PresentationAtif MalikDirector and Semiconductor Capital Equipment & Specialty Semiconductor Analyst [Audio Gap] At of Citi Global TMT Conference. My name is Atif Malik, I cover U.S. semiconductors, semiconductor equipment and networking equipment stocks, and it's my pleasure to welcome Doug Bettinger, EVP, CFO, Lam Research; as well as Ram Ganesh, friendly neighborhood IR. I'm going to kick it off with my questions. And if you have any questions, feel to raise your hands and I'll call on you. Doug, appreci ...

Summary of Lam Research Conference Call Company Overview - **Company**: Lam Research - **Industry**: Semiconductor Equipment Key Points and Arguments Industry Dynamics - The semiconductor equipment industry is experiencing a powerful confluence of spending drivers, particularly in non-lithography areas such as High Bandwidth Memory (HBM) and advanced packaging [4][6][10] - There is a notable divergence in performance among peers, with Lam Research expected to outperform the wafer fab equipment (WFE) market by over 20 points this year [6][10] Market Outlook - The WFE outlook is projected at $105 billion, with a flat second half compared to the first half [6] - Lam Research's Serviceable Available Market (SAM) is expected to be in the mid-30% range this year, with long-term goals of reaching the high 30% [6][10] - The company anticipates that etch and deposition will account for a growing share of WFE spending, moving from low 30% to high 30% by the end of the decade [8][10] Product Portfolio Strength - Lam Research has introduced new tools such as Halo (metalization), Akara (conductor etch), and Vantex (dielectric etch), which are seeing strong customer demand [9][10] - The company believes it can capture 50% of the growing SAM due to the strength of its product portfolio [10] Foundry and Logic Market - Foundry sales are becoming a significant part of Lam's business, with gate-all-around technology driving investments [20][22] - The company is seeing a transformation in its revenue composition, with foundry sales now representing 52% of system sales, compared to memory's previous dominance [22] NAND Market Insights - NAND equipment spending is currently at about half of its peak of $20.1 billion, with Lam Research focusing on conversion-related spending to upgrade the installed base [26][28] - The company expects approximately $40 billion in conversion-related spending over the next several years, with a significant share of that going to Lam [28][29] Advanced Packaging Growth - Advanced packaging is projected to grow significantly, from 1% of WFE to 6%, with revenues increasing from over $1 billion to north of $3 billion [30][31] - The growth is driven by high-bandwidth memory and advanced packaging solutions, particularly in AI compute applications [32] Financial Performance and Margins - Lam Research has improved its gross margins to 50%, up from 46% previously, due to a favorable customer mix and a close-to-customer manufacturing strategy [36][37] - Guidance for December suggests a potential decrease in gross margins to around 48% due to a less favorable customer mix and higher tariffs [37][58] Customer Support Business Group (CSBG) - The CSBG is expected to see modest growth driven by higher utilization rates and advanced service offerings [42][46] - The focus is shifting towards outcome-based services, enhancing customer satisfaction and operational efficiency [46][47] Regulatory and Geopolitical Factors - The U.S. Commerce Department's revocation of waivers for international customers will require Lam to apply for licenses in partnership with customers, with expectations for approval [18][60] - The company has a global manufacturing presence, allowing it to adapt to tariff environments effectively [57][58] Capital Allocation Strategy - Lam Research plans to return at least 85% of free cash flow to shareholders through dividends and buybacks, with a recent 13% increase in dividends [60][61] Additional Important Insights - The company is collaborating with ASML on the Aether dry-resist solution, which has the potential to generate $1.5 billion in revenue over the next five years [50][51] - There is a growing share in mature foundries, particularly in China, as the company navigates the end of the inventory cycle [56]

I have over 13 years of diverse financial analysis experience across various sectors, including Auto, Industrials, and IT. Worked in a Ford and Caterpillar treasury, and managed Investor relations and Strategic finance of a listed IT company of market cap ~USD 2.5bn. My early background also includes equity research analyst, where I built strong expertise in market analysis, valuation models, and investment strategy. What ties my journey together is my ability to connect companies' strategy, industry-specif ...

