventory write-down can vary significantly depending on the determination of inventory categories. We review the major characteristics of product type and markets in determining the unit of account for which we perform the lower of cost or net realizable value analysis and categorize all inventories (including DRAM, NAND, and other memory) as a single group.

Property, plant, and equipment: We periodically assess the estimated useful lives of our property, plant, and equipment based on technology node transitions, capital spending, and equipment re-use rates. We also review the carrying value of property, plant, and equipment for impairment when events and circumstances indicate that the carrying value of an asset or group of assets may not be recoverable from the estimated future cash flows expected to result from its use and/or disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to the amount by which the carrying value exceeds the estimated fair value of the assets. The estimate of future cash flows involves numerous assumptions which require significant judgment by us, including, but not limited to, future use of the assets for our operations versus sale or disposal of the assets, future selling prices for our products, and future production and sales volumes.

Revenue recognition: Revenue is primarily recognized at a point in time when control of the promised goods is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods. Contracts with our customers are generally short-term in duration at fixed, negotiated prices with payment generally due shortly after delivery. We estimate a liability for returns using the expected value method based on historical returns. In addition, we generally offer price protection to our distributors, which is a form of variable consideration that decreases the transaction price. We use the expected value method, based on historical price adjustments and current pricing trends, to estimate the amount of revenue recognized from sales to distributors. Differences between the estimated and actual amounts are recognized as adjustments to revenue.

Recently Issued Accounting Standards

See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Recently Issued Accounting Standards.”

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are exposed to interest rate risk related to our indebtedness and our investment portfolio. As of August 29, 2024 and August 31, 2023, we had fixed-rate debt with an aggregate carrying value of $8.52 billion and $7.52 billion, respectively, and as a result, the fair value of our debt fluctuates with changes in market interest rates. We estimate that, as of August 29, 2024 and August 31, 2023, a hypothetical 1% decrease in market interest rates would increase the fair value of our fixed-rate debt by approximately $520 million and $475 million, respectively.

Interest rate risk related to our investment portfolio is managed by primarily investing in shorter term securities. We estimate that, as of August 29, 2024 and August 31, 2023, a hypothetical 1% increase in interest rates would decrease the fair value of our portfolio by approximately $20 million. Such impact would only be realized if investments were sold prior to maturity.

As of August 29, 2024 and August 31, 2023, we had floating-rate debt, including fixed-rate debt that is swapped to floating-rate debt, with an aggregate principal amount of $2.89 billion and $4.63 billion, respectively. A hypothetical 1% increase in the interest rates of this floating-rate debt would result in an increase in annual interest expense of $29 million and $46 million as of August 29, 2024 and August 31, 2023, respectively.

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Foreign Currency Exchange Rate Risk

The information in this section should be read in conjunction with the information related to changes in the currency exchange rates in “Part I – Item 1A. Risk Factors – Changes in foreign currency exchange rates could materially adversely affect our business, results of operations, or financial condition.”

The functional currency for all of our operations is the U.S. dollar. The substantial majority of our sales are transacted in the U.S. dollar; however, significant amounts of our operating expenses and capital expenditures, and certain assets and liabilities, are incurred in or exposed to other currencies, primarily the Canadian dollar, Chinese yuan, euro, Indian rupee, Japanese yen, Malaysian ringgit, New Taiwan dollar, and Singapore dollar. We have established currency risk management programs for our monetary assets and liabilities, investments in debt instruments, and forecasted future cash flows denominated in foreign currencies to hedge against fluctuations in the fair value and volatility of future cash flows caused by changes in currency exchange rates. We generally utilize currency forward contracts in these hedging programs, which reduce, but do not always entirely eliminate, the impact of currency exchange rate movements. We do not use derivative financial instruments for trading or speculative purposes.

Based on monetary assets and liabilities and investments in debt instruments denominated in foreign currencies, we estimate that a hypothetical 10% adverse change in exchange rates versus the U.S. dollar would result in losses of approximately $480 million as of August 29, 2024 and $129 million as of August 31, 2023. We hedge our exposure to changes in currency exchange rates by utilizing a rolling hedge strategy for our primary currency exposures with currency forward contracts that generally mature within three months. The effectiveness of our hedges is dependent, among other factors, upon our ability to accurately measure exposures on a timely basis. We may also hedge currency risk arising from foreign currency-denominated investments in debt instruments with currency forward contracts that generally mature within one year. To hedge the exposure of changes in cash flows from changes in currency exchange rates for certain capital expenditures and manufacturing costs, we may utilize currency forward contracts that generally mature within two years. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Derivative Instruments.”

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Consolidated Statements of Operations 59

Consolidated Statements of Comprehensive Income (Loss) 60

Consolidated Balance Sheets 61

Consolidated Statements of Changes in Equity 62

Consolidated Statements of Cash Flows 63

Notes to Consolidated Financial Statements 64

Report of Independent Registered Public Accounting Firm (PCAOB ID 238) 92

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Micron Technology, Inc.

Consolidated Statements of Operations

(In millions, except per share amounts)

Restructure and asset impairments 1 171 48

Other operating (income) expense, net (251) 124 (34)

Other non-operating income (expense), net (31) 7 (38)

Income tax (provision) benefit (451) (177) (888)

Equity in net income (loss) of equity method investees (11) 2 4

Earnings (loss) per share

Number of shares used in per share calculations

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In millions)

Other comprehensive income (loss), net of tax

Gains (losses) on derivative instruments 142 234 (516)

Unrealized gains (losses) on investments 33 6 (48)

Pension liability adjustments 3 11 3

Foreign currency translation adjustments — (3) (1)

Other comprehensive income (loss) 178 248 (562)

Total comprehensive income (loss) $ 956 $ (5,585) $ 8,125

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

Consolidated Balance Sheets

(In millions, except par value amounts)

Assets

Long-term marketable investments 1,046 844

Operating lease right-of-use assets 645 666

Liabilities and equity

Accounts payable and accrued expenses $ 7,299 $ 3,958

Noncurrent operating lease liabilities 610 603

Noncurrent unearned government incentives 550 727

Other noncurrent liabilities 911 987

Commitments and contingencies

Shareholders’ equity

Accumulated other comprehensive income (loss) (134) (312)

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

Consolidated Statements of Changes in Equity

(In millions, except per share amounts)

Numberof Shares Amount

Other comprehensive income (loss), net — — — — — (562) (562)

Stock issued under equity compensation plans 12 1 244 — — — 245

Stock-based compensation expense — — 514 — — — 514

Repurchase of stock - repurchase program — — — — (2,432) — (2,432)

Net income (loss) — — — (5,833) — — (5,833)

Other comprehensive income (loss), net — — — — — 248 248

Stock issued under equity compensation plans 15 1 262 — — — 263

Stock-based compensation expense — — 596 — — — 596

Repurchase of stock - repurchase program — — — — (425) — (425)

Net income (loss) — — — 778 — — 778

Other comprehensive income (loss), net — — — — — 178 178

Stock issued under equity compensation plans 17 1 271 — — — 272

Stock-based compensation expense — — 833 — — — 833

Repurchase of stock - repurchase program — — — — (300) — (300)

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

Consolidated Statements of Cash Flows

(In millions)

Cash flows from operating activities

Depreciation expense and amortization of intangible assets 7,780 7,756 7,116

Provision to write down inventories to net realizable value — 1,831 —

Goodwill impairment — 101 —

Change in operating assets and liabilities:

Cash flows from investing activities

Expenditures for property, plant, and equipment (8,386) (7,676) (12,067)

Purchases of available-for-sale securities (1,999) (723) (1,770)

Proceeds from government incentives 315 710 115

Proceeds from sale of Lehi, Utah fab — — 888

Net cash provided by (used for) investing activities (8,309) (6,191) (11,585)

Cash flows from financing activities

Payments of dividends to shareholders (513) (504) (461)

Repurchases of common stock - repurchase program (300) (425) (2,432)

Payments on equipment purchase contracts (149) (138) (141)

Net cash provided by (used for) financing activities (1,842) 4,983 (2,980)

Supplemental disclosures

Income taxes paid, net $ (338) $ (532) $ (493)

Interest paid, net of amounts capitalized (503) (323) (154)

Noncash equipment acquisitions on contracts payable 118 165 157

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All tabular amounts in millions, except per share amounts)

Significant Accounting Policies

Basis of Presentation

We are an industry leader in innovative memory and storage solutions transforming how the world uses information to enrich life for all. With a relentless focus on our customers, technology leadership, and manufacturing and operational excellence, Micron delivers a rich portfolio of high-performance DRAM, NAND, and NOR memory and storage products through our Micron® and Crucial® brands. Every day, the innovations that our people create fuel the data economy, enabling advances in artificial intelligence (AI) and compute-intensive applications that unleash opportunities — from the data center to the intelligent edge and across the client and mobile user experience.

The accompanying consolidated financial statements include the accounts of Micron Technology, Inc. and our consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America.Intercompany balances and transactions have been eliminated in consolidation.Certain reclassifications have been made to prior period amounts to conform to current period presentation.

Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31. Fiscal 2024, 2023, and 2022 each contained 52 weeks. All period references are to our fiscal periods unless otherwise indicated.

Derivative and Hedging Instruments

We use derivative instruments to manage our exposure to changes in currency exchange rates from (1) our monetary assets and liabilities denominated in currencies other than the U.S. dollar, (2) non-U.S.-dollar-denominated investments in debt instruments, and (3) forecasted cash flows for certain capital expenditures and manufacturing costs. We also use derivative instruments to manage our exposure to changes in commodity prices for manufacturing supplies and to minimize certain exposures to changes in the fair value of fixed-rate debt that result from fluctuations in benchmark interest rates. Derivative instruments are measured at their fair values and recognized as either assets or liabilities.

The accounting for changes in the fair value of derivative instruments is based on the intended use of the derivative and the resulting designation. For derivative instruments that are not designated for hedge accounting, gains or losses from changes in fair values are recognized in other non-operating income (expense) and cash flows are classified as investing activities in the statement of cash flows. For derivative instruments designated as cash flow hedges, gains or losses are included as a component of accumulated other comprehensive income and reclassified into earnings in the same line items and in the same periods in which the underlying transactions affect earnings. For derivative instruments designated as fair value hedges, changes in the fair values of the derivative instruments and the offsetting changes in the fair values of the underlying hedged items are both recognized in earnings. For foreign currency and commodity derivative instruments designated as cash flow hedges or fair value hedges, time value is excluded from the assessment of effectiveness and the gains and losses attributable to time value are recognized in earnings through an amortization approach. Cash flows from derivative instruments designated as cash flow hedges or fair value hedges are classified in the same category as the items being hedged.

We enter into master netting arrangements with our counterparties to mitigate credit risk in derivative hedge transactions. These master netting arrangements allow us and our counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled with each counterparty have been presented in our consolidated balance sheet on a net basis.

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Financial Instruments

Cash equivalents include highly liquid short-term investments with original maturities at the time of purchase of three months or less that are readily convertible to known amounts of cash. Other investments with remaining maturities of less than one year are included in short-term investments. Investments with remaining maturities greater than one year are included in long-term marketable investments. The carrying value of investment securities sold is determined using the specific identification method.

Functional Currency

The U.S. dollar is the functional currency for us and all of our consolidated subsidiaries.

Goodwill

We perform an annual impairment assessment for goodwill in our fourth quarter each year.

Government Incentives

We receive incentives from governmental entities related to capital expenditures, expenses, and other activities. Our government incentives may require that we meet or maintain specified spending levels and other operational metrics and may be subject to reimbursement if such conditions are not met or maintained. Government incentives are recorded in the financial statements in accordance with their purpose: as a reduction of asset costs or a reduction of expenses. Incentives related to the acquisition or construction of fixed assets are recognized as a reduction in the carrying amounts of the related assets and as a reduction to depreciation expense over the useful lives of the assets. Incentives related to specific operating activities are offset against the related expense in the period the expense is incurred. Government incentives received prior to being earned are recognized in current or noncurrent deferred income, whereas government incentives earned prior to being received are recognized in current or noncurrent receivables. Cash received from government incentives related to operating expenses is included as an operating activity in the statement of cash flows, whereas cash received from incentives related to the acquisition of property, plant, and equipment is included as an investing activity.

Inventories

Inventories are stated at the lower of cost or net realizable value, with cost being determined on a FIFO basis. Cost includes depreciation, labor, material, and overhead costs, including product and process technology costs. Determining net realizable value of finished goods and work in process inventories requires projecting future average selling prices, sales volumes, and costs per part. When net realizable value is below cost, we record a charge to cost of goods sold to write down inventories to their estimated net realizable value in advance of when inventories are actually sold. We review the major characteristics of product type and markets in determining the unit of account for which we perform the lower of cost or net realizable value analysis and categorize all inventories (including DRAM, NAND, and other memory) as a single group.

Leases

We determine if an arrangement is a lease, or contains a lease, at the inception of the arrangement and evaluate whether the lease is an operating lease or a finance lease at the commencement date. We recognize right-of-use assets and lease liabilities for operating and finance leases with terms greater than 12 months. Right-of-use assets represent our right to use an asset for the lease term, while lease liabilities represent our obligation to make lease payments. We do not separate lease and non-lease components for real-estate and gas plant leases. Sublease income is included within lease expense.

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Product and Process Technology

Costs incurred to (1) acquire product and process technology, (2) patent technology, and (3) keep patents in force, are capitalized and amortized on a straight-line basis over periods ranging up to 12.5 years. We capitalize a portion of costs incurred to patent technology based on historical data of patents issued as a percent of patents we file. Product and process technology costs are amortized over the shorter of (1) the estimated useful life of the technology, (2) the patent term, or (3) the term of the technology agreement. Fully-amortized assets are removed from product and process technology and accumulated amortization.

Product Warranty

We generally provide a limited warranty that our products are in compliance with applicable specifications existing at the time of delivery. Under our standard terms and conditions of sale, liability for certain failures of product during a stated warranty period is usually limited to repair or replacement of defective items or return of, or a credit with respect to, amounts paid for such items. Under certain circumstances, we provide more extensive limited warranty coverage than that provided under our standard terms and conditions. Our warranty obligations are not material.

Property, Plant, and Equipment

Property, plant, and equipment is stated at cost and depreciated using the straight-line method over estimated useful lives of generally 10 to 30 years for buildings, 7 years for production equipment, up to 7 years for other equipment, and 3 to 5 years for software. Assets held for sale are carried at the lower of estimated fair value or carrying value and are included in current assets. When property, plant, or equipment is retired or otherwise disposed, the net book value is removed and we recognize any gain or loss in results of operations.

