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Founded in 1980, Lam Research is a top seller of equipment to semiconductor manufacturers. Its machines are used to produce components critical to the tech industry, including the silicon wafers and the chips that power a variety of electronics. Over time, to keep up with industry innovation, Lam has adapted its equipment to handle increasingly tiny chip designs and ramped up production to meet the growing demand for chips in the AI era.

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Lam Research (LRCX): Company Profile, Stock Price, News, Rankings

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Lam Research

lam research

Good afternoon and welcome to the Lam Research March twenty twenty five Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ram Ganesh, Vice President, Investor Relations.

Thank you, and good afternoon, everyone. Welcome to the Lam Research quarterly earnings conference call. With me today are Tim Marcher, President and Chief Executive Officer and Doug Bettinger, Executive Vice President and Chief Financial Officer. During today's call, we will share our overview on the business environment and we will review our financial results for the March and our outlook for the June. The press release detailing our financial results was distributed a little after 1PM Pacific Time.

The release can be found on the Investor Relations section of the company's website along with the presentation slides that accompany today's call. Today's presentation and Q and A include forward looking statements that are subject to risks and uncertainties reflected in the risk factors disclosed in our SEC public filings. Please see accompanying slides in the presentation for additional information. Today's discussion of our financial results will be presented on a non GAAP financial basis unless otherwise specified. A detailed reconciliation between GAAP and non GAAP results can be found in the accompanying slides in the presentation.

This call is scheduled to last until 3PM Pacific Time. A replay of this call will be made available later this afternoon on our website. And with that, I'll hand the call over to Tim.

Great. Thank you, Ram, and thank you all for joining the call today. Lam's March quarter results reflect continued strong execution across the company with revenues, gross margin, operating margin and EPS all exceeding the midpoint of our guidance. We delivered a record quarter for foundry revenues, demonstrating our solid product momentum in leading edge technology inflections. Gross margin percentage was also a record for the company since the Novelis merger, as the investments we have made over the past several years in our manufacturing and supply chain operations are contributing positively as we scale the business.

As our guidance indicates, gross margins are set to expand again in the June. On our January earnings call, we laid out what we saw as the fundamental drivers of WFE spending in the year ahead. To date, these have played out largely as expected, with strength in leading edge foundry logic, technology driven conversions in NAND, and a focus on high bandwidth memory in DDR5 and DRAM. From an overall industry perspective, we continue to forecast calendar year 2025 WFE spending in the $100,000,000,000 range. We recognize that the current tariff and global economic environment is dynamic, but thus far we have not seen any meaningful changes to our customers' plans.

We are closely monitoring the situation alongside our customers and ecosystem partners. We believe that the agile manufacturing and supply chain capability that we have developed in recent years provides us with the flexibility to lessen the direct impact of tariffs. Our strategic focus in this environment remains on delivering the new products, advanced services, and digital transformation initiatives required to achieve the growth and profitability outperformance goals we described at our Investor Day in February. As a reminder, we identified three key drivers that underpin our ability to outperform overall WP growth over the next several years. First, we expect to expand our served market, or SAM, faster than WFE as deposition and etch intensity rises due to greater semiconductor device complexity.

Second, we expect to gain share with the strongest product portfolio in the company's history, targeted at billion dollar plus technology inflections such as gate all around, backside power distribution, advanced packaging, and dry EUV photoresist processing. And third, we expect to grow our CSBG revenue faster than our installed base as customers look to Lam's upgrade automation and equipment intelligence offerings to enhance productivity and execution as they expand their global fab operations. Year to date, we are already witnessing incredible momentum in these areas. In deposition, Lam's Atomic Layer Deposition or ALD products are making strong gains. Our Stryker Spark ALD tool delivers the industry's densest conformal low K carbide dielectric films.

