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    LRCX
    Earnings call· Jun 2025(Q4 FY25)

    LAM RESEARCH Q4 FY25 earnings call LRCX

    Jul 30, 2025 Source

    Executive summary

    Lam Research Q4 FY25 — Record Gross Margin and Strong Foundry/NAND Performance

    Lam Research delivered a strong Q4 FY25, achieving record gross margins and EPS, driven by robust foundry and NAND upgrades. The company is executing on its served available market expansion strategy, with new products gaining traction in advanced packaging and gate-all-around architectures. While WFE spending is now expected to be flat half-on-half for CY25, Lam remains confident in its outperformance due to technology inflections and product leadership.

    Highlights

    5

    • Achieved record gross margin of 50.3% in the post-Novellus period.

    • Record revenue of $18.4 billion and free cash flow of $5.4 billion (29% of revenue) for FY25.

    • Record foundry revenues, driven by gate-all-around and mature nodes, and upgrades business grew mid-teens percent QoQ.

    • Secured key win for ALD Moly at another leading foundry customer for next-generation application, with Lam being the only company with ALD Moly in production.

    • Expanded Dextro cobot capabilities to 3 additional tool types, accelerating roadmap for autonomous fab vision.

    Concerns

    4

    • Gross margin expected to decline to ~48% in December quarter due to mix, tariffs, and slightly softer revenue.

    • Operating expenses increased to $822 million from $763 million QoQ, primarily due to increased incentive compensation.

    • DRAM revenue declined to 14% of systems revenue from 23% QoQ due to timing of certain customer projects.

    • China revenue in December quarter expected to lighten up after a strong September, contributing to gross margin headwinds.

    Guidance & targets

    14
    CategoryTargetConfidence
    Calendar Year 2025 WFE spending
    $105 billion range
    high materiality
    High
    Calendar Year 2025 Non-China WFE investments
    remaining broadly consistent with our prior view
    medium materiality
    High
    WFE spending in second half of Calendar Year 2025
    roughly flat with the first half
    high materiality
    High
    Calendar Year 2025 Served Available Market (SAM)
    around mid-30s percent of WFE
    high materiality
    High
    Longer-term Served Available Market (SAM)
    high 30% range of WFE
    high materiality
    High
    Share of incremental SAM
    over 50% share
    high materiality
    High
    Customer Support Business Group (CSBG) revenue growth
    modest growth
    medium materiality
    Medium
    Revenue
    $5.2 billion, plus or minus $300 million
    high materiality
    High
    Gross Margin
    50%, plus or minus 1 percentage point
    high materiality
    High
    Operating Margin
    34%, plus or minus 1 percentage point
    high materiality
    High
    Earnings Per Share
    $1.20, plus or minus $0.10
    high materiality
    High
    Non-GAAP Tax Rate
    low- to mid-teens range
    medium materiality
    High
    Gross Margin
    about 48%
    high materiality
    High
    NAND investment for technology conversions/upgrades
    roughly $40 billion
    medium materiality
    High

    Segment performance

    9
    SegmentRevenueYoYQoQMargin
    Foundry
    Benefited from continued momentum in leading-edge processes as well as investments in mature nodes by domestic Chinese customers.
    Second consecutive record quarter in dollar termsNew record from a fiscal year perspective
    		52% of systems revenue—increase from 48%—
    Memory
    Overall memory segment, including NAND and DRAM.
    		41% of systems revenue—slight decrease from 43%—
    Non-volatile memory (NAND)
    Investments focused primarily on upgrades, with an anticipated $40 billion investment over several years for technology conversions.
    		27% of systems revenue—higher than March quarter's level of 20%—
    DRAM
    Decline in June quarter related to timing of certain customer projects. FY25 spending focused on technology upgrades to 1-beta and 1-gamma nodes enabling DDR5 and LPDDR5, and High Bandwidth Memory.
    Record revenue in dollar terms for FY25
    		14% of systems revenue—decline from 23% last quarter—
    Logic and other
    		7% of systems revenue—slightly lower than 9% prior quarter—
    China
    Saw increasing investment from global multinational customers (up >90% QoQ) to highest level since Dec 2022. Majority of China revenue from domestic Chinese customers.
    		35% of total revenue—increase from 31%—
    Korea
    		22% of total revenue—decrease from 24%—
    Taiwan
    		19% of total revenue—decrease from 24%—
    Japan
    Driven by investment from a large new foundry.
    Record for Lam in dollar terms
    		14% of total revenue———

    Operational metrics

    29
    Non-GAAP gross margin
    50.3%up from 49% (Q3 FY25)
    Q4 FY25

    Record gross margin percentage in the post Novellus period.

