Micron Technology Inc. (NASDAQ:MU)

The period under review demonstrates significant fluctuations in economic profit. Initial observations reveal a pattern of improving performance followed by substantial declines, and a subsequent recovery. Net operating profit after taxes (NOPAT) and invested capital both generally increased from 2020 to 2022, but NOPAT experienced a dramatic decrease in 2023, impacting economic profit.

Economic Profit Trend

Economic profit began at -US$4,060 million in 2020 and improved to -US$1,884 million in 2021, then to a positive US$262 million in 2022. However, 2023 saw a significant downturn, with economic profit falling to -US$14,575 million. A partial recovery occurred in 2024, with economic profit at -US$8,104 million, and further improvement is projected for 2025, reaching -US$1,936 million.

NOPAT Analysis

NOPAT exhibited a strong upward trend from US$2,891 million in 2020 to US$9,071 million in 2022, indicating increasing operational efficiency and profitability. The substantial decline to -US$5,885 million in 2023 represents a major shift in operational performance. A rebound to US$857 million in 2024, and a projected increase to US$8,713 million in 2025, suggests a return towards previous levels of profitability.

Cost of Capital

The cost of capital remained relatively stable throughout the period, fluctuating between 16.25% and 17.41%. While there were minor increases in 2021, 2024, and 2025, these changes were not substantial enough to fully explain the dramatic swings in economic profit. The cost of capital appears to be a consistent factor, rather than a primary driver of the observed performance changes.

Invested Capital

Invested capital generally increased from US$42,291 million in 2020 to US$61,173 million in 2025. The growth was consistent until 2024, where it showed a slight decrease to US$53,327 million before increasing again in 2025. This suggests continued investment in the business, although the relationship between invested capital and economic profit is not directly proportional, particularly given the volatility in NOPAT.

The significant decline in economic profit in 2023 is primarily attributable to the negative NOPAT experienced during that year. While invested capital continued to grow, the inability to generate sufficient operating profit to cover the cost of that capital resulted in a substantial economic loss. The projected improvements in NOPAT for 2024 and 2025 are expected to mitigate these losses, but economic profit is still projected to remain negative through 2025.

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 exhibited significant fluctuations over the observed period. Initially negative, it improved substantially before declining again to negative values. This movement correlates with changes in economic profit and invested capital.

Economic Spread Ratio Trend

The economic spread ratio began at -9.60% in 2020 and improved to -4.06% in 2021, indicating a lessening of the gap between the cost of capital and returns generated. A positive value of 0.50% was achieved in 2022, suggesting returns exceeded the cost of capital for that year. However, the ratio experienced a substantial decline to -27.26% in 2023, followed by -15.20% in 2024, and a partial recovery to -3.17% in 2025. This indicates a worsening, then moderating, underperformance relative to the cost of capital.

The economic spread ratio’s volatility suggests a sensitivity to underlying economic profit performance. The largest negative spread in 2023 aligns with the most substantial economic loss reported for that year. The subsequent years show a trend toward improvement, though the ratio remains negative through 2025.

Relationship to Economic Profit

A strong inverse relationship is apparent between economic profit and the economic spread ratio. Years with negative economic profit consistently correspond with negative spread ratios, and the magnitude of the economic loss appears to influence the depth of the negative spread. The positive economic profit in 2022 directly corresponds to the only positive economic spread ratio within the observed timeframe.

Invested capital generally increased throughout the period, from US$42,291 million in 2020 to US$61,173 million in 2025. Despite this growth in invested capital, the economic spread ratio did not consistently improve, indicating that increases in capital deployment did not always translate into commensurate returns exceeding the cost of capital.

Invested Capital and Ratio Performance

While invested capital increased from 2020 to 2025, the economic spread ratio did not follow a similar upward trajectory. The period between 2022 and 2025 demonstrates that increased invested capital, in conjunction with declining economic profit, can lead to a more negative economic spread ratio. This suggests that capital allocation efficiency may be a key area for consideration.

The economic profit margin exhibited significant fluctuations over the observed period. Initially negative, it improved substantially before declining sharply, and then showed signs of recovery towards the end of the period.

Economic Profit Margin Trend

In the period ending September 3, 2020, the economic profit margin was -18.94%. This indicates a substantial economic loss relative to revenue. A notable improvement occurred by September 2, 2021, with the margin increasing to -6.80%, suggesting a reduction in the economic loss. The period ending September 1, 2022, saw further positive movement, achieving a margin of 0.85%, representing a near break-even point in economic profit. However, a dramatic decline followed, with the margin plummeting to -93.79% by August 31, 2023, indicating a significant economic loss. A partial recovery was observed in the period ending August 29, 2024, with the margin improving to -32.27%. This trend continued into August 28, 2025, where the margin reached -5.18%, suggesting a further, though incomplete, reduction in economic loss.

The economic profit margin’s volatility appears strongly correlated with revenue fluctuations. The largest negative margin coincided with the lowest revenue figure, while the positive margin occurred alongside the highest revenue. This suggests that the company’s ability to generate economic profit is highly sensitive to revenue levels.

Relationship to Revenue

Revenue increased from US$21,435 million in 2020 to US$27,705 million in 2021, and further to US$30,758 million in 2022. This revenue growth coincided with the improvement in the economic profit margin. However, revenue decreased significantly to US$15,540 million in 2023, which corresponded with the substantial decline in the economic profit margin. Revenue then increased to US$25,111 million in 2024 and further to US$37,378 million in 2025, aligning with the subsequent improvements in the economic profit margin, though not fully offsetting the earlier losses.

The substantial negative margins in 2023, 2024, and 2025, despite revenue increases in the latter two years, indicate that the cost of capital, or other factors impacting economic profit, may be increasing at a faster rate than revenue growth. Further investigation into the components of economic profit is warranted.