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    LRCX
    Earnings call· Sep 2025(Q1 FY26)

    LAM RESEARCH CORP LRCX

    Oct 22, 2025 Source

    Executive summary

    Lam Research Q1 FY26 — Record Revenue and Operating Margin Driven by AI and NAND Upgrades

    Lam Research delivered a strong quarter with record financial performance, driven by robust demand in leading-edge foundry, HBM, and NAND upgrades, fueled by AI-related investments. The company's etch and deposition technologies are well-positioned for increasing semiconductor manufacturing complexity. Management anticipates continued WFE growth in 2026, despite headwinds from China export restrictions and customer mix impacting gross margins.

    Highlights

    5

    • Record revenues of $5.3 billion in the September quarter, up 3% QoQ.

    • Record gross margin of 50.6% and record operating margin of 35% in the September quarter.

    • Record combined spares and services revenue, with total CSBG revenue growth outpacing installed base units.

    • Foundry segment accounted for 60% of systems revenue, up from 52% in the prior quarter, marking the third consecutive record quarter for foundry.

    • Strong demand for ALD products, including a key win at a major NAND manufacturer and Halo moly ALD selected as tool of record for 3 consecutive nodes.

    Concerns

    5

    • December quarter guidance contemplates a $200 million revenue impact from the recently announced 50% affiliate rule restricting shipments to certain domestic China customers.

    • Expected calendar year 2026 revenue impact from China restrictions is approximately $600 million.

    • Customer mix and tariffs are expected to contribute to a sequential decline in gross margin to 48.5% in the December quarter.

    • China revenue represented 43% of total revenue in the September quarter, an increase from 35% in the prior quarter, indicating high exposure to trade restrictions.

    • Deferred revenue balance increased slightly due to services and system-related transactions, partially offset by a $100 million reduction in customer advanced down payments, which are expected to continue to decline.

    Guidance & targets

    11
    CategoryTargetConfidence
    Revenue
    $5.2 billion +/- $300 million
    high materiality
    High
    Gross Margin
    48.5% +/- 1 percentage point
    high materiality
    High
    Operating Margin
    33% +/- 1 percentage point
    high materiality
    High
    Diluted EPS
    $1.15 +/- $0.10
    high materiality
    High
    China Revenue Impact
    approximately $600 million
    high materiality
    High
    China Revenue as % of Total Revenue
    less than 30%
    high materiality
    High
    WFE Spending
    slightly better than $105 billion
    high materiality
    Medium
    WFE Spending Outlook
    robust setup for equipment spending
    high materiality
    High
    CSBG Revenue Growth
    year-over-year growth
    medium materiality
    High
    Tax Rate
    low- to mid-teens for the near term
    medium materiality
    High
    Free Cash Flow Return to Shareholders
    at least 85%
    high materiality
    High

    Segment performance

    9
    SegmentRevenueYoYQoQMargin
    Foundry
    Increased from 52% in the June quarter, marking the third consecutive record quarter for foundry systems revenue, driven by leading-edge investments and mature node spending in China.
    Systems revenue share: 60%Systems revenue share (prior quarter): 52%
    		————
    Memory
    Down from 41% in the prior quarter due to timing of customer investment plans. Includes Nonvolatile Memory and DRAM.
    Systems revenue share: 34%Systems revenue share (prior quarter): 41%
    		————
    Nonvolatile Memory (NAND)
    Down from 27% in the June quarter. The trajectory of NAND spending is consistent with expectations, with over $40 billion in upgrade spending estimated for devices above 200 layers over several years.
    Systems revenue share: 18%Systems revenue share (prior quarter): 27%
    		————
    DRAM
    Increased from 14% in the June quarter, driven by strong investments in high-bandwidth memory (HBM) for AI and traditional node migrations to 1B and 1C nodes.
    Systems revenue share: 16%Systems revenue share (prior quarter): 14%
    		————
    Logic and Other
    Roughly in line with the prior quarter.
    Systems revenue share: 6%Systems revenue share (prior quarter): 7%
    		————
    Customer Support Business Group (CSBG)
    Slightly higher sequentially and year-over-year, driven by continued strength in spares and upgrades. Expected to deliver year-over-year growth in 2025.
    		$1.8 billionslightly higherslightly higher—
    China
    Increased from 35% in the prior quarter. While multinationals in China remained steady, growth was largely driven by domestic Chinese customers. Expected to be less than 30% of overall revenues in CY26 due to restrictions.
    Total revenue share: 43%Total revenue share (prior quarter): 35%
    		————
    Taiwan
    Flat sequentially.
    Total revenue share: 19%
    		——flat—
    Korea
    Down sequentially from 22% due to the timing of customer investment plans.
    Total revenue share: 15%Total revenue share (prior quarter): 22%
    		——down sequentially—

    Operational metrics

    20
    Non-GAAP gross margin
    50.6%up from 50.3% QoQ
    Q1 FY26

    Achieved a record gross margin in the September quarter.