    Non-GAAP operating expenses
    $822 millionup from $763 million (Q3 FY25)
    Q4 FY25

    A bit higher than original estimate.

    R&D as % of total operating expenses
    69%
    Q4 FY25
    Non-GAAP operating margin
    34.4%
    Q4 FY25

    Near the high end of guidance, representing a record level in both dollars and percentage terms.

    Non-GAAP tax rate
    4.8%
    Q4 FY25

    Lower than expected.

    Other income and expense
    $4 million incomecompared with $7 million expense (Q3 FY25)
    Q4 FY25

    Improvement in OI&E.

    Share buybacks executed
    $1.3 billion
    Q4 FY25

    ASR will continue to execute into the September quarter.

    Dividends paid
    $295 million
    Q4 FY25
    Non-GAAP diluted EPS
    $1.33exceeding high end of guidance range
    Q4 FY25
    Diluted share count
    1.28 billion sharesreduction from March quarter
    Q4 FY25

    Consistent with guidance.

    Remaining share repurchase authorization
    $7.5 billion
    As of Q4 FY25

    On Board authorized program.

    Cash and investments balance
    $6.4 billionincrease from $5.5 billion (Q3 FY25)
    End of Q4 FY25
    Days sales outstanding
    59 daysdown from 62 days (Q3 FY25)
    Q4 FY25
    Inventory turns
    2.4ximproved from 2.2x (Q3 FY25)
    Q4 FY25

    Making progress in managing inventory levels.

    Equity compensation expense
    $94 million
    Q4 FY25

    Noncash expense.

    Depreciation expense
    $86 million
    Q4 FY25

    Noncash expense.

    Amortization expense
    $12 million
    Q4 FY25

    Noncash expense.

    Capital expenditures
    $172 milliondown from $288 million (Q3 FY25)
    Q4 FY25

    Supporting global strategy to be close to customers.

    CHIPS Act benefits
    more than $50 million
    Q4 FY25

    Offsetting capital spending.

    Total employees
    19,000increase of approximately 400 people from prior quarter
    End of Q4 FY25
    Deferred revenue balance
    $2.68 billionincrease of approximately $670 million from March quarter
    End of Q4 FY25
    Revenue
    $18.4 billion
    FY25

    Record revenue for the fiscal year.

    Gross Margin
    48.8%
    FY25
    Free Cash Flow Margin
    29%
    FY25
    Upgrades business growth
    mid-teens percentover prior quarter
    Q4 FY25

    Grew to a new high, driven by NAND customers migrating to higher layer count, higher performance devices for AI applications.

    Advanced packaging WFE share
    more than 6xfrom 1% in 2021
    Since 2021

    With AI's rapid adoption of advanced packaging, that number has grown more than 6x from 1% in 2021.

    Installed plating cells
    6,000
    As of Q4 FY25

    Significant milestone for copper plating hardware design and process technology.

    SABRE 3D market share growth in advanced packaging
    nearly 5 pointsyear-on-year
    CY25

    Expected to grow, leveraging experience gained at the leading edge.

    Global multinational customers in China revenue growth
    more than 90%quarter-over-quarter
    Q4 FY25

    Contributed to the uptick in China regional spending.

    Industry KPIs

    7
    MetricValueDetails
    Ai data center revenueAdvanced packaging WFE share grown more than 6x from 1%x
    Services installed baseCustomer Support Business Group (CSBG) revenue $1.7 billion; 6,000 installed plating salesUSD
    Wfe industry spend outlook$105 billion rangeUSD
    Design wins socket pipelineKey win for ALD Moly; multigeneration etch decision for Vantex; multiple new application wins for Akara
    Inventory channel inventoryInventory turns 2.4xx
    Node platform ramp scheduleMoly adoption for 200 layers and higher NAND; Gate-all-around below 2nm; 1-beta and 1-gamma nodes for DDR5 and LPDDR5 DRAM; HBM3E to HBM4E
    End market segment revenue mixFoundry: 52% of systems revenue; Memory: 41% of systems revenue (NAND 27%, DRAM 14%); Logic and other: 7% of systems revenue%

    Orderbook & backlog

    1
    Deferred revenue balance$2.68 billionEnd of Q4 FY25

    increase of approximately $670 million from March quarter

    Related to customer advanced on payments from several newer customers.

