Micron Technology Inc. (NASDAQ:MU)

The period under review demonstrates significant fluctuations in economic profit. Initial observations reveal a pattern of improving, then sharply declining, financial performance, followed by a potential recovery. Net operating profit after taxes (NOPAT) initially increased substantially before experiencing a substantial loss, and then a partial rebound.

Overall Economic Profit Trend

Economic profit exhibited a consistent negative trend from 2020 through 2023. The magnitude of the loss increased significantly in 2023, reaching its lowest point during the observed period. A partial recovery is indicated in 2024 and 2025, though economic profit remains negative. The negative economic profit suggests that the company’s returns are not exceeding its cost of capital.

NOPAT Performance

NOPAT increased from US$2,891 million in 2020 to US$5,967 million in 2021, and further to US$9,071 million in 2022. This positive trend reversed dramatically in 2023, with NOPAT falling to a loss of US$5,885 million. A modest recovery to US$857 million is observed in 2024, followed by a more substantial increase to US$8,713 million in 2025. This volatility in NOPAT is a primary driver of the fluctuations in economic profit.

Cost of Capital

The cost of capital remained relatively stable between 2020 and 2023, fluctuating between 18.76% and 19.62%. A slight increase to 19.43% is noted in 2024, followed by a more pronounced increase to 20.16% in 2025. The rising cost of capital in the later years contributes to the continued negative economic profit, even with the NOPAT recovery.

Invested Capital

Invested capital generally increased over the period, rising from US$42,291 million in 2020 to US$61,173 million in 2025. The increase was relatively steady until 2023, after which it continued to climb. The growth in invested capital, coupled with periods of negative NOPAT, exacerbates the negative economic profit.

In summary, the company experienced a period of initial profitability, followed by a significant downturn in 2023, and a subsequent, though incomplete, recovery. The interplay between NOPAT, cost of capital, and invested capital significantly influenced the observed economic profit trends. The increasing cost of capital and continued growth in invested capital present ongoing challenges to achieving positive economic profit.

Net Income (Loss) Attributable to Micron

The net income exhibited significant fluctuations over the observed periods. Starting from a positive value of 2,687 million USD in 2020, there was a substantial increase to 5,861 million USD in 2021, followed by a further rise to 8,687 million USD in 2022. However, the year 2023 saw a marked reversal with a net loss of 5,833 million USD. Subsequently, the net income rebounded in 2024 to a positive 778 million USD and further increased to 8,539 million USD in 2025. This pattern highlights considerable volatility in profitability, with a notable dip in 2023 amidst an overall upward trajectory in net income.

Net Operating Profit After Taxes (NOPAT)

NOPAT reflected a trend similar to net income, indicating a strong correlation between operating profitability and net earnings. The figure rose steadily from 2,891 million USD in 2020 to 5,967 million USD in 2021 and reached a peak of 9,071 million USD in 2022. A sharp decline occurred in 2023, with NOPAT turning negative at -5,885 million USD. Recovery ensued in 2024 with a modest positive value of 857 million USD and a significant improvement to 8,713 million USD in 2025. This indicates that operating efficiency and after-tax operating profits experienced a disruption in 2023 but resumed a positive and robust recovery in the subsequent years.

Overall Trends and Insights

Both net income and NOPAT demonstrated robust growth through 2022, followed by a critical downturn in 2023. The sharp declines in 2023 suggest an extraordinary or challenging event impacting profitability and operational effectiveness during that year. The recovery in 2024 and strong performance in 2025 reflect resilience and an effective restoration of earnings capacity. The data suggests that despite volatility, the company managed to return to a growth trajectory in profitability in the most recent period.

Income Tax Provision

Over the examined periods, the income tax provision exhibits considerable volatility. Starting at 280 million USD in 2020, it rose significantly to 394 million USD in 2021. The figure then more than doubled to 888 million USD in 2022, indicating a substantial increase in tax expenses or taxable income during that year. However, in 2023, the income tax provision sharply declined to 177 million USD, the lowest in the observed timeframe. It then rebounded to 451 million USD in 2024 and reached a peak of 1,124 million USD in 2025, marking the highest level recorded. This pattern suggests fluctuations in profitability or changes in tax strategy, with a notable upward trend towards the latter periods.

Cash Operating Taxes

Cash operating taxes demonstrate a parallel yet slightly less volatile pattern compared to the income tax provision. Beginning at 189 million USD in 2020, the amount increased to 446 million USD in 2021 and further rose to 618 million USD in 2022. A significant decline occurred in 2023, where the cash operating taxes dropped to 172 million USD, closely mirroring the income tax provision trend. Following this low point, there was a recovery to 428 million USD in 2024, and a substantial increase to 963 million USD in 2025. The overall trajectory shows growth in cash taxes paid, with a notable dip in 2023, suggesting changes in operating income or tax payments timing.