    Non-GAAP operating margin
    35%
    Q1 FY26

    Achieved a record operating margin in the September quarter.

    Operating expenses
    $832 millionup from $822 million QoQ
    Q1 FY26

    Increase primarily due to increased headcount and incentive compensation tied to improved profitability.

    R&D as % of operating expenses
    68%
    Q1 FY26

    R&D accounted for 68% of total operating expenses, reflecting investment in innovations.

    Non-GAAP tax rate
    14.2%
    Q1 FY26

    Generally in line with expectations, expected to be in the low- to mid-teens for the near term.

    Other income and expense
    $8 millionup from $4 million QoQ
    Q1 FY26

    Slight increase primarily due to increased interest income.

    Share buybacks executed
    $990 million
    Q1 FY26

    Allocated to share buybacks through open market repurchases.

    Shares repurchased year-to-date
    30 million
    YTD Q1 FY26

    Total shares repurchased year-to-date.

    Dividends paid
    $292 million
    Q1 FY26

    Dividends paid in the September quarter.

    Dividend per share increase
    from $0.23 to $0.26
    Q1 FY26

    Increased the dividend per share.

    Diluted share count
    1.27 billionreduction from June quarter
    Q1 FY26

    Consistent with guidance, reduced from the June quarter.

    Remaining share repurchase authorization
    $6.5 billion
    Q1 FY26

    Remaining on Board-authorized share repurchase plan.

    Cash and investments balance
    $6.7 billionup from $6.4 billion QoQ
    Q1 FY26

    Increased primarily due to cash generated from operating activities, partially offset by capital return and capex.

    Days sales outstanding (DSO)
    62 daysup from 59 days QoQ
    Q1 FY26

    Slight increase in DSO.

    Inventory turns
    2.6xup from 2.4x QoQ
    Q1 FY26

    Improved inventory turns, reflecting focus on driving asset utilization.

    Equity compensation
    $97 million
    Q1 FY26

    Noncash expense for the September quarter.

    Depreciation
    $89 million
    Q1 FY26

    Noncash expense for the September quarter.

    Amortization
    $13 million
    Q1 FY26

    Noncash expense for the September quarter.

    Capex
    $185 millionup $13 million QoQ
    Q1 FY26

    Spending focused on global strategy to be close to customer development and manufacturing locations.

    Total employees
    19,400increase of 400 QoQ
    Q1 FY26

    Increase in regular full-time employees.

    Industry KPIs

    6
    MetricValueDetails
    Ai data center revenue$8 billion WFE for every $100 billion incremental data center investmentUSD
    Services installed base$1.8 billionUSD
    Wfe industry spend outlookSlightly better than $105 billionUSD
    Design wins socket pipelineKey win at a major NAND manufacturer for ALD; Halo moly ALD tool selected as tool of record for 3 consecutive nodes; critical wins at foundry/logic and DRAM customers for low-K ALDwins
    Node platform ramp scheduleAether dry resist EUV patterning solution ramping in HBM high-volume production; High-NA EUV with Aether for sub-10-nanometer features; transition from gate-all-around to CFET in foundry logic; migration from 6F squared to 4F squared in DRAM
    End market segment revenue mixFoundry: 60%, Memory: 34%, Logic and Other: 6%%

    Orderbook & backlog

    1
    Deferred revenue balance$2.77 billionQ1 FY26 end

    up slightly QoQ

    Due to increases in services and system-related transactions where revenue recognition was not yet complete, partially offset by approximately $100 million reduction in customer advanced down payments.

    Product announcements

    5
    ProductTypeDetails
    Lam Cryo 3.0 dielectric etch technologymilestone
    Halo moly ALD toolmilestone
    Aether dry resist EUV patterning solutionmilestone
    Low-K ALD solutionmilestone
    SABRE 3D, Kallisto, and Phoenix toolsroadmap

    Deals & partnerships

    1
    JSR CorporationCollaboration on integration of Aether technology with novel EUV patterning materials and metal oxide resists, and exploration of new precursor materials for advanced ALD applications.

    Partnership announced in September to collaborate on Aether technology integration and explore new precursor materials for advanced ALD applications.

    Risks & headwinds

    5
    China Export Restrictions (50% affiliate rule)Q2 FY26 and CY26

    $200 million revenue impact in Q2 FY26; approximately $600 million revenue impact in CY26.

    Mitigation: Focus on strong growth anticipated in worldwide WFE spending and global multinationals to offset the impact.

    Customer Mix Impact on Gross MarginQ2 FY26

    Expected sequential decline in gross margin to 48.5% in Q2 FY26.

    Mitigation: Management expects customer mix to normalize as China mix normalizes, but it will be a headwind.