Group 1 - The recent underperformance of momentum factors due to market breadth expansion is viewed as a "bullish top-down signal" [1] - Tactical pullbacks are seen as opportunities to buy high-momentum stocks, reaffirming their attractiveness as late-cycle factors [1] - The analysis indicates that the industrial, financial, and technology sectors have the highest momentum scores, while healthcare, real estate investment trusts, and energy rank the lowest [1] Group 2 - Low market-weighted sectors suggest that momentum factors are expected to perform well in the coming months [1] - Capital goods, aerospace and defense, construction, and electrical equipment have reestablished their positions in momentum scores at the expense of commercial services [1] - Top-rated capital goods stocks include General Dynamics (GD.US), Parker-Hannifin (PH.US), United Rentals (URI.US), and Xylem (XYL.US) [1] Group 3 - Within the banking sector, large banks and brokers maintain a preferred position over deteriorating insurance companies, with regional banks also seeing a rise due to small-cap recovery [1] - Top-rated bank stocks include Bank of America (BAC.US), Citigroup (C.US), JPMorgan Chase (JPM.US), and Morgan Stanley (MS.US) [2] Group 4 - In the semiconductor and technology sectors, the semiconductor segment has expanded beyond selected large-cap stocks, indicating meaningful strength [2] - Top-rated semiconductor stocks include KLA Corporation (KLAC.US), Lam Research Corporation (LRCX.US), Monolithic Power Systems (MPWR.US), and NXP Semiconductors (NXPI.US) [2]

Core Viewpoint - Lam Research (LRCX) experienced a 3.12% decline in stock price on September 2, marking a total drop of 6.78% over two consecutive trading days, reaching its lowest point since August 2025 due to external policy changes and internal performance expectations [1][2] Group 1: External Factors - The recent decline in Lam Research's stock price is significantly influenced by the U.S. government's announcement on September 1 to tighten export restrictions on chip equipment to China, which includes revoking exemptions for Samsung and SK Hynix, directly impacting Lam Research's sales potential in the Chinese market [1] - The tightening of export restrictions raises concerns about the company's future growth prospects in China, indicating potential challenges ahead [1] Group 2: Internal Factors - Morgan Stanley analysts downgraded Lam Research's rating to underweight and reduced the target price from $94 to $92, reflecting a cautious outlook on the company's performance for the fiscal year 2026 and increasing worries about revenue growth slowing down [1] - This downgrade has heightened investor anxiety, prompting a reassessment of investment strategies regarding Lam Research [1] Group 3: Market Outlook - The current market performance of Lam Research can be viewed as a result of both external policy changes and internal expectation adjustments, necessitating close monitoring of future policy developments and the company's responses to these challenges [2] - Despite the uncertainties, Lam Research's long-term technological strength and market position should not be overlooked, suggesting that for risk-tolerant investors, a measured approach of attention and patience remains a reasonable strategy [2]

Core Viewpoint - Lam Research is facing challenges in growth potential, leading to a downgrade in stock recommendation by Morgan Stanley's analyst Shane Brett, who has shifted from an equalweight to an underweight rating [2][4]. Group 1: Stock Performance - Lam Research's share price declined by 3% in a recent trading session, which is significantly more than the S&P 500 index's 0.7% dip [1]. - The analyst has adjusted the price target for Lam Research's shares from $94 to $92 [2]. Group 2: Analyst Insights - Analyst Shane Brett believes that Lam Research will struggle to maintain high growth levels through 2026 [4]. - Two main pressures identified on Lam Research's business include difficulties in growing market share in China and concerns regarding the NAND memory business, which may not have sufficient potential to enhance the company's fundamentals [5]. Group 3: Management and Business Health - Despite the negative outlook, Brett does not find any fundamental issues with Lam Research's management or business operations; his concerns are primarily focused on the customer base and the diminishing prospects of the NAND segment [6].

the chips are being scrutinized. I I think Josh, in a way that it's like if you're if you're in the AI space, by and large, you're good. If you're not like right in the ball game, maybe you're not so good.Chip equipment names have been scrutinized. Lamb Research downgraded to underweight. That was at Morgan Stanley today.You sold Lamb Research. Why'd you do that. I Well, that was a stop. So that was a name on my best stocks in the market.Uh but then they reported earnings and the stock sold off and I tried ...

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **Global Semiconductor Capital Equipment** industry, particularly the **Wafer Fabrication Equipment (WFE)** market, with significant emphasis on the impact of **China's semiconductor market** on global trends [2][17]. Key Forecasts and Adjustments - The WFE forecast for **2025** has been raised to **$114 billion**, reflecting a **6% year-over-year growth** from the previous estimate of **$111 billion** [2][17]. - The **2026 WFE** forecast is adjusted to **$120 billion**, a **5% increase** from the prior estimate of **$119 billion** [2][17]. - A new forecast for **2027** anticipates a **3% decline** in WFE, primarily due to normalization in China's advanced logic capital expenditures [2][17]. China Market Insights - China's WFE is expected to decline by **5%** in **2025** (previously forecasted at **-13%**) and remain flat in **2026**, but is projected to drop by **19%** in **2027** due to normalization of advanced logic capex [2][21]. - The **China foundry** segment is forecasted to remain flat year-over-year in **2025**, driven by an acceleration in capacity expansion post **DeepSeek** [3][17]. - The **DRAM** segment in China has been trimmed, with global DRAM WFE expected to grow by **6%** in **2025**, down from a previous estimate of **13%** [3][17]. Company-Specific Insights - **Applied Materials (AMAT)** and **Lam Research (LRCX)** are both rated as **Outperform** with price targets of **$195** and **$105**, respectively. Both companies are expected to benefit from leading-edge technology advancements [4][41]. - **Tokyo Electron (TEL)** is also rated **Outperform** with a price target of **¥29,400**, expected to gain market share and expand margins due to competitive pricing [9][60]. - **Kokusai** is rated **Outperform** with a price target of **¥3,570**, although there are concerns regarding the high revenue CAGR guidance of **22%** [10][60]. - **Screen** is rated **Market-Perform** with a price target of **¥12,000**, facing competitive pressures and declining revenue contributions from China [11][60]. - **Lasertec** is rated **Underperform** with a price target of **¥10,900**, anticipating a deceleration in revenue growth due to increased competition [12][60]. Investment Implications - The overall sentiment towards the **Japanese semiconductor equipment** companies is cautious due to short-term challenges in China, but long-term positions remain strong with attractive valuations [5][60]. - Local Chinese semiconductor capital equipment vendors like **NAURA**, **AMEC**, and **Piotech** are rated **Outperform** due to their increasing market share driven by domestic substitution [6][14][15][16]. Additional Insights - The semiconductor industry is experiencing a shift with increased spending on **AI-related** technologies, which is expected to drive demand for advanced logic capacity in China [6][37]. - The overall WFE market is projected to grow, with a slight adjustment in expectations for non-China WFE growth, now estimated at **13%** for **2025** [26][32]. This summary encapsulates the critical insights and forecasts discussed during the conference call, highlighting the dynamics of the semiconductor capital equipment industry and the implications for various companies involved.

Group 1 - Lam Research Corporation (LRCX) experienced a stock price decline of 3.79% on August 29, following the announcement of a 13% increase in quarterly dividends to $0.26 per share [1] - The significant stock price increase of 37.79% from the beginning of the year to August 29 may have led to technical correction pressures, as investors seek repositioning opportunities or consider profit-taking [1] - The recent stock price fluctuations reflect a combination of factors, including the confidence in future profitability indicated by the dividend increase and potential overbought signals from technical indicators [1] Group 2 - Investors should analyze stock price movements from multiple perspectives, including company fundamentals, market trends, and global economic conditions [2] - In the current market environment, caution is advised due to potential short-term technical adjustments, while considering Lam Research's long-term potential in the growing semiconductor industry [2] - A comprehensive analysis of various factors affecting stock prices, such as economic data, company earnings, industry technology trends, and global events, is essential for developing effective investment strategies [2]

Core Insights - Lam Research reported strong fourth-quarter fiscal 2025 results, with both earnings and revenues exceeding expectations, indicating robust performance in the semiconductor equipment sector [2][3]. Financial Performance - Non-GAAP earnings per share for Q4 fiscal 2025 were $1.33, surpassing the Zacks Consensus Estimate by 10.8% and reflecting a year-over-year increase of 64.2% [2]. - Revenues for Q4 reached $5.17 billion, exceeding the consensus estimate by 3.6% and marking a 34% increase from $3.87 billion in the same quarter last year [3]. Revenue Breakdown - Systems revenues accounted for $3.44 billion, representing 66.5% of total revenues, which is a 13% increase from the previous quarter and a 58% increase year-over-year [4]. - Customer Support Business Group revenues were $1.73 billion, making up 33.5% of total revenues, with a 2.9% increase from the previous quarter and a 1.9% increase year-over-year [5]. Operating Metrics - Non-GAAP gross margin improved to 50.3%, up 130 basis points from the previous quarter, while non-GAAP operating expenses rose to $822.4 million, a 7.7% increase [6]. - The non-GAAP operating margin improved to 34.4%, reflecting a sequential increase of 160 basis points [6]. Cash Flow and Shareholder Returns - As of June 29, 2025, Lam Research held $6.39 billion in cash and cash equivalents, an increase from $5.45 billion in the prior quarter [7]. - Cash flow from operating activities surged to $2.55 billion, up from $1.31 billion in the previous quarter, with total operating cash flow for fiscal 2025 at $6.17 billion [7]. - The company paid dividends totaling $295.2 million and repurchased shares worth $1.29 billion during the quarter, with total share repurchases for fiscal 2025 amounting to $3.42 billion [8]. Guidance and Future Outlook - For Q1 fiscal 2026, Lam Research projects revenues of $5.2 billion (+/- $300 million) and expects a non-GAAP gross margin of 50% (+/-1%) [9]. - Non-GAAP earnings per share are projected to be $1.20 (+/- $0.10) with a diluted share count of 1.27 billion [10]. - Recent estimates have trended upward, with a consensus estimate shift of 21.43% [11]. Investment Scores - Lam Research has a Growth Score of B and a Momentum Score of C, with an aggregate VGM Score of B, indicating a balanced investment profile [12].