We capitalize interest on borrowings during the period of time we carry out the activities necessary to bring assets to the condition of their intended use and location. We utilize a weighted average capitalization rate that is based on our consolidated debt portfolio. Capitalized interest becomes part of the cost of assets.

Research and Development

Costs related to the conceptual formulation and design of products and processes are charged to R&D expense as incurred. Development of a product is deemed complete when it is qualified through reviews and tests for performance and reliability. Subsequent to product qualification, product costs are included in cost of goods sold.

Revenue Recognition

Revenue is primarily recognized at a point in time when control of the promised goods is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods. Contracts with our customers are generally short-term in duration at fixed, negotiated prices with payment generally due shortly after delivery. We estimate a liability for returns using the expected value method based on historical returns. In addition, we generally offer price protection to our distributors, which is a form of variable consideration that decreases the transaction price. We use the expected value method, based on historical price adjustments and current pricing trends, to estimate the amount of revenue recognized from sales to distributors. Differences between the estimated and actual amounts are recognized as adjustments to revenue.

Stock-based Compensation

Stock-based compensation is measured at the grant date, based on the fair value of the award, and recognized as expense under the straight-line attribution method over the requisite service period. We account for forfeitures as they occur. We issue new shares upon the exercise of stock options, conversion of share units, or issuance of shares under our ESPP.

Treasury Stock

Treasury stock is carried at cost. When we retire our treasury stock, any excess of the repurchase price paid over par value is allocated between additional capital and retained earnings.

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Use of Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that we believe to be reasonable under the circumstances. Estimates and judgments may differ under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis. Actual results could differ from estimates.

Recently Issued Accounting Standards

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 (ASC Topic 280), Improvements to Reportable Segment Disclosures. This ASU expands on existing reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. This ASU is effective for our annual reporting for 2025 on a retrospective basis. This standard will impact our disclosures and will not impact our financial statements.

In December 2023, the FASB issued ASU 2023-09 (ASC Topic 740), Improvements to Income Tax Disclosures. This ASU requires disaggregated income tax disclosures on the rate reconciliation and income taxes paid. This ASU will be effective for our annual reporting for 2026 on a prospective basis, with retrospective application permitted. This standard will impact our disclosures and will not impact our financial statements.

Variable Interest Entities

A number of special purpose entities (the "Lease SPEs") were created by a third-party to facilitate equipment lease financing transactions between us and financial institutions that fund the lease financing transactions ("Financing Entities"). Neither we nor the Financing Entities have an equity interest in the Lease SPEs. The Lease SPEs are variable interest entities because their equity is not sufficient to permit them to finance their activities without additional support from the Financing Entities and because the third-party equity holder lacks characteristics of a controlling financial interest. By design, the arrangements with the Lease SPEs are merely financing vehicles and we do not bear any significant risks from variable interests with the Lease SPEs. We have determined that we do not have the power to direct the activities of the Lease SPEs that most significantly impact their economic performance and we do not consolidate the Lease SPEs. As of August 29, 2024, we had approximately $680 million of financial lease liabilities and right-of-use assets under these arrangements.

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Cash and Investments

All of our short-term investments and long-term marketable investments were classified as available-for-sale as of the dates noted below. Cash and equivalents and the fair values of our available-for-sale investments, which approximated amortized costs, were as follows:

Cash, cash equivalents, and restricted cash $ 7,052 $ 8,656

(1)The maturities of long-term marketable investments primarily range fromone tofive years, except for asset-backed securities which are not due at a single maturity date.

(2)The fair value of Level 1 securities is measured based on quoted prices in active markets for identical assets.

(3)The fair value of Level 2 securities is measured using information obtained from pricing services, which obtain quoted market prices for similar instruments, non-binding market consensus prices that are corroborated by observable market data, or various other methodologies, to determine the appropriate value at the measurement date. We perform supplemental analysis to validate information obtained from these pricing services. No adjustments were made to the fair values indicated by such pricing information as of August 29, 2024 or August 31, 2023.

(4)Restricted cash is included in other current assets and other noncurrent assets and primarily relates to certain government incentives received prior to being earned and for which restrictions lapse upon achieving certain performance conditions or which will be returned if performance conditions are not met.

Gross realized gains and losses from sales of available-for-sale securities were not significant for any period presented.

Non-marketable Equity Investments

In addition to the amounts included in the table above, we had $190 million and $218 million of non-marketable equity investments without a readily determinable fair value that were included in other noncurrent assets as of August 29, 2024 and August 31, 2023, respectively. For non-marketable investments, we recognized in other non-operating income (expense) a net loss of $32 million for 2024 and $7 million for 2023 and a net gain of $36 million for 2022. Our non-marketable equity investments are recorded at fair value on a non-recurring basis and classified as Level 3.

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Receivables

Inventories

Raw materials and supplies 793 660

In 2023, we recorded charges of $1.83 billion to cost of goods sold to write down the carrying value of work in process and finished goods inventories to their estimated net realizable value.

Property, Plant, and Equipment

(1)Includes costs related to equipment not placed into service of $3.10 billion as of August 29, 2024 and $2.91 billion as of August 31, 2023.

(2)Primarily includes building-related construction and tool installation.

Depreciation expense was $7.70 billion, $7.67 billion, and $7.03 billion for 2024, 2023, and 2022, respectively. Interest capitalized as part of the cost of property, plant, and equipment was $225 million, $208 million, and $77 million for 2024, 2023, and 2022, respectively.

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Leases

We have finance and operating leases through which we obtain the right to use facilities, land, and equipment that support our business operations. Our finance leases consist primarily of (i) gas and other supply agreements that are deemed to contain embedded leases and (ii) equipment leases. Our operating leases consist primarily of offices, laboratories, other facilities, and land. Certain of our operating leases include one or more options to extend the lease term for periods from one year to 10 years for real estate and one year to 99 years for land.

Certain supply or service agreements require us to exercise significant judgment to determine whether the agreement contains a lease. Our assessment includes determining whether we or the supplier control the assets used to fulfill the agreements by identifying whether we or the supplier have the right to change the type, quantity, timing, or location of the output of the assets. Our gas supply arrangements generally are deemed to contain a lease because we have the right to substantially all of the output of the assets used to produce the supply and we have the right to change the quantity and timing of the output of those assets. In determining the lease term, we assess whether we are reasonably certain to exercise any options to renew or terminate a lease or to purchase the right-of-use asset. Measuring the present value of the initial lease liability requires judgment to determine the discount rate, which we base on interest rates for borrowings with similar terms and collateral issued by entities with credit ratings similar to ours.

The components of lease cost are presented below:

Finance lease cost

Amortization of right-of-use asset $ 176 $ 105 $ 99

Interest on lease liability 70 24 24

(1)Operating lease cost includes short-term and variable lease expenses, which were not material for the periods presented.