Leveraging this capability, we have secured multiple key wins for spacer applications and a leading edge foundry. Our Altus Halo system enables barrierless atomic layer deposition of molybdenum, reducing the resistance of critical contact and interconnect layers by 50% compared to legacy technologies. In the case of three d NAND, this reduction is critical to achieving the superior IO performance needed for AI applications. As a result, Lam's Halo Molybdenum process is seeing increased adoption across our leading three d NAND customers. In Etch, our new Aqara system has gotten off to a great start, rapidly solidifying and expanding our market leading position in conductor etch.

Featuring a proprietary industry first innovation for ultrafast plasma control, Aqara delivers previously unachievable levels of performance in edge selectivity and profile patterning precision. We have previously announced leading edge foundry logic momentum with this tool. And just since our Investor Day, Aqara has also won multiple critical etch applications at a major DRAM manufacturer. By enabling current DRAM and logic roadmaps with Aqara, we are setting the stage for Lam to make further gains as the industry looks to implement even more challenging device architectures like three d DRAM and CFET over the next decade. Turning to CSBG.

We saw record revenues in our upgrades business. While the growth in upgrades was primarily driven by NAND technology conversions as forecasted at our Investor Day, key DRAM and foundry logic customers are also more actively upgrading and repurposing existing tools for new applications to optimize capital spending. Looking forward, we see the upgradable architecture of our systems being a growing point of differentiation for Lam. We are enabling our customers to cost effectively scale technology on the equipment they already own while creating revenue and share gain opportunities for us. Our collaboration with customers on operating cost optimization extends across the entirety of our installed base business and over longer time horizon.

For example, in the March, we signed a new multi year spares agreement with a large memory customer for their latest technology node. This enables us to deliver value to the customer through assured component quality, cost, and availability. Finally, in specialty technologies, we achieved a couple of key milestones recently. First, we displaced a competitor and shipped multiple 200 millimeter PCVD tools for silicon carbide based wide band gap power device fabrication. Second, our PULSE laser deposition solutions are being extended into more use cases, and we will be shipping our latest tool this year for an advanced memory application.

As customers look to accelerate R and D and scale manufacturing globally, we're finding new ways to add value. We have talked in the past about our semi burst solutions capabilities, which apply advanced modeling, simulation, data science, machine learning, and artificial intelligence to enhance equipment performance and shorten the time required for process optimization. I'm pleased to report that recently we signed new licensing agreements with three large customers for our virtual fabrication platform, Simulator three d. For both its cost and performance benefits, we see virtual fabrication fast becoming a required discipline in advanced technology development. And Lam is leading the industry in this evolution.

So, to wrap up, when I look at our solid March results and strong June guide, I see Lam executing at a high level on all aspects of the outperformance strategy we described at our February Investor Day. This includes new product momentum and key customer wins, value creation from the installed base business, and innovation in equipment intelligence and virtual process development. Near term, we're taking steps to lessen the direct impact of tariffs and closely monitoring for longer term indicators of demand changes. Our priority is to continue delivering the technological innovations and world class support that uniquely enable our customers to scale semiconductor manufacturing faster, more productively, and more cost effectively. Simply put, our competitive differentiation is enabling our customers' competitive advantage.

For this reason, we remain highly confident that Lam is in an excellent position to outperform overall semiconductor industry growth in the years to come. Thank you. And I'll now pass it on to Doug.

Good afternoon, everyone, and thank you for joining our call today. WAM is off to a strong start in 2025. The March performance exceeded the midpoint of all of our guidance ranges that we gave on the last earnings call. I was pleased with the company's continued solid execution. We reached the highest quarterly gross margin percentage since GLAM merged with Novelis in 2012.

We achieved this by proactively delivering on our operational efficiencies via our manufacturing strategy of being close to our customers. Let's look at the details of our March financial results. Revenue for the March was $4,720,000,000 which was an increase of 8% from the prior quarter. Our deferred revenue balance at quarter end was $2,000,000,000 which was essentially flat from the December. Within this number though, advanced payments trended lower, while other components of the deferred balance trended higher.