    Tariffs Impact on Gross MarginQ2 FY26

    Expected to continue to increase somewhat in Q2 FY26, contributing to sequential decline in gross margin.

    Mitigation: Tariffs are a factor in the expected gross margin decline.

    Decline in Customer Advanced Down PaymentsQ2 FY26

    Approximately $100 million reduction in Q1 FY26, expected to continue to decline in Q2 FY26.

    Mitigation: This is a trend management expects to continue.

    Clean Room Space as a Limiter for Capacity Growth

    Discussed as a potential limiter to the pace of NAND supply growth.

    Mitigation: Lam is well-positioned for upgrade activity in the near term and new capacity builds in the future, but physical infrastructure build-out takes time.

    What to watch in Q2 FY26

    5

    2026 WFE Spending Outlook

    January call (Q2 FY26 earnings call)
    CurrentRobust setup expected, but detailed outlook not yet provided.
    TargetDetailed 2026 WFE spending outlook and subsegment color.

    Why it matters

    This will provide crucial visibility into the overall market demand and Lam's growth prospects for the upcoming year, especially regarding AI-driven investments.

    We plan to provide our detailed 2026 WFE spending outlook and subsegment color on our January call per our usual practice.

    Q&A highlights

    6

    How are customer conversations progressing regarding AI infrastructure spending, and is it translating into expedited meetings or actual orders, especially given recent announcements?

    Recent AI infrastructure announcements are long-term guideposts, not immediate demand. Near-term equipment needs are driven by enterprise SSDs and NAND upgrades, which are strong for 2025 and 2026. Lam's products for leading-edge nodes, HBM, and advanced packaging are seeing robust demand for current, real needs.

    “Those data center investments are going to require faster GPUs made at smaller nodes for foundry logic. They're going to be made with higher capability HBM. And that's where all of our products come into play...”

    asked by Christopher Muse · answered by Timothy Archer

    2 min read6 chapters

    Detailed Narrative

    01

    AI's Impact on WFE Spending and Lam's Opportunity

    AI data center investments are expected to drive significant expansion of manufacturing capacity over a multiyear period. Lam Research estimates that these needs translate to roughly $8 billion of WFE spending for every $100 billion in incremental data center investment. Deposition and etch, Lam's core product areas, play an increasingly critical role in enabling higher performance, more scalable semiconductor devices required for AI, creating billions of dollars of served available market expansion and share gain opportunity.

    02

    NAND Upgrade Cycle and Technology Leadership

    NAND customers are upgrading existing fabs for higher layer count, higher-performance devices, with an estimated $40 billion in WFE spending required over several years for conversions. Lam is well-positioned to capture a high percentage of this spend due to its large installed base and comprehensive product portfolio. The company's Cryo 3.0 dielectric etch technology earned the 2025 SEMI Award, and its Halo moly ALD tool is the tool of record for 3 consecutive nodes at a leading customer, reinforcing leadership in 3D NAND wordline applications.

    03

    Advanced Technology Inflections in Foundry/Logic and DRAM

    Lam is benefiting from investments in foundry logic and DRAM manufacturing inflections. Its Aether dry resist EUV patterning solution resolves features less than 15-nanometers, reduces EUV exposure dose by over 10%, and is ramping in HBM high-volume production. The company anticipates High-NA EUV with Aether will be critical for sub-10-nanometer features and transitions to CFET in foundry logic and 4F squared in DRAM. Lam's low-K ALD solution, using a unique single-wafer remote plasma reactor, has secured critical wins at foundry/logic and DRAM customers for thin, defect-free films.

    04

    Growth in Advanced Packaging and Panel-Level Solutions

    Healthy growth in advanced packaging is benefiting Lam, with its SABRE 3D plating and Syndion etch systems seeing strong demand driven by AI. The company is investing in new advanced packaging opportunities, particularly panel-level packaging, which is emerging as a scalable solution for larger chips. Lam's SABRE 3D, Kallisto, and Phoenix tools are being engineered for future panel packaging needs, with tools shipped to or installed at 20 customers worldwide, building experience for mainstream adoption.

    05

    China Revenue Dynamics and Export Restrictions

    China revenue increased to 43% of total revenue in the September quarter, primarily driven by domestic Chinese customers. However, new 50% affiliate rule restrictions are expected to impact December quarter revenue by $200 million and calendar year 2026 revenue by approximately $600 million. This, combined with anticipated strong worldwide WFE growth, is projected to reduce China's share of overall revenues to less than 30% in calendar year 2026.

    06

    Financial Performance and Capital Allocation

    Lam Research delivered record revenues of $5.3 billion, gross margin of 50.6%, and operating margin of 35% in the September quarter. The company allocated $990 million to share buybacks at an average price of $106 per share and paid $292 million in dividends. Lam remains committed to returning at least 85% of free cash flow to shareholders over time⏳, with $6.5 billion remaining on its share repurchase authorization.

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