Supplemental cash flow information related to leases was as follows:

Cash flows used for operating activities

Cash flows used for financing activities – Finance leases 155 109 103

Noncash acquisitions of right-of-use assets

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Supplemental balance sheet information related to leases was as follows:

Weighted-average remaining lease term (in years)

Finance leases 8 9

Operating leases 10 11

Weighted-average discount rate

As of August 29, 2024, maturities of lease liabilities by fiscal year were as follows:

Finance Leases Operating Leases

Less imputed interest (308) (137)

The table above excludes obligations for leases that have been executed but have not yet commenced. As of August 29, 2024, excluded obligations consisted of $835 million of finance lease obligations over a weighted-average period of 13 years for gas supply arrangements deemed to contain embedded leases and equipment leases. We will recognize right-of-use assets and associated lease liabilities at the time such assets become available for our use.

Intangible Assets

In 2024, 2023, and 2022, we capitalized $84 million, $87 million, and $158 million, respectively, for product and process technology with weighted-average useful lives of 10 years, 9 years, and 9 years, respectively. Amortization expense was $82 million, $86 million, and $85 million for 2024, 2023, and 2022, respectively. Expected amortization expense is $67 million for 2025, $56 million for 2026, $52 million for 2027, $49 million for 2028, and $42 million for 2029.

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Accounts Payable and Accrued Expenses

Property, plant, and equipment 2,925 1,419

Salaries, wages, and benefits 1,117 367

Income and other taxes 218 67

Debt

Net Carrying Amount Net Carrying Amount

(1) In 2021, we entered into fixed-to-floating interest rate swaps on the 2027 Notes with an aggregate $900 million notional amount equal to the principal amount of the 2027 Notes. The resulting variable interest paid is at a rate equal to SOFR plus approximately 3.33%. The fixed-to-floating interest rate swaps are accounted for as fair value hedges, and as a result, the carrying values of our 2027 Notes reflect adjustments in fair value.

As of August 29, 2024, all of our debt, other than finance lease obligations, were unsecured obligations that rank equally in right of payment with all of our other existing and future unsecured indebtedness and were effectively subordinated to all future secured indebtedness, to the extent of the value of the assets securing such indebtedness. All our unsecured debt were obligations of our parent company, Micron, and were structurally subordinated to all liabilities of its subsidiaries, including trade payables. The terms of our indebtedness generally contain cross payment default and cross acceleration provisions. Micron’s guarantees of certain liabilities of its subsidiaries are unsecured obligations ranking equally in right of payment with all of Micron’s other existing and future unsecured indebtedness.

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Debt Activity

The table below presents the effects of debt financing and prepayment activities in 2024:

Issuances

Prepayments

In 2023, we issued $6.70 billion of senior unsecured notes and term loan agreements and received cash of $6.69 billion. We prepaid $600 million of principal amount of the 2024 Term Loan A.

In 2022, we issued $2.00 billion of senior unsecured notes and received cash of $1.99 billion. We prepaid $1.85 billion of principal amount of notes for $1.93 billion in cash. We recognized losses of $83 million in connection with these prepayments.

Senior Unsecured Notes

We may redeem our 2026 Notes, 2027 Notes, 2028 Notes, 2029 A Notes, 2029 B Notes, 2030 Notes, 2031 Notes, 2032 Green Bonds, 2033 A Notes, 2033 B Notes, 2041 Notes, and 2051 Notes (the “Senior Unsecured Notes”), in whole or in part, at our option prior to their respective maturity dates at a redemption price equal to the greater of (i) 100% of the principal amount of the Senior Unsecured Notes to be redeemed and (ii) the present value of the remaining scheduled payments of principal and interest, in each case plus accrued interest. We may also redeem any series of our Senior Unsecured Notes, in whole or in part, at a price equal to par between one and six months prior to maturity in accordance with the respective terms of such series.

Each series of Senior Unsecured Notes contains covenants that, among other things, limit, in certain circumstances, our ability and/or the ability of our restricted subsidiaries (which are generally domestic subsidiaries in which we own at least 80% of the voting stock and which own principal property, as defined in the indenture governing such series) to (1) create or incur certain liens; (2) enter into certain sale and lease-back transactions; and (3) consolidate with or merge with or into, or convey, transfer, or lease all or substantially all of our properties and assets, to another entity. These covenants are subject to a number of limitations and exceptions. Additionally, if a change of control triggering event, as defined in the indentures governing our Senior Unsecured Notes, occurs with respect to a series of Senior Unsecured Notes, we will be required to offer to purchase such Senior Unsecured Notes at 101% of the outstanding aggregate principal amount plus accrued interest up to the purchase date.

Multi-Tranche Term Loan Agreement

The 2026 Term Loan A and 2027 Term Loan A (the “Multi-Tranche Term Loan Agreement”) require equal quarterly installment payments in an amount equal to 1.25% of the original principal amount. Borrowings under the Multi-Tranche Term Loan Agreement will generally bear interest at adjusted term SOFR plus an applicable interest rate margin ranging from 1.00% to 2.00%, varying by tranche and depending on our corporate credit ratings. Adjusted term SOFR for the Multi-Tranche Term Loan Agreement is the SOFR benchmark plus 0.10%.

The Multi-Tranche Term Loan Agreement requires us to maintain, on a consolidated basis, a leverage ratio of total indebtedness to adjusted EBITDA, as defined in the Multi-Tranche Term Loan Agreement and calculated as of the last day of each fiscal quarter, not to exceed 3.25 to 1.00, subject to a temporary four quarter increase in such ratio to 3.75 to 1.00 following certain material acquisitions.

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The Multi-Tranche Term Loan Agreement contains other covenants that, among other things, limit, in certain circumstances, our ability and/or the ability of our restricted subsidiaries to (1) create or incur certain liens and enter into sale and lease-back transactions, (2) create, assume, incur, or guarantee certain additional secured indebtedness and unsecured indebtedness of our restricted subsidiaries, and (3) consolidate with or merge with or into, or convey, transfer, lease, or otherwise dispose of all or substantially all of our assets, to another entity. These covenants are subject to a number of limitations, exceptions, and qualifications. Our obligations under the Multi-Tranche Term Loan Agreement are unsecured.

Revolving Credit Facility

As of August 29, 2024, no amounts were outstanding under the Revolving Credit Facility and $2.50 billion was available to us. Under the Revolving Credit Facility, borrowings would generally bear interest at a rate equal to adjusted term SOFR plus 1.00% to 1.75%, depending on our corporate credit ratings. Adjusted term SOFR for the Revolving Credit Facility agreement is the SOFR benchmark plus a credit spread adjustment ranging from approximately 0.11% to 0.43% depending on the applicable interest period selected. Any amounts outstanding under the Revolving Credit Facility would mature in May 2026 and amounts borrowed may be prepaid without penalty.

The Revolving Credit Facility contains the same leverage ratio and substantially the same other covenants as the Multi-Tranche Term Loan Agreement.

Maturities of Notes Payable

As of August 29, 2024, maturities of notes payable by fiscal year were as follows:

Unamortized issuance costs, discounts, and premium, net (34)

Hedge accounting fair value adjustment (60)

Commitments

As of August 29, 2024, we had noncancelable commitments with remaining contractual terms in excess of one year of approximately $6.7 billion for purchase obligations, of which approximately $1.7 billion will be due in 2025, $1.7 billion due in 2026, $1.0 billion due in 2027, $800 million due in 2028, $200 million due in 2029, and $1.3 billion due in 2030 and thereafter. Purchase obligations primarily include payments for goods or services with either a fixed or minimum quantity and price, which includes payments for the acquisition of property, plant, and equipment. Payments for leases that have been executed but have not yet commenced are excluded.