As we sit here today, I believe our deferred revenue balance will move lower by the end of calendar year 2025. From a market segment perspective, March systems revenue and memory was 43%, a decrease from 50% in the prior quarter. Within Memory, non volatile memory accounted for 20% of our systems revenue, down from 24 in the prior quarter. And just a reminder, this segment includes a domestic China customer that we classified as a non volatile memory producer and that we are currently limited from shipping to. On a dollar basis, NAND saw growth from non China based customers consistent with our expectations from earlier in the year.

The Nonvolatile Memory segment is being driven by customer spending on technology conversions from 1XX layer to two fifty six layer class devices. We currently expect this segment to represent the biggest percentage growth in systems revenue for Lam in the June. DRAM represented 23% of systems revenue compared with 26% in the December. DRAM spending was focused on technology upgrades across one alpha, one beta, and one gamma nodes to enable DDR5, LPDDR5, and high bandwidth memory. Foundry represented 48% of our systems revenue, up from the percentage concentration in the December of 35%.

This level represents a new record in dollar terms for Lam. Shipments for gate all around nodes and advanced packaging were strong. We also benefited from mature node spending with domestic Chinese customers. I'd just like to point out that the last time we were at these revenue levels, back in late twenty twenty two, Foundry represented a concentration in the low to mid 30% range. We have clearly broadened and diversified our business since then.

And finally, Logic and Other were 9% of our systems revenue in the March, down from the prior quarter's level of 15%. The decrease was primarily driven by reduced leading edge spending. Now I'll discuss the regional composition of our total revenue. The China region accounted for 31% flat from the prior quarter. Most of our revenue from China continued to come from domestic Chinese customers.

Our next largest geographic concentrations were Taiwan and Korea at 24% of revenue each in the March. Taiwan represented a new record level for us in dollar terms. The Customer Support Business Group generated approximately 1,700,000,000 in revenue for the March, down a little bit from the December, however, 21% higher than the same period in 2024. Sequentially, the decline was attributable to lower Reliant Systems revenue, partly offset by record upgrade revenue. Turning to the gross margin performance.

The March came in at 49%, at the high end of our guidance range and improving from the December level of 47.5%. The increase reflects a stronger mix, as well as the efficiencies we're delivering from our close to customer manufacturing strategy. Operating expenses in March were $763,000,000 up from the prior quarter level of $735,000,000 The increase was due to growth in R and D activities associated with our ongoing roadmap differentiation. R and D accounted for 70% of the total operating expenses. Operating margin in the March was 32.8% above the December level of 30.7% and near the high end of our guidance range, primarily because of the higher revenue and the stronger gross margin performance.

Our non GAAP tax rate for the quarter was 13.3% in line with our expectations. Our estimate for the June is for the tax rate to be in the single digit range due to an anticipated tax reserve release tied to a statute of limitations expiration. Beyond the June, we continue to believe the tax rate will be in the low to mid teens for the remainder of the calendar year. Other income expense for the March came in at $7,000,000 in expense compared with $11,000,000 in income in the December. The change in OI and E was due to lower gains on our equity investments and lower interest income.

OI and E will continue to be susceptible to market related fluctuations that will cause some level of volatility each quarter. I do believe OI and E will have a slight negative bias in the June. On the capital return side of things, we allocated approximately $347,000,000 to open market share repurchases, and we paid $296,000,000 in dividends in the March. As I indicated on the last earnings call, in the quarter, we retired $500,000,000 of unsecured notes that reached maturity using cash from our balance sheet. We returned 63% of free cash flow in the quarter.

This was a little lower than normal due to that cash that we allocated for the debt retirement. For the March, diluted earnings per share came in at $1.04 The diluted share count was roughly 1,290,000,000.00 shares, about flat with the December. We have $8,800,000,000 remaining on our board authorized share repurchase program. Let me pivot to the balance sheet. Our cash and short term investments totaled $5,500,000,000 at the end of the March, down slightly from $5,700,000,000 at the end of the December.

The primary factors behind the cash decrease were the repayment of those notes, our capital spending, as well as our capital return activities. Total debt on the balance sheet obviously declined by that $500,000,000 to $4,500,000,000 at quarter end. Day sales outstanding were sixty two days in the March, which was a decrease from sixty nine days in the December. Inventory at March totaled $4,500,000,000 a slight increase from the December as we prepare for higher revenue levels in the June. Inventory turns were 2.2 times compared with 2.1 times in the previous quarter.

