Lam Research Corporation (LRCX) Earnings

Management highlights

### AI-Driven Industry Tailwinds - AI is progressing through sequential waves (training → inference → agentic → physical AI), creating growing demand for higher-performance semiconductor devices across all memory and logic segments - Expanding AI context windows and persistent memory requirements are driving strong NAND demand, as customers upgrade existing installed base to 200+ layer architectures; LAM's served available market (SAM) per NAND wafer is expected to double from the 128-layer node to 500+ layer devices - Technology transitions for advanced foundry/logic (gate-all-around, CFET) and DRAM (HBM, 4F squared) and advanced packaging (panel-level) all increase etch and deposition intensity, expanding LAM's SAM; LAM is on track to reach its target high-30s SAM as a percentage of WFE faster than outlined at 2025 Investor Day ### Key Product & Technology Momentum - ACARA conductor edge platform: first adopted for 2nm and below gate-all-around foundry logic, now gaining traction in advanced DRAM with multiple strategic tool-of-record wins; installed base has doubled annually since launch, with continued growth expected in 2027 - Co-optimized vector hard mask deposition and vector diffusion barrier systems for DRAM deliver improved transistor performance, yield, and cost savings versus competing solutions, driving new design wins - Argos Selective Edge System: proprietary plasma technology for highly selective surface treatment, winning design wins at 2nm and below leading foundry logic customers and expanding into DRAM applications - Advanced packaging: on track for >70% year-over-year growth; LAM has shipped 510x515mm panel-level packaging tools for customer development programs, and will ship its first 310x310mm panel tool in 2026, capturing early leadership in this emerging transition ### CSBG Growth Drivers - Growing demand for equipment intelligence and fab automation solutions to increase fab capacity amid tight AI-driven demand; LAM Dextro collaborative maintenance robots are seeing rapid adoption, improving tool availability and output - Number of automatable preventative maintenance tasks has doubled since the start of 2026, with solutions originally developed for NAND now expanding into DRAM, creating new incremental service revenue opportunities in H2 2026 ### Financial Operational Highlights - Fiscal year 2026 (ended June 2026) record results: total revenue $23.2 billion, gross margin 50.6%, diluted EPS $5.82 (up 41% YoY), ahead of 2025 Investor Day profitability objectives - June quarter gross margin 52% (above guidance, up from 49.9% prior quarter), driven by pricing actions, operational/scale efficiencies, and favorable product mix; operating margin 38.4% (above guidance, up from 35% prior quarter) - Inventory turns improved to 3x (highest level in almost 5 years) even as inventory grew to meet increasing demand; 1,800 net new employees added in the quarter, mostly in manufacturing, field operations, and R&D to support growing demand - Returned 45% of free cash flow to shareholders in the quarter; 81% year-to-date, on track to meet the target of returning at least 85% of free cash flow over time; $4 billion remaining under the board-authorized share repurchase program

Guidance

- September 2026 quarter non-GAAP guidance: revenue $8.1 billion ±$400 million, gross margin 52% ±1 percentage point, operating margin 39.5% ±1 percentage point, EPS $2.15 ±$0.15 on a diluted share count of ~1.255 billion - 2026 global wafer fab equipment (WFE) spending is now expected to be in the low $150 billion range, up from the prior outlook of $140 billion - Long-term: LAM expects to reach gross margins of mid-50% and operating margins of mid-40% over the next several years, as AI-driven semiconductor capacity investment continues - 2027 is expected to be a strong year for the industry and LAM, with DRAM projected as the fastest growing WFE segment, followed by foundry/logic, then NAND - China overall WFE spending is expected to remain flat to slightly up, with sequential lumpiness; global multinational customers in China are expected to continue growing while domestic Chinese customers decline