In 2023, we entered into an 18-year power purchase agreement in Singapore to purchase up to 450 megawatts of power at predominantly variable prices. This contract is expected to supply the majority of our power consumption needs in Singapore with more favorable pricing than our previous supply arrangements.

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Contingencies

We are currently a party to legal actions other than those described below arising from the normal course of business, none of which are expected to have a material adverse effect on our business, results of operations, or financial condition.

Patent Matters

As is typical in the semiconductor and other high-tech industries, from time to time, others have asserted, and may in the future assert, that our products or manufacturing processes infringe upon their intellectual property rights. A description of certain claims is below.

On April 28, 2021, Netlist, Inc. (“Netlist”) filed two patent infringement actions against Micron, Micron Semiconductor Products, Inc. (“MSP”), and Micron Technology Texas, LLC (“MTEC”) in the U.S. District Court for the Western District of Texas. The first complaint alleges that one U.S. patent is infringed by certain of our non-volatile dual in-line memory modules. The second complaint alleges that three U.S. patents are infringed by certain of our load-reduced dual in-line memory modules (“LRDIMMs”). Each complaint seeks injunctive relief, damages, attorneys’ fees, and costs. On March 31, 2022, Netlist filed a patent infringement complaint against Micron and Micron Semiconductor Germany, GmbH in Dusseldorf Regional Court alleging that two German patents are infringed by certain of our LRDIMMs. The complaint seeks damages, costs, and injunctive relief.

On June 10, 2022, Netlist filed a patent infringement complaint against Micron, MSP, and MTEC in the U.S. District Court for the Eastern District of Texas (“E.D. Tex.”) alleging that six U.S. patents are infringed by certain of our memory modules and HBM products. On August 1, 2022, Netlist filed a second patent infringement complaint against the same defendants in E.D. Tex. alleging that one U.S. patent is infringed by certain of our LRDIMMs. On August 15, 2022, Netlist amended the second complaint to assert that two additional U.S. patents are infringed by certain of our LRDIMMs. The complaints in E.D. Tex. seek injunctive relief, damages, and attorneys’ fees. On May 23, 2024, following a four-day trial regarding the second complaint filed by Netlist in the E.D. Tex., a jury rendered a verdict that Micron’s memory modules infringe two asserted patents — U.S. Patent No. 7,619,912 (“the ‘912 patent”) and U.S. Patent No. 11,093,417 (“the ‘417 patent”) — and found that Micron should pay $425 million for infringement of the ‘912 patent and $20 million for infringement of the ‘417 patent. Micron expects to appeal the verdict. On April 17, 2024, the Patent Trial and Appeal Board (“PTAB”) of the United States Patent and Trademark Office (“USPTO”) issued a final written decision (“FWD”) finding unpatentable the sole asserted claim of the ‘912 patent. Netlist sought review of that ruling by the Director of the USPTO, which was denied on July 10, 2024. On July 30, 2024, the USPTO issued a FWD finding unpatentable all asserted claims of the ‘417 patent. In the case of each of the ‘912 and ‘417 patents, if the United States Court of Appeals for the Federal Circuit affirms the FWD, then the affirmed FWD will preclude any pending actions asserting infringement of such patent (including any infringement verdict that is subject to an ongoing appeal).

On August 16, 2022, Sonrai Memory Ltd. filed a patent infringement complaint against Micron in the U.S. District Court for the Western District of Texas. The complaint alleged that two U.S. patents are infringed by certain SSD and NAND flash products. The complaint sought damages, attorneys’ fees, and costs. On September 6, 2024, pursuant to a motion jointly filed by the parties, the court dismissed Sonrai’s complaint.

On January 23, 2023, Besang Inc. filed a patent infringement complaint against Micron in the U.S. District Court for the E.D. Tex. The complaint alleges that one U.S. patent is infringed by certain of our 3D NAND and SSD products. The complaint seeks an injunction, damages, attorneys’ fees, and costs.

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On November 9, 2023, Yangtze Memory Technologies Company, Ltd. (“YMTC”) filed a patent infringement complaint against Micron and one of its subsidiaries in the U.S. District Court for the Northern District of California (“N.D. Cal.”). The complaint alleges that eight U.S. patents are infringed by certain of our 3D NAND products. The complaint seeks an injunction, damages, attorneys’ fees, and costs. On January 22, 2024, Micron Semiconductor (Shanghai) Co., Ltd. (“MSS”) was served with three patent infringement complaints filed by YMTC in Beijing Intellectual Property Court and on February 27, 2024, Micron Technology, Inc. (“MTI”) was served with the same complaints. The complaints assert that MTI and MSS infringed three Chinese patents owned by YMTC by importing, selling, offering for sale, and assisting others to sell certain 3D NAND products and SSDs in China. The complaint seeks an injunction, damages, attorneys’ fees, and costs. On July 12, 2024, YMTC filed a second complaint against the Company and its subsidiary in N.D. Cal. The second complaint alleges that eleven U.S. patents are infringed by certain of our 3D NAND and DDR5 DRAM products. The complaint seeks an injunction, damages, attorneys’ fees, and costs. On September 11, 2024, MSS was served with five patent infringement complaints filed by YMTC in Shanghai Intellectual Property Court. The complaints assert that MTI and MSS infringed five Chinese patents owned by YMTC by importing, selling, offering for sale, and assisting others to sell certain 3D NAND products and SSDs in China. The complaint seeks an injunction, damages, attorneys’ fees, and costs.

On June 3, 2024, MimirIP LLC (“MimirIP”) submitted a complaint to the United States International Trade Commission (“ITC”) alleging that certain of Micron’s DRAM and NAND products infringe six patents owned by MimirIP. The complaint requested the ITC to institute an investigation of such alleged infringement pursuant to Section 337 of the Tariff Act of 1930 and to issue a permanent limited exclusion order barring from entry into the United States such allegedly infringing DRAM and NAND devices and electronic devices containing the same produced by several alleged customers of Micron. On August 27, 2024, MimirIP and the Company filed a joint motion to terminate the ITC investigation, which was granted on September 12, 2024.

On June 3, 2024, MimirIP filed a complaint against Micron, two of its subsidiaries, and certain alleged customers of Micron in the E.D. Tex. alleging that the same six patents as are asserted in the ITC are infringed by certain of Micron’s DRAM and NAND products. The complaint sought damages, attorneys’ fees, and costs. On August 30, 2024, the court dismissed the complaint pursuant to a notice of voluntary dismissal filed by MimirIP.

On June 4, 2024, MimirIP filed a second complaint against Micron, two of its subsidiaries, and certain alleged customers of Micron in the E.D. Tex. alleging that six additional patents are infringed by certain of Micron’s DRAM and NAND products. The complaint sought damages, attorneys’ fees, and costs. On August 30, 2024, the court dismissed the complaint pursuant to a notice of voluntary dismissal filed by MimirIP.

The above lawsuits pertain to substantially all of our DRAM, NAND, and other memory and storage products we manufacture, which account for substantially all of our revenue.

Antitrust Matters

On May 15, 2018, the Chinese State Administration for Market Regulation (“SAMR”) notified Micron that it was investigating potential collusion and other anticompetitive conduct by DRAM suppliers in China. On May 31, 2018, SAMR made unannounced visits to our sales offices in Beijing, Shanghai, and Shenzhen to seek certain information as part of its investigation. We are cooperating with SAMR in its investigation.