We will continue to manage inventory levels to align with customer demand. Our non cash expenses for the March included approximately $87,000,000 in equity compensation, 83,000,000 in depreciation and $14,000,000 in amortization. Capital expenditures in the March were $288,000,000 up $100,000,000 from the December. A major driver of this increase was a purchase of land in India to enable our planned lab expansions there. Our capital spending otherwise was focused on lab investments in The United States and global growth in manufacturing.

We ended the March with approximately 18,600 regular full time employees, which was an increase of approximately 300 people from the prior quarter. We had headcount growth primarily in the factory and field organizations to support increased tool installation, as well as growing manufacturing activities. We also saw headcount increases within R and D to support that long term product roadmap. Now let's turn to our non GAAP guidance for the June 2025 quarter. We're expecting revenue of $5,000,000,000 plus or minus $300,000,000 We expect systems revenue in Foundry and NAND to be up in the June.

This business level is consistent with our expectations from the beginning of the year. I want to specifically point out that we don't see anything being pulled in from future quarters. We're expecting gross margin of 49.5% plus or minus one percentage point. This guidance includes our current assessment of the direct impacts of tariffs on our business. Operating margin of 33.5% plus or minus one percentage point and finally, earnings per share of 1.2 plus or minus $0.10 based on a share count of approximately 1,280,000,000.00 shares.

This guidance for gross margin and operating margin percentage would represent record levels since our joining of Lam and Novelis. I would also just point out that this would be the highest operating margin percentage that Lam has delivered since the late 1990s. These earnings would obviously represent an all time record level of profitability. Only wrap up. We're off to a strong start in 2025.

We're executing well on our critical operational and financial objectives. While the tariff related macro uncertainty is keeping the environment dynamic, customers are continuing to invest consistently with their planned technology roadmaps. At Lam, we're laser focused on driving innovation and delivering new product and service capabilities, while at the same time enhancing operational efficiency and managing our profitability goals. We believe we're well set up to outperform overall WFE growth in 2025, as well as in the years ahead. Operator, that concludes our prepared remarks.

Tim and I would now like to open up the call for questions.

We will now begin the question and answer session. Our first question today comes from C. J. Muse with Cantor Fitzgerald. Please go ahead.

Thank you for taking the question. I guess first question, was hoping to hit on the NAND upgrade cycle that you're seeing. You talked about that being the biggest growth driver into the June. Would love to hear, you know, your thoughts around the sustainability of that beyond June. Are you anticipating a broadening of spending beyond just the one or two customers in the first that you're seeing in the first half of the year?

And as you think about the growth there, I guess how much of that will come through tools versus CSPG upgrades? As well as, is there a way to think about your share of wallet with the industry focusing so greatly on upgrades where it would appear that you're going from 30% to maybe 40% to 50%?

CJ, this is Tim. I'll go ahead and start on this. As we talked a couple of times on earnings calls recently, a significant portion we said two thirds of the industry's bits are still at around the 128 level. That's the 1XX generation. So, we see a tremendous number of bits that ultimately have to get upgraded to 2XX plus And so, we don't know exactly what the rate and pace of that is.

Right now, we see a strong move in that direction, and obviously, we're watching for that. But Lam is in an incredibly good position on two fronts. One is the fact that we are the ones who upgrade our own tools, and so we capture a tremendous amount of the wallet with the spend associated with upgrading the tools that are in place. At the same time, as we described at our Investor Day, as you extend beyond the 2XX to the 3XX and 4XX layers, you begin to need additional new tooling to enable that stacking. We talked about the sacrificial carbon gap fill that helps enable tier stacking.

We talked about the backside deposition tool that helps with wafer stress as we move beyond 200 layers. We talked about the need to change the means of gap fill to an ALD gap fill. These are things that are new tools. So, I think you're going to see a mix. You're going to see existing tools like our etchers, some of the mold and stack depth tools be upgraded.