Comparative Analysis

Both income tax provision and cash operating taxes reveal correlated fluctuations across the years, with peaks in 2022 and 2025 and a pronounced trough in 2023. The income tax provision consistently exceeds cash operating taxes, indicating differences likely due to deferred tax adjustments or non-cash tax expenses. The sharp variations imply that fiscal results and tax obligations experienced significant shifts over the period, possibly impacted by changes in earnings, tax legislation, or accounting practices.

Total Reported Debt & Leases

The total reported debt and leases demonstrate a fluctuating upward trend over the analyzed periods. Initially, the amount increased slightly from 7,230 million USD in 2020 to 7,576 million USD in 2022. A significant rise occurred between 2022 and 2023, with the value nearly doubling to 13,999 million USD. This elevated level of debt and leases was sustained through 2024 and increased further to 15,352 million USD in 2025, indicating an increasing reliance on debt financing in recent years.

Shareholders’ Equity

Shareholders’ equity generally exhibited growth over the reported timeframe, rising from 38,996 million USD in 2020 to a peak of 49,907 million USD in 2022. However, in 2023, equity declined to 44,120 million USD before resuming an upward trend, reaching 54,165 million USD in 2025. This pattern suggests some volatility, but a longer-term positive increase in equity base is evident by the end of the period.

Invested Capital

Invested capital shows an overall growth trend, moving from 42,291 million USD in 2020 to 61,173 million USD in 2025. The increase appears steady, with minor fluctuations around 2023 and 2024 when the invested capital plateaued near 53,000 million USD before rising again. This reflects a consistent expansion in the company's total capital commitment over the examined years.

General Insights

The data indicates that the company has been increasing its use of debt and leases substantially since 2022, which has contributed to rising invested capital. Despite some fluctuations in shareholders’ equity, the overall capital structure suggests growth and increased financial leverage. The simultaneous growth in both equity and debt levels points to an expansion strategy that involves utilizing both internal funds and external borrowings.

The economic spread ratio demonstrates a volatile pattern over the observed period. Initially, the ratio exhibited a decreasing negative value, suggesting improving economic profitability, but subsequently experienced a significant downturn before showing signs of recovery.

Economic Spread Ratio Trend

In the period ending September 3, 2020, the economic spread ratio was -12.18%. This figure improved to -6.75% by September 2, 2021, and further to -2.14% by September 1, 2022. However, a substantial decline occurred, with the ratio reaching -29.77% by August 31, 2023. A partial recovery is then observed, with the ratio increasing to -17.82% by August 29, 2024, and continuing to improve to -5.92% by August 28, 2025.

The economic spread ratio’s movement correlates with fluctuations in economic profit. The most significant deterioration in the economic spread ratio coincides with the largest negative economic profit reported in 2023. The subsequent improvements in the ratio align with the reduced negative economic profit figures in 2024 and 2025.

Invested Capital

Invested capital generally increased over the period, rising from US$42,291 million in 2020 to US$61,173 million in 2025. The rate of increase was not consistent, with a more moderate rise between 2020 and 2022, followed by a slower growth rate between 2022 and 2024, and a more substantial increase in the final period. Despite the increasing invested capital, the economic spread ratio remained negative throughout the entire period, indicating that returns on invested capital were consistently below the cost of capital.

The trend suggests a potential sensitivity of economic profitability to external factors or internal operational challenges. While invested capital grew, the ability to generate returns exceeding the cost of capital varied considerably, as evidenced by the fluctuations in the economic spread ratio.

The economic profit margin demonstrates significant volatility over the observed period. Initially, the margin exhibited improvement, followed by a substantial decline and subsequent partial recovery. A review of the figures reveals a pattern of negative economic profit throughout the entire period, indicating that the company’s returns are not exceeding its cost of capital.

Economic Profit Margin Trend

In fiscal year 2020, the economic profit margin was -24.04%. This figure improved to -11.29% in 2021 and further to -3.66% in 2022. However, a dramatic deterioration occurred in 2023, with the margin plummeting to -102.43%. A partial recovery is then observed in 2024, with the margin increasing to -37.85%, and continuing into 2025, reaching -9.69%.

The substantial decline in the economic profit margin in 2023 is particularly noteworthy. This coincided with a decrease in revenue, suggesting that the company experienced a significant reduction in profitability relative to its capital employed. While revenue increased in subsequent years, the economic profit margin remained negative, indicating that the cost of capital continued to exceed generated returns. The improvement from 2024 to 2025 suggests a potential stabilization, but further monitoring is required to determine if this trend will continue.

Relationship to Revenue

Revenue increased from US$21,435 million in 2020 to US$27,705 million in 2021 and US$30,758 million in 2022. However, revenue decreased significantly to US$15,540 million in 2023, before recovering to US$25,111 million in 2024 and further increasing to US$37,378 million in 2025. The most substantial decline in the economic profit margin occurred during the year with the lowest revenue, highlighting a strong correlation between revenue performance and economic profitability.

The consistently negative economic profit values, coupled with the volatile economic profit margin, suggest potential challenges in capital allocation and profitability management. The company’s ability to generate returns exceeding its cost of capital remains a concern, despite revenue fluctuations.