Other Matters

In the normal course of business, we are a party to a variety of agreements pursuant to which we may be obligated to indemnify another party. It is not possible to predict the maximum potential amount of future payments under these types of agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Historically, our payments under these types of agreements have not had a material adverse effect on our business, results of operations, or financial condition.

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Contingency Assessment

We are unable to predict the outcome of any of the matters noted above and cannot make a reasonable estimate of the potential loss or range of possible losses. A determination that our products or manufacturing processes infringe the intellectual property rights of others or entering into a license agreement covering such intellectual property could result in significant liability and/or require us to make material changes to our products and/or manufacturing processes. Any of the foregoing, as well as the resolution of any other legal matter noted above, could have a material adverse effect on our business, results of operations, or financial condition.

Equity

Common Stock Repurchases

Our Board of Directors has authorized the discretionary repurchase of up to $10 billion of our outstanding common stock through open-market purchases, block trades, privately-negotiated transactions, derivative transactions, and/or pursuant to Rule 10b5-1 trading plans. The repurchase authorization has no expiration date, does not obligate us to acquire any common stock, and is subject to market conditions and our ongoing determination of the best use of available cash. We repurchased 3.2 million shares of our common stock for $300 million in 2024 and 8.6 million shares for $425 million in 2023. Through August 29, 2024, we had repurchased an aggregate of $7.19 billion under the authorization. Amounts repurchased are included in treasury stock.

Dividends

In each quarter of 2024, we declared and paid dividends of $0.115 per share. On September 25, 2024, our Board of Directors declared a quarterly dividend of $0.115 per share, payable in cash on October 23, 2024, to shareholders of record as of the close of business on October 7, 2024.

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) by component for the year ended August 29, 2024 were as follows:

Other comprehensive income (loss) before reclassifications 34 33 7 — 74

Tax effects (64) — (1) — (65)

Other comprehensive income (loss) 142 33 3 — 178

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Fair Value Measurements

The estimated fair values and carrying values of our outstanding debt instruments were as follows:

FairValue CarryingValue FairValue CarryingValue

The fair values of our debt instruments were estimated based on Level 2 inputs, including the trading price of our notes when available, discounted cash flows, and interest rates based on similar debt issued by parties with credit ratings similar to ours.

Derivative Instruments

Notional or Contractual Amount Fair Value(1) of

Assets(2) Liabilities(3)

Derivative instruments with hedge accounting designation

Cash flow currency hedges $ 3,724 $ 57 $ (71)

Cash flow commodity hedges 471 20 (7)

Fair value currency hedges 2,511 — (41)

Fair value interest rate hedges 900 — (60)

Derivative instruments without hedge accounting designation

Non-designated currency hedges 2,393 18 (3)

Derivative instruments with hedge accounting designation

Cash flow currency hedges $ 3,873 $ 16 $ (180)

Cash flow commodity hedges 331 45 —

Fair value interest rate hedges 900 — (100)

Derivative instruments without hedge accounting designation

Non-designated currency hedges 1,839 2 (17)

(1)Forward and swap contracts are measured at fair value based on market-based observable inputs including market spot and forward rates, interest rates, and credit-risk spreads (Level 2).

(2)Included in receivables and other noncurrent assets.

(3)Included in accounts payable and accrued expenses and other noncurrent liabilities.

Derivative Instruments with Hedge Accounting Designation

Cash Flow Hedges: We utilize forward and swap contracts that generally mature within two years designated as cash flow hedges to minimize our exposure to changes in currency exchange rates or commodity prices for certain capital expenditures and manufacturing costs.

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The effects of cash flow hedging activities were as follows:

As of August 29, 2024, we expect to reclassify $89 million of pre-tax losses related to cash flow hedges from accumulated other comprehensive income (loss) into earnings in the next 12 months.

Fair Value Hedges: We utilize currency forward contracts that generally mature within one year designated as fair value hedges to minimize our exposure to changes in currency exchange rates for non-U.S.-dollar-denominated cash and investments in debt securities. The fair value of our hedged cash and investments in debt securities was $2.58 billion as of August 29, 2024. The changes in the fair values of derivatives designated as fair value hedges and the offsetting changes in the underlying fair values of the hedged items are both recognized in earnings. The effects of fair value currency hedges on our consolidated statements of operations, recognized in other non-operating income (expense), net, were not significant for the periods presented.

We also utilize fixed-to-floating interest rate swaps designated as fair value hedges to minimize certain exposures to changes in the fair value of fixed-rate debt that result from fluctuations in benchmark interest rates. We recognized interest expense of $96 million for changes in the fair value of our interest rate swaps in 2022 and the impact to interest expense was not significant for 2024 or 2023. We also recognized offsetting reductions in interest expense of the same amounts related to the changes in the fair value of the hedged portion of the underlying debt for these periods.

Derivative Instruments without Hedge Accounting Designation

Currency Derivatives: We generally utilize a rolling hedge strategy with currency forward contracts that mature within three months to hedge our exposures of monetary assets and liabilities from changes in currency exchange rates. At the end of each reporting period, monetary assets and liabilities denominated in currencies other than the U.S. dollar are remeasured into U.S. dollars and the associated outstanding forward contracts are marked to market. Realized and unrealized gains and losses on derivative instruments without hedge accounting designation as well as the changes in the underlying monetary assets and liabilities from changes in currency exchange rates are included in other non-operating income (expense), net. The amounts recognized for derivative instruments without hedge accounting designation were not significant for the periods presented. We do not use derivative instruments for speculative purposes.

Derivative Counterparty Credit Risk and Master Netting Arrangements

Our derivative instruments expose us to credit risk to the extent counterparties may be unable to meet the terms of the contracts. Our maximum exposure to loss due to credit risk if counterparties fail completely to perform according to the terms of the contracts would generally equal the fair value of assets for these contracts as listed in the tables above. We seek to mitigate such risk by limiting our counterparties to major financial institutions and by spreading risk across multiple financial institutions. As of August 29, 2024 and August 31, 2023, amounts netted under our master netting arrangements were not significant.

Equity Compensation Plans

As of August 29, 2024, 69 million shares of our common stock were available for future awards under our equity compensation plans, including 11 million shares approved for issuance under our employee stock purchase plan (“ESPP”).

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Restricted Stock and Restricted Stock Units (“Restricted Stock Awards”)

As of August 29, 2024, there were 28 million shares of Restricted Stock Awards outstanding, 24 million of which are only subject to service-based vesting conditions. Service-based Restricted Stock Awards granted through October 2021 generally vest in one-fourth or one-third increments during each year of employment after the grant date. Service-based Restricted Stock Awards granted after October 2021 generally vest on 25% or 33% of the units granted after the first year and on 6.25% or 8.33% each quarter thereafter over the remaining three or two years of employment. Restricted Stock Awards with performance or market-based vesting conditions vest over a 3-year period as conditions are met. At the end of the performance period, the number of actual shares to be awarded will vary between 0% and 200% of target amounts, depending upon the achievement level. In 2022, our Board of Directors approved dividend equivalent rights for unvested restricted stock units awarded on or after October 13, 2021.