But I think then you'll see new tools being added. And one of those most significant new tools from a technology perspective is what I talked about in my script, which is the Halo Moly. And we're seeing strong momentum there. And eventually, because of the improvement it makes in terms of resistance and that impact on device performance, we think that ultimately broadens out and is adopted across all customers.

Very helpful. I guess as my follow-up, your Taiwan revenues, in the quarter, were were spectacular. I think the the the highest level that I can see over the last decade, or more. And I guess, you know, curious on on on kind of two fronts. One, how sustainable is that contribution to Lam?

And then how does that inform your thinking about what second half tool shipments could look like versus first half? Thanks so much.

Actually, CJ, let me just start from the standpoint of the comments we've made around leading edge foundry logic strength. It's been our stated strategy for the last several years to invest in new tooling to increase our exposure to leading edge foundry logic. And so, I don't think it should come as any surprise. We talk about record foundry revenues. We talk about strength in places like Taiwan.

A lot of that is coming, because we've been executing on the new product roadmaps. And I talked about the Aqara Conductor etch tool off to a strong start. We talked about Spark ALD in my prepared remarks. I mean, it goes well beyond that. Obviously, packaging, a big portion of that as well.

Lam is really well situated in the technology inflections that are coming in leading edge foundry logic, and I think that accounts for a lot of the strength. I'll let Doug answer kind of the second part of it.

Yeah. I mean, Tim covered it. It's sustainable, CJ.

It's not going away. It's all about the gate all around node. It's all about advanced packaging. It's all the stuff we've been talking about. So not much to add from Tim's comments.

The next question is from Timothy Arcuri with UBS. Please go ahead.

Thanks a lot. Tim, you made a comment on the call that you're I think you said, taking steps to limit the impact of tariffs. Can you talk about that? I guess, you do have a free trade zone in, Fremont and then when you make the tools in Malaysia, the

So you should be fine there too. So but you did say taking steps to limit the impact. So can you kind of go into some details on that?

Well, don't know that I can go into a lot of details on as far as the specific steps. But what I can say is that we've worked hard over the last several years to build a very flexible manufacturing supply chain operation that's centered around our U. S. Operations, operations in Asia, as Doug said, close to our customers, close to the supply chain. And so when I say taking steps, it's no different than what we're always doing.

We look at the environment, we look at the customers, and then we optimize that capability that we have that exists in many different places in the world to deliver our tools most efficiently and most effectively to our customers. And so, it's kind of what we're always doing. And I think that that's a result. I mean, that flexibility is, again, part of the strategy we executed when we saw disruptions like COVID and other things over the past years to really broaden out the global capability of our supply chain and manufacturing operations.

We've got factories all over the world, right? We've got factories in The United States, factories in Austria, factories in Malaysia, factories in Taiwan, factories in Korea. And we've been talking about this for a while. The fact that we have that broad footprint enables us to have some level of flexibility. And I guess I'd just leave it there.

Cool. Okay, Doug. And then I had a question for you. So sounds like NAND upgrades you think should continue. But if we look at TSMC's CapEx, it looks like it does kind of flatten off as you get to the back half of the

I know that you don't track business doesn't track to their CapEx. But I think the feeling was that your revenue bias would be a

little bit lower in the back half of the year. Is that still the case? If you can give us some sort

of puts and takes into the back half of the year, that'd be great. Thanks.

Yes, Tim, you're exactly right. You remember exactly what we intimated last call and that's still the right way to think about it. It's a little bit of a first half weighted year. And you'll remember we talked last quarter about the fact that we lost some of those Chinese customers that were as we looked into the year would have been second half weighted. We talked about a number of approximately $700,000,000 of business that we had planned on being there that is no longer there.

So thinking about it a little bit first half weighted is still the right way to have it, Tim.

The next question is from Harlan Sur with JPMorgan. Please go ahead.

