LAM RESEARCH CORP Q1 FY2025 earnings call

• Lam posted a strong September quarter with revenues and earnings per share higher than midpoint and profitability above high-end of guided ranges, marking fifth consecutive quarter of revenue growth.
• View on calendar year 2024 WFE remains mostly unchanged at mid-$90 billion range; 2025 WFE outlook to be detailed in January, with early view of growth from 2024's range.
• AI driving investments in leading-edge logic, advanced packaging (HBM). Domestic China WFE expected down in second-half 2024, China's share of Lam's overall revenue normalizing to 30% range in Dec 2024 quarter.
• In NAND, spending recovery driven by technology upgrades; Lam has industry-leading position in critical NAND processes. In foundry/logic and DRAM, benefit from growth in gate-all-around, backside power distribution, advanced packaging, etc.
• Advanced packaging has been a highlight with SABRE 3D revenue more than doubling in 2024 due to growth in 2.5D and 3D packages and metal layer count per package.
• CSBG seeing strong customer pull for productivity enhancement, extendibility, and reuse of installed base, with market share wins and increased adoption of equipment intelligence services.

In the September 2024 quarter, systems revenue breakdown: Memory was 35% of systems revenue, with DRAM increasing to 24% of systems revenue from 19% in the prior quarter and NAND representing 11% of systems revenue, down from 17% in the prior quarter. Foundry segment was 41% of systems revenue, slightly down from 43% in the June quarter. Logic and other segment was 24% of systems revenue in the September quarter, up from 21% in the prior quarter. Customer support business group (CSBG) generated approximately $1.8 billion in revenue for the September quarter, up 4% from the June quarter and 25% higher than the same period in 2023.

• For the December 2024 quarter, expecting revenue of $4.3 billion, plus or minus $300 million. Gross margin of 47%, plus or minus 1 percentage point. Operating margins of 30%, plus or minus 1 percentage point. Earnings per share of $0.87, plus or minus $0.10, based on a share count of approximately 1.29 billion shares.

• China WFE expected to decline in the second-half of 2024 and normalize to lower percentage of Lam's overall revenue in future quarters.
• Uncertainty around export controls and their impact on business operations and revenue mix.
• Competitive dynamics in leading-edge foundry logic that could potentially affect outlook.

Q: Tim Arcuri asked about China WFE and CSBG.

A: Tim Archer stated China WFE would be lower next year and a lower percent of Lam's total revenue, while Doug Bettinger mentioned CSBG growth was a combination of Reliant and other components.

Q: Harlan Sur inquired about NAND utilizations and HBM outlook.

A: Tim Archer said NAND utilizations trend continued and advanced packaging business, including HBM, remained strong.

Q: Toshiya Hari asked about Moly adoption and leading-edge foundry logic outlook.

A: Tim Archer explained Moly adoption was a net gain opportunity and leading-edge foundry logic outlook remained unchanged relative to 90 days ago.

Q: Vivek Arya questioned China gross margin trade-off and OpEx.

A: Doug Bettinger discussed gross margin influenced by multiple factors including customer mix and operational efficiencies, and that OpEx funded necessary projects with expectation of operating leverage in 2025.

Q: C.J. Muse asked about CSBG and OpEx.

A: Tim Archer and Doug Bettinger discussed CSBG components and OpEx funding for growth projects.

Q: Krish Sankar inquired about Lam's outperformance in 2025 and inventory management.

A: Tim Archer and Doug Bettinger explained drivers of outperformance and inventory management tied to NAND business and other segments.

Q: Stacy Rasgon drilled into China gross margin trade-off and NAND tech transition.

A: Doug Bettinger and Tim Archer discussed gross margin influenced by multiple factors and NAND tech transition being better for Lam's outperformance.

Q: Atif Malik asked about China WFE dynamics and Dry Resist adoption.

A: Doug Bettinger and Tim Archer responded on China WFE comparisons and Dry Resist adoption not tied to specific nodes.

Q: Joe Moore asked about export controls and China in Dec quarter.

A: Tim Archer stated Lam's view contemplated best estimate of export control impact on China WFE.

Q: Blayne Curtis asked about China impact on CSBG and NAND upgrades.

A: Doug Bettinger and Tim Archer discussed CSBG components and NAND upgrades timing in 2025.

Q: Chris Caso asked about DRAM trends and China revenue percentage.

A: Doug Bettinger discussed DRAM trends remaining unchanged and China revenue likely trending below 30% of total revenue in 2025.