Restricted Stock Awards activity for 2024 is summarized as follows:

Number of Shares Weighted-Average Grant Date Fair Value Per Share

Restricted stock award shares granted 13 17 13

Weighted-average grant-date fair value per share $ 72.72 $ 55.99 $ 70.81

Aggregate vesting-date fair value of shares vested $ 1,008 $ 514 $ 498

Employee Stock Purchase Plan (“ESPP”)

Our ESPP is offered to substantially all employees and permitted eligible employees to purchase shares of our common stock through payroll deductions of up to 15% of their eligible compensation, subject to certain limitations. The purchase price of the shares under the ESPP equals 85% of the lower of the fair market value of our common stock on either the first or last day of each six-month offering period. Compensation expense is calculated as of the beginning of the offering period as the fair value of the employees’ purchase rights utilizing the Black-Scholes option valuation model and is recognized over the offering period. Grant-date fair value and assumptions used in the Black-Scholes option valuation model were as follows:

Weighted-average grant-date fair value per share $ 26.82 $ 17.06 $ 18.87

Average expected life in years 0.5 0.5 0.5

Weighted-average risk-free interest rate 5.2 % 5.1 % 2.0 %

Expected dividend yield 0.5 % 0.7 % 0.6 %

Under the ESPP, employees purchased 4 million, 5 million, and 4 million shares of common stock in 2024, 2023, and 2022, respectively, at a per share weighted average price of $65.72, $51.93, and $58.52, respectively.

Stock Options

We last granted stock options in September 2018 and as of August 29, 2024, our outstanding stock options were not material. Stock options of 1.3 million shares were exercised in 2024. The total intrinsic value for options exercised was $92 million, $30 million, and $54 million in 2024, 2023, and 2022, respectively.

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Stock-based Compensation Expense

Stock-based compensation expense by caption

Selling, general, and administrative 213 137 133

Restructure — (7) (5)

Stock-based compensation expense by type of award

Stock options — — 1

Income tax benefits related to the tax deductions for share-based awards are recognized only upon the settlement of the related share-based awards. Income tax benefits for share-based awards were $140 million, $68 million, and $77 million for 2024, 2023, and 2022, respectively. Stock-based compensation expense of $99 million and $88 million was capitalized and remained in inventory as of August 29, 2024 and August 31, 2023, respectively. As of August 29, 2024, $1.44 billion of total unrecognized compensation costs for unvested awards, before the effect of any future forfeitures, was expected to be recognized through the fourth quarter of 2028, resulting in a weighted-average period of 1.2 years.

Employee Benefit Plans

We have employee retirement plans at our U.S. and international sites. Details of significant plans are as follows:

Employee Savings Plan for U.S. Employees

We have a 401(k) retirement plan under which U.S. employees may contribute up to 75% of their eligible pay, subject to Internal Revenue Service annual contribution limits, to various savings alternatives, none of which include direct investment in our stock. We match in cash eligible contributions from employees up to 5% of the employee’s annual eligible earnings. Contribution expense for the 401(k) plan was $66 million, $59 million, and $66 million in 2024, 2023, and 2022, respectively.

Retirement Plans

We have pension plans available to employees at various foreign sites. As of August 29, 2024, the projected benefit obligations of our plans were $191 million and plan assets were $261 million. As of August 31, 2023, the projected benefit obligations of our plans were $175 million and plan assets were $232 million. Pension expense was not material for 2024, 2023, or 2022.

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Government Incentives

We receive incentives from governmental entities primarily in India, Japan, Singapore, Taiwan, and the United States principally in the form of cash grants and tax credits. These incentives primarily relate to capital expenditures, have initial terms ranging from one year to 15 years, and may be subject to reimbursement if certain conditions are not met or maintained. The conditions attached to these incentives require us to incur expenditures related to the construction of new manufacturing facilities, the purchase and installation of specialized tools and equipment, R&D expenditures, and/or maintain certain levels of fixed asset investment or employee headcount during the incentive terms.

The line items on the balance sheet affected by government incentives were as follows:

Receivables $ 834

Other noncurrent assets 188

Noncurrent unearned government incentives 550

Beginning in 2023, we receive a 25% investment tax credit on qualified investments in U.S. semiconductor manufacturing under the CHIPS Act. As qualified investments are made, we recognize investment tax credits in receivables or other noncurrent assets.

We have signed a non-binding preliminary memorandum of terms with the U.S. Department of Commerce for up to $6.1 billion in direct funding under the CHIPS Act for our planned fab in Boise, Idaho and the first two planned fabs in Clay, New York. We are also eligible for federal loans up to $7.5 billion. We have also signed a non-binding term sheet with the state of New York that provides up to $5.5 billion in funding for the planned four-fab facility over the next 20-plus years through a combination of tax credits for qualified capital investments and incentives for eligible new job wages.

In addition to the receivables and other noncurrent assets in the table above, as of August 29, 2024, we had aggregate commitments from various governmental entities of up to $3.4 billion to be received through 2033, subject to achievement of certain performance conditions. The commitment amount includes $1.8 billion (150 billion Indian rupees) for the construction of a new assembly and test facility in Gujarat, India. We will receive incentives representing 50% of the total project cost from the Indian central government and 20% of the total project cost from the state of Gujarat. The commitment amount also includes up to $1.3 billion (188 billion Japanese yen) from the Japanese Ministry of Economy, Trade and Industry to support the production of DRAM using EUV lithography in Hiroshima, Japan.

Government incentives related to capital expenditures have reduced property, plant and equipment by $2.34 billion as of August 29, 2024, of which $1.10 billion pertained to 2024 expenditures.

In 2024, operating income (loss) benefited by $588 million (approximately 85% in COGS and 15% in R&D) from government incentives recognized as a reduction of expense.

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Revenue and Customer Contract Liabilities

Revenue by Technology

See “Segment and Other Information” for disclosure of disaggregated revenue by market segment.

Revenue is primarily recognized at a point in time when control of the promised goods is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods. Substantially all contracts with our customers are short-term in duration at fixed, negotiated prices with payment generally due shortly after delivery. From time to time, we have contracts with initial terms that include performance obligations that extend beyond one year. As of August 29, 2024, our future performance obligations beyond one year were $141 million, which included customer prepayments and other contract liabilities. Customer prepayments made to secure product supply in future periods and other contract liabilities were $907 million as of August 29, 2024, of which $766 million was reported in other current liabilities and the remainder in other noncurrent liabilities.

As of August 29, 2024 and August 31, 2023, other current liabilities included $718 million and $453 million, respectively, for estimates of consideration payable to customers including estimates for pricing adjustments and returns.

In 2023, we received an aggregate of $228 million from settlements of insurance claims involving a power disruption in 2022 and an operational disruption in 2017, of which $186 million was for business interruption and recognized in revenue.

Restructure and Asset Impairments

Employee severance $ 1 $ 163 $ —

Asset impairments and other asset-related costs — 14 63

Other — (6) (15)

In 2023, we initiated a restructure plan in response to challenging industry conditions (the “2023 Restructure Plan”). Under the 2023 Restructure Plan, we reduced our headcount by approximately 15% by the end of calendar 2023, through a combination of voluntary attrition and personnel reductions. The plan was substantially completed in 2023.

Restructure and asset impairments for 2022 primarily related to the sale of our Lehi, Utah facility to Texas Instruments Incorporated.