Segment performance

June 2026 quarter total company revenue was $6.72 billion, up 15% quarter-over-quarter and 30% year-over-year. Systems revenue segment breakdown: - Memory: 46% of systems revenue (record absolute dollar level), up from 39% in the prior quarter. Within memory: NAND accounted for 23% of systems revenue (up from 12% prior quarter), with NAND revenue more than doubling sequentially; DRAM accounted for 23% of systems revenue (down from 27% prior quarter), with DRAM revenue flat sequentially at the prior quarter's record level. - Foundry: 44% of systems revenue, down from 54% in the prior quarter. Decline in mature node spending in China was offset by strong leading-edge 2nm/3nm and advanced packaging investments. - Logic and Other: 10% of systems revenue, up from 7% in the prior quarter. Geographic revenue breakdown: - Taiwan: 27% of total revenue (up from 23% prior quarter), a new record absolute dollar level. - China: 26% of total revenue (down from 34% prior quarter); global multinational customers in China grew sequentially while domestic Chinese customers declined. - Korea: 20% of total revenue (down from 23% prior quarter). Customer Support Business Group (CSBG): third consecutive quarter of record revenue at nearly $2.5 billion, up 17% sequentially and 43% year-over-year. Growth was led by record upgrade revenue, with smaller increases in Reliant and services; spare part revenue remained steady at the prior quarter's strong level.

Risks & headwinds

- Forward-looking results are subject to inherent risks and uncertainties that could cause actual outcomes to differ materially from current expectations, as detailed in LAM's SEC filings - Longer lead times and supply chain constraints could limit LAM's ability to meet unexpected upside demand in the remainder of 2026 - Foreign exchange volatility creates variability in other income and expense quarter to quarter - Industry supply constraints and clean room availability currently limit the size of 2027 WFE growth, even while underlying demand remains strong - Memory industry supply/demand fundamentals could shift, leading to unexpected changes in customer capital spending

Analyst Q&A

• Q: UBS analyst asks if CSBG (service) growth will remain strong in September, and how long it will take to reach the new mid-50% gross margin target. /

  A: Management expects CSBG growth to remain consistent with the June quarter, with continued strong upgrade demand driven by NAND investment, steady strong spare part demand from high fab utilization, and growing growth from advanced cobot and equipment intelligence services. Management notes reaching mid-50% gross margins will take several years, driven by a combination of revenue scale/scope, new product introductions, and appropriate pricing for the value LAM delivers. (301 characters)

• Q: Citi analyst asks if LAM sees emerging NAND oversupply in 2027, following third party forecasts of diverging memory fundamentals. /

  A: Management notes most NAND spending today is for upgrades of existing installed base to 200+ layer devices, with very little new greenfield capacity coming online in the near term. The 2027 outlook remains solid: LAM expects DRAM to be the fastest growing segment, foundry/logic second, and NAND third, the same dynamic that drove strong LAM results in 2026, and LAM's growth is supported by vertical scaling trends across all segments, not just NAND. (347 characters)

• Q: JP Morgan analyst asks why advanced packaging growth guidance has increased to 70% year-over-year, up from prior targets of 40-50%, and what is driving this acceleration. /

  A: Management says the acceleration comes from all sources: faster than expected adoption of 2.5D/3D packaging, growing HBM demand, and customers pulling in production capability development. Advanced packaging is increasingly used as a core technical lever to improve AI device performance across all customer segments, and the transition to panel-level packaging is just beginning, with LAM holding early technical leadership in TSV etch and copper electroplating that positions it to capture disproportionate growth. (352 characters)

• Q: RBC Capital Markets analyst asks how LAM is positioned to meet any further upside demand in 2026 after raising WFE guidance from $140 billion to $150 billion. /

  A: Management explains the upward WFE revision came from customers squeezing additional clean room capacity and resolving existing bottlenecks to meet strong demand, enabled by LAM's flexible global manufacturing and supply chain footprint that allowed it to meet accelerated requests. From current levels, it becomes increasingly difficult to accommodate further unexpected upside in 2026 due to lead time constraints, so new additional demand is now pushing into 2027 and beyond as customers secure tool delivery for new fabs coming online. (398 characters)