Yeah. Good afternoon. Thanks for taking my question. Maybe to follow-up on Tim's question. So on the reciprocal tariffs that were levied on many countries, including Malaysia and Taiwan, Obviously, there's a ninety day reprieve through early July, but let's assume that somehow this doesn't get resolved or you still have some residual tariffs even post resolution.

Like, does the Lam team have enough manufacturing capability in The US to service your leading edge customers that are going to be aggressively building out plants here in The US? I know before your manufacturing consolidation initiative, you did have manufacturing in Oregon and in California, but not sure how that footprint has changed, as you brought on your Malaysia factory.

Yes. So I would go back to what it's a good question. Go back to Doug's comment about our long standing strategy of putting our capabilities close to our customers. And you referred to this as, as we see customers expanding aggressively in The U. S, obviously, that will occur over a period of time in which we've already shown an ability to be agile within our manufacturing and supply chain, like I mentioned, in response to COVID, where we moved things to regions where we could meet our customers' needs more effectively.

I think that if we continue to see more investment in The US, we still have operations significant manufacturing capabilities and footprint in The U. S. And obviously, as each region grows, we reassess what local manufacturing we need to support that capability.

And Harlan, it's Doug. I'd just add, we can't instantaneously change things, but given enough lead time, once you know what the rules are, you can adjust certain things with a period of time.

So just think about that. It might take a little bit of time depending on what shows up, but we have an ability to be flexible.

Great. Thank you for that. And good to see the very strong performance in the gross margins. I assume near term you have spares and subsystems inventories that were there before tariffs were put in place. Just wondering if there are some basic materials that you or your subsystem partners source from China, which could potentially be a cost headwind

the team, maybe beyond the June, either on spare parts or subsystem side of the business that could impact product costs if the tariff headwinds remain?

Listen, Harlan, I don't want to get into everything like what do you have where in which country. We've got a global supply chain footprint. We've got a global manufacturing footprint. We have an ability to respond to different things depending on what the rules are and how they change. I guess I'd just leave it at that.

The next question is from Stacy Rasgon with Bernstein Research. Please go ahead.

Hi, guys. Thanks for taking my questions. First, it does sound to me like you're based on your comments that you still expect China revenues to be a mix to be down in the second half versus the first half. I guess can you just confirm that that is correct? And if that is true, does that have any implications for the sustainability of gross margins at these levels given that China's business has tended to have higher gross margins?

Like how do we think about the gross margin sustainability into the back half of these levels given those dynamics?

Yes, Stacy, I'm not going to give details on mix quarter by quarter. I still would tell you what we said last quarter was we expect the China concentration year over year to be down. That's still absolutely what we expect quarter by quarter. Things might bounce around a little bit, but I'm not going to give you specific details on the quarter by quarter amount.

But you're right, gross margin will go up and down depending on customer mix, product mix, overall revenue levels. It's a very complicated calculus when you look at all the things that move it around. So there will be variability there.

I guess so then should I not be thinking about gross margin sustainable at these levels into the back half then? Or are you talking about variability around the current level or what?

Yeah, there will be variability around the current level, Stacy. It won't go up every quarter. It'll bounce around a little bit.

Okay. So I mean, should I be thinking about it going down, like just to be direct?

Yes. Variability means it'll go up sometimes. It'll go down sometimes.

So my follow-up is very quickly. I think last quarter you said you thought services at CFPG revenues would probably flat year over year in the calendar year. Is that still your expectation?

Yes, flattish is how I would describe it. Reliant will have some headwinds offset by the tailwinds that the upgrade part of the business has, Stacy.

The next question is from Krish Sankar with TD Cowen and Company. Please go ahead.

I had two questions. One is just to double check on this overseas manufacturing. Doug, can you meet all of your non U. S. Customer demand from your non U.

S. Manufacturing sites like Malaysia and Taiwan?

Yes. I'm not sorry, Chris, I'm not going to get into the exact details, right? We don't build every single tool at every single factory. But with enough lead time, we can adjust depending on what is where. And like I said earlier on the call, depending on what the rules end up being, we can move things around as necessary.

Lam Research (LRCX) Q3 2025 Earnings Call Transcript

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