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Other Operating (Income) Expense, Net

Patent cross-license agreement gain $ (200) $ — $ —

(Gain) loss on disposition of property, plant, and equipment (59) (54) (41)

Goodwill impairment — 101 —

Litigation settlement — 68 —

We performed a qualitative assessment for goodwill impairment in 2024 and did not identify any impairment indicators for our reporting units.

Due to 2023 global and macroeconomic challenges, as well as lower expected demand resulting from customer actions to reduce elevated inventory levels, we performed a 2023 quantitative assessment for goodwill impairment for each of our reporting units. We evaluated the fair value of our reporting units based on an income approach, using a discounted cash flow methodology. We recognized a $101 million charge in 2023, included in other operating income (loss) to impair all of the goodwill assigned to our SBU reporting unit based on our best estimates of projected future cash flows at that time. The 2023 quantitative assessment for all of our other reporting units yielded fair values that substantially exceeded their carrying values.

Income Taxes

Our income tax (provision) benefit consisted of the following:

Income tax (provision) benefit

Current

U.S. federal $ (82) $ (5) $ (65)

State (1) (1) (1)

Deferred

Income tax (provision) benefit $ (451) $ (177) $ (888)

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The table below reconciles our tax (provision) benefit based on the U.S. federal statutory rate to our effective rate:

Change in unrecognized tax benefits (41) 3.3 (30) (0.5) (67) 0.7

Research and development tax credits 76 (6.1) 43 0.8 66 (0.7)

State taxes, net of federal benefit 12 (1.0) 37 0.7 — —

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. As a result of low level of profitability and geographic mix of income, the benefit from tax incentive arrangements was not material for 2024 or 2023. These arrangements reduced our tax provision by $1.12 billion ($1.00 per diluted share) for 2022.

As of August 29, 2024, certain non-U.S. subsidiaries had cumulative undistributed earnings of $4.12 billion that were deemed to be indefinitely reinvested. A provision has not been recognized to the extent that distributions from such subsidiaries are subject to additional foreign withholding or state income tax. Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable.

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Deferred income taxes reflect the net tax effects of temporary differences between the bases of assets and liabilities for financial reporting and income tax purposes as well as carryforwards. Deferred tax assets and liabilities consist of the following:

Deferred tax assets

Net operating loss and tax credit carryforwards $ 1,050 $ 1,112

Accrued salaries, wages, and benefits 182 39

Operating lease liabilities 175 135

Inventories 4 52

Less valuation allowance (593) (528)

Deferred tax assets, net of valuation allowance 877 885

Deferred tax liabilities

Right-of-use assets (152) (115)

Property, plant, and equipment (194) (31)

Deferred tax liabilities (416) (246)

Net deferred tax assets $ 461 $ 639

Reported as

Deferred tax assets $ 520 $ 756

Deferred tax liabilities (included in other noncurrent liabilities) (59) (117)

Net deferred tax assets $ 461 $ 639

We assess positive and negative evidence for each jurisdiction to determine whether it is more likely than not that existing deferred tax assets will be realized. As of August 29, 2024, and August 31, 2023, we had a valuation allowance of $593 million and $528 million, respectively, against our net deferred tax assets, primarily related to carryforwards in U.S. states and Malaysia. Changes in 2024 in the valuation allowance were due to adjustments based on management's assessment of the realizability of tax credits, allowances and net operating losses based on a level that is more likely than not to be realized.

As of August 29, 2024, our net operating loss carryforward amounts and expiration periods, as reported to tax authorities, were as follows:

Year of Expiration Malaysia Singapore State Japan Other Total

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As of August 29, 2024, our tax credit carryforward amounts and expiration periods, as reported to tax authorities, were as follows:

Year of Tax Credit Expiration U.S. Federal State Other Total

Below is a reconciliation of the beginning and ending amount of our unrecognized tax benefits:

Beginning unrecognized tax benefits $ 744 $ 731 $ 660

Increases related to tax positions from prior years 2 2 14

Increases related to prior year tax positions taken in current year 20 27 —

Increases related to tax positions taken in current year 54 17 80

Decreases related to tax positions from prior years (89) (33) (23)

Decreases related to settlement with tax authorities (15) — —

Ending unrecognized tax benefits $ 716 $ 744 $ 731

As of August 29, 2024, gross unrecognized tax benefits were $716 million, which would have an impact of approximately $633 million on our effective tax rate in the future, if recognized. Amounts accrued for interest and penalties related to uncertain tax positions were not significant for any period presented. The resolution of tax audits or expiration of statute of limitations could also reduce our unrecognized tax benefits. Although the timing of final resolution is uncertain, the estimated potential reduction in our unrecognized tax benefits in the next 12 months would not be significant.

We and our subsidiaries file income tax returns with the U.S. federal government, various U.S. states, and various foreign jurisdictions throughout the world. We regularly engage in discussions and negotiations with tax authorities regarding tax matters, including transfer pricing, and we continue to defend any and all such claims presented. Our U.S. federal and state tax returns remain open to examination for 2018 through 2024. We are currently under audit by the Internal Revenue Service for our 2018 and 2019 tax years. In addition, tax returns that remain open to examination in Singapore, Taiwan and Japan range from the years 2016 to 2024. We believe that adequate amounts of taxes and related interest and penalties have been provided, and any adjustments as a result of examinations are not expected to materially adversely affect our business, results of operations, or financial condition.

Earnings Per Share

Net income (loss) – Basic and Diluted $ 778 $ (5,833) $ 8,687

Weighted-average common shares outstanding – Basic 1,105 1,093 1,112

Dilutive effect of equity compensation plans 13 — 10

Weighted-average common shares outstanding – Diluted 1,118 1,093 1,122

Earnings (loss) per share

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Antidilutive potential common shares excluded from the computation of diluted earnings per share, that could dilute basic earnings per share in the future, were as follows at the end of the periods shown:

Equity compensation plans 3 33 5

Segment and Other Information

Segment information reported herein is consistent with how it is reviewed and evaluated by our chief operating decision maker. We have the following four business units, which are our reportable segments:

Compute and Networking Business Unit (“CNBU”):Includes memory products and solutions sold into the data center, PC, graphics, and networking markets.

Mobile Business Unit (“MBU”):Includes memory and storage products sold into the smartphone and other mobile-device markets.

Embedded Business Unit (“EBU”):Includes memory and storage products and solutions sold into the intelligent edge through the automotive, industrial, and consumer embedded markets.

Storage Business Unit (“SBU”):Includes SSDs and component-level storage solutions sold into the data center, PC, and consumer markets.

Certain operating expenses directly associated with the activities of a specific segment are charged to that segment. Other indirect operating income and expenses are generally allocated to segments based on their respective percentage of cost of goods sold or forecasted wafer production. We do not identify or report internally our assets (other than goodwill) or capital expenditures by segment, nor do we allocate gains and losses from equity method investments, interest, other non-operating income or expense items, or taxes to segments. As of August 29, 2024 and August 31, 2023, CNBU, MBU, and EBU had goodwill of $855 million, $198 million, and $97 million, respectively.

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Revenue

Operating income (loss)

Unallocated

Lower costs from sale of inventory written down in prior periods 987 844 —

Patent cross-license agreement 200 — —

Restructure and asset impairment (1) (171) (48)

Provision to write down inventories to net realizable value — (1,831) —

Goodwill impairment — (101) —

Litigation settlement — (68) —

Depreciation and amortization expense included in operating income (loss) was as follows: