Lam Research (NasdaqGS:LRCX) Q2 2026 Earnings call January 28, 2026 05:00 PM ET Speaker9Good day, and welcome to the Lam Research Corporation December 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, pl ...

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]

Investment Rating - The report does not explicitly state an investment rating for Lam Research, but the strong performance and growth indicators suggest a positive outlook for the company. Core Insights - Lam Research delivered a strong performance in 4Q2025, with revenue reaching $5.17 billion, up approximately 9.5% quarter-over-quarter, and non-GAAP EPS hitting a record high of $1.33, significantly up from $1.04 in 3Q [1][7] - The company is experiencing robust growth momentum, with FY2025 revenue reaching $18.44 billion, a year-over-year increase of about 23.7% [1][7] - The balance sheet remains sound, with net accounts receivable of $3.228 billion and inventory of $4.463 billion [1][7] Summary by Sections Financial Performance - In 4Q, Lam Research's systems revenue was dominated by the foundry segment, accounting for 52% of total revenue, driven by AI-related transistor performance demands [3][9] - Non-volatile memory (NVM) contributed 27%, aligning with NAND customers converting capacity to ≥200 layers, while DRAM made up 14% [3][9] - The customer support business group generated $1.73 billion in 4Q revenue, maintaining stable performance with a 3% quarter-over-quarter increase [3][10] Market Trends and Technology - The company continues to make breakthroughs in critical technology areas, with significant momentum in Equipment Intelligence-enabled Dextro cobots and investments in GAA, advanced packaging, HBM, and NAND layer conversions [2][8] - The 2025 served available market (SAM) is expected to account for over 30% of wafer fabrication equipment (WFE) [2][8] - ALTUS Halo ALD Mo technology is rapidly being adopted, driving a threefold increase in metallization SAM per wafer [2][8] Outlook - Lam Research raised its 2025 WFE spending forecast to approximately $105 billion, primarily driven by increased domestic spending in China [4][11] - For 1Q2026, the company projects revenue of $5.2 billion ± $300 million, with a non-GAAP gross margin of 50.0% ± 1% [4][11] - Long-term, the company anticipates expanding its SAM to over 30% of WFE and capturing more than 50% of incremental SAM [4][11]