Lam Research (LRCX) Q3 FY26 earnings call: guidance and Q&A

How has Lam achieved such strong gross margins so quickly, and what is the capacity outlook, especially with a new Malaysia facility?

Management attributed strong gross margins to self-help activities like expanding factory footprint closer to customers, leading to efficiencies in logistics, labor, and supply chain. They also highlighted improved tool performance and reliability from R&D investments. Gross margins are expected to remain around current levels for the rest of the year. The second Malaysia facility, similar in size to the first, will come online in 2H CY26 to support future demand.

“I would encourage you to kind of keep it roughly in the levels that we just guided you to in June. This is going to kind of level out at where it's at, I think, for the rest of the year.”

asked by Timothy Arcuri · answered by Douglas Bettinger

What is the visibility into 2027 demand, and how is Lam preparing its supply chain for the anticipated ramp?

Lam is actively engaging with customers regarding 2027, and even beyond for planning purposes, given current lead times and announced fab openings. This early visibility helps in preparing the supply chain and internal capabilities. Management feels positive about 2027, expecting it to be a 'pretty good year' with more clean room availability.

“it feels like it's setting up to be a pretty good year in '27 right now based on what we can see.”

asked by Christopher Muse · answered by Douglas Bettinger

Is the strong upgrade business within CSBG sustainable, and what is the outlook for its revenue growth in CY26?

The strong CSBG performance, driven by high industry utilization, spares, and services, is expected to sustain at roughly current levels, possibly with slight increases. Management clarified that the $40 billion NAND conversion spending includes new equipment purchases, not just upgrades. Innovations like Equipment Intelligence and cobots are expected to layer on top of this base.

“When you see how strong it was in March, I think it popped up. I think it's going to kind of sustain roughly at these levels as we go through the remaining quarters in the calendar year, maybe up a little bit.”

asked by Christopher Muse · answered by Douglas Bettinger

What has changed in the NAND market to drive the accelerated conversion spending, and how do lower customer down payments reconcile with WFE growth expectations?

Increased demand for NAND from AI data centers, particularly for QLC-based devices, is accelerating the need for 200-layer+ technologies. This requires both accelerated conversions of existing capacity and eventual greenfield investments. Doug explained that lower down payments are from smaller customers, many in China, who are not driving the fastest growth, while global multinational customers are growing significantly.

“I guess what I would tell you, Atif, is the group of customers that generally provide the down payments aren't the ones that are growing the quickest, and that's absolutely what we're seeing going on right now.”

asked by Atif Malik · answered by Douglas Bettinger

Is this memory cycle fundamentally different due to AI, and how is Lam derisking cyclicality while capturing upside?

Tim believes this memory cycle is different for Lam due to dramatic increases in etch and deposition intensity driven by 3D scaling and new architectures, leading to SAM expansion and share gains. Lam operates flexibly with operational investments like Dextro cobots and Equipment Intelligence, which allow support without extensive fixed cost scaling, enabling outperformance even in slowdowns. Doug added that memory's criticality in AI architectures and disciplined investment by the industry contribute to a more stable environment.

“I think the most important thing about this memory cycle is it is a cycle in which you're seeing dramatic improvement and change in the etch and deposition intensity.”

asked by Melissa Weathers · answered by Timothy Archer

How durable are the current high gross margins, and can Lam sustain its pricing power regardless of memory pricing fluctuations?

Tim emphasized that gross margin improvements are rooted in fundamental capabilities, operational efficiency, and the value Lam's equipment delivers through technical advancements and productivity. These are sustainable because they are based on real value and efficiency, not transactional opportunities. He cited cobots as an example where value delivered (uptime, yield) directly translates to payment, making it sustainable regardless of market cycles.

“we have been building the gross margin improvement in our company around fundamental capabilities, either our own through our own operational efficiency or through the value that our equipment delivers.”

asked by Vivek Arya · answered by Timothy Archer

Given clean room constraints in 2026, should 2027 WFE growth be even stronger on a dollar basis as new clean rooms come online?

Doug stated it's too soon to give an exact magnitude for 2027 WFE but confirmed that clean rooms will be more available next year, and WFE is expected to be 'nicely growing.' Tim added that as technology advances, etch and deposition intensity rises, which benefits Lam's position in more advanced technology nodes within new clean rooms.

“we do firmly, as we sit here today, look at clean rooms are going to be more available next year and where we believe demand to be, WFE is going to be nicely growing next year.”

asked by Stacy Rasgon · answered by Douglas Bettinger