    Product announcements

    5
    ProductTypeDetails
    Dextro cobotsexpansion
    Halo ALD Moly toolmilestone
    SABRE 3D systemmilestone
    Vantex systemmilestone
    Akara conductor etch toolmilestone

    Risks & headwinds

    4
    Increased tariff headwindsDecember quarter

    incrementally higher in December quarter

    Mitigation: Included in gross margin guidance.

    Less favorable customer and product mixDecember quarter

    contributing to gross margin decline

    Mitigation: Included in gross margin guidance.

    Softer overall revenueDecember quarter

    December quarter revenue expected to be down

    Mitigation: Included in gross margin guidance.

    Timing of certain customer projects in DRAMQ4 FY25

    DRAM revenue declined to 14% of systems revenue from 23% QoQ

    Mitigation: Not explicitly stated, but FY25 DRAM revenue was a record, suggesting project timing rather than fundamental weakness.

    What to watch in Q1 FY26

    5

    Gross Margin Trajectory

    Q2 FY26 (December quarter)
    Current50.3%
    Target~48%

    Why it matters

    Gross margin is a key profitability metric, and management guided a notable decline due to mix and tariffs. Verifying this trend is crucial for profitability outlook.

    You should be kind of thinking about where consensus is today, which is about 48%. I think that's what you're going to see in December.

    Q&A highlights

    6

    What are the key factors contributing to Lam's expected growth significantly above the overall WFE market?

    Tim Archer cited gate-all-around, advanced packaging, HBM, NAND layer scaling, moly, selective etch, ALD, backside power, and dry resist as key technology drivers. He emphasized that etch and deposition intensity continues to rise faster than WFE, and Lam's strong product portfolio positions it for SAM expansion and share gains.

    “It's all the things that we've talked about in the past. I mean, clearly, if we look at foundry/logic, I mentioned extensively the discussion of moly today, but we're also looking at other tools around the gate-all-around structure. It's things like selective etch, ALD. We still have backside power to come.”

    asked by Christopher Muse · answered by Timothy Archer

    2 min read6 chapters

    Detailed Narrative

    01

    Record Profitability and Operational Execution

    Lam Research achieved a record gross margin of 50.3% in Q4 FY25, the highest since the Lam-Novellus merger, and record EPS. For FY25, the company reported record revenue of $18.4 billion and free cash flow of $5.4 billion (29% of revenue). This performance is attributed to a growing top line, favorable mix, and strong operational efficiencies from its close-to-customer manufacturing strategy.

    02

    Market Outperformance and SAM Expansion

    The company expects to outperform WFE growth in CY25 and CY26, driven by its strong position in gate-all-around, advanced packaging, HBM, and NAND layer conversions. Lam's served available market (SAM) is projected to expand to mid-30s percent of WFE in CY25 and is on track to reach high 30% range longer term, with an expectation to win over 50% share of the incremental SAM.

    03

    Advanced Technology Inflections (Moly)

    Lam is leading the industry transition to ALD Moly, with its Halo ALD Moly tool ramping at multiple NAND customers and already in production in foundry/logic. This technology addresses RC challenges below 2nm gate-all-around structures, driving a roughly 3x increase in Lam's metal deposition SAM per wafer for advanced nodes. The company secured a key win at a leading foundry customer for next-gen applications.

    04

    Advanced Packaging Leadership

    Advanced packaging is a critical growth driver, with Lam's SAM expanding due to increased adoption in DRAM, CPUs, GPUs, and ASICs for data centers. The company's SABRE 3D system, leveraging 20 years of copper plating experience and over 6,000 installed plating cells, is gaining market share, expected to grow nearly 5 points year-on-year in CY25.

    05

    Etch Technology Wins

    Lam solidified its leadership in high aspect ratio dielectric etch for NAND with its Vantex system winning a multigeneration etch decision at a major NAND customer. The new Akara conductor etch tool, launched earlier this year, secured multiple new application wins at a top DRAM maker, demonstrating industry-leading depth uniformity and profile control vital for DRAM scaling.

    06

    Customer Support Business Group (CSBG) Momentum

    CSBG revenue was approximately $1.7 billion, consistent with the prior quarter. The upgrades business achieved its third consecutive record quarter, driven by NAND technology conversions. The company also highlighted momentum with its Equipment Intelligence enabled Dextro cobots, expanding capabilities to 3 additional tool types, enhancing tool-to-tool matching, machine availability, and operational costs.

    AI-generated summary of the company’s earnings call. Not investment advice.